Heritage Credit Union v. Office of Credit Unions

• Decision Date: 02 August 2001
• Docket Number: No. 00-3162.,00-3162.
• Citation: Heritage Credit Union v. Office of Credit Unions, 2001 WI App 213, 247 Wis.2d 589, 634 N.W.2d 593 (Wis. App. 2001)
• Parties: HERITAGE CREDIT UNION, Petitioner-Appellant, v. OFFICE OF CREDIT UNIONS, Respondent-Respondent.
• Court: Wisconsin Court of Appeals

247 Wis.2d 589

2001 WI App 213

634 N.W.2d 593

HERITAGE CREDIT UNION, Petitioner-Appellant,¹ v. OFFICE OF CREDIT UNIONS, Respondent-Respondent.

No. 00-3162.

Court of Appeals of Wisconsin.

Submitted on briefs June 11, 2001.

Decided August 2, 2001.

On behalf of the petitioner-appellant, the cause was submitted on the briefs of Jerard J. Jensen, Thomas M. Pyper, and Jeanne M. Armstrong of Whyte Hirschboeck Dudek S.C. of Madison.

On behalf of the respondent-respondent, the cause was submitted on the brief of James E. Doyle, Attorney General, and Stephen J. Nicks, Asst. Attorney General.

Before Vergeront, P.J., Roggensack and Lundsten, JJ.

¶ 1. VERGERONT, P.J.

This appeal concerns the applications of Heritage Credit Union, chartered by the State of Illinois, to operate four branch offices in Wisconsin. The Office of Credit Unions (OCU) for the State of Wisconsin denied the applications. It applied its general reciprocity policy for credit unions incorporated under the laws of other states (foreign states) and decided that, since WIS. STAT. § 186.113(1) (1999-2000)² limits branch offices for Wisconsin credit unions to twenty-five miles outside of Wisconsin, Heritage could not operate branch offices in Wisconsin more than twenty-five miles from the Wisconsin border. The Credit Union Review Board affirmed the denial and the circuit court affirmed the board. Heritage appeals, contending: (1) because Heritage was formerly a federal credit union, federal law preempts any restrictions on Heritage's ability to operate branch offices in Wisconsin; (2) OCU does not have the statutory authority under Wisconsin law to regulate foreign state credit unions, and even if OCU does have that authority, it does not have the authority to restrict whether or where they may operate branch offices; (3) OCU's decision is based on a policy that is invalid because it was not promulgated as a rule under WIS. STAT. ch. 227; and (4) OCU's decision is an unreasonable application of OCU's reciprocity policy.

¶ 2. We conclude: (1) OCU's decision does not conflict with federal law and therefore does not violate the supremacy clause; (2) OCU has the statutory authority to regulate foreign state credit unions operating in Wisconsin, including the authority to regulate whether and where they may operate branch offices; (3) Heritage may not obtain judicial review of its rulemaking argument because it did not raise this before the board as required by WIS. STAT. § 227.40(2)(e); and (4) the board acted reasonably and within its discretion in deciding that OCU's decision was a reasonable application of its reciprocity policy. We therefore affirm.

BACKGROUND

¶ 3. The pertinent facts are not disputed. Heritage operated in Wisconsin as a federally chartered credit union until December 4, 1998, when it converted to an Illinois-chartered credit union. Heritage asked the Illinois regulatory agency to include the Wisconsin communities of Dane, Columbia, Rusk, Barron, and Chippewa counties in its "field of membership." Accordingly, the Illinois Credit Union Division supervisor wrote the OCU asking about the requirements Heritage must satisfy in order to add those counties to its "field of membership." OCU responded that Heritage would not be permitted to expand to include those counties. It explained that, because Heritage had an Illinois charter, its principal office could not be located in Wisconsin, and community expansions were based on a "well-defined neighborhood, community or rural district in relation to a credit union's principal office." OCU also explained that the Wisconsin Credit Union Review Board policy guidelines³ require that a credit union chartered and operating under the laws of another state must obtain a certificate of authority for a branch office to operate in Wisconsin, and it enclosed an "Application to Establish a Subsidiary Office."

¶ 4. Heritage submitted an application for each of the four locations — two in Madison, one in Chetek, and one in Ladysmith. Heritage had operated offices at these locations as a federal credit union. OCU denied the applications in a letter that stated:

Chapter 186, Wis. Stats., does not address reciprocal branching authority for out of state, state-chartered credit unions. Because of reciprocity requirements of other states, it has been the position of this office to issue a statement of reciprocity or approve requests from out of state credit unions as long as the authority requested meets the criteria for powers established by statute for Wisconsin credit unions.

Wisconsin credit unions are allowed to establish branch offices 25 miles outside this state. They are also allowed to establish limited services offices outside this state if the common bond among the members of the credit union establishing the limited services office is employment by a corporation, limited liability company, partnership or association which maintains an office or other facility in this state.

Per the application information you submitted, the above parameters are not met.

¶ 5. Heritage filed a petition with the board for review of OCU's decision.⁴ It contended: (1) OCU's denial of its applications conflicts with the Federal Credit Union Act and is therefore invalid under the supremacy clause; (2) OCU does not have the statutory authority under Wisconsin law to regulate foreign state credit unions generally and, even if it does, it does not have the authority to restrict whether or where in Wisconsin Heritage may operate branch offices; and (3) OCU's decision is unreasonable because, since Wisconsin credit unions may operate anywhere in Illinois, true reciprocity means that an Illinois credit union may operate anywhere in Wisconsin.⁵

¶ 6. Heritage and OCU stipulated there were no factual issues in dispute and submitted briefs to the hearing examiner. The examiner issued a proposed decision and order affirming the denial of the applications, and the board adopted that decision and order after considering Heritage's objections.⁶ The board concluded that: (1) OCU's denial of the applications did not conflict with federal law; (2) OCU has the authority under WIS. STAT. ch. 186 to regulate foreign state credit unions operating in Wisconsin, and that includes the authority to regulate their operation of branch offices in Wisconsin; and (3) OCU's application of its reciprocity policy to branch offices is reasonable. ¶ 7. Heritage sought review of the board's decision in the circuit court,⁷ advancing essentially the same three challenges. The circuit court affirmed the board's decision on each point.

DISCUSSION

¶ 8. On appeal, Heritage renews the arguments it made in the circuit court and, in addition, argues that OCU's decision is based on a policy that is invalid because it is not promulgated as a rule as required by WIS. STAT. ch. 227. We address first Heritage's contention that OCU's denial of the applications violates the supremacy clause because it conflicts with 12 U.S.C. § 1771(a) (1994).⁸

¶ 9. 12 U.S.C. § 1771(a)(4) permits a federal credit union to convert to a credit union incorporated under the laws of any state and provides that the successor state credit union "shall be vested with all of the assets and shall continue [to be] responsible for all of the obligations of the Federal credit union to the same extent as though conversion had not taken place." According to Heritage, this statute means that since Heritage had offices in Wisconsin and operated there while a federal credit union, it has the right to continue to operate those offices in Wisconsin in the same manner it did before it converted to an Illinois credit union. OCU responds that this statute means only that Heritage retains ownership of the assets it owned while a federal credit union after it converts to a state credit union, and the statute does not address the regulation of Heritage's operation of its business after conversion.

[1]

¶ 10. When an administrative agency's decision is challenged, this court reviews the agency's decision and applies the same standard of review as that which should be applied by the circuit court. Citizens' Util. Bd. v. Public Serv. Comm'n, 211 Wis. 2d 537, 543-44, 565 N.W.2d 554 (Ct. App. 1997). The proper interpretation of 12 U.S.C. § 1771(a)(4) presents an issue of statutory construction — a question of law which we generally review de novo. See Harnischfeger Corp. v. LIRC, 196 Wis. 2d 650, 659, 539 N.W.2d 98 (1995). While we may give deference to a state administrative agency's interpretation of a statute that it is authorized to administer,⁹ we are concerned here with a federal statute. Neither party addresses whether it is appropriate to defer to the board's interpretation of this federal statute,¹⁰ and the circuit court's discussion of this statute suggests that it undertook a de novo review. Since OCU does not present any reason why we should defer to the board's interpretation of this federal statute, we will analyze the statute without deferring to the board's interpretation.

[2-4]

¶ 11. In construing statutes, our aim is to discern the intent of the legislative body. Pritchard v. Madison Metro. Sch. Dist., 2001 WI App 62, ¶ 8, 242 Wis. 2d 301, 625 N.W.2d 613,review denied, 2001 WI 88, 246 Wis. 2d 166, 630 N.W.2d 220. To that end, we begin with the language of the statute, and, if that is plain, we apply the language to the facts at hand. Id. We conclude the plain language of 12 U.S.C. § 1771(a)(4) addresses the impact of conversion on a credit union's ownership of its assets and its responsibility for its obligations, but does not address whether a former federal credit union may continue to operate in one state when it has chosen to be chartered under the laws of another state. The subsection makes clear that converting from a federal credit union to a state credit union does not affect the assets that Heritage owns or the obligations for which it is responsible; but the subsection...