Appeal of North Carolina Sav. and Loan League

• Decision Date: 07 April 1981
• Docket Number: No. 82,82
• Citation: 276 S.E.2d 404,302 N.C. 458
• Parties: In the Matter of The Appeal of NORTH CAROLINA SAVINGS AND LOAN LEAGUE and Burke County Savings and Loan Association from Judgment of Credit Union Commission in Contested Case Relating to By-Laws of State Employees' Credit Union. NORTH CAROLINA BANKERS ASSOCIATION, INC., Petitioner, v. NORTH CAROLINA CREDIT UNION COMMISSION and Roy D. High, Administrator of Credit Union, Respondents.
• Court: North Carolina Supreme Court

Page 404

276 S.E.2d 404

302 N.C. 458

In the Matter of The Appeal of NORTH CAROLINA SAVINGS AND

LOAN LEAGUE and Burke County Savings and Loan Association

from Judgment of Credit Union Commission in Contested Case

Relating to By-Laws of State Employees' Credit Union.

NORTH CAROLINA BANKERS ASSOCIATION, INC., Petitioner, v. NORTH CAROLINA CREDIT UNION COMMISSION and Roy D. High, Administrator of Credit Union, Respondents.

No. 82.

Supreme Court of North Carolina.

April 7, 1981.

Law Offices of John R. Jordan, Jr. by John R. Jordan, Jr., Robert R. Price, and Henry W. Jones, Jr., and Alfred P. Carlton, Jr., Raleigh, for petitioner-appellant North Carolina Bankers Association, Inc.

Brooks, Pierce, McLendon, Humphrey & Leonard by L. P. McLendon, Jr., and Edward C. Winslow III, Greensboro, for petitioner-appellants North Carolina Savings and Loan League and Burke County Savings and Loan Association.

Byrd, Byrd, Ervin, Blanton & Whisnant, P. A. by John W. Ervin, Jr., Morganton, for petitioner-appellant Burke County Savings and Loan Association.

Bailey, Dixon, Wooten, McDonald & Fountain by J. Ruffin Bailey and Gary S. Parsons, Raleigh, for respondent-appellee State Employees' Credit Union.

Barringer, Allen & Pinnix, by Thomas L. Barringer, Raleigh, for respondent-appellees North Carolina Credit Union Commission and Roy D. High, Administrator of Credit Unions.

C. Ronald Aycock, Raleigh, for respondent-appellee North Carolina Association of County Commissioners.

Ernest Ball, Raleigh, for respondent-appellee North Carolina League of Municipalities.

CARLTON, Justice.

I.

This case arose from the North Carolina Credit Union Administrator's (hereinafter "Administrator") approval on 15 September 1977 of an amendment to the By-Laws (sic) of the State Employees' Credit Union, allowing an expansion of its field of membership to include employees of local government units who participate in retirement systems administered by the State of North Carolina and federal employees working in conjunction with these units. Prior to the amendment, Article II, Section 1 of the bylaws provided that:

The field of membership shall be limited to those having the following common bond: employees of the State of North Carolina and Federal employees working in conjunction with State departments; employees of Public Boards of Education; employees of associations formed for the benefit of State Employees, ... and unremarried spouses of persons who died while in the field of membership of this credit union: persons retired from the above employment as pensioners and/or annuitants from the above employment or service; members of their immediate families, and organizations of such persons: and employees of agencies or departments whose employees are subject to the State Personnel Act.

As amended, the bylaw would read as follows:

The field of membership shall extend to those having the following common bond: employees of governmental units in North Carolina whose employees are covered under a retirement system administered by the State of North Carolina*; Federal employees working in conjunction with these governmental units; employees of agencies or departments whose employees are subject to the State Personnel Act; employees of associations formed for the benefit of the above persons; unremarried spouses of persons who died while in the field of membership; persons retired from any of the above as pensioners and/or annuitants; members of their immediate families and organizations of such persons....

In response to a request by the North Carolina Bankers Association, the North Carolina Credit Union Commission (hereinafter "Commission") conducted hearings on 5 and 6 June 1978 to review the decision of the Administrator. The Commission granted petitions from the North Carolina Savings and Loan League and the Burke County Savings and Loan Association to intervene in opposition to the amendment. The State Employees' Credit Union (hereinafter "Credit Union"), the North Carolina Association of County Commissioners, and the North Carolina League of Municipalities were granted leave to intervene in support of the Administrator's action. On 10 August 1978 the Commission issued a decision affirming the approval of the bylaw amendment by the Administrator.

Pursuant to G.S. 150A-43, the Bankers Association, Savings and Loan League and Savings and Loan Association (hereinafter "petitioners") filed petitions in superior court for review of the Commission's decision, contending that the members added by the amendment lacked a "common bond" with the previous State employee membership of the Credit Union in violation of G.S. 54-109.26. Judge Braswell agreed with petitioners and reversed the Commission in a judgment entered 10 January 1979. The Commission, Administrator, State Employees' Credit Union, North Carolina Association of County Commissioners and North Carolina League of Municipalities (hereinafter "respondents") appealed. The Court of Appeals reversed the superior court and remanded for entry of an order affirming the decision of the Commission. Petitioners filed a petition for discretionary review with this Court pursuant to G.S. 7A-31, which we allowed 6 May 1980.

Other facts pertinent to the decision are noted in the footnote below. ¹

II.

We first consider the appropriate standard for judicial review of this administrative agency's decision.

The basic issue with which the courts below were confronted, and which we must now consider, is the propriety of an action taken by the North Carolina Credit Union Commission and its Administrator. The Credit Union Commission is an agency of the state, G.S. § 54-109.10 (Cum.Supp.1979), and review of its actions is governed by the Administrative Procedure Act (hereinafter "APA"), General Statutes, Chapter 150A. G.S. § 150A-2(1) (1978).

Under the APA, a reviewing court's power to affirm the decision of the agency and to remand for further proceedings is not circumscribed. However, the court may reverse or modify only if

the substantial rights of the petitioners may have been prejudiced because the agency findings, inferences, conclusions, or decisions are:

(1) In violation of constitutional provisions; or

(2) In excess of statutory authority or jurisdiction of the agency; or

(3) Made upon unlawful procedure; or

(4) Affected by other error of law; or (5) Unsupported by substantial evidence admissible under G.S. 150A-29(a) or G.S. 150A-30 in view of the entire record as submitted; or

(6) Arbitrary or capricious.

G.S. § 150A-51 (1978).

The Court of Appeals, while recognizing that its review was governed by G.S. 150A-51, failed to specify under which of the above listed standards it reviewed the decisions of the superior court and the Commission. Judge Braswell, in the superior court, relied on the first, second, fifth and sixth standards in reversing the Commission's decision. While we agree with the result reached by the superior court, we think it failed to apply the correct standard in reviewing the Commission's actions. In our opinion, the appropriate line of inquiry is whether the Commission's approval of the bylaw amendment is "(a)ffected by ... error or law." G.S. § 150A-51(4). Thus, the proper standard of review has nowhere been addressed in the lower courts. Selection of the proper standard is important in every appeal from an administrative decision because use of the correct standard clarifies the basic issues and focuses the reviewing court's inquiry on the relevant factors.

The appropriate standard can be determined only after an examination of the issues presented by the appeal. While petitioners claim that the Commission's decision is in violation of the constitution, in excess of statutory authority, unsupported by substantial evidence and arbitrary and capricious, both they and respondents agree that the propriety of the Commission's actions turns on the meaning accorded the term "common bond" in G.S. 54-109.26, or, as aptly put by Judge Hedrick, writing for the Court of Appeals, "whether the membership of the State Employees' Credit Union as enlarged by the amendment meets the 'common bond' requirement of G.S. § 54-109.26." When the issue with which this Court is confronted on this appeal is accurately set forth it becomes obvious that the basic issue is one of statutory interpretation. Any error made in interpreting a statute is an error of law, and the fourth of the standards enumerated above, whether substantial rights of petitioners have been prejudiced because the Commission's decision is affected by an error of law, ² is the scope of our inquiry on this appeal.

This case does not involve a decision that is made in excess of statutory authority, that is unsupported by substantial evidence, or one that is arbitrary or capricious. Although it can be argued that if the Commission approved a bylaw based on an erroneous and overly broad statutory interpretation it exceeded its statutory authority, this argument ignores the gist of the alleged error, the meaning of "common bond." If the scope of the bylaw exceeds that permissible under the statute, the basic error is still one of law, not of exceeding statutory authority. No one denies the statutory authority of the Administrator and Commission to approve and enact bylaw amendments; it is the bylaw itself with which we are concerned. When determining which standard or standards are appropriate to employ in a particular case, the standard which deals most directly with the alleged error, the gravamen of the petitioners' complaint, is the proper scope of review.

Nor does this appeal raise questions of the sufficiency of the evidence to support the Commission's implicit finding that a "common bond" exists. If the "common bond" requirement is satisfied by employment in the public sector, as the Court of Appeals held, there is ample and uncontroverted evidence that all persons made eligible for membership by the amended bylaw...