Cole v. Carteret Sav. Bank, P.A.

• Court: Superior Court of New Jersey
• Writing for the Court: CONN
• Citation: 540 A.2d 923,224 N.J.Super. 446
• Decision Date: 26 February 1988
• Parties: Robert COLE and Marie Cole, Plaintiffs, v. CARTERET SAVINGS BANK, P.A. and Frank Willis, Defendants.

Page 446

224 N.J.Super. 446 540 A.2d 923 Robert COLE and Marie Cole, Plaintiffs,
v.
CARTERET SAVINGS BANK, P.A. and Frank Willis, Defendants. Superior Court of New Jersey, Law Division,
Passaic County. Decided Feb. 26, 1988.

Page 447

W. Thomas McDonough, Jr., Montclair, for plaintiffs.

Carl H. Rifino, Roseland, for defendants (Carella, Byrne, Bain & Gilfillan, attorneys).

CONN, J.S.C.

In this wrongful job termination suit, bifurcated first as to liability, the core of the claim is that defendant, a large savings institution with over 800 employees, is liable to plaintiff under an implied contract doctrine based on an employee manual, all as enunciated in Woolley v. Hoffmann-La Roche, 99 N.J. 284, 491 A.2d 1257, mod. 101 N.J. 10, 499 A.2d 515 (1985).

A prior oral ruling in this nonjury trial disposed of the various factual issues; the court having concluded that plaintiff had contract rights under defendant's manual as per Woolley,

Page 448

supra; that defendant failed to follow the required procedures and further, it found that defendant had terminated plaintiff's job without good cause. An additional claim by plaintiff that the supervisory officer involved had tortiously interfered with his employment rights, thus giving rise to a claim of punitive damages, was rejected by the court.

This opinion addresses the defense by Carteret that notwithstanding all of the findings above, the Woolley v. La Roche contract doctrine is inapplicable here, because it is preempted by federal law and the regulations that control defendant as a federal savings and loan institution. The claim is that the Home Owner's Loan Act, 12 U.S.C.A. §§ 1461 et seq. (HOLA) and the Federal Home Loan Bank Board (board), the regulatory agency thereunder, [540 A.2d 924] oversee member institutions such as defendant and that the act (HOLA) and the board's regulations have completely preempted all phases of federal savings and loan activity. While case law elsewhere and in the federal system have addressed the issue, the point is a novel one here in New Jersey.

A brief history reveals that plaintiff was hired by defendant in March 1984 and that he received, as all defendant's employees did, a company employee manual. He was a middle-level manager and received a $33,000 per annum salary. His job was terminated in September 1984 and as indicated, the firing was without good cause and without any semblance of compliance by Carteret with the manual's performance and termination procedures, etc.

Defendant has been a federal savings and loan association operating under the aegis of the HOLA for many years. In September 1983 it became "re-chartered" which in essence, made it into a public company. It changed its name from savings and loan association to savings bank in January 1986. The HOLA which became law in 1933 authorizes the board to regulate member savings and loans such as defendant and to issue regulations thereunder. That board not only regulates

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institutions such as defendant, but also institutions under the Home Loan Bank Act, 12 U.S.C.A. §§ 1421 et seq., as well as being the regulatory agency for several other federal banking and financing statutes.

The thrust of Carteret's claim is that by reason of a certain regulation, 12 C.F.R. § 563.39 "employment contracts," the board has preempted the whole area of employee rights as to member institutions and thus the implied contract right established in Woolley, supra, is barred as well. It relies generally on the broad preemption principles outlined by the United States Supreme Court in Fidelity Federal S & L Assn. v. de la Cuesta, 458 U.S. 141, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982) and specifically on Berry v. American Federal Savings, 730 P.2d 905 (Colo.App.1986), which case defendant contends is a direct on point precedent to the case at bar. The issue is classic federal versus state preemption and therefore the court's function is to examine the federal statute and regulations in order to determine the congressional and regulatory agency intent as to this area of federal savings and loan employee rights.

Fidelity Federal, supra, teaches us that the HOLA and its regulations will preempt and nullify any conflicting state law. A conflict will arise, for example, when compliance with both federal and state regulations is a physical impossibility. See Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 83 S.Ct. 1210, 10 L.Ed.2d 248 (1963). Also, a conflict arises when the state law stands as an obstacle to the accomplishment and execution of the purposes of Congress. See Hines v. Davidowitz, 312 U.S. 52, 61 S.Ct. 399, 85 L.Ed. 581 (1941). In Fidelity Federal, supra, the issue was a concise and narrow one--whether the board's regulation empowering members to include due-on-sale clauses in their loan instruments preempted local law which limited the enforcement of such clauses only when the institution demonstrated that a transfer of the property impaired its security. The Court concluded the board regulation did preempt and construed the California statute in question to be in conflict with the board's regulations. The Court,

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however, also recognized that HOLA and its board's regulations did not have unlimited preemptive power over state law:

Although the Board's power to promulgate regulations exempting federal savings and loans from the requirement of state law may not be...