Anchor Sav. & Loan Ass'n v. Equal Opportunities Com'n

• Decision Date: 02 October 1984
• Docket Number: No. 82-1508,82-1508
• Parties: ANCHOR SAVINGS & LOAN ASSOCIATION, Petitioner-Appellant-Petitioner, v. EQUAL OPPORTUNITIES COMMISSION, City of Madison, and Roy U. Schenk, Respondents.
• Court: Wisconsin Supreme Court

Page 234

355 N.W.2d 234

120 Wis.2d 391

ANCHOR SAVINGS & LOAN ASSOCIATION, Petitioner-Appellant-Petitioner, v. EQUAL OPPORTUNITIES COMMISSION, City of Madison, and Roy U Schenk, Respondents.

No. 82-1508.

Supreme Court of Wisconsin.

Argued Sept. 4, 1984.

Decided Oct. 2, 1984.

Ronald W. Todd, argued, Madison, for petitioner-appellant-petitioner; Stroud, Stroud, Willink, Thompson & Howard, Madison, on brief.

James L. Martin, Asst. City Atty., argued, for respondent, City of Madison; Henry A. Gempeler, City Atty., on brief.

Roy U. Schenk, pro se.

W. Charles Jackson, James E. Bauman and Michael, Best & Friedrich, Milwaukee, for amicus curiae Wisconsin League of Financial Institutions, Ltd.

STEINMETZ, Justice.

The issue in this case is whether the city of Madison, through an exercise of its home rule powers, can regulate a state chartered savings and loan association.

The Equal Opportunities Commission (EOC) of the city of Madison found that Anchor Savings & Loan Association (Anchor) discriminated against Roy U. Schenk on the basis of his marital status, in violation of sec. 3.23(3) of the Madison General Ordinances, ¹ when it denied Schenk a mortgage loan. Anchor argues that Madison did not have the power to regulate the lending practices of a state chartered savings and loan, and in the alternative, that Anchor did not unlawfully discriminate against Schenk.

The circuit court for Dane county, the Honorable Richard W. Bardwell, affirmed the EOC. Upon Anchor's appeal to the court of appeals, that court found Madison had the power to regulate Anchor's lending practices, and Anchor did discriminate against Schenk as to his marital status and therefore it affirmed the circuit court. ² Anchor petitioned this court for review. We reverse the decision of the court of appeals.

In December, 1977, Schenk, a divorced, single man, applied for a mortgage loan at Anchor in the amount of $24,000 to purchase income property in Madison. As a result of his divorce, Schenk was under a court ordered obligation to pay his former wife and four children $500 a month in support and maintenance.

In evaluating Schenk's credit-worthiness, Anchor applied its customary formula and considered his fixed debt-to-income ratio, a computation that yields the percentage of an applicant's monthly income committed to repayment of recurring fixed expenses. Schenk's percentage exceeded the maximum percentage acceptable and his application was denied. His support and maintenance payments were considered fixed expenses and were used in calculating his percentage. Anchor did not consider as fixed expenses the family maintenance obligations of married persons seeking loans. For married persons such maintenance obligations were considered in loan applications as flexible expenses. Without the support and maintenance payments, Schenk's fixed debt-to- income ratio would not have exceeded the maximum acceptable percentage. ³

The trial court concluded that the city of Madison could lawfully regulate the lending practices of a state chartered savings and loan. The court of appeals held that the city of Madison could regulate lending practices of a state chartered savings and loan because there was neither a statutory prohibition nor an infringement of the spirit of state law or policy.

Anchor's challenge to Madison's regulatory power raises a question of law that we review independently. LePoidevin v. Wilson, 111 Wis.2d 116, 121, 330 N.W.2d 555 (1983); First Nat. Leasing Corp. v. Madison, 81 Wis.2d 205, 208, 260 N.W.2d 251, 253 (1977); Nelson v. Union Nat. Bank, 111 Wis.2d 313, 315, 330 N.W.2d 225, 226-27 (Ct.App.1983).

If the city of Madison has power to regulate credit practices of a savings and loan association, its source must be traced through the home rule provisions of the Wisconsin Constitution, Art. XI, sec. 3(1) ⁴ and sec. 62.11(5), Stats. ⁵ This court considered the issue of the respective powers of the state and municipalities on the subject of legislative enactment in State ex rel. Michalek v. LeGrand, 77 Wis.2d 520, 527, 253 N.W.2d 505 (1977), and held that three areas have been outlined as: "(1) Those that are 'exclusively of statewide concern'; (2) those that 'may be fairly classified as entirely of local character'; and (3) those which 'it is not possible to fit ... exclusively into one or the other of these two categories.' " (Footnotes omitted.) Madison EOC and the city concede that the regulation of credit is a matter of statewide concern, as well as local concern.

In Wis. Asso. of Food Dealers v. City of Madison, 97 Wis.2d 426, 432, 293 N.W.2d 540 (1980), we stated:

" 'The constitutional authority of cities only extends to local affairs and does not cover matters of statewide concern.' Plymouth v. Elsner, 28 Wis.2d 102, 106, 135 N.W.2d 799 (1965). See also: Muench v. Public Service Commission, 261 Wis. 492, 53 N.W.2d 514, on rehearing 261 Wis. , 515c, 515c-515d, 515j, 55 N.W.2d 40 (1952)."

A city ordinance may be authorized by sec. 62.11(5), Stats., notwithstanding statewide concern in the matter it regulates. The question before this court is whether sec. 62.11(5) provides the city of Madison with the power to enact and enforce the ordinance.

In Wis. Asso. of Food Dealers v. City of Madison, 97 Wis.2d at 432-33, 293 N.W.2d 540, we stated:

"If a city ordinance exercises a power which the legislature could confer on the city, then the city possesses the power under sec. 62.11(5) unless there is express language elsewhere in the statutes restricting, revoking, or withdrawing the power, or unless state legislation is logically inconsistent with the existence of the power in the city. See: Wis. Environmental Decade, Inc. v. DNR, 85 Wis.2d 518, 534-35, 271 N.W.2d 69 (1978), quoting with approval, Comment, Conflicts Between State Statute and Local Ordinance in Wisconsin, 1975 Wis.L.Rev. 840, 848. This court has added a further limitation on a municipality's exercise of authority pursuant to the legislature's broad grant of power in sec. 62.11(5); ordinances may not ' "infringe the spirit of a state law or ... general policy of the state." ' Fox v. Racine, 225 Wis. 542, 545, 275 N.W. 513 (1937); See also : Wis. Environmental Decade, Inc. v. DNR, supra at 534-35. Thus in determining whether a preemption challenge to an ordinance adopted pursuant to sec. 62.11(5) has a reasonable probability of success, a circuit court should assess whether express statutory language has withdrawn, revoked, or restricted the city's power; the probability that the challenged ordinance is logically inconsistent with state legislation; and the probability that the challenged ordinance infringes the spirit of a state law or general policy of the state."

Section 62.11(5), Stats., does not limit a municipality's authority to act only in local affairs. As we stated in Wis. Environmental Decade, Inc. v. DNR, 85 Wis.2d 518, 533, 271 N.W.2d 69 (1978):

"Indeed, sec. 62.11(5), Stats., would be a nullity if it were construed to confer on municipalities only that authority which related to 'local affairs' since that power is already constitutionally guaranteed by the home-rule amendment."

In Wis. Environmental Decade, 85 Wis.2d at 534, 271 N.W.2d 69, we stated:

"We approve of the rule as set forth by Solheim, Conflicts Between State Statutes and Local Ordinance in Wisconsin, 1975 Wis.L.Rev. 840, 848:

" '2. If a municipality acts within the legislative grant of power but not within the constitutional initiative, the state may withdraw the power to act; so if there is logically conflicting legislation, or an express withdrawal of power, the local ordinance falls. Furthermore, if the state legislation does not logically conflict, or does not expressly withdraw power, it is possible that the local ordinance nevertheless must fall if an intent that such an ordinance not be made can be inferred from the fact that it defeats the purpose or goes against the spirit of the state legislation.' "

This same Wis. Environmental Decade case cited Fox v. Racine, 225 Wis. 542, 545, 275 N.W. 513 (1937), wherein the court stated a municipality may not pass ordinances " 'which infringe the spirit of a state law or are repugnant to the general policy of the state.' " This has been the rule in Wisconsin and still is as most recently stated in Wis. Asso. of Food Dealers v. City of Madison, 97 Wis.2d at 433, 293 N.W.2d 540.

Where a municipality acts within the legislative grant of power but not within the constitutional initiative, the state has the authority to withdraw the power of the municipality to act. The tests for determining whether such a legislatively intended withdrawal of power which would necessarily nullify the local ordinance has occurred are:

(1) whether the legislature has expressly withdrawn the power of municipalities to act;

(2) whether the ordinance logically conflicts with the state legislation;

(3) whether the ordinance defeats the purpose of the state legislation; or

(4) whether the ordinance goes against the spirit of the state legislation. Sec. 62.11(5), Stats.; Fox v. Racine, 225 Wis. 542, 546-47, 275 N.W. 513; State ex rel. Michalek v. LeGrand, 77 Wis.2d 520, 530, 253 N.W.2d 505. See also: Solheim, supra.

The state legislature has adopted a complex and comprehensive statutory structure dealing with all aspects of credit and lending in ch. 138, Stats., which governs rates of interest, variable rate contracts, federal rate parity, residential mortgages and credit discrimination. See sec. 138.20. ⁶ In addition, ch. 215 governs state chartered savings and loan associations. This chapter created the office of the commissioner of savings and loan. Sec. 215.03(1) provides that: "All associations organized under this chapter or similar laws, or permitted by license to transact, in this state, a business similar to that authorized by this chapter, shall be under the supervision and control of the commissioner."

There is a detailed system of...