State ex rel. Cleary v. Hopkins St. Bldg. & Loan Ass'n

• Decision Date: 11 December 1934
• Citation: 257 N.W. 684,217 Wis. 179
• Court: Wisconsin Supreme Court
• Parties: STATE EX REL. CLEARY ET AL. v. HOPKINS STREET BUILDING & LOAN ASS'N ET AL. RELIANCE BUILDING & LOAN ASS'N v. CLEARY ET AL. NORTHERN BUILDING & LOAN ASS'N v. CLEARY ET AL.

217 Wis. 179

257 N.W. 684

STATE EX REL. CLEARY ET AL.

v.HOPKINS STREET BUILDING & LOAN ASS'N ET AL.^a1

RELIANCE BUILDING & LOAN ASS'N

v.CLEARY ET AL.

NORTHERN BUILDING & LOAN ASS'N

v.CLEARY ET AL.

Supreme Court of Wisconsin.

Dec. 11, 1934.

Appeal from two judgments of the Circuit Court for Milwaukee County; Charles L. Aarons, Circuit Judge.

An original action commenced pursuant to leave granted by this court.

Original action by the State of Wisconsin, on the relation of Peter A. Cleary and others, as the Banking Commission of the State of Wisconsin, against the Hopkins Street Building & Loan Association and others. Actions by the Reliance Building & Loan Association, and by the Northern Building & Loan Association against Peter A. Cleary and others, as the Banking Commission of the State of Wisconsin, in which the defendants filed a counterclaim. From adverse judgments, the defendants in the latter actions appeal.--[By Editorial Staff.]

Reversed and remanded, with directions in the latter actions; writ granted in the original action.

The Reliance Building and Loan Association and the Northern Building & Loan Association each brought its action to restrain the banking commission and supervisor of building and loan associations from interfering with the plaintiffs in their attempt to convert their association from a state building and loan association into a federal savings and loan association. On September 14, 1934, the banking commission, with leave of this court, began an original action against the Hopkins Street Building & Loan Association to restrain the association, its officers and agents, from operating as a federal savings and loan association, to have defendant's attempted conversion into such an association declared null and void, and to compel the officers of said association to operate it as a Wisconsin building and loan association or to wind up its affairs as such an association in the manner provided by the statutes of this state, on the ground that the Hopkins Street Building & Loan Association is under the jurisdiction of the banking commission of the state of Wisconsin. The cases of Reliance Building & Loan Association and the Northern Building & Loan Association were tried together in the circuit court for Milwaukee county before the court without a jury. The petition for leave to commence the original action in this court stands as the complaint. There was an appearance in this action by all of the named defendants and for “Hopkins Federal Savings & Loan Ass'n, a national corporation, organized pursuant to the acts of congress and the laws of the United States of America, and successor by conversion to Hopkins Street Bldg. & Loan Ass'n.” An answer was interposed by the Hopkins Federal Savings & Loan Association describing the proceedings taken and alleging the legality and sufficiency thereof in the matter of converting that association into a federal savings and loan association, a corporation under the government of the United States, and praying for a rule that the banking commission of the state of Wisconsin has no jurisdiction of the defendant.J. E. Finnegan, Atty. Gen., and John E. Martin, Asst. Atty. Gen. (Benjamin Poss, and Joseph P. Brazy, both of Milwaukee, of counsel), for Cleary and others.

B. F. Saltzstein and E. J. Gross, both of Milwaukee (Lyman W. Sherwood, of Chicago, Ill., of counsel), for Hopkins Street Building & Loan Ass'n.

Wallace Reiss, of Milwaukee (Lyman W. Sherwood, of Chicago, Ill., of counsel), for Reliance Building & Loan Ass'n.

Wallace Reiss, of Milwaukee (Lyman W. Sherwood, of Chicago, Ill., of counsel), for Northern Building & Loan Ass'n.

FAIRCHILD, Justice.

The Reliance Building & Loan Association and the Northern Building & Loan Association, respondents on this appeal, and the Hopkins Street Building & Loan Association, defendant in the original action here, are each Wisconsin corporations organized under the provisions of chapter 215, Stats. (section 215.01 et seq.). This chapter places the control and supervision of building and loan associations under the banking commission and authorizes the commission to take possession of and liquidate such an association when it shall appear that it is violating its charter or any of the laws of the state.

On July 22, 1932, Congress enacted the Federal Home Loan Bank Act (12 USCA § 1421 et seq.). By virtue of the provisions of this act, state building and loan associations were eligible to membership and, under certain conditions and restrictions, entitled to borrow from a Federal Home Loan Bank. The Wisconsin Legislature, on July 10, 1933, by its enactment of section 215.07(8), Stats., authorized Wisconsin building and loan associations, with the approval of the commissioner of banking, to become members of, and borrowers from, the Federal Home Loan Bank. Each of the building and loan associations here involved became members of the Federal Home Loan Bank. On June 13, 1933, there was enacted by the Congress of the United States the Home Owners' Loan Act (12 USCA § 1461 et seq.), section 5 of which authorizes the Federal Home Loan Bank Board to provide for the organization of associations to be known as federal savings and loan associations and to issue charters therefor; and on April 27, 1934 (48 Stat. 645, §§ 5, 6), by amendment to the Home Owners' Loan Act (12 USCA § 1464(i), it was provided:

“Sec. 5. * * * (i) Any member of a Federal Home Loan Bank may convert itself into a Federal savings and loan association under this Act upon a vote of 51 per centum or more of the votes cast at a legal meeting called to consider such action; but such conversion shall be subject to such rules and regulations as the Board may prescribe, and thereafter the converted association shall be entitled to all the benefits of this section and shall be subject to examination and regulation to the same extent as other associations incorporated pursuant to this chapter.”

Following the passage of the amendment just referred to and without further consent or authority of the state, application was made by the three associations to the Federal Home Loan Bank Board for permission to convert themselves into federal savings and loan associations under the provisions of section 5(i) of the Home Owners' Loan Act of 1933 as amended. In each case the Federal Home Loan Bank Board granted the permission. With reference to the Hopkins Street Building & Loan Association, the banking commission undertook to prevent the proposed conversion, but, in compliance with the order of the circuit court for Milwaukee county, desisted from such attempt and the association accepted a charter from the Federal Home Loan Bank Board and has since held itself out to be a savings and loan association free from the jurisdiction and control of the banking commission of this state. An original action is brought against the association seeking to have the attempted conversion declared null, void, and of no effect. The Reliance Building & Loan Association and the Northern Building & Loan Association each began an action to restrain the banking commission from interfering with its proposed conversion. In those cases the banking commission interposed counterclaims praying for declaratory relief similar to that sought in the original action in this court and an injunctional order to prevent the proposed conversion. This is briefly a description of the record in the three matters, and they present identical questions. The learned judge who tried the two cases in which judgment was entered below was of the opinion that Congress had power to incorporate federal savings and loan associations, that the language of section 5(i) of the Home Owners' Loan Act of 1933, as amended April 27, 1934, did not imply the necessity of consent by the state to the proposed conversion of a state loan association into a federal loan association, and that Congress had the power to authorize the conversion without the consent of the state.

The cause was first submitted upon arguments and briefs dealing to a large extent with the questions of whether Congress has power to incorporate federal savings and loan associations and as to the power of Congress to supersede the authority of the state over building and loan associations created by the state and to invest such corporations with corporate power to transmute themselves into federal savings and loan associations. We have since been favored by the contending parties with supplemental briefs in which are able discussions of the reservation by the state of power over corporate charters. Since then we have again examined the questions raised. We are convinced that the precise question before us relates to the power of a building and loan association, organized under and subject to the laws of the state of Wisconsin, to convert itself into a savings and loan association under the federal act. While the other questions are well within the limits of proper discussion as outlined by the issues, it is worthy of emphasis that all other questions are incidental to this controlling question and such reference to them as may be made is in aid of the determination of the actual corporate powers of a state organized building and loan association to accomplish transmutation. This being true, we will therefore consider whether the respondents, by reason of provisions in their charters or the laws of their creator, have any such power.

[1][2] The respondents were created by the state of Wisconsin at a time when without question the state had plenary power to create and to control the powers of these corporations. They are not banks; they have not banking powers or privileges under our state laws. Leahy v. National Bldg. & Loan Ass'n, 100 Wis. 555, 76 N. W. 625, 69 Am. St. Rep. 945;Julien v. Model Bldg. & Investment Ass'n, 116 Wis. 79, 92 N. W. 561, 61 L. R. A. 668;First Nat. Bank v. County of Dawson, 66 Mont. 321, 213 P. 1097;Lomb v. Pioneer Savings &...