SPRINGFIELD INSTITUTION FOR SAVINGS & others vs. WORCESTER FEDERAL SAVINGS AND LOAN ASSOCIATION & another.

WILKINS, J. Twelve savings banks in various parts of the Commonwealth bring this bill in equity for a declaratory judgment under G. L. (Ter. Ed.) c. 231A. The defendants are Worcester Federal Savings and Loan Association, which maintains its principal or home office in Worcester, and Union Federal Savings and Loan Association, which maintains its principal or home office in Pittsfield. The defendants, formerly Massachusetts banking corporations, are now corporations organized and operating under the home owners' loan act for the purposes of acting as local mutual thrift institutions and of financing homes. U. S. C. (1946 ed.) Title 12, Sections 1461-1468, as amended. The business of each is similar to that of savings banks and co”perative banks incorporated in this Commonwealth. See Commissioner of Corporations & Taxation v. Flaherty, 306 Mass. 461. On September 29, 1950, each defendant established a branch office in Springfield, which is forty-one miles from Worcester

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and thirty-nine miles from Pittsfield. The defendants have filed an answer containing a counterclaim. The Attorney General has intervened on the side of the plaintiffs and filed an information, purportedly pursuant to G. L. (Ter. Ed.) c. 231A, Section 8, inserted by St. 1945, c. 582, Section 1. The purpose of all the pleadings is identical. A binding declaration is sought whether establishment of these branches in a city more than fifteen miles distant from the city where the principal or home office is located is unlawful. The facts were agreed. The single justice reserved and reported the case without decision. G. L. (Ter. Ed.) c. 211, Section 6.

The establishment of each branch had the written approval of the Home Loan Bank Board, but was contrary to the apparent prohibition of G. L. (Ter. Ed.) c. 167, Section 37A, inserted by St. 1949, c. 640, which reads: "No association, corporation, partnership, or person organized or operating under laws other than the laws of this commonwealth and doing a business similar to any business referred to in section one, shall establish or maintain any branch or depot in this commonwealth unless expressly authorized to operate and maintain a branch or depot by the laws under which it was organized or operates and except in accordance with the same restrictions and limitations as to branches and depots applicable to similar institutions organized or operating under the laws of this commonwealth." Section 1 contains a definition of "bank," which includes savings banks and co”perative banks. G. L. (Ter. Ed.) c. 167, Section 1, as amended by St. 1935, c. 452, Section 1. Both in 1950 and down to the present time savings banks and co”perative banks incorporated in this Commonwealth have not been allowed to establish branches in a municipality more than fifteen miles distant from that in which the main banking office is located. G. L. (Ter. Ed.) c. 168, Section 25, as amended by St. 1949, c. 270, and St. 1951, c. 100; c. 170, Section 12, as appearing in St. 1950, c. 371, Section 1.

The point at issue is whether the limitation on branch banking imposed by Section 37A is applicable to Federal savings and loan associations doing business in this Commonwealth.

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The answer depends upon the effect to be given to the Federal legislation and administrative acts done pursuant to it.

Beyond question, the home loan board has been validly and generally empowered by the home owners' loan act to make rules for the organization and regulation of savings and loan associations. Fahey v. Mallonee, 332 U.S. 245, 250, 253. "The statute is one of the type which states a policy, provides for the project under consideration, lays down some general rules and prohibitions and leaves details to the Board . . . ." North Arlington National Bank v. Kearny Federal Savings & Loan Association, 187 Fed. (2d) 564, 565 (C. A. 3). Its purposes stated in its own words are: "In order to provide local mutual thrift institutions in which people may invest their funds and in order to provide for the financing of homes, the Board is authorized, under such rules and regulations as it may prescribe, to provide for the organization, incorporation, examination, operation, and regulation of associations to be known as `Federal Savings and Loan Associations', and to issue charters therefor, giving primary consideration to the best practices of local mutual thrift and home-financing institutions in the United States." U. S. C. (1946 ed.) Title 12, Section 1464 (a).

While not self authorizing, Addison v. Holly Hill Fruit Products, Inc. 322 U.S. 607, 616, the regulations of the board explicitly provide for the establishment of branches. [Note p187-1] Such action, it is argued, is not authorized by the home owners' loan act. The act, to be sure, does not use the word "branch," but it does contain provisions which seem consistent only with the conferring of such a power upon

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the board. Home loan associations may lend funds "on the security of first liens upon homes or combination of homes and business property within fifty miles of their home office." Section 1464 (c), as amended. On certain conditions, an association may "convert itself into a savings and loan type of institution organized pursuant to the laws of the State, District, or Territory . . . in which the principal office of such Federal association is located." Section 1464 (i), as amended. If branches are not authorized, it would be pointless to refer to the "home office" or the "principal office." See Media Title & Trust Co. v. Cameron, 289 Pa. 96, 97. A most important consideration, too, is the broad discretion confided in the board in the selection of localities for the establishment of such institutions. "No charter shall be granted . . . unless in the judgment of the Board a necessity exists for such an institution in the community to be served, nor unless there is a reasonable probability of its usefulness and success, nor unless the same can be established without undue injury to properly conducted existing local thrift and home-financing institutions." Section 1464 (e). [Note p188-1] When subsection (e) is read in connection with the portions of subsections (c) and (i) quoted above, it appears that the board's discretion in determining the community to be served is to be unaffected by State lines. Moreover, as appears from subsection (a), the board in issuing charters must give "primary consideration to the best practices of local mutual thrift and home-financing institutions in the United States." The practice in 1949 with regard to branch offices seems to have been that six States prohibited branches, thirteen authorized them, and twenty-nine had no legislation on the subject. See Report of Committee on Banking and Currency, Sen. Rep. No. 1118, 81st Cong., 1st Session 2, cited in North Arlington National Bank v. Kearny Federal Savings & Loan Association, 187 Fed. (2d) 564, 565-566. We agree with the conclusion of the Court of Appeals for the Third Circuit in the case last cited that subsection (a) constitutes

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an express authorization to the board to consider and determine the establishment of branches to be among "the best practices of local mutual thrift and home-financing institutions." We see no reason to suppose that Congress intended that the board should make regulations which should not be of uniform application throughout the country. See Hopkins Federal Savings & Loan Association v. Cleary, 296 U.S. 315, 333.

It does not ensue because formerly under the national bank law the power to establish branches was withheld, First National Bank v. Missouri, 263 U.S. 640, that Congress did likewise in the home owners' loan act. California v. Coast Federal Savings & Loan Association, 98 Fed. Sup. 311, 319. See Eddy v. Home Federal Savings & Loan Association, 60 Cal. App. (2d) 42, 44-45.

Once the conclusion is reached that the Home Loan Bank Board has been clothed with Congressional sanction to allow the establishment of branches, the rest of the reasoning follows almost automatically. It then would become inconsistent to assert that there is no conflict between Section 37A and the power of the board to approve the establishment of a branch and at the same time to insist that that power is so circumscribed by Section 37A as to render nugatory the approval of a branch in a municipality which is not within fifteen miles of the city or town where the principal banking office is located. In our opinion, the conflict already exists, and it is a conflict which is "direct and positive." Kelly v. Washington, 302 U.S. 1, 10. There is nothing inconsistent with what we here say in Commonwealth v. McHugh, 326 Mass. 249, 265-266.

If it be thought that the result reached is not in accord with the most approved principles of economics, the remedy must lie with Congress.

A decree is to be entered, with costs to the defendants, declaring that G. L. (Ter. Ed.) c. 167, Section 37A, inserted by St. 1949, c. 640, does not render invalid the branches which have been established by the defendants with the approval of the Home Loan Bank Board.

So ordered.