No. 14277
I N THE SUPREME COURT O THE STATE OF M N A A
F OTN
I N THE MATTER OF THE APPLICATION FOR
AUTHORITY T CONDUCT SAVINGS AND L A
O O N
ACTIVITIES I N THE STATE OF M N A A BY
OTN
GATE CITY SAVINGS AND L A ASSOCIATION
O N
O FARGO, NORTH DAKOTA.
F
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 ,
H o n o r a b l e L. C . G u l b r a n d s o n , J u d g e p r e s i d i n g .
C o u n s e l o f Record:
For Appellants:
Hooks a n d B u d e w i t z , Townsend, Montana
P a t r i c k F. Hooks a r g u e d , Townsend, Montana
S c o t t , L i n n e l l , N e i l l a n d N e w h a l l , G r e a t F a l l s , Montana
Kenneth N e i l l a r g u e d , G r e a t F a l l s , Montana
L o b l e a n d P a u l y , H e l e n a , Montana
P e t e r P a u l y a r g u e d , H e l e n a , Montana
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For Respondents:
Church, H a r r i s , J o h n s o n and W i l l i a m s , Great F a l l s , Montana
C h a r l e s Love11 a r g u e d , G r e a t F a l l s , Montana
Cannon and G i l l e s p i e , H e l e n a , Montana
R o s s W. Cannon a r g u e d , H e l e n a , Montana
A l e x a n d e r , Kuennlng, M i l l e r a n d U g r i n , Great F a l l s , Montana
Edward A l e x a n d e r a r g u e d , Great F a l l s , Montana
Submitted: F e b r u a r y 1 4 , 1979
\ ! U L ~ 1975
Decided : JUL 3 1979
Filed:
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 - - superintendent of banks, [now
of the
known as the Director of the ~epartmentof
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 t h e i s s u e s c o n s i d e r e d h e r e i n , t h e amended v e r s i o n i s i d e n t i c a l
t o s e c t i o n 7-113 ( 2 2 ) . )
Being u n c e r t a i n on how t o t r e a t t h e proposed merger
a p p l i c a t i o n , t h e D i r e c t o r r e q u e s t e d an o p i n i o n from t h e S t a t e
Attorney General. On October 3 , 1972, t h e A t t o r n e y G e n e r a l
i s s u e d a f o r m a l o p i n i o n t h a t Montana law p r o h i b i t s t h e proposed
merger b e c a u s e o p e r a t i o n of branch o f f i c e s i n t h i s S t a t e by
f o r e i g n 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 s .forbidden. 34 Op. A t t ' y .
Gen. No. 53 ( 1 9 7 2 ) . The Department t h e r e f o r e d e n i e d Gate C i t y ' s
a p p l i c a t i o n f o r merger.
S h o r t l y t h e r e a f t e r , Gate C i t y commenced a d e c l a r a t o r y
judgment a c t i o n i n Lewis and C l a r k County D i s t r i c t C o u r t s e e k i n g
s t a t u t o r y c o n s t r u c t i o n o f s e c t i o n 7-113(22) i n l i g h t o f t h e
proposed merger and t h e A t t o r n e y G e n e r a l ' s o p i n i o n . Glendive
and F i d e l i t y were j o i n e d a s p l a i n t i f f s and t h e D i r e c t o r was
named a s t h e d e f e n d a n t . The Montana S a v i n g s and Loan League,
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 o f G r e a t F a l l s ,
Montana, and G r e a t F a l l s 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
of G r e a t F a l l s , Montana ( h e r e i n a f t e r " o p p o n e n t s " ) i n t e r v e n e d i n
o p p o s i t i o n t o t h e proposed mergers. O J a n u a r y 23, 1974, t h e
n
D i s t r i c t C o u r t o v e r t u r n e d d e n i a l o f Gate C i t y ' s a p p l i c a t i o n .
The D i r e c t o r and opponents a p p e a l e d and t h e judgment was a f f i r m e d
by t h i s C o u r t i n G a t e C i t y v. P i t t s ( 1 9 7 5 ) , 1 6 6 Mont. 4 1 1 ,
533 P.2d 1083.
Gate C i t y r e a p p l i e d t o t h e Department, and t h e D i r e c t o r
h e l d a p r e h e a r i n g c o n f e r e n c e f o r t h e purpose of " d e f i n i n g i s s u e s ,
d e t e r m i n i n g w i t n e s s e s and a g r e e i n g upon s t i p u l a t i o n s . " The
r e p o r t o f t h i s p r e h e a r i n g c o n f e r e n c e shows t h a t " c o u n s e l f o r
t h e v a r i o u s p a r t i e s and t h e d e p a r t m e n t were u n a b l e t o r e a c h any
s i g n i f i c a n t agreement as t o what c o n s t i t u t e s t h e e x a c t i s s u e s . "
The Department n o n e t h e l e s s s t a t e d i t s p o s i t i o n t h a t " s i n c e t h e r e
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
- Procedure
and 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 admin-
istrative 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 establish-
ment 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 of thisstate is divided into three
J
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 writh this statement of the law and go
further by saying that the standard must not be so
broad that the officer or board will have unascer-
tainable 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 Depart-
ment of Health and Environmental Sciences to establish limits
on pollutant emissions and to prohibit facilities causing
or contributing to air pollution, was held - to be an
not
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 pub-
lic, it is not essential to the validity of the
ordinance that it prescribe all the conditions
upon which such license s h a l l b e y a n t e d 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 extra-
polate 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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