### No. 12766 

### INTHE SUPREME COURT OF 

### THE STATE OF MONTANA

GATE 

### CITY SAVINGS 

### AND LOAN ASSOC. 

## ,et a

### 1.

# , Plaintiffs and Respondents, -vs

# - HAROLD PITTS

## ,DIRECTOR, DEPARTMENT OF BUSINESS REGULATION OF THE STATE OF MONTANA, etal., Defendants, MONTANA SAVINGS & 

### LOAN LEAGUE, GREAT FALLS FEDERAL SAVINGS & 

### LOAN ASSOC. etal., Defendant inIntervention and Appellants.

Appeal from: District Court of the FirstJudicial District, Honorable Peter 

### G. Meloy, Judge presiding. Counsel of Record: For Appellants

### : Hon. Robert L. Woodahl, Attorney General, Helena,

Montana Lon J. 

### Maxwell, Assistant Attorney General, argued,

Helena, Montana Church, Harris, Johnson & 

### Williams, Great Falls,

Montana Charles 

### C. Love11 argued, Great Falls, Montana For Respondents: Loble, Picotte, Loble, Helena, Montana Peter 

### C. Pauly argued, and Henry Loble argued,

Helena, Montana

Submitted: March 

### 3, 1975 Decided: 

### APR

# -8

## 1975 Filed: 

### fiPR

# -8

## 1975Mr. Justice Wesley Castles delivered the Opinion of the Court.

This 

### is an appeal by defendant Harold Pitts, Director of the Department of Business Regulation of the stateof Montana (hereinafter referred toasDirector), and intervening defendants, Nontana Savings & Loan League, Great FallsFederal Savings

& Loan Association and FirstFederal Savings and Loan Association, from a judgment and decree of the district court, Lewis and Clark County, infavor of plaintiffs Gate City Savings and Loan Association (hereinafterreferred toasGateCity), Fidelity Savings and Loan Association (hereinafter referred toasFidelity) and Glendive Building and Loan Association (hereinafter referred to as Glendive). Gate City commenced this action against John A. Dowdall, then Director of the StateDepartment of Business Regulation, under the provisions of theUniform Declaratory Judgments Act, sections 93-5901-93-8916, R.C.M. 1947, seeking tohave the dis

### trict court construe the provisions of Title7, R.C.Y. 1947, governing the operations and activities of building and loan associations inthe stateof Montana and tooverrule two official opinions of 

### the Montana attorney general. On motion, Montana Savings and Loan League, Great Falls Federal Savings & Loan Association, and FirstFederal Savings and Loan Association 

### were granted leave to intervene. The dis

### trict court ordered Harold Pitts, successor inofficetoJohn A. Dowdall, substituted asdefendant. Fidelity and Glendive 

### were ordered joined asindispensable parties plaintiff, 

### pursuant to Rule 19, M.K.Civ.P. 

### The cause 

### was submitted to thedistrict court on an agreed statement of facts. The districtcourt ruled, in substance, that the Director

was authorized toconsider Gate City's application todo business inMontana and tomerge with Fidelity and Glendive; and, the laws

### of Montana permit the establishment, maintenance and operation of branch offices inMontana by foreign or domestic building and loan associations. The Director and intervenors appeal. Gate City 

### isa savings and loan association incorporated under the laws of the stateof North Dakota. Its 

### principal place of business is

### Fargo, North Dakota, with eight branch offices in North Dakota. Fidelity and Glendive are savings and loan associations incorporated under the laws of the stateof Montana. Their offices are located respectively atGreat Falls and Glendive, Montana. On May 10, 

### 1972, Gate City entered into two separate agreements of merger with Fidelity and Glendive with the intent tocontinue tooperate the existing offices atGreat Falls and Glendive, if and when themergers became effective. On June 8, 

### 1972, Gate City filed an application, with supporting documents, with the Director seeking permission toconduct savings and loan activities inthe stateof Nontana and permission tomerge with 

### Fidelity and Glendive. The application tomerge was conditioned upon the consent of the members and shareholders of the institutions involved; the consent of the Director; the approval of the Federal Home Loan Bank Board (hereinafter referred to asFHLBB); 

### and issuance of insurance of accounts by the Federal Savings and Loan Insurance Corporation. On July 10, 

### 1972, Director Dowdall requested an attorney general's opinion concerning Gate City's application. Attorney General Woodahl ruled that Gate City's proposed merger was contrary toMontana law, 34 

### Opinions of theAttorney General, No. 53. 

### The opinion ruled the application was deficient inthat the proposed merger had not been ratified by two-thirds of the members of eachof tne three associations involved prior tothe submissionof the application tothe Director for his approval. It 

### relied upon a formal opinion issued by 

### Attorney General Andersonwhich held that branch savings and loan associations areprohibited by Montana law, 29 Opinions of the Attorney General, No. 2. On October 12, 1972, on the basis of Attorney General Woodahl's opinion, Director Dowdall denied Gate City's application. This action followed. The issues involved on appeal are: 

### (1) Whether the districtcourt had jurisdiction of the subjectmatter of the case? (2) Whether Gate City's application was deficient inthat the proposed merger had not been ratified by themembers of each of the associations involved, prior to 

### its submission to the Director? (3) Whether a North Dakota chartered savings and loan associationmay merge with two Montana chartered savings and loan associations and maintain their separate existing facilities? Issue 

### 1, whether the districtcourt had jurisdiction; 

### we hold 

### it did. The Director's contention is that Gate City sought merely an advisory opinion from the district court and the only way Gate City could present a justiciable controversy to that court would be if 

### it had first secured the approval of the merger by FHLBB. Relying upon 12U.S.C. S1730a and 12C.F.R. SS 556.5(b)(2) and 563.22, the Director then argues there 

### isabsolutely no possibility the FHLBB would approve thismerger across stateboundaries. The short answer to the Director's contention 

### is that we

are living ina federal system. Gate City's proposed merger 

### is governed by federal and state law. Pursuant to section 7-113(22), R.C.M. 1947, the proposed merger must be approved by the Director. It alsomust be approved by theFHLBB, atleast insofar as it involved an increase in insurance of accounts. (Fidelity is an uninsured association). Gate City had to start somewhere in seeking approval of

### itsproposed merger, whether 

### it be the Director or the FHLBB. That Gate City started with the Director, rather than the FHLBB, does not render this an advisory, nonjusticiable controversy. In 12C.F.R. § 571.5(b)(l),the FHLBB states 

### its general policy concerning merger proposals: "The legalityof a proposed merger 

### is a precondition to further consideration by the Board." In making that decision, the Board looks to "applicable law". In light of 12C.E.R. § 571.5 and the two attorney general opinions heretofore mentioned, Gate City's decision to firstpursue 

### its stateremedies appears to be reasonable. It 

### is not necessary toinquire into, nor decide, whether Gate City 

### will succeed inobtaining FHLBB approval of the Proposed merger. That decision 

### willbe made in any event by the FHLBB, with possible appeal tothe federal courts. We shall not prematurely foreclose Gate City's federal remedies. Issue 2,is tne Director's contention that section 7-113(22), R.C.M. 1947, mandates that the merger agreements be ratified by two-thirds of the members of each of the three associations involved before the application of merger may be filed and acted upon by the Director. That section reads: "Any two (2) or more building and loan associations, by and with the consent and approval of the superintendent of banks, [now the Director]

## , may consolidate and unite and become incorporated inone 

### (1)body, with orwithout 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 associationupon such terms 

### asmay be agreed upon by a majority vote of the respectiveboard of directors, and ratified by a twothirds (2/3) vote of the shares present and voting inperson or by proxy ata 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 statethe object of the meeting. No such transfer shallprejudice any right of any creditor of such association." There 

### isnothing in section 7-113(22), R.C.X. 1947, to indicate that the two-thirds vote of the shareholders must precede theconsent of the Director, nor alternatively, that the Director's consent must precede the shareholders' vote. Either may precede the other. In a sense appellant's issue 2 

### ismoot, since the merger agreements have since been ratified by two-thirds of the members of each of the three associations. Gate City has complied with the requirements of sections 7-131 and 7-137, R.C.M. 1947. Gate City's application shows that 

### it was applying for a certificate of authority toconduct savings and loan activities inthe stateof Montana, a precondition toboth doing business inMontana and any action by the Director on themerger. Intervenors raise the issue that Fidelity and Glendive should have joined inthe application formerger. We agree. Gate City's application asked for two things, permission todo business inthe stateof Montana and permission tomerge with Fidelity and Glendive. 

### In further proceedings, thisjoinder should be made. The heart of the controversy 

### is appellant's issue 3: Whether a North Dakota chartered savings and loan association may merge with two Montana chartered savings and loan associations and maintain their separate existing facilities? We hold that a North Dakota chartered savings and loan associationmay merge with two Montana chartered savings and loan associations and maintain their separate existing facilities. Section 7-130, R.C.M. 1947, reads inpertinent part: "The provisions of this act shall apply toand be enforceable against allcorporations, persons, firms, partnerships, associations, trustees or combinations of persons whatsoever, whether foreign or domestic 

## * * *". (Emphasis supplied.) Although section 7-113(22), R.C.M. 1947, was not a part of "this act" referred to in section 7-130, the great bulk of Title 7, R.C.M. 1947, was. The obvious legislative intent was that foreign

### and domestic savings and loan associations be 

### treated alike. Thus, the factGate 

### City is 

### organized under the laws of North Dakota, rather than the laws of Montana, is 

### immaterial. Section 7-113(22), R.C.M. 

### 1947, reads inpertinent part: "Any two (2) ormore building and loan associations

## * 

## * * may consolidate and unite and become incorporated inone (1)body 

## * 

## * * without any dissolutionordivision of the funds or property of any such association

## * * 

## *." This is 

### exactlywhat Gate City, Fidelity, and Glendive seek to do. The statutepermits them todo it. 

### The appellant Director's reliance on section 7-102, R.C.M. 

### 1947, for the proposition that Gate City'sprincipal place of business must be inMontana is

### nisplaced. That section relatestowhat must be included inarticlesof incorporationof prospective corporations seeking tobe incorporated under the laws of Montana. Gate City is

### already incorporated under the laws of North Dakota. Section 7-131, 

### R.C.M. 1947, clearlyprovides that a foreign associationmay have a principal place of business bothwithin and without Montana. This opinion shallconstitute a declaratoryjudgment. Each party shallbear its

### own costs.



# ................................. Justice

Chief Justice