Redwood Thrift of California v. Stephenson

DRAPER, J. Appellant is an industrial loan corporation. Respondent Commissioner of Corporations, on January 9,1958, ordered appellant to make good an impairment of capital, to comply with the law limiting individual loans, and to discontinue unsafe and injurious practices. (Fin. Code, §§ 18814, 18815.) Appellant was ordered to show cause why such orders should not be made final. (Fin. Code, § 18816.) Following administrative hearing, and upon recommendation of the hearing officer, a final order was issued by the commissioner. Upon appellant’s petition, the superior court issued alternative writ of mandate and enjoined the commissioner from carrying out his order and from interfering with appellant’s business pending determination of the mandamus proceeding. After [283]hearing and upon the record of the administrative proceeding, the trial court denied peremptory writ, discharged the alternative writ, and dismissed its stay order This appeal follows.

Appellant’s principal contention is that the evidence does not support the finding of the hearing officer and of the trial court that appellant’s capital was impaired. It is conceded that in determining what are "reasonable reserves” (Fin. Code, § 18616), it is proper to "age” the accounts and to require greater reserves for accounts which have been delinquent for longer periods of time A regulation then in force required establishment of delinquency schedules grouping accounts which are three to six months delinquent, those which are six to twelve months delinquent, and those delinquent for more than one year. (Cal. Admin. Code, tit. 10, § 1236.) Appellant does not contend that this age grouping is exclusive, but argues that to require a reserve for accounts less than three months delinquent the commissioner must show that such requirement is "in accordance with standard accounting and business practice prevailing in the banking business.” (Fin. Code, § 18616.) In fact, the commissioner required a 10 per cent reserve for accounts 0-90 days delinquent. This reserve amounts to $87,046.72 of the total reserves required by the commissioner's order. The trial court found that there was no evidence of "standard accounting and business practice prevailing in the banking business” to support the requirement of a 10 per cent reserve for such accounts. However, the trial court also found, on substantial evidence, that such reserve requirement was based on "the standard of sound accounting practices generally in use . . . with other industrial loan companies similarly situated ...” The court concluded that the absence of specific evidence of banking practice, together with errors of calculation, were not substantial and "that justice is best served in this case by denying the petition. ’ ’ This determination is clearly warranted by the evidence that appellant’s capital was impaired by more than $119,000, even after giving effect to all claims of appellant. We join in the trial court’s conclusion.