                                       No. 12766

       I N THE SUPREME COURT O THE STATE O M N A A
                              F           F OTN




GATE C I T Y SAVINGS AND L A ASSOC.
                          ON                        , et    a 1. ,

                               P l a i n t i f f s and Respondents,
       -vs    -
HAROLD PITTS , DIRECTOR, DEPARTMENT OF
BUSINESS REGULATION O THE STATE O MONTANA, e t a l . ,
                      F            F

                    Defendants,
M N A A SAVINGS & L A LEAGUE, GREAT FALLS
 OTN               ON
FEDERAL SAVINGS & L A ASSOC. e t a l . ,
                   ON

                              Defendant i n I n t e r v e n t i o n and A p p e l l a n t s .



Appeal from:         D i s t r i c t Court o f t h e F i r s t J u d i c i a l D i s t r i c t ,
                     Honorable P e t e r G. Meloy, Judge p r e s i d i n g .

Counsel of Record:

     For Appellants :

          Hon. Robert L. Woodahl, A t t o r n e y G e n e r a l , H e l e n a ,
           Montana
          Lon J . Maxwell, A s s i s t a n t A t t o r n e y G e n e r a l , a r g u e d ,
           Helena, Montana
          Church, H a r r i s , Johnson & W i l l i a m s , G r e a t F a l l s ,
           Montana
          C h a r l e s C. Love11 a r g u e d , G r e a t F a l l s , Montana

     F o r Respondents:

          L o b l e , P i c o t t e , L o b l e , Helena, Montana
          P e t e r C. Pauly a r g u e d , and Henry Loble a r g u e d ,
           Helena, Montana



                                                    Submitted:         March 3 , 1975

                                                         Decided:       APR   - 8 1975
Filed: fiPR       - 8 1975
Mr.    J u s t i c e Wesley C a s t l e s d e l i v e r e d t h e O p i n i o n o f t h e C o u r t .


             T h i s i s a n a p p e a l by d e f e n d a n t H a r o l d P i t t s , D i r e c t o r

o f t h e Department of B u s i n e s s R e g u l a t i o n o f t h e s t a t e o f Montana

( h e r e i n a f t e r r e f e r r e d t o a s D i r e c t o r ) , and i n t e r v e n i n g d e f e n d -

a n t s , Nontana S a v i n g s      &   Loan League, G r e a t F a l l s F e d e r a l S a v i n g s

&   Loan A s s o c i a t i o n and F i r s t F e d e r a l S a v i n g s and Loan A s s o c i a t i o n ,

f r o m a judgment and d e c r e e o f t h e d i s t r i c t c o u r t , Lewis and C l a r k

County, i n f a v o r o f p l a i n t i f f s G a t e C i t y S a v i n g s and Loan A s s o c i a -

t i o n ( h e r e i n a f t e r r e f e r r e d t o a s G a t e C i t y ) , F i d e l i t y S a v i n g s and

Loan A s s o c i a t i o n ( h e r e i n a f t e r r e f e r r e d t o a s F i d e l i t y ) and Glen-

d i v e B u i l d i n g and Loan A s s o c i a t i o n ( h e r e i n a f t e r r e f e r r e d t o a s

Glendive).

             G a t e C i t y commenced t h i s a c t i o n a g a i n s t J o h n A. Dowdall,

t h e n D i r e c t o r o f t h e S t a t e Department o f B u s i n e s s R e g u l a t i o n ,

u n d e r t h e p r o v i s i o n s o f t h e Uniform D e c l a r a t o r y Judgments A c t ,

s e c t i o n s 93-5901-93-8916,            R.C.M.      1947, s e e k i n g t o have t h e d i s -

t r i c t c o u r t c o n s t r u e t h e p r o v i s i o n s o f T i t l e 7 , R.C.Y.         1947,

g o v e r n i n g t h e o p e r a t i o n s and a c t i v i t i e s o f b u i l d i n g and l o a n

a s s o c i a t i o n s i n t h e s t a t e o f Montana and t o o v e r r u l e two o f f i c i a l

o p i n i o n s o f t h e Montana a t t o r n e y g e n e r a l .

             On m o t i o n , Montana S a v i n g s and Loan League, G r e a t F a l l s

Federal Savings            &   Loan A s s o c i a t i o n , and F i r s t F e d e r a l S a v i n g s

and Loan A s s o c i a t i o n were g r a n t e d l e a v e t o i n t e r v e n e .            The d i s -

t r i c t c o u r t o r d e r e d Harold P i t t s , s u c c e s s o r i n o f f i c e t o John A.

Dowdall, s u b s t i t u t e d a s d e f e n d a n t .       F i d e l i t y and G l e n d i v e w e r e

o r d e r e d j o i n e d a s i n d i s p e n s a b l e p a r t i e s p l a i n t i f f , pursuant t o

Rule 1 9 , M.K.Civ.P.              The c a u s e w a s s u b m i t t e d t o t h e d i s t r i c t
c o u r t on a n a g r e e d s t a t e m e n t o f f a c t s .

             The d i s t r i c t c o u r t r u l e d , i n s u b s t a n c e , t h a t t h e D i r e c t o r

was a u t h o r i z e d t o c o n s i d e r G a t e C i t y ' s a p p l i c a t i o n t o d o b u s i n e s s

i n Montana a n d t o merge w i t h F i d e l i t y and G l e n d i v e ; a n d , t h e l a w s
of Montana p e r m i t t h e e s t a b l i s h m e n t , maintenance and o p e r a t i o n
o f b r a n c h o f f i c e s i n Montana by f o r e i g n o r d o m e s t i c b u i l d i n g and

loan associations.                 The D i r e c t o r and i n t e r v e n o r s a p p e a l .

              Gate C i t y i s a s a v i n g s and l o a n a s s o c i a t i o n i n c o r p o r a t e d
under t h e laws of t h e s t a t e o f North Dakota.                           Its principal place

of b u s i n e s s i s F a r g o , North Dakota, w i t h e i g h t branch o f f i c e s i n
North Dakota.             F i d e l i t y and G l e n d i v e a r e s a v i n g s and l o a n a s s o -

c i a t i o n s i n c o r p o r a t e d under t h e laws of t h e s t a t e of Montana.

T h e i r o f f i c e s a r e l o c a t e d r e s p e c t i v e l y a t G r e a t F a l l s and Glen-

d i v e , Montana.

              On May 1 0 , 1972, Gate C i t y e n t e r e d i n t o two s e p a r a t e

a g r e e m e n t s of merger w i t h F i d e l i t y and G l e n d i v e w i t h t h e i n t e n t

t o c o n t i n u e t o o p e r a t e t h e e x i s t i n g o f f i c e s a t G r e a t F a l l s and

G l e n d i v e , i f and when t h e mergers became e f f e c t i v e .                        On J u n e 8,

1972, G a t e C i t y f i l e d a n a p p l i c a t i o n , w i t h s u p p o r t i n g documents,

w i t h t h e D i r e c t o r s e e k i n g p e r m i s s i o n t o c o n d u c t s a v i n g s and l o a n

a c t i v i t i e s i n t h e s t a t e of Nontana and p e r m i s s i o n t o merge w i t h

F i d e l i t y and G l e n d i v e .    The a p p l i c a t i o n t o merge was c o n d i t i o n e d

upon t h e c o n s e n t of t h e members and s h a r e h o l d e r s of t h e i n s t i t u -

t i o n s i n v o l v e d ; t h e c o n s e n t of t h e D i r e c t o r ; t h e a p p r o v a l of t h e

F e d e r a l Home Loan Bank Board ( h e r e i n a f t e r r e f e r r e d t o a s F H L B B ) ;

and i s s u a n c e of i n s u r a n c e of a c c o u n t s by t h e F e d e r a l S a v i n g s and

Loan I n s u r a n c e C o r p o r a t i o n .
             On J u l y 1 0 , 1972, D i r e c t o r Dowdall r e q u e s t e d a n a t t o r n e y

g e n e r a l ' s o p i n i o n c o n c e r n i n g Gate C i t y ' s a p p l i c a t i o n .     Attorney

G e n e r a l Woodahl r u l e d t h a t Gate C i t y ' s proposed merger was con-
t r a r y t o Montana law, 3 4 Opinions of t h e A t t o r n e y G e n e r a l , No. 5 3 .
The o p i n i o n r u l e d t h e a p p l i c a t i o n was d e f i c i e n t i n t h a t t h e pro-
posed merger had n o t been r a t i f i e d by t w o - t h i r d s of t h e members
of e a c h of t n e t h r e e a s s o c i a t i o n s i n v o l v e d p r i o r t o t h e submis-

s i o n of t h e a p p l i c a t i o n t o t h e D i r e c t o r f o r h i s a p p r o v a l .         It

r e l i e d upon a f o r m a l o p i n i o n i s s u e d by A t t o r n e y G e n e r a l Anderson
which h e l d t h a t b r a n c h s a v i n g s and l o a n a s s o c i a t i o n s a r e p r o h i b -

i t e d by Montana law, 29 Opinions o f t h e A t t o r n e y G e n e r a l , No. 2 .

              On October 1 2 , 1972, on t h e b a s i s of A t t o r n e y G e n e r a l

Woodahl's o p i n i o n , D i r e c t o r Dowdall d e n i e d Gate C i t y ' s a p p l i c a -

tion.       This a c t i o n followed.

              The i s s u e s i n v o l v e d on a p p e a l a r e :

              (1) Whether t h e d i s t r i c t c o u r t had j u r i s d i c t i o n of t h e

s u b j e c t m a t t e r of t h e c a s e ?

              (2)     Whether Gate C i t y ' s a p p l i c a t i o n was d e f i c i e n t i n t h a t

t h e proposed merger had n o t been r a t i f i e d by t h e members of e a c h

of t h e a s s o c i a t i o n s i n v o l v e d , p r i o r t o i t s s u b m i s s i o n t o t h e D i r -

ector?

              (3)     Whether a North Dakota c h a r t e r e d s a v i n g s and l o a n

a s s o c i a t i o n may merge w i t h two Montana c h a r t e r e d s a v i n g s and

l o a n a s s o c i a t i o n s and m a i n t a i n t h e i r s e p a r a t e e x i s t i n g f a c i l i t i e s ?

             I s s u e 1, whether t h e d i s t r i c t c o u r t had j u r i s d i c t i o n ;             we

h o l d it d i d .      The D i r e c t o r ' s c o n t e n t i o n i s t h a t Gate C i t y s o u g h t

merely a n a d v i s o r y o p i n i o n from t h e d i s t r i c t c o u r t and t h e o n l y

way Gate C i t y c o u l d p r e s e n t a j u s t i c i a b l e c o n t r o v e r s y t o t h a t

c o u r t would be i f it had f i r s t s e c u r e d t h e a p p r o v a l of t h e merger

by FHLBB.           R e l y i n g upon 1 2 U.S.C.          S1730a and 1 2 C.F.R.                S S 556.5(b) (2)

and 563.22,          t h e D i r e c t o r t h e n a r g u e s t h e r e i s a b s o l u t e l y no p o s s i -

b i l i t y t h e FHLBB would approve t h i s merger a c r o s s s t a t e b o u n d a r i e s .

             The s h o r t answer t o t h e D i r e c t o r ' s c o n t e n t i o n i s t h a t we

a r e l i v i n g i n a f e d e r a l system.            Gate C i t y ' s proposed merger i s

governed by f e d e r a l and s t a t e law.                  Pursuant t o s e c t i o n 7-113(22),

R.C.M.      1947, t h e proposed merger must be approved by t h e D i r e c t o r .

I t a l s o must be approved by t h e FHLBB, a t l e a s t i n s o f a r a s i t

i n v o l v e d a n i n c r e a s e i n i n s u r a n c e of a c c o u n t s .      ( F i d e l i t y i s an

uninsured a s s o c i a t i o n ) .

             Gate C i t y had t o s t a r t somewhere i n s e e k i n g a p p r o v a l of
i t s proposed merger, whether it be t h e D i r e c t o r o r t h e FHLBB.

That Gate C i t y s t a r t e d w i t h t h e D i r e c t o r , r a t h e r t h a n t h e FHLBB,

does not render t h i s an advisory, n o n j u s t i c i a b l e controversy.

I n 1 2 C.F.R.        §   5 7 1 . 5 ( b ) ( l ) , t h e FHLBB s t a t e s i t s g e n e r a l p o l i c y

c o n c e r n i n g merger p r o p o s a l s :

             "The l e g a l i t y of a proposed merger i s a precon-
             d i t i o n t o f u r t h e r c o n s i d e r a t i o n by t h e Board."

I n making t h a t d e c i s i o n , t h e Board l o o k s t o " a p p l i c a b l e law".

I n l i g h t of 1 2 C . E . R .      §    571.5 and t h e two a t t o r n e y g e n e r a l

o p i n i o n s h e r e t o f o r e mentioned, Gate C i t y ' s d e c i s i o n t o f i r s t p u r -

s u e i t s s t a t e r e m e d i e s a p p e a r s t o be r e a s o n a b l e .

              I t i s n o t n e c e s s a r y t o i n q u i r e i n t o , nor d e c i d e , whether

Gate C i t y w i l l succeed i n o b t a i n i n g FHLBB a p p r o v a l of t h e Pro-

posed merger.             That d e c i s i o n w i l l be made i n any e v e n t by t h e

FHLBB, w i t h p o s s i b l e a p p e a l t o t h e f e d e r a l c o u r t s .           W s h a l l not
                                                                                            e

p r e m a t u r e l y f o r e c l o s e Gate C i t y ' s f e d e r a l r e m e d i e s .

              I s s u e 2 , i s t n e D i r e c t o r ' s contention t h a t s e c t i o n 7-113(22),

R.C.M.      1947, mandates t h a t t h e merger a g r e e m e n t s be r a t i f i e d by

t w o - t h i r d s of t h e members of e a c h of t h e t h r e e a s s o c i a t i o n s i n -

volved b e f o r e t h e a p p l i c a t i o n of merger may be f i l e d and a c t e d

upon by t h e D i r e c t o r .           That s e c t i o n r e a d s :

             "Any two ( 2 ) o r more b u i l d i n g and l o a n a s s o c i a -
             t i o n s , by and w i t h t h e c o n s e n t and a p p r o v a l of
             t h e s u p e r i n t e n d e n t of banks, [now t h e D i r e c t o r ] ,
             may c o n s o l i d a t e and u n i t e and become i n c o r p o r -
             a t e d i n one (1) body, w i t h o r w i t h o u t any d i s -
             s o l u t i o n o r d i v i s i o n of t h e f u n d s o r p r o p e r t y of
             any such a s s o c i a t i o n , o r any s u c h a s s o c i a t i o n
             may t r a n s f e r i t s engagements, f u n d s and p r o p e r t y
             t o any l i k e a s s o c i a t i o n upon s u c h t e r m s a s may
             be a g r e e d upon by a m a j o r i t y v o t e of t h e r e s p e c -
             t i v e board of d i r e c t o r s , and r a t i f i e d by a two-
             t h i r d s (2/3) v o t e of t h e s h a r e s p r e s e n t and v o t i n g
             i n p e r s o n o r by proxy a t a s p e c i a l meeting o r
             m e e t i n g s o f t h e s t o c k h o l d e r s of t h e r e s p e c t i v e
             a s s o c i a t i o n s convened f o r t h a t p u r p o s e , upon
             n o t i c e g i v e n a s p r o v i d e d by law, s a i d n o t i c e t o
             s t a t e t h e o b j e c t of t h e meeting.            No such t r a n s f e r
             s h a l l p r e j u d i c e any r i g h t o f any c r e d i t o r of
             such a s s o c i a t i o n . "

There i s n o t h i n g i n s e c t i o n 7 - 1 1 3 ( 2 2 ) , R.C.X.            1947, t o i n d i c a t e

t h a t t h e t w o - t h i r d s v o t e of t h e s h a r e h o l d e r s must p r e c e d e t h e
c o n s e n t of t h e D i r e c t o r , n o r a l t e r n a t i v e l y , t h a t t h e D i r e c t o r ' s

c o n s e n t must p r e c e d e t h e s h a r e h o l d e r s ' v o t e .       E i t h e r may p r e c e d e

the other.           I n a s e n s e a p p e l l a n t ' s i s s u e 2 i s moot, s i n c e t h e

merger agreements have s i n c e been r a t i f i e d by t w o - t h i r d s of t h e

members o f e a c h of t h e t h r e e a s s o c i a t i o n s .

              Gate C i t y h a s complied w i t h t h e r e q u i r e m e n t s of s e c t i o n s

7-131 and 7-137,             R.C.M.       1947.       Gate C i t y ' s a p p l i c a t i o n shows

t h a t i t was a p p l y i n g f o r a c e r t i f i c a t e of a u t h o r i t y t o c o n d u c t

s a v i n g s and l o a n a c t i v i t i e s i n t h e s t a t e of Montana, a precon-

d i t i o n t o b o t h d o i n g b u s i n e s s i n Montana and any a c t i o n by t h e

D i r e c t o r on t h e merger.

              I n t e r v e n o r s r a i s e t h e i s s u e t h a t F i d e l i t y and G l e n d i v e

s h o u l d have j o i n e d i n t h e a p p l i c a t i o n f o r merger.               W e agree.

Gate C i t y ' s a p p l i c a t i o n asked f o r two t h i n g s , p e r m i s s i o n t o do

b u s i n e s s i n t h e s t a t e o f Montana and p e r m i s s i o n t o merge w i t h

F i d e l i t y and Glendive.             I n f u r t h e r proceedings, t h i s joinder
s h o u l d be made.

             The h e a r t of t h e c o n t r o v e r s y i s a p p e l l a n t ' s i s s u e 3:

Whether a North Dakota c h a r t e r e d s a v i n g s and l o a n a s s o c i a t i o n

may merge w i t h two Montana c h a r t e r e d s a v i n g s and l o a n a s s o c i a -

t i o n s and m a i n t a i n t h e i r s e p a r a t e e x i s t i n g f a c i l i t i e s ?     W hold
                                                                                                   e

t h a t a North Dakota c h a r t e r e d s a v i n g s and l o a n a s s o c i a t i o n may

merge w i t h two Montana c h a r t e r e d s a v i n g s and l o a n a s s o c i a t i o n s

and m a i n t a i n t h e i r s e p a r a t e e x i s t i n g f a c i l i t i e s .     S e c t i o n 7-130,

R.C.M.      1947, r e a d s i n p e r t i n e n t p a r t :

              "The p r o v i s i o n s of t h i s a c t s h a l l a p p l y t o and
              be e n f o r c e a b l e a g a i n s t a l l c o r p o r a t i o n s , p e r s o n s ,
             firms, partnerships, associations, trustees o r
             c o m b i n a t i o n s of p e r s o n s w h a t s o e v e r , whether
             f o r e i g n o r d o m e s t i c * * *".          (Emphasis s u p p l i e d . )

Although s e c t i o n 7 - 1 1 3 ( 2 2 ) , R.C.M.            1947, was n o t a p a r t of " t h i s

a c t " r e f e r r e d t o i n s e c t i o n 7-130,         t h e g r e a t b u l k of T i t l e 7 ,

R.C.M.      1947, was.           The o b v i o u s l e g i s l a t i v e i n t e n t was t h a t f o r e i g n
and d o m e s t i c s a v i n g s and l o a n a s s o c i a t i o n s be t r e a t e d a l i k e .
Thus, t h e f a c t Gate C i t y i s o r g a n i z e d u n d e r t h e l a w s o f N o r t h

D a k o t a , r a t h e r t h a n t h e l a w s o f Montana, i s i m m a t e r i a l .

              S e c t i o n 7 - 1 1 3 ( 2 2 ) , R.C.M.     1947, r e a d s i n p e r t i n e n t p a r t :

             "Any two ( 2 ) o r more b u i l d i n g and l o a n a s s o -
             c i a t i o n s * * * may c o n s o l i d a t e and u n i t e and be-
             come i n c o r p o r a t e d i n one (1) body * * * w i t h o u t
             a n y d i s s o l u t i o n o r d i v i s i o n of t h e f u n d s o r
             p r o p e r t y of any such a s s o c i a t i o n * * * . "

T h i s i s e x a c t l y what G a t e C i t y , F i d e l i t y , and G l e n d i v e s e e k t o
do.      The s t a t u t e p e r m i t s them t o d o i t .

             The a p p e l l a n t D i r e c t o r ' s r e l i a n c e on s e c t i o n 7-102,

R.C.M.      1947, f o r t h e p r o p o s i t i o n t h a t Gate C i t y ' s p r i n c i p a l
p l a c e o f b u s i n e s s must be i n Montana i s n i s p l a c e d .                 That s e c t i o n

r e l a t e s t o what m u s t be i n c l u d e d i n a r t i c l e s o f i n c o r p o r a t i o n o f
p r o s p e c t i v e c o r p o r a t i o n s s e e k i n g t o be i n c o r p o r a t e d u n d e r t h e

l a w s o f Montana.           Gate C i t y i s a l r e a d y i n c o r p o r a t e d under t h e

l a w s o f N o r t h Dakota.           S e c t i o n 7-131,      R.C.M. 1 9 4 7 , c l e a r l y p r o v i d e s

t h a t a f o r e i g n a s s o c i a t i o n may have a p r i n c i p a l p l a c e of b u s i n e s s

b o t h w i t h i n and w i t h o u t Montana.
              T h i s o p i n i o n s h a l l c o n s t i t u t e a d e c l a r a t o r y judgment.          Each

p a r t y s h a l l b e a r i t s own c o s t s .


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                                                                     Justice




   Chief J u s t i c e
