Conference of State Bank Sup'rs v. Lord

• Decision Date: 11 February 1982
• Docket Number: Civ. A. No. 81-1591.
• Citation: 532 F. Supp. 694
• Parties: CONFERENCE OF STATE BANK SUPERVISORS, Plaintiff, v. Charles E. LORD, Defendant.
• Court: U.S. District Court — District of Columbia

532 F. Supp. 694

CONFERENCE OF STATE BANK SUPERVISORS, Plaintiff, v. Charles E. LORD, Defendant.

Civ. A. No. 81-1591.

United States District Court, District of Columbia.

February 11, 1982.

James F. Bell, James R. Johnson, Arthur E. Wilmarth, Jr., John A. Buchman, Washington, D. C., for plaintiff.

Dina R. Lassow, Dept. of Justice, Washington, D. C., for defendant.

MEMORANDUM

GESELL, District Judge.

This is a civil action for a declaratory judgment that regulations promulgated by the Comptroller of the Currency establishing the terms on which national banks may offer or purchase adjustable-rate-mortgages, 46 Fed.Reg. 18932 (1981) (to be codified in 12 CFR Part 29), are invalid to the extent they purport to preempt inconsistent state laws. The matter is before the Court on defendant's motion to dismiss or for summary judgment, plaintiff's cross-motion for summary judgment, and the oppositions thereto.¹

The essential feature of an adjustable-rate-mortgage ("ARM") is that the interest rate may be periodically adjusted to reflect changes in prevailing interest rates. The regulations of the Comptroller provide that national banks may offer or purchase ARMs subject to various conditions relating to the permissible amount of each increase in interest, the frequency of increases, the maximum overall interest increase, and other matters. The regulations are intended to "encourage national bank participation in the residential mortgage market by facilitating the development of new mortgage instruments ...," 46 Fed.Reg. 18934 (1981). A number of states have established restrictions on ARMs that conflict with the Comptroller's regulations in various respects. Believing that these state restrictions have the effect of discouraging national banks from offering ARMs the Comptroller determined that the regulations should override inconsistent state law. First, the regulations provide generally that national banks may offer ARMs without regard to any "limitations" imposed by state law. Second, the regulations preempt state laws which prohibit the charging of interest on interest and prepayment fees and that impair the enforceability of due-on-sale clauses.

The Comptroller raises the threshold issue of whether the plaintiff Conference of State Bank Supervisors has standing to bring this action. The Conference is an association composed of state government officials responsible for regulating state banks. Since it is firmly established that an individual state banking official has standing to bring an action against the Comptroller, see Nuesse v. Camp, 385 F.2d 694 (D.C. Cir. 1967), the only argument seriously pressed by the Comptroller is whether the Conference meets the other tests for associational standing. In Hunt v. Washington Apple Advertising Commn., 432 U.S. 333, 343, 97 S.Ct. 2434, 2441, 53 L.Ed.2d 383 (1977), the Court stated:

We have recognized that an association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. Id. at 343, 97 S.Ct. at 2441.

The purpose of the Conference is to promote the interests of state bank officials in performing their official duties and the participation of individual members in this lawsuit is unnecessary insofar as the cross-motions raise a pure issue of law. Thus the requisite of standing is clearly met.

The dispute on the merits is whether the Comptroller possesses the power to issue these regulations insofar as they preempt state banking laws. The Supremacy Clause requires that state law give way when there is a clear conflict between federal and state law. That the federal law at issue is in the form of regulations rather than statute does not alter its preemptive effect. See Ray v. Atlantic Richfield Co., 435 U.S. 151, 172, 98 S.Ct. 988, 1001, 55...