The opinion of the court was delivered by: TAMM
During the course of the pre-trial proceedings held before the Pre-Trial Examiner of this Court, the parties agreed to submit to the Court for decision two fundamental issues of law which constitute the basis for this action with the stipulation that the Court's ruling upon these points of law will determine the future course which the case will follow in the Court. The pre-trial stipulation provides at paragraph 15:
'The parties stipulate and agree that the proceedings could be expedited and simplified by the Court first determining two legal issues indentified as follows --
'(a) The legality of the regulations (and charter provisions) promulgated and maintained by defendants as a Board since on or about March 7, 1949.
(b) The plaintiffs' legal standing to sue upon the basis of the defendants stipulating for purpose of determining this question that the business of banking may be conducted in Wisconsin by only such organizations, including plaintiffs, as are chartered to operate as banks, and upon the assumption for the purpose of determining this question that the factual allegations of the complaint are true.'
The Court has heard argument in open court upon each of the above questions, and counsel on both sides have filed with the Court briefs detailing their positions upon these questions. The Court will treat in this opinion the questions individually.
1. The legality of the regulations (and charter provisions) promulgated and maintained by defendants as a Board since on or about March 7, 1949.
The defendant Board was created by Act of Congress known as the Home Owners' Loan Act of 1933. Sec. 1464, Title 12, United States Code. The defendant Board is authorized and directed by its governing regulation to provide rules and regulations for the operation of Federal savings and loan associations in the following language:
'(a) 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.
'(b) Such associations shall raise their capital only in the form of payments on such shares as are authorized in their charter, which shares may be retired as is therein provided. No deposits shall be accepted and no certificates of indebtedness shall be issued except for such borrowed money as may be authorized by regulations of the Board.'
The plaintiffs allege that in accordance with the provisions of Title 12, United States Code Annotated as cited above, the defendant Board did prescribe rules and regulations which were in accordance with the authorization of Congress until the enactment of the regulations of March 7, 1949. The plaintiffs claim that the 1949 regulations (published in the Federal Register, Volume 14, Number 47, March 11, 1949) are illegal in that they are not in accord with the enabling statute and that they are beyond the authority of the defendants to promulgate and maintain. Generally, the plaintiffs say that the amended regulations, particularly in using the word, 'saving,' in the 1949 regulations, as distinguished from the word, 'share,' in the original regulations and through the subsequent definitions, have so changed the basic concept of operations of the Federal savings and loan associations that they are now, in fact, in Wisconsin engaged in the banking business in violation of the plaintiffs' exclusive right to engage in that business. More specifically, the plaintiffs charge that under the 1949 regulations, the defendants are permitting Federal savings and loan associations to accept 'deposits' in 'savings accounts' in violation of the Congressional mandate that the associations shall raise their capital only in the form of payments on shares. The plaintiffs allege other procedures now prevalent, they say, in the Federal savings and loan associations in Wisconsin which emphasize the plaintiffs' position that the defendants are permitting the Federal savings and loan associations to accept deposits in savings accounts, thereby enabling them to actually engage in the banking business.
The plaintiffs say, in summary form, the 1949 regulations are invalid in that:
(1) the form of capital prescribed by law -- shares as authorized in the charter of each individual association -- has been eliminated.
(2) the capital raising activity prescribed by law -- receipt of payments on shares authorized ...