Veix v. Sixth Ward Building & Loan Assn. of Newark
Headline: High Court upheld New Jersey law limiting withdrawals from building-and-loan associations, allowing the state to restrict members’ withdrawal rights to protect associations’ finances even for earlier purchasers.
Holding: The Court ruled that New Jersey could constitutionally change withdrawal rules for building-and-loan shares, applying the 1932 law to protect associations’ financial stability and not violating purchasers’ contract protections.
- Allows states to limit withdrawals to protect associations’ finances.
- Applies the 1932 withdrawal rules even to earlier purchasers who bought into a regulated system.
- Limits members’ ability to sue for withdrawal value when the statute’s rules are followed.
Summary
Background
In 1928 and 1929 a man bought prepaid $200 shares in a New Jersey building and loan association. At that time state laws already set rules for withdrawing shares by notice, limits on how much of monthly receipts could be used to pay withdrawals, a six-month limit on postponing payments, and a right to sue if a withdrawal was not paid within six months. In 1932 New Jersey changed those rules: it defined what counts as an association’s receipts, limited monthly withdrawals by paying $500 per withdrawing member in order until funds ran out, allowed withholding payments when funds were insufficient to pay matured shares, and barred suits by members so long as the law’s rules were followed. The buyer filed his withdrawal notice in August 1932 and sued in 1939 after his claim was denied.
Reasoning
The Court considered whether the 1932 law impaired the obligation of contracts or violated due process. It limited review to the 1932 act because the state court had upheld that statute. The Court held that, because the building-and-loan business was long regulated and the state faced real risks to its financial system, the legislature could use its police power to protect associations’ solvency. People who buy into an already regulated enterprise take their shares subject to further reasonable laws on the same topic, so the statute did not unlawfully impair the buyer’s contract rights.
Real world impact
The ruling allows New Jersey to enforce the 1932 withdrawal limits to protect building-and-loan associations’ finances and the state’s credit system. It leaves open later statutes and notes the decision focused only on the 1932 act; future changes could still be challenged.
Dissents or concurrances
Justice McReynolds agreed with the result.
Ask about this case
Ask questions about the entire case, including all opinions (majority, concurrences, dissents).
What was the Court's main decision and reasoning?
How did the dissenting opinions differ from the majority?
What are the practical implications of this ruling?