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

Decision Date26 February 1988
Citation540 A.2d 923,224 N.J.Super. 446
PartiesRobert COLE and Marie Cole, Plaintiffs, v. CARTERET SAVINGS BANK, P.A. and Frank Willis, Defendants.
CourtNew Jersey Superior Court

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 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, 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 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 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 boundless, in this case we need not explore the outer limits of the Board's discretion. [458 U.S. at 167, 102 S.Ct. at 3030]

12 C.F.R. § 563.39 states in part:

§ 563.39. Employment contracts.

(a) General. An insured institution may enter into an employment contract with its officers and other employees only in accordance with the requirements of this section. All employment contracts shall be in writing and shall be approved specifically by an institution's board of directors. An institution shall not enter into an employment contract with any of its officers or other employees if such contract would constitute an unsafe or unsound practice. The making of such an employment contract would be an unsafe or unsound practice if such contract could lead to material financial loss or damage to the institution or could interfere materially with the exercise by the members of its board of directors of their duty or discretion provided by law, charter, bylaw or regulation as to the employment of an officer or employee of the institution. This may occur, depending upon the circumstances of the case, where an employment contract provides for an excessive term.

(b) Required provisions. Each employment contract shall provide that:

(1) The institution's board of directors may terminate the officer or employee's employment at any time, but any termination by the institution's board of directors other than termination for cause, shall not prejudice the officer or employee's right to compensation or other benefits under the contract. The officer or employee shall have no right to receive compensation or other benefits for any period after termination for cause. Termination for cause shall include termination because of the officer or employee's personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of the contract....

Thus, a savings and loan may have employment contracts and if so they shall be in writing, specifically approved by a member's board of directors and include the language of 12 C.F.R. § 563.39(b)(1), which language is clearly protective of employees who are fired without cause.

Carteret says the manual, while in writing, is not that which is contemplated by 12 C.F.R. § 563.39, that it was never specifically approved by its directors and further that it does not contain the aforesaid language. Therefore, since the very promulgation of 12 C.F.R. § 563.39 bespeaks a concern about employees and their contractual arrangements with the institution, defendant claims the regulation totally preempts any local efforts in this area of employee contracts. (Carteret's position with the manual is somewhat anomalous, for while the evidence indicates its board of directors never formally authorized the issuance of the manual, Carteret conceded that it was uniformly distributed to all employees.) In any event, the evidence shows that only ten top level management officers of defendant had employment contracts and all of them contained the required language of 12 C.F.R. § 563.39(b)(1) and all with specific time periods.

Thus the question, does the...

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8 cases
  • Weber v. First Federal Bank
    • United States
    • South Dakota Supreme Court
    • 25 d3 Maio d3 1994
    ...and applied 12 C.F.R. § 563.39. See Hall v. Great Western Bank, 231 Cal.App.3d 713, 282 Cal.Rptr. 640 (1991); Cole v. Carteret Savings Bank, 224 N.J.Super. 446, 540 A.2d 923 (1988); and Dynan v. Rocky Mountain Federal Savings & Loan, 792 P.2d 631 (Wyo.1990). These courts held that the langu......
  • Thomka v. Financial Corp.
    • United States
    • California Court of Appeals Court of Appeals
    • 10 d1 Maio d1 1993
    ...as contended by respondents. The court held that section 563.39 does not preempt state law. (Id. at pp. 717, 721-722 ; Cole v. Carteret Sav. Bank (1988) 224 N.J.Super. 446 .) Additionally, we note that appellant's claim is based upon a discharge in violation of public policy. Thus, even if ......
  • Dynan v. Rocky Mountain Federal Sav. and Loan
    • United States
    • Wyoming Supreme Court
    • 8 d2 Maio d2 1990
    ...of State of California v. Coast Federal Savings and Loan Association, 98 F.Supp. 311 (S.D.Cal.1951). See also Cole v. Cartaret Savings Bank, P.A., 540 A.2d 923 (N.J.Super.L.1988). There is no denial of the proposition that pursuant to 12 C.F.R. § 545.2, the Federal Home Loan Bank Board regu......
  • Hall v. Great Western Bank, B045945
    • United States
    • California Court of Appeals Court of Appeals
    • 25 d2 Junho d2 1991
    ...incorporated into part 545. Those few cases discussing section 563.39 reached varying results. For example, in Cole v. Carteret Sav. Bank (L.1988) 224 N.J.Super. 446, 540 A.2d 923, a New Jersey court treated the preemption issue as a choice of law issue rather than a choice of forum issue w......
  • Request a trial to view additional results

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