Woodard v. Broadway Federal Savings & Loan Ass'n of LosAngeles

Decision Date19 May 1952
Citation244 P.2d 467,111 Cal.App.2d 218
CourtCalifornia Court of Appeals Court of Appeals

Thomas L. Griffith, Jr., Bishop & Hoffmann, and Sylvester Hoffmann, Los Angeles, for appellants.

Russell H. Pray and Eric A. Rose, Long Beach, for respondents.

VALLEE, Justice.

Appeal by defendants from (1) a judgment which declared invalid the election of the individual defendants to the board of directors of defendant Broadway Federal Savings & Loan Association of Los Angeles, directed that a new election be held, and appointed a master for the purpose of supervising the election proceedings; (2) an order denying their motion for a new trial; and (3) an order denying their motions to amend the conclusions of law, to vacate the judgment and to dismiss the action, and for entry of another and different judgment.

Defendant Broadway Federal Savings & Loan Association of Los Angeles, a federal savings and loan association, was chartered on November 25, 1946, by the Federal Home Loan Bank Board 1 under section 5 of the Home Owners' Loan Act of 1933, 2 and is engaged in the business of home financing in California, with its principal place of business in Los Angeles.

Plaintiffs and the individual defendants are members of defendant association. Some of the plaintiffs and the individual defendants were nominees for the positions of director of defendant association. On February 24, 1950, a special meeting was held for the principal purpose of conducting the annual election of directors. The individual defendants were elected directors at the meeting.

On February 27, 1950, plaintiffs brought this action under sections 2236 et seq. of the Corporations Code of California 3 to determine the validity of the election of the individual defendants. Plaintiffs challenged the manner in which the election and balloting was conducted, the right of the secretary to determine the maximum number of proxy votes certain members were entitled to cast and the validity and effect of those cast and counted. No application or petition was filed by plaintiffs with the Home Loan Bank Board challenging the validity of the election.

The court adjudged that the election was null and void, of 'no force and effect,' for the reason it was conducted contrary to the charter and bylaws of defendant association and the laws of California, and that the individual defendants had not been elected to the office of director at the election, and ordered that a new election be called.

Defendants contend that plaintiffs have an administrative remedy which they have not initiated or exhausted, that under the Home Owners' Loan Act of 1933 and the rules and regulations adopted thereunder, jurisdiction over the subject matter is vested in the Home Loan Bank Board and the superior court had no jurisdiction. The contention must be upheld.

Where an administrative remedy is provided by statute, relief must be sought from the administrative body, and this remedy must be exhausted before the courts will act. Abelleira v. District Court of Appeal, 17 Cal.2d 280, 292, 109 P.2d 942, 132 A.L.R. 715. Exhaustion of administrative remedies is a jurisdictional prerequisite to resort to the courts. Abelleira v. District Court of Appeal, supra, 17 Cal.2d at page 293, 109 P.2d 942, 132 A.L.R. 715; United States v. Superior Court, 19 Cal.2d 189, 194, 120 P.2d 26. The doctrine of exhaustion of administrative remedies applies where a statute provides an administrative remedy, even though the terms of the statute do not make the exhaustion of the remedy a condition of the right to resort to the courts. First Nat. Bank of Greeley v. Board of County Com'rs, 264 U.S. 450, 44 S.Ct. 385, 68 L.Ed. 784, 788, 789. The doctrine, whenever applicable, requires not merely the initiation of prescribed administrative procedures; it requires pursuing them to their appropriate conclusion and awaiting their final outcome before seeking judicial intervention. Home Loan Bank Board v. Mallonee, 9 Cir., 196 F.2d 336; Aircraft & Diesel Equipment Corp. v. Hirsch, 331 U.S. 752, 767, 67 S.Ct. 1493, 91 L.Ed. 1796, 1806; Red River Broadcasting Co. v. Federal Communications Commission, 69 App.D.C. 1, 98 F.2d 282, 287, certiorari denied 305 U.S. 625, 59 S.Ct. 86, 83 L.Ed. 400. '[I]t lies within the power of the administrative agency to determine in the first instance, and before judicial relief may be obtained, whether a given controversy falls within the statutory grant of jurisdiction. United States v. Sing Tuck, 194 U.S. 161, 24 S.Ct. 621, 48 L.Ed. 917; Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 58 S.Ct. 459, 82 L.Ed. 638; Federal Trade Commission v. Claire Furnace Co., 274 U.S. 160, 47 S.Ct. 553, 71 L.Ed. 978; Federal Power Commission v. Metropolitan Edison Co., 304 U.S. 375, 58 S.Ct. 963, 82 L.Ed. 1408; South Porto Rico Sugar Co. v. Munoz, 1 Cir., 28 F.2d 820; 48 Yale L.J. 981, 992-995.' United States v. Superior Court, 19 Cal.2d 189, 195, 120 P.2d 26, 29. The importance of giving the administrative agency the first opportunity to determine the extent of its jurisdiction and to decide in a final way matters falling therein is discussed in Camp v. Herzog, 88 U.S.App.D.C. 373, 190 F.2d 605, and S.S.W., Inc. v. Air Transport Ass'n of America, D.C.Cir., 191 F.2d 658. See, also, Fahey v. Mallonee, 332 245, 67 S.Ct. 1552, 91 L.Ed. 2030, which held that before an action could be brought to enjoin a conservator of a federal savings and loan association appointed by the Board under the rules and regulations, the parties were first required to exhaust their administrative remedy before the Board.

The Home Owners' Loan Act of 1933 4 empowers the Home Loan Bank Board 'under such rules and regulations as it may prescribe, to provide for the organization, incorporation, examination, operation, and regulation' of federal savings and loan associations, and 'to issue charters therefor, giving primary consideration to the best practices of local mutual thrift and home-financing institutions in the United States.' § 1464(a). Italics added. Upon issuance of a charter, the association automatically becomes a member of the Federal Home Loan Bank of the district in which the association is located. § 1464(f). Each association is issued a standard, prescribed form of charter and bylaws. 5 Pertinent provisions of defendant-association's charter and bylaws relating to the subject matter of the action are set forth in the margin. 6 The charter provides that defendant association 'shall have such powers as are conferred by law and shall exercise its powers in conformity with the Home Owners' Loan Act of 1933 and all laws of the United States as they now are, or as they may hereafter be amended, and with the rules and regulations made thereunder which are not in conflict with this charter.'

The rules and regulations promulgated by the Board under authority of the Home Owners' Loan Act of 1933, which were in effect at the time of the challenged election, are found in Title 24, Code of Federal Regulations (1949 Ed.), Chapter 1, Subchapter C, Parts 141-150. They are comprehensive, explicit, and govern the operation of federal savings and loan associations from their inception to their dissolution. They have the force and effect of law and are binding on an association, its board of directors, and its members. Community Federal Savings & Loan Ass'n v. Fields, 8 Cir., 128 F.2d 705, 707.

Part 142.2 thereof provides: 'Any person who has made an application or petition to the Board pursuant to any provision of Parts 143, 144, 145, or 146 of this subchapter may request a hearing thereon, provided such application or petition has been denied or disapproved by the Board. At any time after the filing of any such application or petition and before consideration thereof by the Board, any interested person may request a hearing upon such application or petition. The Board may order a hearing in connection with the consideration of any matter arising under any provision of the rules and regulations in this subchapter, whether or not any request therefor has been made by any person. The Board may deny any request for, or dispense with, any hearing for which this section provides when, in its judgment, no need therefor exists.' (Italics added.)

The 'subchapter' referred to in the foregoing quotation, is 'Subchapter C,' covering the entire subject matter of the 'Federal Savings and Loan System [Revised].' Parts 141-150, inclusive, are all a part of Subchapter C. Part 144, entitled 'Charter and Bylaws,' contains the prescribed form of charter and bylaws. The charter defines the powers of the association, and the bylaws prescribe the rights and duties of the members with respect to the 'management of its property and regulation and government of its affairs.' Under Part 142.2 the Board may order a hearing in connection with the consideration of any matter arising under any provision of the rules and regulations, including matters arising under the charter and bylaws.

We think it is unmistakable that there is an administrative remedy available to plaintiffs before the Home Loan Bank Board....

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