The opinion of the court was delivered by: EGAN
The Federal Home Loan Bank Board (sometimes herein referred to as the Board) alleging, among other things, that its prior consent had not been obtained, filed this action against defendant seeking a declaratory judgment to the effect that the defendant's conversion from a Federal charter to a State charter was ineffective and is void.
The Secretary of Banking and the Secretary of the Commonwealth of Pennsylvania, represented by the Attorney General of Pennsylvania, have been permitted to intervene and they support the defendant's position that Board approval is not required and that defendant is now properly doing business under a State charter as a savings and loan association.
The defendant and the intervenors filed separate motions to dismiss, or in the alternative, for summary judgment. The plaintiff also moves for summary judgment.
The relevant facts appear in the amended complaint and affidavits of Guy G. DeFuria and David G. Welsh, submitted in support of defendant's motion, in affidavits of Harry W. Caulsen, Raymond J. Strecker and Ray E. Dougherty, submitted in support of plaintiff's motion, in an affidavit by Secretary of Banking, Robert L. Myers, Jr., submitted in support of intervenors' motion, and in the record in Greater Delaware Valley Federal Savings and Loan Ass'n v. Federal Home Loan Bank Board, D.C., 163 F.Supp. 176. All parties agree that there is no substantial dispute as to the facts.
The defendant, Greater Delaware Valley Federal Savings and Loan Association, (sometimes referred to as Association), pursuant to the provisions of the Home Owners' Loan Act of 1933, was chartered in 1938 by the Federal Home Loan Bank Board. Defendant's home office is at 69th and Walnut Streets, Upper Darby, Pennsylvania. Having decided to convert to a Pennsylvania charter, it complied with the provisions of Section 5(i) relating to such conversion and also with the provisions of the Pennsylvania Building and Loan Code relating to such conversion as contained in 15 P.S. § 1074-1001, etc., and received a State charter on January 2, 1959.
As stated above, the Board in this action seeks a declaratory judgment that the conversion of the defendant from a Federal to a State charter was ineffective and void because Section 5(i) of the Home Owners' Loan Act requires the approval of the Board and the defendant neither sought nor obtained such approval.
Section 5(i) consists of three unnumbered paragraphs, each covering a different situation. The first paragraph permits the conversion of any member of a Federal Home Loan bank into a Federal savings and loan association, 'subject to such rules and regulations as the Board may prescribe.'
The third paragraph permits the conversion of any Federal savings and loan association into a State institution upon an 'equitable basis.' Such a conversion, however, is expressly made 'subject to approval, by regulations or otherwise, by the Federal Home Loan Bank Board and by the Federal Savings and Loan Insurance Corporation:' These two types of conversion under paragraphs 1 and 3 obviously require Board approval. Congress did not set forth in these two paragraphs the requirements which the association in question must fulfill in order that such a conversion may be permitted except that it specified in paragraph 1 that that type of conversion must at least be upon a vote of 51% or more of the votes cast at a legal meeting called to consider such action. All other requirements for such conversions under both paragraphs 1 and 3 of Section 5(i) ware left to the discretion of the Federal Home Loan Bank Board which was given the power to make rules and regulations on the subject.
However, in the case of a conversion of a Federal savings and loan association to a State charter, under paragraph 2 of Section 5(i), (which is referred to in paragraph 3 of Section 5(i) as a conversion 'upon a vote of the members only'), Congress set forth in detail the conditions with which the association must comply in order that such a conversion may be effective.
By the express provisions of the Act, no such conversion is permitted except in a State which permits the conversion of a savings and loan type of State institution into a Federal savings and loan association. It specifies the kind of notice to the stockholders and the necessary vote and requires a special meeting to consider and approve such conversion. As an additional condition, it requires that upon the effective date of the conversion the association has repurchased the total amount invested in its shares by the Secretary of the Treasury, and if upon the effective date of conversion the Home Owners' Loan Corporation holds shares of the association, its approval of the conversion has to be obtained. The conversion is to be upon a mutual basis so that in the event of dissolution, the shareholders will share in the assets of the association in exact proportion of their relative share or account credits, that the conversion shall be effective upon the date that all the provisions of the Act have been complied with, and upon the issuance of a new charter by the State wherein the association is located, and that in that event, the insurance of the shares by the Federal Savings and Loan Insurance Corporation shall continue.
The Board concedes that it does not have the power of approval of a conversion from a Federal to a State charter in all cases. It claims, however, that a Federal savings and loan association cannot convert to a Pennsylvania chartered building and loan association without the approval of the Federal Home Loan Bank Board because under the law of Pennsylvania, the conversion of a State charter to a Federal charter requires the approval of the Pennsylvania Department of Banking, 15 P.S., Corporations, Article X, § 1074-1001, etc.
It points to the second proviso of paragraph 2 of Section 5(i) and specifically to the words 'and upon compliance with other requirements reciprocally equivalent to the requirements of such State law for the conversion of a State-chartered institution into a Federal association' as compelling the conclusion that since Pennsylvania law requires the approval of the State Banking Department of a State to Federal conversion, its reciprocally equivalent administrative counterpart in the Federal Government, namely, the Board, must likewise approve a Federal to State conversion.
Not every State has a Banking Department. Consequently the argument of the Board has force only in the few States where there is a Banking Department. The Pennsylvania Department of Banking, inter alia, has supervision over all banks and building and loan associations chartered in that State and even over national banks which have power to carry on a fiduciary business: 71 P.S. § 422. It is empowered by law to enforce administer the laws of Pennsylvania in relation to all corporations and persons under its jurisdiction, 'and shall see that the greatest possible safety is afforded to depositors therein or therewith, and to other interested persons.' Act of April 9, 1929, P.L. ...