Wisconsin Bankers Ass'n v. Mutual Savings & Loan Ass'n

291 N.W.2d 869, 96 Wis. 2d 438, 1980 Wisc. LEXIS 2593

• Court: Wisconsin Supreme Court
• Decided: May 13, 1980
• Docket: 77-347
• Status: Published

Opinions

WILLIAM G. CALLOW, J.

On this review, we consider the legality of Mutual Savings and Loan Association’s 'Supreme Account II.

I.

Mutual Savings and Loan Association of Wisconsin (Mutual) is a state chartered savings and loan association. It is the third largest savings and loan in the state. In September of 1974, Mutual wrote to the Wisconsin Commissioner of Savings and Loan advising him that it was considering offering, at some future date, a service called Supreme Account II. As characterized by the court of appeals, this account is “a service by which a savings and loan depositor can authorize payment from his savings account directly to a third party by issuing a negotiable sight draft drawn on his account and payable to the named payee.” On April 9, 1976, Mutual notified the Commissioner it was proceeding to implement the account. The letter outlined the legal support for the service and requested an opinion of the Commissioner with regard to its legality. On April 16, 1976, the Commissioner responded by a letter in which he concluded that there was an “absence of any prohibition [in the governing statutes] against the form of withdrawal you have proposed” and that the account was therefore legal. Mutual offered Supreme Account II to the public on May 14, 1976, becoming the first savings and loan association in Wisconsin to offer this service.

Each Mutual customer desiring a Supreme Account II makes an initial deposit of $100, executes a signature card and an account rules agreement, and then receives a supply of sight drafts or payment orders which may be drawn on the association and against the customer’s funds. The sight drafts provide spaces for the date, name of the payee, amount of the draft, and the depositor’s signature as drawer. Once the sight drafts are issued, they are collected by presentation to Mutual through the Milwaukee office of the Federal Reserve Bank of Chicago, with the aid of First Bank-Midland. The items are presented daily with a cash letter summary, and Mutual has until midnight of the day following presentment to advise the Federal Reserve of any items which are not properly payable.

Mutual’s customers who have opened such an account can fill in the drafts, sign, and deliver them to a payee in return for goods or services, to obtain cash, or otherwise negotiate them. The payee can negotiate the item or deposit it with his own financial institution so that the draft may be collected from Mutual. Withdrawals from a Supreme Account II are posted to the account as a cash withdrawal in the same fashion as they would be if the customer had personally come into a Mutual office. To accommodate the provisions of sec. 215.17, Stats., Mutual reserves, in the account rules agreement, the right to require thirty days’ notice prior to payment of the sight draft; in practice, this requirement is waived. The customer receives a monthly statement listing all account deposit and withdrawal transactions (whether accomplished by draft or otherwise) occurring during the statement period. The rate of earnings payable on funds held in a Supreme Account II was established by Mutual’s board of directors as zero percent.

Plaintiff Wisconsin Bankers Association (WBA) had discovered only a day or two before Mutual’s announcement and offering of Supreme Account II what Mutual was planning to do. It had heard that the Commissioner of Savings and Loan had authorized Mutual to offer the account. The WBA wrote the Commissioner on May 13, 1976, arguing that “any attempted action ... by a savings and loan association [to offer negotiable orders of withdrawal would be] ultra vires in nature.” (Emphasis in original.) The Deputy Commissioner replied that Mutual was not acting on the Commissioner’s authority but was merely taking advantage of the “broad statutory power to offer savings accounts without any statutory or administrative restrictions governing the form that those withdrawals may take” and “the absence of such restrictions on the use of [negotiable orders of withdrawal] in connection with savings accounts.”

On Monday, May 17, 1976, three days after Supreme Account II was announced and offered by Mutual, the WBA and two of its. members as representative plaintiffs commenced this class action on behalf of all commercial banks in Wisconsin, seeking temporary and permanent injunctions to prevent Mutual from offering Supreme Account II or any similar account. The circuit court granted a temporary restraining order pending hearing on the application for a preliminary injunction. Following an evidentiary hearing, the circuit court denied the temporary injunction and dissolved the restraining order. Mutual then resumed offering the account.

The action was then advanced for trial. After four days of testimony, the circuit court filed an opinion on August 17, 1977, concluding that the Supreme Account II was a legal account and denying the requested permanent injunction. Judgment, dismissing the complaint upon its merits, was entered on October 7, 1977.¹

The court of appeals affirmed the judgment of the circuit court. Wisconsin Bankers Asso. v. Mutual Savings & Loan Asso., 87 Wis.2d 470, 275 N.W.2d 130 (Ct. App. 1978). On March 26, 1979, we granted the plaintiffs’ petition for review.

On review, the plaintiffs argue that the Supreme Account II is not a savings account, as required by sec. 215.13(1), Stats.; that Mutual is illegally engaged in the banking business by offering the account; and that Mutual is not paying withdrawals from the account “to the owner” and “ [to] the saver,” as required by sec. 215.-17(1) and (4) (a). While we reject the plaintiffs’ first and second contentions, we hold that Mutual’s use of negotiable orders of withdrawal is inconsistent with the statutory mandate that withdrawals be paid “to the owner” and “[to] the saver.” Accordingly, we reverse.

II.

In the trial court, the plaintiffs presented extensive testimony by an expert witness regarding the meaning of the term “savings account.” As explained in that testimony, the commercially accepted definition and the ordinary meaning of the term “savings account” prescribe the existence of three characteristics: (1) a savings account is interest bearing; (2) it is subject to a requirement of prior notice of withdrawal; and (3) withdrawals from it may be paid only to its owner. Because the rate of earnings payable on funds held in a Supreme Account II was established as zero percent and because, the plaintiffs allege, withdrawals from a Supreme Account II are paid to anyone who presents the account owner’s draft, the plaintiffs claim the Supreme Account II is not a savings account within the meaning of sec. 215.13(1), Stats.; and Mutual is not allowed to accept payments on such an account.

We cannot agree. Rather than import the usage of the term’s generally accepted meaning, the legislature chose to restrict “savings account” by definition. Sec. 215.01(24), Stats., states that “‘[s]avings account’ means the monetary interest of the owner thereof in the aggregate of savings accounts in the association and consists of the withdrawal value of such interest.” This legal definition must be given effect. State v. Schaller, 70 Wis.2d 107, 110, 233 N.W.2d 416 (1975). “As a rule, ‘[a] definition which declares what a term “means” . . . excludes any meaning that is not stated.’ ” Colautti v. Franklin, 439 U.S. 379, 392 n. 10 (1979), quoting 2A Sands, Statutes and Statutory Construction, sec. 47.07 (4th ed. Supp. 1978). Thus on the issue of whether a Supreme Account II is a “savings account,” as defined in sec. 215.01(24), it is of no consequence that the rate of earnings payable on Supreme Account II is zero percent or that withdrawals may be paid to someone other than the account owner; these characteristics, while perhaps features of the term’s ordinary meaning, are not required by the statutory definition of the term.

The plaintiffs have never contended that the Supreme Account II does not meet the statutory definition of savings account. Nor could they successfully do so. We conclude that a Supreme Account II is a savings account as that term is employed in Chapter 215, Stats., and, consequently, that Mutual is authorized to accept deposits on such accounts, pursuant to sec. 215.13(1).

III.

The plaintiffs also contend Mutual’s offering the Supreme Account II constitutes the illegal conduct of a banking business. Sec. 224.03, Stats., makes it unlawful “for any person, copartnership, association, or corporation to do a banking business without having been regularly organized and chartered as a national bank, a state bank, a mutual savings bank, or a trust company bank.” The term “banking business” is defined in sec. 224.02:

“The soliciting, receiving, or accepting of money or its equivalent on deposit as a regular business by any person, copartnership, association, or corporation, shall be deemed to be doing a banking business, whether such deposit is made subject to check or is evidenced by a certificate of deposit, a pass book, a note, a receipt, or other writing, provided that nothing herein shall apply to or include money left with an agent, pending investment in real estate or securities for or on account of his principal.”

The plaintiffs assert that Supreme Account II is a “deposit . . . subject to check” and a deposit within the proscription of Chapter 224, Stats., and that the account is therefore illegal. We disagree.

In State ex rel. Rohn S. Mfg. Co. v. Industrial Comm., 217 Wis. 138, 258 N.W. 449 (1935), it was contended that an association, not chartered as a bank and unauthorized to do a banking business, was engaging in illegal banking in violation of secs. 224.02 and 224.03, Stats., by its solicitation and receipt of money on deposit. The association was licensed and authorized to engage in business as an “investment company” under secs. 216.01, 216.02 and 215.38 to 215.47, Stats. 1929. Sec. 216.01 then required that no corporation “doing business as a so-called investment . . . company, . . . and which . . . shall solicit payments to be made to . . . itself . . . , issuing therefor so-called bonds, shares, coupons, certificates of membership or other evidences of obligation or agreement” shall do any business in Wisconsin unless it shall have complied with the requirements of Chapter 215, Stats. We deemed it “manifest” that the association

“is to be licensed in Wisconsin under the statutes relating to building and loan associations, and is not to be licensed under the statutes relating to the doing of a banking business. Consequently, the mere soliciting and receiving of payments by an investment association, licensed, — as is the plaintiff association, — under sec. 216.01 and ch. 215, Stats., and its issuance therefor of written evidence of obligation or agreement, — to return to the owners thereof money or anything of value, are to be considered to be within the legitimate scope of the authorized business of such an investment company, as recognized by sec. 216.01, Stats., and are not to be deemed the doing of prohibited banking business. (Emphasis supplied.) Id. at 143-44.

Similarly, we conclude the prohibition of secs. 224.02 and and 224.03 against the acceptance of money on deposit presents no bar to Mutual’s offering Supreme Account II.

Sec. 215.13(1), Stats., expressly permits savings and loan associations to “ [a]ccept payments on savings accounts,” and, as we have already stated, a Supreme Account II is such a savings account. Thus the depository relationship to which the plaintiffs object, Mutual’s accepting payments on a Supreme Account II, is ‘to be considered to be within the legitimate scope of the authorized business” of a savings and loan association, and is “not to be deemed the doing of prohibited banking business.” State ex rel. Rohn S. Mfg. Co. v. Industrial Comm., supra at 143-44. The legality of the Supreme Account II must be determined with reference to the provisions of Chapter 215.

IV.

Sec. 215.13(4), Stats., provides that savings and loan associations may “[p]ay withdrawal requests of savings accounts, in part or in full, in accordance with s. 215.17.” Sec. 215.17(1) permits associations to pay withdrawals on its savings accounts and provides that the association “may pay to the owners of such savings accounts the withdrawal value thereof.” The statutes further provide that the association “shall . . . [p] ay the saver” upon receipt of the written withdrawal requests, sec. 215.17 (4) (a), and that “the saver shall be paid” the withdrawal request, sec. 215.17(4) (c). The plaintiffs contend Mutual’s use of sight drafts to effect withdrawals from Supreme Account II constitutes the payment of withdrawals to third persons, in violation of these statutory mandates.

The court of appeals rejected this argument holding that “the legislature’s provision that savings and loan depositor withdrawals be paid to the saver or owner is expressly complied with when a depositor’s draft, made payable to a third person, is honored by the savings and loan association upon which the draft is drawn.” Wisconsin Bankers Asso. v. Mutual Savings & Loan Asso., 87 Wis.2d at 502-03. Although the court found sec. 215.17, Stats., “unambiguous,” Id. at 493, the section was found to require construction and interpretation. The court of appeals concluded that the section’s provisions that withdrawals be paid “to the owner” and “ [to] the saver” do not restrict payments to a third party in light of the commercial and legal history of the “pay to” phrase, the nature of the depositor-association relationship, and an articulated “legislative policy in favor of business competition.” Id. at 498. We find this conclusion and reasoning incorrect.

In the absence of ambiguity in a statute, resort to judicial rules of interpretation and construction is not permitted, and the words of the statute must be given their obvious and ordinary meaning. State ex rel. Milwaukee County v. WCCJ, 73 Wis.2d 237, 241, 243 N.W.2d 485 (1976); Schoolway Transportation Co. v. Division of Motor Vehicles, 72 Wis.2d 223, 228, 240 N.W.2d 403 (1976). A statute, phrase, or word is ambiguous when capable of being interpreted by reasonably well-informed persons in either of two or more senses. In re Estate of Haese, 80 Wis.2d 285, 292, 259 N.W.2d 54 (1977). The plaintiffs assert the ordinary meaning of the phrases “pay to the owner” and “pay the saver” preclude payment to third parties; Mutual’s argument, accepted by the court of appeals, is that the phrase “pay to” has long possessed a meaning in commercial law² which allowed the transferability of an instrument bearing the phrase and that the statutes’ use of “pay to” does not require payment exclusively to the account owner. We conclude the phrase is ambiguous.

When a statute or part thereof is ambiguous, it is permissible to look to the legislative intent which is to be found in the language of the statute in relation to the statute’s context, scope, history, subject matter, and object intended to be accomplished. Wisconsin’s Environmental Decade v. Public Service Comm., 81 Wis.2d 344, 350, 260 N.W.2d 712 (1978). This precept in mind, we conclude the use of negotiable sight drafts to effectuate withdrawals from Supreme Account II contravenes the provisions of sec. 215.17, Stats.

We start with the proposition that the power of savings and loan associations to pay withdrawals is governed by sec. 215.13(4), Stats., which incorporates sec. 215.17. Chapter 215 is a comprehensive enactment, regulatory in nature. As such, its provisions are to be given expansive application, supplanting, rather than preserving, previously existing common law practices.

“Modern regulatory legislation, moreover, is generally regarded as a newly conceived system of legal arrangements to deal with newly emergent problems in society, entitled to liberal construction because of its remedial character and not subject to the rule of strict construction of statutes in derogation of the common law because its genesis and conception are wholly outside and apart from any common law frame of reference.”

Severity Savings & Loan Asso. v. Wauwatosa Colony, 71 Wis.2d 174, 179, 237 N.W.2d 729 (1976), quoting 3 Sands, Statutes and Statutory Construction, sec. 61.03 (4th ed. 1974). Thus withdrawals must be paid in accordance with sec. 215.17, notwithstanding any common law right to establish means of withdrawal by private contract.

Several factors persuade us that the plaintiffs’ position must be accepted. First, we disagree with the court of appeals’ conclusion that the historical definition of “pay to,” as used in commercial instruments, is of relevance in ascertaining the legislature’s intent in using that phrase where used in a statute governing withdrawals of savings accounts. We deem it more likely that the ordinary meaning of this phrase was intended. Mutual’s argument, if accepted, satisfies only the requirement of sec. 215.17(1), Stats., that associations “pay to the owners”; the commercial definition of “pay to” is of less assistance in meeting the requirements that the association “[p]ay the saver” and that “the saver shall be paid.” Sec. 215.17(4) (a) and (c). The ordinary meaning of the words employed dictates the conclusion that the provisions of sec. 215.17 are not complied with when a depositor’s draft, made payable to a third person, is honored by the savings and loan associations upon which the draft is drawn.³

Second, we reject the court of appeals’ analogy to the principle favoring the assignability of choses in action. Initially, we note the court expressly disavowed any direct application of the principle of assignability. Wisconsin Bankers Asso. v. Mutual Savings & Loan Asso., supra at 494 n. 17. However, the court of appeals referred to the principle as exemplifying a trend of increasing commercial flexibility, shared by both the legislature and courts, and found Mutual’s utilization of the sight draft to be consistent with the trend. Id. at 495. The existence of the trend indicated to the court of appeals that sec. 215.17, Stats., should not be construed to proscribe sight drafts in the absence of language strictly requiring such an interpretation. Id. This, in essence, is a variant of the derogation rule. “The maxim of construction is familiar, that a statute to abrogate or change any rule or principle of the common law, must be clearly expressed so as to leave no doubt of the intention of the legislature.” Orton v. Noonan and McNab, 29 Wis. 541, 545 (1872). See also: Page, Statutes in Derogation of Common Law: The Canon as an Analytical Tool, 1956 Wis. L. Rev, 78. For the rule to apply, (1) there must be a common law doctrine in existence, or potentially in existence, relevant to the issue presented by the parties; (2) the statute in issue must be one which, construed as the party pleading it contended, would operate to change the common law; and (3) the statute must be ambiguous on its face. These three shown, a court was then warranted in proceeding to interpret the statute narrowly, to have as little effect as possible in altering the common law. Id. at 97. In the case at bar, the common law trend favoring the assignability of choses in action is relevant only to the extent the relationship between association and depositor can be characterized as debtor-creditor. Case law⁴ and our own statutes⁵ indicate that this may not be appropriate. More important, sec. 215.17 is not susceptible to construction in light of the derogation rule. As the court of appeals correctly recognized, the section is regulatory in nature. Wisconsin Bankers Asso. v. Mutual Savings & Loan Asso., supra at 498-99. As such, it is entitled to a liberal construction and is not to be construed narrowly as in derogation of common law rules. Ante at 10. We conclude the court of appeals’ reliance on “a continually growing flexibility in the relations between financial institutions and their depositors respecting . . . choses in action” to be error. Wisconsin Bankers Asso. v. Mutual Savings & Loan Asso., supra at 493.

Similarly, we reject the court of appeals’ reliance on the “declaration of legislative policy in favor of business competition . . . found in sec. 133.01, Stats.” Id. at 498, 502. While statutes in pari materia may be construed together and compared with each other in order to ascertain the legislative intent, In Matter of Estate of Walker, 75 Wis.2d 93, 102, 248 N.W.2d 410 (1977), statutes which have no common aim or purpose and which do not relate to the same subject, thing, or person are not in pari materia. The antitrust statute, sec. 133.01, and sec. 215.17, Stats., are not in pari materia.

The court of appeals, in its consideration of a perceived legislative policy in favor of business competition and the trend toward flexibility in the relationship of financial institutions to their depositors, ignored traditional restraints on the judiciary’s assessment of policy to aid in the construction of legislative enactments. As aptly stated by the court of appeals, “the function of this court is to apply and interpret the statutes enacted by the legislature and not engage in an ad hoc economic construction that substitutes the judgment of the court for the act of the legislature.” Wisconsin Bankers Asso. v. Mutual Savings & Loan Asso., supra at 500. While legislative choice, as expressed in sec. 215.17, Stats., may indeed be unduly restrictive and retrogressive, statutory barriers to the continued expansion of commercial practices must be removed by the legislature. Accordingly, we are compelled to reverse. We hold that the provisions of sec. 215.17 preclude the use of sight drafts payable to third parties to effectuate withdrawals from savings accounts.

On appellate review, plaintiffs have sought “a declaration from the court that Supreme [Account] II is illegal.” Appellants’ Brief at 38. Accordingly, the action is akin to one requesting declaratory relief. Thus we declare Supreme Account II illegal as inconsistent with the provisions of sec. 215.17, Stats.

By the Court. — Rights declared; the decision of the Court of Appeals is reversed and cause remanded to the Circuit Court for further proceedings not inconsistent with this opinion.

Coffey, J., took no part.

1 In an order dated June 23, 1976, the trial court denied Mutual’s motion to dismiss for the plaintiffs’ lack of standing. Mutual did not appeal from the denial of its motion to dismiss, and the plaintiffs’ standing to bring this action has not been challenged in this court or in the court of appeals.

As we have recently noted, Wisconsin courts generally require that a plaintiff possess standing not as a jurisdictional prerequisite but rather as a matter of sound judicial policy. State ex rel. First National Bank of Wisconsin Rapids v. M & I Peoples Bank of Coloma, 95 Wis.2d 303, 308 n. 5, 290 N.W.2d 321, 325 n. 5 (1980). While we are not foreclosed from the question of the plaintiffs’ standing by Mutual’s failure to present the issue (see, e.g., Scharping v. Johnson, 32 Wis.2d 383, 395, 145 N.W.2d 691 (1966); Appendices and Briefs, Vol. 2958, No. 7), we do not believe resolution of the case on these grounds would be appropriate, and we will review the decision of the court of appeals on the merits. However, in doing so, we express no view as to whether any of the plaintiffs possess standing to question the legality of Mutual’s offering the Supreme Account II.

2 Sec. 990.01(1), Stats., provides: “All words and phrases shall be construed according to common and approved usage; but technical words and phrases and others that have a peculiar meaning in the law shall be construed according to such meaning.”

3 In its decision, the court of appeals stated that various other withdrawal practices employed by Mutual were distinguishable from Supreme Account II as each involved “the direct participation and superintendence of the . . . depositor” in the transaction in which the withdrawal was requested and paid. Wisconsin Bankers Asso. v. Mutual Savings & Loan Asso., 87 Wis.2d 470, 490, 275 N.W.2d 130 (Ct. App. 1978). The plaintiffs have not challenged this statement; indeed, they maintain “that none of these practices were payments to persons other than the account owner, and that they thus complied with the ‘pay to the owner’ requirement of sec. 215.17.” Appellants’ Supplemental Brief at 16. Because the court of appeals’ statement was not challenged and was not necessary to that court’s decision, we do not consider its correctness.

4 See: Wisconsin Bankers Association v. Robertson, 190 F. Supp. 90, 93 (D.D.C. 1960), aff’d. 294 F.2d 714 (D.C. Cir. 1961).

5 See, e.g.: Secs. 215.17(3) (b) and 215.32(12) (c), Stats.