No. 14277 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

IN THE MATTER OF THE APPLICATION FOR 

AUTHORITY TO CONDUCT SAVINGS AND LOAN 

ACTIVITIES IN THE STATE OF MONTANA BY 

GATE CITY SAVINGS AND LOAN ASSOCIATION 

OF FARGO, NORTH DAKOTA. 

Appeal from: District Court of the First Judicial District, 

Honorable L. C. Gulbrandson, Judge presiding. 

Counsel of Record: 

For Appellants: 

Hooks and Budewitz, Townsend, Montana 

Patrick F. Hooks argued, Townsend, Montana 

Scott, Linnell, Neill and Newhall, Great Falls, Montana 

Kenneth Neill argued, Great Falls, Montana 

Loble and Pauly, Helena, Montana 

Peter Pauly argued, Helena, Montana 

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For Respondents: 

Church, Harris, Johnson and Williams, Great Falls, Montana 

Charles Love11 argued, Great Falls, Montana 

Cannon and Gillespie, Helena, Montana 

Ross W. Cannon argued, Helena, Montana 

Alexander, Kuennlng, Miller and Ugrin, Great Falls, Montana 

Edward Alexander argued, Great Falls, Montana 

Submitted: February 14, 1979 

\!UL~ 1975 

Filed: 

Decided : JUL 3 1979 
Mr. Justice Daniel J. Shea delivered the Opinion of the Court. 

Gate City Savings and Loan Association of Fargo, North 

Dakota ("Gate City") and Fidelity Savings and Loan Association 

of Great Falls, Montana ("Fidelity") appeal from judgment of the 

Lewis and Clark County District Court in a proceeding for judicial 

review of an administrative hearing before the Department of Business 

Regulation ("Department"). The District Court reversed the 

Department's approval of a proposed merger between Gate City and 

Fidelity because the statute governing merger of building and 

loan associations, section 7-113.2, R.C.M. 1947, now section 

32-2-231 MCA, (formerly section 7-113(22), R.C.M. 1947) contained 

an unconstitutional delegation of legislative power. For the 

reasons set forth below, we affirm. 

The facts leading to this appeal are as follows: In 1972 

Gate City applied to the Director of the Department of Business 

Regulation ("Director") for approval to merge with Fidelity 

and with Glendive Building and Loan Association of Glendive, 

Montana ("Glendive"). The application for merger was made pursuant 

to section 7-113(22), R.C.M. 1947, which provided: 

". . . Any two (2) or more building and loan 

associations, & and with the consent - and 

approval -- of the superintendent of banks, [now 

known as the Director of the ~epartment of 

Business Regulation] may consolidate and unite 

and become incorporated in one (1) body, with or 

without any dissolution or division of the funds 

or property of any such association, or any such 

association may transfer its engagements, funds 

and property to any like association upon such 

terms as may be agreed upon by a majority vote 

of the respective board of directors, and ratified 

by a two-thirds (2/3) vote of the shares present 

and voting in person or by proxy at a special 

meeting or meetings of the stockholders of the 

respective associations convened for that purpose, 

upon notice given as provided by law, said notice 

to state the object of the meeting. No such 

transfer shall prejudice any right of any creditor 

of such association." (Emphasis and bracketed 

material added.) 

(This statute in its current, amended form is found at section 

7-113.2, R.C.M. 1947, now section 32-2-231 MCA. For purposes 
of the issues considered herein, the amended version is identical 

to section 7-113 (22). ) 

Being uncertain on how to treat the proposed merger 

application, the Director requested an opinion from the State 

Attorney General. On October 3, 1972, the Attorney General 

issued a formal opinion that Montana law prohibits the proposed 

merger because operation of branch offices in this State by 

foreign savings and loan associations is .forbidden. 34 Op. Att'y. 

Gen. No. 53 (1972). The Department therefore denied Gate City's 

application for merger. 

Shortly thereafter, Gate City commenced a declaratory 

judgment action in Lewis and Clark County District Court seeking 

statutory construction of section 7-113(22) in light of the 

proposed merger and the Attorney General's opinion. Glendive 

and Fidelity were joined as plaintiffs and the Director was 

named as the defendant. The Montana Savings and Loan League, 

First Federal Savings and Loan Association of Great Falls, 

Montana, and Great Falls Federal Savings and Loan Association 

of Great Falls, Montana (hereinafter "opponents") intervened in 

opposition to the proposed mergers. On January 23, 1974, the 

District Court overturned denial of Gate City's application. 

The Director and opponents appealed and the judgment was affirmed 

by this Court in Gate City v. Pitts (1975), 166 Mont. 411, 

533 P.2d 1083. 

Gate City reapplied to the Department, and the Director 

held a prehearing conference for the purpose of "defining issues, 

determining witnesses and agreeing upon stipulations." The 

report of this prehearing conference shows that "counsel for 

the various parties and the department were unable to reach any 

significant agreement as to what constitutes the exact issues." 

The Department nonetheless stated its position that "since there 
are no specific statutory guidelines the issues involved are 

necessarily broad." The Department refused to adopt the various 

specific criteria proposed by the opponents. The only substantive 

criteria stated was whether it would be in the public interest 

to grant or deny the proposed mergers. 

Hearings began on September 23, 1975 and lasted a total 

of seven days. The Director finally issued his lengthy findings, 

conclusions and order on July 19, 1976 wherein he concluded that 

the proposed merger of Gate City and Fidelity was in the public 

interest but the proposed merger of Gate City and Glendive was 

not. The Department therefore approved the Gate City/Fidelity 

merger and disapproved the Gate City/Glendive merger. 

Inquiries were made on if and when petitioners for rehearing 

would be entertained. The Department responded on August 11, 

1976 with a detailed time schedule for petitions, briefing and 

argument. All specified deadlines were followed by both opponents 

and applicants, Gate City and Fidelity. The Department denied 

the petitions for rehearing on November 1, 1976. 

On November 30, 1976, opponents brought the present suit 

for judicial review of the Department's findings and conclusions 

in Lewis and Clark County District Court. Gate City, the 

Director and Fidelity all filed responses to the petitions for 

judicial review that did not question the timeliness of the petitions, 

but rather contended that the opponents' petitions failed to state 

any of the grounds prescribed in section 52-4216(7), R.C.M. 1947, 

now section 2-4-704(2) MCA, for reversal or modification of the 

Department's rulings. After extensive briefing and oral argument, 

the court issued an order reversing the Department's ruling 

insofar as it purported to approve the proposed merger of Gate 

City and Fidelity. The Department's ruling was reversed on the 

ground that the statute permitting such mergers, section 7-113.2, 

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contained an unconstitutional delegation of legislative power 

to the Department by reason of a lack of statutory standards 

to guide its discretion. The court also stated "even if it be 

assumed that the legislative oversight might have been cured by 

the administrative agency, it is plain that such was not 

accomplished here." 

Gate City and Fidelity appeal from this order and present 

the following issues for our consideration: 

(1) Whether the District Court erred in ruling that 

opponents' petitions for judicial review were timely filed under 

section 82-4216 (2) (a), R.C.M. 1947, now section 2-4-702 (2) (a) MCA. 

(2) Whether opponents were estopped from challenging the 

constitutionality of section 7-113.2, R.C.M. 1947, now section 

32-2-231 MCA. 

(3) Whether the District Court erred in holding section 

7-113.2 constitutes an unconstitutional delegation of legislative 

power due to the absence of standards. 

(4) If an agency may supply appropriate standards in the 

absence of statutory standards, were adequate standards provided 

here? 

Gate City, alone, insists this case can be decided on a 

nonconstitutional ground; that the District Court was without 

jurisdiction because the opponents' petitions for judicial review 

were not timely filed in accordance with section 82-4216(2)(a), 

R.C.M. 1947, now section 2-4-702 (2) (a) MCA. 

In pertinent part, this statute provides: 

"Proceedings for review shall be instituted by 

filing a petition in district court within 30 days 

after service of the final decision of the agency 

or, if a rehearing is requested, within 30 days after 

the decision thereon." 

Gate City argues that this provision does not create a right 

to petition for rehearing; it merely accomodates such right where 
adopted pursuant to administrative rulemaking procedure. Gate 

City relies on Koehn v. State Bd. of Equalization (Cal.App. 

1958), 333 P.2d 125, 128 for the "general rule" that an 

administrative agency has no inherent power to rehear its 

decision. While this may be the general rule in California, it 

is not nationally. See, 73 C.J.S. Public Administrative Bodies 

- and Procedure 8156, n. 82; Annot., 73 A.L.R.2d 939. The 

annotation summarizes: 

"Some authorities have expressed the view that, 

like a court of general jurisdiction, an 

administrative agency exercising functions of a 

judicial nature has the inherent power to grant 

a rehearing or otherwise to reconsider a previous 

decision. Other authorities deny the existence of 

such power and proceed on the theory that the 

power does not exist, in the absence of specific 

statutory authority. An intermediate position 

is taken by those authorities which consider the 

controlling statute as a whole with a view to 

determining whether it was the intention of the 

legislature to confer the power of reconsideration 

upon the agency." (Footnotes omitted.) 73 A.L.R.2d 

at 942-43. 

Notably, even the California court more recently stated that all 

administrative bodies have inherent power to reconsider their 

decisions unless it is such that it may not be set aside or 

unless reconsideration is precluded by statute. In Re Fain 

Thus far, this Court has not ruled on whether an administrative agency has inherent power to reconsider its decision. 

The facts of the instant case do not require that we do so. 

The Department's final decision and order of July 19, 1976 stated: 

"You are entitled to judicial review of the Final Decision and 

Order pursuant to and in accordance with the provisions of 

section 82-4216, R.C.M. 1947." On August 11, 1976, the Department 

responded to inquiries about possible rehearing by issuing a 

detailed time schedule for petitions, briefing and argument. 

Gate City participated in opposing the petitions for rehearing 
and did not raise the jurisdictional issue cited here. Its 

position at that time was stated in its brief in opposition 

to rehearing as follows: "While section 82-4216, R.C.M. 1947, 

indicates that a rehearing may be requested, we submit that it 

is within the sound discretion of the agency decision-maker, 

in this instance the Director of the Department, as to whether 

or not to grant any such rehearing." It seems Gate City interpreted 

section 82-4216(2) (a) as creating a right to petition for 

rehearing (as did opponents and the Department). Given this 

factual matrix and the language of section 82-4216(2) (a), the 

District Court did not err in concluding that the opponents' 

petitions for judicial review were timely. 

Under issue two, Gate City contends opponents are estopped 

from challenging the constitutionality of section 7-113.2 for 

their failure to raise the issue when it first came before this 

Court in Gate City v. Pitts, supra. Although not mentioned, 

Gate City is apparently referring to the doctrine of res judicata 

by which all questions that might have been litigated under the 

issues formed (as well as those actually adjudged) in a prior 

appeal must be taken as at rest forever. 5B C.J.S. Appeal and 

Error 81822; Phalen v. Rilley (1970), 156 Mont. 91, 475 P.2d 998. 

Here, it is important to bear in mind the nature and scope of 

proceedings leading to this and the prior appeal. The 1972 

proposed merger was denied on the basis of an Attorney General's 

opinion that foreign savings and loan associations are prohibited 

from merging with domestic associations. Gate City sought 

declaratory judgment in District Court for construction of section 

7-113(22), R.C.M. 1947, in light of their application and the 

Attorney General's opinion. It was the District Court's decision, 

reversing the Department's ruling, that was appealed by the 

Director and joined in by the opponents. On the appeal, the 

scope of review was limited to correction of errors committed by 

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the District Court (See, section 93-8907, R.C.M. 1947, now 

section 27-8-312 MCA, and Rule 2, Mont.R.App.Civ.P.), and 

Gate City framed the issue. That issue was the scope of section 

7-113(22), not its implementation in a particular case. 

Constitutional issues should generally be raised at the 

earliest opportunity. Johnson v. Doran (1975), 167 Mont. 501, 

511, 540 P.2d 306, 311. Here, the earliest opportunity was in 

1975, when the Department first implemented the provision in 

the manner giving rise to the constitutional challenge. 

Gate City also argues that opponents are estopped from 

questioning the constitutionality of section 7-113.2 by actively 

supporting passage of the statute during the 1977 legislative 

session. The 1977 amendment to section 7-113.2 had no bearing 

on the constitutionality of that portion of the provision granting 

the Department power to approve or disapprove applications for 

merger. As already indicated, section 7-113.2, enacted in 1977, 

only changed section 7-113(22) to the extent that it restricted 

applications for merger to domestic savings and loan associations. 

There is nothing inconsistent in opponents' support of a statutory 

amendment precluding merger by foreign savings and loan associations 

and the present constitutional challenge. 

The dispositive issue in this case is whether section 7- 

113.2, R.C.M. 1947, now section 32-2-231 MCA, contains an 

unconstitutional delegation of legislative power. The central 

theme of Gate City's and Fidelity's argument against finding 

section 7-113.2 an unconstitutional delegation of legislative 

power is that the trend is away from requiring that statutory 

standards or guides be specified and toward finding the establishment of procedural safeguards sufficient for constitutional 

purposes. While this may be the trend under federal law and in 

some states, it is not Montana's position. 

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All the cases dealing with the nondelegation doctrine 

in Montana have done so with respect to the Montana Constitution. 

Article 111, section 1, of the 1972 Montana Constitution (formerly 

Article IV, section 1, 1889 Montana Constitution) specifically 

states: 

". . . Separation of powers. The power of the 

sovernment J of thisstate is divided into three 

distinct branches--legislative, executive, and 

judicial. No person or persons charged with the 

exercise of power properly belonging to one branch 

shall exercise any power properly belonging to 

either of the others, except as in this constitution 

expressly directed or permitted." 

Two recent cases clarify what is and is not an overly 

broad delegation of legislative power in Montana. In Douglas 

v. Judge (1977), Mont . , 568 P.2d 530, 34 St.Rep. 975, 

a statute authorizing the Department of Natural Resources to 

make loans to farmers and ranchers who proposed "worthwhile" 

renewable resource development programs was held to be insufficient 

under the test set out in Bacus v. Lake County (1960), 138 Mont. 

69, 354 P.2d 1056. The Court articulated the test by quoting 

the following excerpt from Bacus: 

"In the case of State v. Stark, 100 Mont. 365, 

371, 52 P.2d 890, 892, this court has stated: 

"'Delegation of power to determine who are within 

the operation of the law is not a delegation of 

legislative power.. . . But it is essential that 

the Legislature shall fix some standard by which 

the officer or board to whom the power is delegated 

may be governed, and not left to be controlled by 

caprice. ' 

"We agree w 

further by 

broad that 

rith this statement of the law and go 

saying that the standard must not be so 

the officer or board will have unascertainable limits within which to act." Douglas v. 

Judge, 568 P.2d at 534 (quoting Bacus v. Lake County, 

354 P.2d at 1062.) 

In State ex rel. Department of Health and Environmental Sciences 

v. Lincoln County (1978), Mont. , 584 P.2d 1293, 

35 St.Rep. 1402, the Clean Air Act, which authorized the Department of Health and Environmental Sciences to establish limits 
on pollutant emissions and to prohibit facilities causing 

or contributing to air pollution, was held - not to be an 

unconstitutional delegation of legislative power. This Court 

stated: "While the powers of the Board are expressed in broad 

and general language, they necessarily must be as air pollution 

control is an emerging field of environmental protection for 

which detailed and precise standards have not yet been fully 

developed." State Dept. of Health and Environmental Sciences 

v. Lincoln County, 584 P.2d at 1296. 

The instant case presents a delegation of legislative power 

that provides no standards or guidelines either expressed or 

otherwise ascertainable. There is nothing in the statute "to 

enable the agency to know its rights and obligations." Huber 

v. Groff (1976), 171 Mont. 442, 457, 558 P.2d 1124, 1132 (quoting 

Milk Control Bd. v. Rehberg (1962), 141 Mont. 149, 161, 376 

Gate City attempts to characterize the statute as within 

the qualification enunciated in Altop v. City of Billings (1927), 

79 Mont. 25, 35, 255 P. 11, 14: 

". . . that where it is impracticable to lay 

down a definite or all-comprehensive rule, or 

where the ordinance relates to the administration 

of a police regulation and is necessary to protect 

the general welfare, morals and safety of the public, it is not essential to the validity of the 

ordinance that it prescribe all the conditions 

upon which such license shallbeyanted or refused." 

(Emphasis added.) 

However, the statute in the instant case provides absolutely no 

standards, guides or conditions. 

Gate City also argues that the ascertainable standards 

are that the merger be made "upon terms agreed upon by a majority 

vote of the respective board of directors, and ratified by a 

two-thirds vote" of the shareholders (section 7-113.2). This 

contention ignores the clear meaning of the statute. The majority 

vote ratification requirement and the approval of the Department 

requirement are obviously independent prerequisites for merger. 

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Finally, Gate City urges that any constitutional infirmity 

in the statute was cured by the Department's supplying appropriate 

standards to govern the hearing. Relying on S.E.C. v. Chenery 

Corp. (1947), 332 U.S. 194, 91 L.Ed. 1995, 67 S.Ct. 1575, Gate 

City argues that in unforseeable situations involving a statutory 

delegation of legislative power, determination on an ad hoc or 

case-by-case basis is appropriate. 

In Chenery, the contention was thatthe agency could not 

apply a general standard it had formulated for the first time 

in that proceeding, but instead, must promulgate new standards 

through its rulemaking procedures. See, N.L.R.B. v. Bell 

Aerospace Co. (1974), 416 U.S. 267, 292, 40 L.Ed.2d 134, 153, 

94 S.Ct. 1757, 1770. Thus, Chenery more closely resembles Altop 

v. City of Billings, supra, where at least some standards were 

provided by the legislature. Here, however, we find no - statutory 

standards or guidelines from which the Department could extrapolate new ones. Indeed, the preliminary prehearing conference 

report shows that the opponents desired ad hoc formulation of 

standards sufficient to apprise them of the relevant issues before 

the hearing. The only standard announced was "public interest." 

It was only after the hearing, when the Department issued its 

fkdings and conclusions that the substantive meaning of that 

term was clarified. 

Section 7-113.2, R.C.M. 1947, now section 32-2-231 MCA, 

contains an overly-broad delegation of legislative power and is 

hereby declared unconstitutional. 

We Concur: 

Justices 

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