Veix v. Seneca Bldg. & Loan Ass'n of Newark

• Citation: 19 A.2d 219,126 N.J.L. 314
• Decision Date: 03 April 1941
• Docket Number: No. 10.,10.
• Parties: VEIX v. SENECA BUILDING & LOAN ASS'N OF NEWARK.
• Court: United States State Supreme Court (New Jersey)

19 A.2d 219

126 N.J.L. 314

VEIX

v. SENECA BUILDING & LOAN ASS'N OF NEWARK.

No. 10.

Court of Errors and Appeals of New Jersey.

April 3, 1941.

Appeal from Supreme Court, Essex County.

Suit by Harry Veix against the Seneca Building & Loan Association of Newark, N. J., to recover withdrawal value of shares in defendant's association. From a judgment for plaintiff, 13 A.2d 796, 18 N.J. Misc. 275, 280, defendant appeals.

Reversed and remanded.

Francis P. Meehan, of Newark, for appellant.

Walter P. Reilly and James L. Handford, both of Newark, for respondent.

PERSKIE, Justice.

Three interrelated questions of prime importance require decision in this cause.

1. By R.S. 17:12-53, N.J.S.A. 17:12-53, Source, L.1925, c. 65, § 52, p. 212, as amended by L.1932, c. 102, § 1, p. 175, L.1935, c. 59, § 11, p. 153, L.1936, c. 118, § 4, p. 295, the legislature prescribed the method and order to be employed by building and loan associations for the payment of maturities and withdrawals, and prohibited suit against such associations by any member thereof to recover the maturity or withdrawal value of his share so long as the funds in the treasury of the association are applied as required by the statute. Is this statute constitutional as applied to a member who, as plaintiff here, gave notice for the withdrawal value of his prepaid shares prior to its passage?

2. By chapters 48, 166, 258 and 381 of P.L.1933, now R.S.Appendix A:7-3 to 7, N. J.S.A. Appendix A:7-3 to Appendix A:7-7, the legislature, declaring the existence of a public emergency by reason of a prolonged period of economic depression, conferred additional powers on the Commissioner of Banking and Insurance "to make orders for the purpose of conserving the assets of the building and loan associations of this state." Is this statute constitutional?

3. The Commissioner of Banking and Insurance by an order (Number One-A) made, on March 14, 1933, in pursuance of C. 48, L.1933, imposed restrictions and limitations upon the operation of defendant association, and prohibited suit against such association by any member thereof to recover the maturity or withdrawal value of his shares so long as the defendant association complied with this and subsequent orders of the Commissioner of Banking and Insurance, hereafter referred to as Commissioner. By this order plaintiff was prohibited from bringing his action against defendant association. Is this order constitutional?

Plaintiff, on October 7, 1931, purchased ten prepaid shares in the defendant building and loan association. Each share had a par value of $200 and provided, inter alia, that it "shall bear interest at 6 per cent per annum"; that it may be "called in and cancelled" by defendant upon giving "30 days written notice to the owner upon the payment of par value and interest to date of cancellation", and that the shares may be surrendered at any time subject to the provisions of defendant's constitution and amendments thereto.

On April 19, 1932, plaintiff gave the defendant written notice of the withdrawal of said shares in accordance with the provisions of P.L.1925, c. 65, § 52. This statute, in existence both at the time the plaintiff purchased his shares and at the time he gave his withdrawal notice, provided, amongst other things, that "* * * in no case shall payment be postponed for a period longer than six months from the date of such notice, and any member who has given the said notice may sue for and recover the withdrawal value of his shares in any such association in any court of competent jurisdiction, if the same is not paid in six months from the date of the giving of said notice of withdrawal. * * *" Accordingly, not having been paid by defendant, plaintiff brought suit in the Supreme Court, Essex County, on June 12, 1934 alleging defendant association's solvency and seeking judgment for $2,000 with interest from October 7, 1931.

Plaintiff, in his complaint, anticipated defendant's defenses, namely, that defendant was operating under R.S. 17:12-49 and R.S. 17:12-50, N.J.S.A. 17:12-49, and 17:12-50, Source L.1925, c. 65, § 49, p. 211, as amended by L.1932, c. 92, § 1, p. 161, L.1935, c. 59, § 10, p. 152; R.S. 17:12-53, N.J.S.A. 17:12-53, Source L.1925, c. 65, § 52, p. 212, as amended by L.1932, c. 102, § 1, p. 175, L.1035, c. 59, § 11, p. 153, L.1936, c. 118, § 4, p. 295. By the provisions of these amendments plaintiff, because of the financial condition of the defendant association, was, for the time being, precluded from maintaining his suit for the recovery of the value of his prepaid shares. The first of these amendments, C. 102, L.1932, p. 175, had become effective on April 22, 1932—three days after plaintiff's notice of withdrawal. Plaintiff thus alleged, in substance, that in so far as these statutes affected his right presently to recover in accordance with L.1925, c. 65, § 52, they deprived him of his vested rights, i. e., they impaired the obligation of his contract with defendant association, contrary to the provisions of both the State and Federal Constitutions. New Jersey Constitution, Article 4, § 7, par. 3, N.J.S.A.; United States Constitution, Article 1, § 10, and the Fourteenth Amendment thereto.

Defendant, in its answer, denied its solvency and denied that the statutes in question were unconstitutional and void. In its second defense, it asserted that the plaintiff could not recover immediately because defendant was bound by the order (Number One-A) as aforesaid. In its third defense, it alleged that the 1933 statutes were emergency measures designed to meet "the existing economic depression and public emergency which confronted building and loan associations in this state" and "were constitutional and retroactive as to plaintiff's right of withdrawal". A fourth defense asserted that plaintiff was bound by an amendment to the constitution of the defendant association which was passed on November 16, 1936, and which provided for payment of shares in accordance with the provisions of the general building and loan association act. Defendant also reserved its right to move to strike the complaint at the trial because of the failure to allege therein, a noncompliance with the statutory provisions.

Plaintiff thereupon moved to strike defendant's answer upon the grounds that it was in part sham and in part insufficient in law.

Plaintiff's motion to strike defendant's answer was granted. The circuit court judge, sitting as a supreme court commissioner, held that C. 102, L.1932, impaired plaintiff's contract with defendant association and was, therefore, unconstitutional. He further held that the provisions of chapters 48, 166, 258 and 381 of L.1933, now R. S.Appendix A:7-3 to 7, N.J.S.A. Appendix A:7-3 to Appendix A:7-7, were unconstitutional because they did set down a sufficiently definite standard for the making of rules by the Commissioner of Banking and Insurance; and that since order Number One-A was based on one of those statutes, c. 48, L.1933, it was also unconstitutional. In denying a motion for a reargument, the judge amplified his reasons but adhered to his original determination. Accordingly, he entered a rule striking defendant's answer and separate defenses. A judgment on that rule was entered for the plaintiff in the sum of $2,893.33 plus costs of $63.94. Defendant appeals.

1. We desire, at this point, to make the observation that in the recent case of Veix v. Sixth Ward B. & L. Ass'n, 123 N.J.L. 356, 8 A.2d 350, affirmed, 310 U.S. 32, 37, 60 S.Ct. 792, 794, 84 L.Ed. 1061, 1065, the Supreme Court of the United States in sustaining the constitutionality of c. 102, L. 1932, expressed the following caveat: "The question of the applicability to withdrawals of statutes on the subject which were passed subsequent to the notice of withdrawal is not considered in this opinion". Plaintiff here, having purchased his prepaid shares and having given his notice of withdrawal prior to the time when the act of 1932, supra, or any of the subsequent acts became effective, falls squarely within the caveat. And it is only to the extent thus indicated that the facts in the case at bar differ with those in Veix v. Sixth Ward B. & L. Ass'n, supra, on the question as to the constitutionality of the act of 1932, supra, as applied to plaintiff.

Thus in considering and determining the effect of the factual differences, as aforesaid, our task is greatly facilitated by certain recognized facts and controlling principles. We know that we are dealing with "financial institutions of major importance to the credit system of the state". We know, without detailing the facts, that building and loan associations, including defendant association, could not by reason of their depreciated assets, owing to the prolonged period of the economic depression and lack of income, meet the heavy withdrawals. We know, as plaintiff was charged with knowing, that "when he purchased into an enterprise already regulated in the particular to which he now objects, he purchased subject to further legislation upon the same topic". We know that unlike quite similar legislation involved in Treigle v. Acme Homestead Ass'n. 297 U.S. 189, 56 S. Ct. 408, 80 L.Ed. 575, 101 A.L.R. 1284, our legislation was directed towards our economic needs, towards an end which was in fact public. And we know that the "protection * * * against the catastrophe of excessive withdrawal is, today, within legislative power". Veix v. Sixth Ward B. & L. Ass'n (U.S.), supra.

In light of the emphasis placed upon the stated factual differences, between the case at bar and those in Veix v. Sixth Ward B. & L. Ass'n (U.S.), supra, it is interesting to observe that notwithstanding the various permissive designations of shares, their status as common shares remains unchanged. R.S. 17:12-47, N.J.S.A. 17:12-47. Source L.1925, c. 65, § 73, p. 222, as amended by L.1932, c. 91, § 1, p. 160, L.1935, c. 59, § 16, p. 160. But in our opinion neither the fact that...