Treigle v. Acme Homestead Assn.

Background

A shareholder who owned fifty fully paid shares of a Louisiana building-and-loan association gave written notice to withdraw on May 19, 1932. Before July 1932, state law required associations to keep a withdrawal list and to set aside a fixed share of receipts to pay withdrawing members in order. The Legislature then adopted Act No. 140, which let directors use receipts for loans, expenses, dividends, and reserves and changed payment rules so early applicants might receive only 25% initially and be pushed to the list’s end for the balance. The shareholder sued promptly to stop the association from following the new law.

Reasoning

The central question was whether the 1932 law could unmake the withdrawing shareholder’s existing contract and vested right to payment. The Court examined the statute and concluded it did not actually conserve association assets or address an emergency; instead it altered private contract rights and redistributed payments in favor of continuing members. The Court held the law unlawfully impaired contractual obligations and deprived the appellant of vested property rights without due process of law, rejecting the state’s claim that the changes were a valid exercise of police power or merely an amendment of a corporate charter.

Real world impact

The decision protects withdrawing shareholders from retroactive reductions or reordering of payment rights by the State when those rights are already vested under existing law. It prevents similar legislative schemes that arbitrarily divert association receipts away from members awaiting payment. The judgment was reversed, and companion cases raising the same issue were decided the same way.