296 U.S. 315 (1935), 55, Hopkins Federal Savings & Loan Assn. v. Cleary

Docket Nº:No. 55
Citation:296 U.S. 315, 56 S.Ct. 235, 80 L.Ed. 251
Party Name:Hopkins Federal Savings & Loan Assn. v. Cleary
Case Date:December 09, 1935
Court:United States Supreme Court

Page 315

296 U.S. 315 (1935)

56 S.Ct. 235, 80 L.Ed. 251

Hopkins Federal Savings & Loan Assn.



No. 55

United States Supreme Court

Dec. 9, 1935

Argued November 1, 19, 1935



1. The Federal Home Owners' Loan Act of 1933, § 5(i), as amended, must be construed as providing that any state building and loan association which has become a member of a Federal Home Loan Bank by subscribing to its shares may convert itself into a Federal Savings and Loan Association upon the vote of a bare majority of its members, and without the consent of the State that created it. P. 332.

This construction is corroborated by a comparison of the Act in its present form with its form before amendment, and with other analogous legislation. P. 333.

2. Courts cannot ignore the plain meaning of a statute in order to avoid a decision upon its validity. P. 334.

3. The Home Owners' Loan Act, to the extent that it permits the conversion of state associations into federal ones in contravention

Page 316

of the laws of the place of their creation, is an unconstitutional encroachment upon the reserved powers of the States. United States Constitution, Amendment X. Casey v. Galli, 94 U.S. 673, explained and distinguished. P. 335.

4. Building and Loan Associations in Wisconsin and other States are not merely business corporations, they are quasi-public instruments, created and fostered by the State for the common good. P. 336.

5. The destruction of such associations, established by a State, is not an exercise of power reasonably necessary for the maintenance by the central government of other associations created by itself in furtherance of kindred ends. P. 338.

6. The State of Wisconsin, in vindication of her public policy and also as parens patriae acting on behalf of nonconsenting shareholders and creditors, has a standing as litigant to prevent the conversion of local building and loan association into a federal corporation, contrary to her statutes and without her consent. Massachusetts v. Mellon, 262 U.S. 447, distinguished. P. 339.

217 Wis. 179; 257 N.W. 684, affirmed.

Certiorari, 295 U.S. 721, to review judgments of the Supreme Court of Wisconsin in three actions. In No. 55, the suit originated in that court and was brought by the State Banking Commission against a local building and loan association for the purpose of annulling proceedings whereby the association sought to convert itself into a federal corporation and compelling the directors and officers to continue the business in accordance with Wisconsin law, or else to wind it up. The state court granted the decree. The other two cases were suits by two other such associations against the Commission to restrain it from interfering with similar conversions of their status. Decrees in their favor were reversed by by the court below.

Page 327

CARDOZO, J., lead opinion

MR. JUSTICE CARDOZO delivered the opinion of the Court.

The controversy in each of these causes is one as to the meaning and validity of an Act of Congress whereby building and loan associations organized under the laws of a state may be converted into Federal Savings & Loan Associations upon the vote of a majority of the shareholders present at a meeting legally convened.

In Number 55, an original suit was brought in the Supreme Court of Wisconsin by the respondents, constituting the banking commission of that state, against the Hopkins Federal Savings & Loan Association, formerly the Hopkins Street Building & Loan Association, its officers and directors. The complaint prayed for a decree annulling the proceedings whereby the state association had attempted to convert itself into a federal one, and compelling the directors and officers to continue the business

Page 328

in accordance with Wisconsin law, or else to wind it up. The state court granted the decree upon grounds to be considered later.217 Wis. 179, 257 N.W. 684.

In Numbers 56 and 57, suits were brought by Wisconsin corporations, the Reliance [56 S.Ct. 237] Building & Loan Association (plaintiff in No. 56) and the Northern Building & Loan Association (plaintiff in No. 57) to restrain the banking commission and the supervisor of building and loan associations from interfering with the plaintiffs in the attempt to convert themselves into federal corporations. Decrees of the trial court in favor of the plaintiffs were reversed by the Supreme Court of Wisconsin with directions to enter judgment in favor of the Commission. 217 Wis. 179, 257 N.W. 684.

Building and loan associations organized in Wisconsin are subject to strict supervision by the administrative agencies of the state both in the course of doing business and in that of liquidation. They are quasi-public corporations, chartered to encourage thrift and promote the ownership of homes, with powers and immunities peculiarly their own. See Wisconsin St.1933, c. 215, § 215.01et seq.;cf. Louisville Gas & Electric Co. v. Coleman, 277 U.S. 32, 40; United States v. Cambridge Loan & Building Co., 278 U.S. 55, 57.1 They may loan their moneys to members only. Wisconsin St.1933, § 215.07(1). They must submit many of their proposed investments for the approval of the Commissioner of

Page 329

Banking. § 215.07(6), (7), (8). They must conform to precise restrictions as to the quality of mortgages accepted as security for loans. § 215.15;2 cf. § 215.01(10)(11). At the close of every year, they must submit to the commissioner a report of their condition (§ 215.31), and at all times they shall be subject to his control and supervision (§ 215.31). If their business has been conducted in a manner contrary to law, or if their financial condition appears to be unsound, the commissioner may take charge of the business and liquidate the assets. § 215.33. In recognition of their quasi-public functions, they are given an exemption from income taxes payable by corporations generally. § 71.05(d). Cf. United States v. Cambridge Loan & Building Co., supra. The statute contains provisions governing the consolidation of such associations and their voluntary dissolution. Corporations formed thereunder may consolidate with other building and loan associations located in the same county, but only with the consent of the Commissioner of Banking and that of two-thirds of the outstanding shares, as well as the consent of a majority of the directors. § 215.335. A vote of approval by two-thirds of the outstanding shares is necessary also for voluntary dissolution. § 215.36(1). With the consent of the Commissioner, an association formed under the act may become a member of a Federal Home Loan Bank, or a borrower therefrom. § 215.07(7)(8). Membership in such a bank grows out of a subscription to its shares, and has no effect upon the corporate life of the subscribing member. On the other hand, there is nothing in the statutes of Wisconsin whereby building and loan associations chartered in that state may be transmuted into associations chartered by the federal government.

Page 330

The petitioners insist that, without the consent of Wisconsin, the transmutation from a state into a federal association has become possible now by virtue of an Act of Congress. The Act relied upon for that purpose is § 5 of the Home Owners' Loan Act of 1933 (48 Stat. 128, 132), as amended in April, 1934 (48 Stat. 643, 645, 646), and again in May, 1935 (49 Stat. 297), 12 U.S.C. § 1464. By subdivision (a) of that section, the Federal Home Loan Board is empowered to issue charters for the creation [56 S.Ct. 238] of Federal Savings and Loan Associations "in which people may invest their funds and in order to provide for the financing of homes." By subdivision (e), "no charter shall be granted except to persons of good character and responsibility," nor unless, in the judgment of the Board, the institution is likely to be successful and is necessary for the wellbeing of the community to be served. By other subdivisions (b, c, d, f, g, h, j, and k), the powers and duties of the associations are defined. Subdivision (i), the one that concerns us specially, permits state associations to be converted into federal ones. As amended in April, 1934, its provisions are as follows:

(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 percentum 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 Act.3

Page 331

The exchange of a state for a federal charter may be made under this section by any member of a Federal Home Loan Bank. To ascertain the limits of that membership, we turn to the "Federal Home Loan Bank Act" of 1932, as amended from time to time. 47 Stat. 725, 48 Stat. 128, 643, 1246, 12 U.S.C. c. 11; cf. 49 Stat. 297. We learn from that act that the term "member" means any institution which has subscribed for the stock of a Federal Home Loan Bank (§ 2(4)), and that "any building and loan association, savings and loan association, cooperative bank, homestead association, insurance company, or savings bank," shall be eligible to become a member of a Federal Home Loan Bank, or a nonmember borrower from such a bank, upon compliance with conditions not important at this time. §§ 4 and 5.

Each of the three building and loan associations, the petitioners before us, was a member in good standing of the Federal Home Loan Bank of Chicago, Ill. After application in proper form, each received from the Board permission to convert itself into a federal association under § 5(i) of the Federal Home Owners' Loan Act. Each convened a meeting...

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