591 F.2d 417 (1st Cir. 1979), 78-1155, First Fed. Sav. and Loan Ass'n of Boston v. Greenwald
|Citation:||591 F.2d 417|
|Party Name:||FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF BOSTON et al., Plaintiffs, Appellees, v. Carol S. GREENWALD, etc., Defendant, Appellant.|
|Case Date:||February 05, 1979|
|Court:||United States Courts of Appeals, Court of Appeals for the First Circuit|
Argued Sept. 6, 1978.
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Terence P. O'Malley, Asst. Atty. Gen., Boston, Mass., with whom Francis X. Bellotti, Atty. Gen., and S. Stephen Rosenfeld, Asst. Atty. Gen., Boston, Mass., were on brief, for appellant.
Evelle J. Younger, Atty. Gen., Arthur C. DeGoede, Asst. Atty. Gen., Joseph M. O'Heron and W. Gary Kurtz, Deputy Attys. Gen., Los Angeles, Cal., on brief, for State of California, amicus curiae.
Steven J. Toll, Atty., Washington, D. C., with whom Anne P. Jones, Gen. Counsel, Boston, Mass., Harold B. Shore, Associate Gen. Counsel, and Harvey Simon, Asst. Gen. Counsel, Washington, D. C., were on brief, for appellee, Federal Home Loan Bank Board.
William F. McKenna, Washington, D. C., with whom Aaron M. Peck, G. Howden Fraser, Daniel H. Willick, Los Angeles, Cal., McKenna & Fitting, Washington, D. C., Carlton W. Spencer, and Spencer & Stone, Boston, Mass., were on brief, for appellees, Federal Savings and Loan Associations.
Before COFFIN, Chief Judge, CAMPBELL and BOWNES, Circuit Judges.
LEVIN H. CAMPBELL, Circuit Judge.
On October 18, 1976, the Massachusetts Commissioner of Banks commenced a civil action in the Supreme Judicial Court of Massachusetts against the First Federal Savings and Loan Association of Boston (First Federal), a federally-chartered lender which engages in mortgage transactions in Massachusetts. The Commissioner sought declaratory and injunctive relief regarding the interpretation and enforcement of Mass.Gen.Laws c. 183, § 61, which requires mortgagees to pay interest on certain tax escrow accounts and to file informational reports concerning such accounts. 1 Sued as a representative party on behalf of all federally-chartered savings and loan associations in Massachusetts, First Federal was described in the complaint as,
" . . . a mortgagee under G.L. c. 183, § 61 and . . . a lender which is
regulated by an agency of the federal government as that phrase is employed in the Real Estate Settlement Procedures Act of 1974, 12 U.S.C. §§ 2601 et seq."
The complaint charged that notwithstanding notification of the requirements of Mass.G.L. c. 183, § 61, 2 First Federal refused to make the filings requested by the Commissioner. It alleged that the Massachusetts statute requires more than did a federal regulation, 12 C.F.R. § 545.6-11(c), that "relate(s) in part to the payment of interest on tax escrow accounts," 3 and "which (is) designed to conform with § 10 of the Real Estate Settlement Procedures Act of 1974," 12 U.S.C. § 2609 (RESPA). 4 Specifically, the complaint stated,
"a) § 61 requires the filing of annual reports; § 545.6-11 does not;
§ 61 applies to dwelling houses of four or fewer separate households; § 545.6-11 applies only to single family dwellings;
§ 61 applies to deposits on all present outstanding loans; § 545.6-11 applies only to deposits on loans made after June 16, 1975."
Thus, according to the Commissioner's complaint, "(i)nsofar as the state law requirements differ from those of federal law, First Federal has not met those requirements."
The complaint went on to insist that compliance with the federal regulations on the payment of interest on tax escrow accounts does not satisfy the requirements of state law, and that the state statute was not preempted by federal law. Indeed, it alleged that the Massachusetts statute is explicitly recognized as valid by § 18 of RESPA, 12 U.S.C. § 2616, which provides that any state law with respect to settlement practices that gives protection to the consumer greater than that provided by federal law shall not be deemed inconsistent with RESPA. 5 The Commissioner prayed that
the federal associations be compelled to comply with G.L. c. 183, § 61.
On October 29, 1976, First Federal removed the case to the United States District Court for the District of Massachusetts pursuant to 28 U.S.C. § 1441(b). 6 First Federal justified removal on the ground that the action was one over which the district court had original federal question jurisdiction under 28 U.S.C. §§ 1331 and 1337, in that it would involve "the construction, interpretation and application of federal statutes, specifically (12 U.S.C. §§ 1464, 2616, and 12 C.F.R. § 545.6-11)." The Commissioner on November 23, 1976, moved to remand the case to the Massachusetts Supreme Judicial Court. The district court denied the motion on February 23, 1977, in conformity with a magistrate's conclusion that the district court had original jurisdiction under 28 U.S.C. §§ 1331 and 1337.
While the remand issue was being resolved, the litigation proceeded. First Federal filed an answer to the Commissioner's complaint in the district court on November 9, 1976. The bank asserted that it had complied with 12 C.F.R. § 545.6-11, but had not complied with the requirements of the Massachusetts statute "to the extent such state law is not required to be followed by (the federal regulation)." First Federal contended that "certain provisions" of the Massachusetts statute were not applicable to it, and that the Massachusetts statute is not recognized by RESPA as being valid. First Federal also raised four affirmative defenses: (1) that the Commissioner failed to state a claim upon which relief can be granted; (2) that the Commissioner failed to join as a party defendant the Federal Home Loan Bank Board (Bank Board), which allegedly was "the real party defendant in interest . . . or . . . an indispensable party defendant"; (3) that federal regulations promulgated by the Bank Board totally occupy the field of regulation of the practices and procedures of federal savings and loan associations relating to the establishment, maintenance and payment of interest on escrow accounts; and (4) that those portions of Massachusetts G.L. c. 183, § 61 that the Commissioner seeks to enforce conflict with the federal regulations and thus are inapplicable, by virtue of the Supremacy Clause, to federal savings and loan associations.
First Federal along with its answer filed a counterclaim against both the Commissioner and the Bank Board. 7 The amended counterclaim sought declaratory relief under the Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202, to resolve the conflicting positions of the Commissioner and the Bank Board regarding First Federal's obligation to pay interest on escrow accounts as required by the Massachusetts statute.
In addition to the counterclaim against the Commissioner and the Bank Board, on January 11, 1977 First Federal and the other Massachusetts savings and loan associations instituted in the district court a separate civil action against the Commissioner and the Bank Board. Paralleling First Federal's counterclaim in the removed suit, the new action sought an adjudication under the Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202, of the conflicting positions of the Commissioner and the Bank Board.
Jurisdiction was premised on 28 U.S.C. §§ 1331 and 1337. The Commissioner moved on March 21, 1977 to stay proceedings in this second action because of the pendency of the first action involving the same issues, but ten days later she withdrew the stay motion, filed an answer, and agreed to consolidate the two proceedings for hearing in the district court. All parties then moved for summary judgment under Fed.R.Civ.P. 56.
The district court issued a memorandum opinion ruling that Mass.G.L. c. 183, § 61 violates the Supremacy Clause when applied to federally-chartered savings and loan associations. It reasoned both that federal law preempts the field of interest payments on escrow accounts by the federal associations and that the Massachusetts statute directly conflicts with 12 C.F.R. § 545.6-11. The court viewed RESPA § 18 as inapplicable to the case, because there has been no determination by the Secretary of Housing and Urban Development that the Massachusetts law affords greater consumer protection than 12 C.F.R. § 545.6-11(c) and because the payment of interest on escrow accounts is not a "settlement practice," as defined in RESPA, § 3, 12 U.S.C. § 2602.
The district court issued an order in each of the two cases granting First Federal's and the Bank Board's motions for summary judgment and denying the Commissioner's. The order in the Declaratory Judgment Act action declared that Massachusetts G.L. c. 183, § 61 "is inapplicable to and need not be complied with by federally-chartered savings and loan associations located in Massachusetts."
On appeal the Commissioner argues, first, that the federal district court erred in refusing to remand to the state...
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