U.S. Supreme Court HOPKINS FEDERAL SAVINGS & LOAN ASS'N v. CLEARY, 296 U.S. 315 (1935)

[Page 296 U.S. 315, 332]

& Loan Association, held August 20, 1934, 7,286 shares were voted in favor of the change and 66 against it; shares outstanding and not represented numbered 3,533. At the meeting of Northern Building & Loan Association, held August 14, 1934, 23,291 shares were voted in favor of the change and 11 against it; shares outstanding and not represented numbered 12,006.

The state of Wisconsin, acting through its banking commission, came forward at this point to check the process of conversion. It took the position (1) that section 5(i) of the Home Owners' Loan Act was subject to an implied condition whereby no conversion was to be permitted in contravention of local laws; and (2) that if this reading of the section were to be rejected as erroneous, the statute to that extent was void under the Tenth Amendment as an unconstitutional trespass upon the powers of the states. Other provisions of the Constitution, believed not to be material, were invoked at the same time.

The Supreme Court of Wisconsin placed its decision upon the first of these positions to the exclusion of the other. It read the federal statute as subject to the implied condition contended for by the state officials. It did this to avoid embarrassing and doubtful questions of constitutional power, which it described without deciding. To determine the meaning and, if need be, the validity of an important federal statute writs of certiorari were granted by this court. [Footnote 4] 295 U.S. 721, 55 S.Ct. 925

[Page 296 U.S. 315, 339]

exercise of power reasonably necessary for the maintenance by the central government of other associations created by itself in furtherance of kindred ends. [Footnote 6]

[Page 296 U.S. 315, 341]

shown. Creditors other than shareholders have not been heard from at all. To these nonvocal classes the parens owes a duty which it is free to vindicate by suit. [Footnote 7] Hudson Water Co. v. McCarter, 209 U.S. 349, 355, 356 S., 28 S.Ct. 529, 14 Ann.Cas. 560; Kansas v. Colorado, supra; Georgia v. Tennessee Copper Co., supra; New York v. New Jersey, supra; Pennsylvania v. West Virginia, supra.

[Page 296 U.S. 315, 343]

another was to be condemned as ultra vires. The meaning of the statute was thus the pivot of the controversy. The argument in the briefs was directed in the main to the formal correctness of the pleadings, the validity of the act being taken for granted. The assumption was one that could hardly be avoided when the controversy was viewed in the setting of the facts. Louisiana, like the defendant shareholder, had apparently acquiesced in the attempt of the central government to take over the state banks. The time had gone by to vindicate her majesty. What she might have done if she had been vigilant is a question not before us. Distinctions may conceivably exist between the power of the Congress in respect of banks of issue and deposit and its power in respect of associations to encourage industry and thrift. Whether that be so or not, all that was said in Casey v. Galli as to the condition of consent was unnecessary to the decision if it was meant to do more than define the meaning of the statute. We cannot accept it as determining the constitutional rights and privileges of a party not then before the court, least of all when it appears that constitutional rights and privileges were not invoked or argued.

Confining ourselves now to the precise and narrow question presented upon the records here before us, we hold that the conversion of petitioners from state into federal associations is of no effect when voted against the protest of Wisconsin. Beyond that we do not go. No question is here as to the scope of the war power or of the power of eminent domain or of the power to regulate transactions affecting interstate or foreign commerce. The effect of these, if they have any, upon the powers reserved by the Constitution to the states or to the people will be considered when the need arises.

The judgments are

Affirmed. Footnotes

Footnote 1 Cf. Bibb County Loan Association v. Richards, 21 Ga. 592, 595, 596; First National Bank v. County of Dawson, 66 Mont. 321, 335, 213 P. 1097; Washington Investment Association v. Stanley, 38 Or. 319, 330, 331, 63 P. 489, 58 L.R.A. 816, 84 Am.St.Rep. 793; Union Sav. & Inv. Co. v. Salt Lake County, 44 Utah, 397, 404, 405, 140 P. 221, Ann.Cas. 1917A, 821; Becket v. Uniontown Building & Loan Association, 88 Pa. 211, 216; Miller v. Prudential Banking & Trust Co., 63 W.Va. 107, 110, 59 S.E. 977; Mutual Building & Savings Association v. Wilkinson (D.C.) 8 F.(2d) 183; Wilkinson v. Mutual Bldg. & Sav. Ass'n (C.C.A.) 13 F.(2d) 997, 998.

Footnote 2 These restrictions should be compared with those imposed by the Home Owners' Loan Act upon federal associations organized for kindred purposes. 48 Stat. 128, 132, 12 U.S.C. 1464(c), as amended in 1935, 12 USCA 1464(c).

Footnote 3 The following is the text of this subdivision before the date of the amendment:'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 its stockholders as provided by the law under which it operates; 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.' (48 Stat. 134).

Footnote 4 At the same time we dismissed the appeals that had been taken from the judgments, the remedy of appeal being held to be inappropriate for the reason that the validity of the statute was untouched by the decision brought here for review. Section 237(a), Judicial Code, 43 Stat. 936, 937, 28 USCA 344(a).

Footnote 5 Complementary statutes permitting the conversion are common in the states. See, e.g., Mich. Comp. Laws, 1929, 11957; N.Y. Banking Law ( McKinney's Consol. Laws, c. 2) 137; Purdon's PS Pa., title 7, c. 14, 431 et seq.; Wis. Stats. 1933, 221.21.

Footnote 6 The court has upheld the validity of a statute whereby national banks are given the same power as state banks to act as executors or administrators, to the end that the two classes of banks may compete on equal terms. First National Bank v. Union Trust Co., 244 U.S. 416, 37 S.Ct. 734, L.R.A. 1918C, 283, Ann.Cas. 1918D, 1169. This is far from a holding that the function of acting as executors and administrators may be withdrawn from the state banks and lodged by the Congress in the national banks alone.

Footnote 7 The fact is not ignored, but is thought to be unimportant, that the vote in favor of conversion at two of the three meetings, being more than two-thirds of the outstanding shares of stock, would have been sufficient to authorize a voluntary dissolution at a meeting duly called to consider such action. The same shareholders who voted to go on with the business under a charter from the federal government might have opposed dissolution as inexpedient or wasteful. Moreover, liquidation would then have followed under the supervision of the state.