Doyle v. Southern Guar. Corp.

Decision Date18 July 1986
Docket Number85-8297,Nos. 85-8187,s. 85-8187
Citation795 F.2d 907
PartiesRichard DOYLE, Plaintiff-Appellee, v. SOUTHERN GUARANTY CORPORATION, Defendant-Appellant. Jimmy E. WOOD, Plaintiff-Appellee, v. FORT WAYNE MORTGAGE CO., Defendant-Appellant.
CourtU.S. Court of Appeals — Eleventh Circuit

Wyck A. Knox, Jr., Augusta, Ga., Douglas N. Campbell, Susan L. Kupferberg, Laura E. Stevenson, Atlanta, Ga., for defendant-appellant.

Thomas W. Tucker, John B. Long, David E. Hudson, Augusta, Ga., for plaintiff-appellee.

Appeals from the United States District Court for the Southern District of Georgia.

Before RONEY and CLARK, Circuit Judges, and FAIRCHILD *, Senior Circuit Judge.

RONEY, Circuit Judge:

Some federal statutes permit exemption from state usury laws if mobile home financing contracts afford protections to the consumer set forth in the federal laws. Not all the federal statutes require the same protection. These diversity jurisdiction usury cases present the question of whether FHA or VA-insured mobile home agreements, which provide the protections required by those separate Acts, are exempt from Georgia usury laws, even though the contracts do not contain the terms required by another federal exemption statute, section 501 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA). DIDMCA was the statute dealt with in two recent en banc decisions. Quiller v. Barclays American/Credit, Inc., 764 F.2d 1400 (11th Cir.1985) (en banc ), cert. denied, --- U.S. ----, 106 S.Ct. 1992, 90 L.Ed.2d 673 (1986); Grant v. General Electric Credit Corp., 764 F.2d 1404 (11th Cir.1985) (en banc ), cert. denied, --- U.S. ----, 106 S.Ct. 1993, 90 L.Ed.2d 673 (1986).

This is a consolidated appeal of two cases, one involving an FHA-insured agreement, 1 the other a VA-insured agreement. 2 We make three decisions at this time and certify a controlling question of state law to the Supreme Court of Georgia. First, we hold that a lender who complies with the requirements of the FHA or VA preemption statutes, for loans guaranteed under those statutes, need not also comply with DIDMCA in order to exempt itself from state usury limits on mobile home retail installment contracts. Second, we hold that the State of Georgia overrode the FHA and VA preemptions when it amended its usury limit on mobile home transactions in 1980 and 1981, even though the amendments referred to neither the FHA/VA statutes nor to FHA/VA-insured loans. Third, we hold that the Georgia statute of limitations does not bar these suits.

We certify to the Supreme Court of Georgia one question: whether Georgia's 1983 abolition of interest ceilings on mobile home retail installment contracts of the dollar amounts involved here eliminated the cause of action for usury of those purchasers who entered their contracts prior to the amendments' effective date.

Under Georgia law, a lender who violates the finance charge limitations contained in the Georgia Motor Vehicle Sales Finance Act (GMVSFA) is barred from recovering any of the finance charge. O.C.G.A. Sec. 10-1-38(b). A lender who willfully violates the statute is subject to an additional penalty of double the time-price differential. O.C.G.A. Sec. 10-1-38(c). The finance charge on both contracts involved here exceeded the maximum rate of interest (10% add-on) then allowed under GMVSFA. O.C.G.A. Sec. 10-1-30 et seq.

The cases came to us on a 28 U.S.C.A. Sec. 1292(b) appeal of the legal questions decided by the district court in denying defendants' motions for dismissal for failure to state a cause of action and summary judgment.

The district court held that an FHA or VA-insured mobile home lender may not rely on the FHA or VA preemption statutes alone, but rather must also comply with the DIDMCA regulations in order to receive federal exemption from the state usury laws. On this point, we reverse the district court. The district court held that Georgia's 1983 amendments eliminating interest rate limits on mobile home retail sales installment contracts of $3000.00 or more apply prospectively only and did not affect the causes of action herein asserted. This point we certify to the Supreme Court of Georgia. The district court also ruled on class action and discovery issues which are inappropriate for us to decide.

A. FHA/VA Versus DIDMCA

The FHA and the VA preemption statutes were enacted at approximately the same time. 3 The VA statute received final approval several days before the FHA statute. It makes the VA exemption the same as that provided for FHA loans. Therefore, the intent and consequences of both statutes should be the same on the issue before us.

Although the published legislative history regarding the FHA preemption statute gives little guidance as to Congress' purpose in enacting the federal preemption, the VA legislative history provides some insight as to the purpose of the joint FHA/VA preemption.

The Senate Report accompanying the VA legislation noted that although the purpose of state usury laws is to protect state residents against exorbitant interest rates, the laws may effectively "bar lenders from making VA loans and thus prevent veterans from using their loan-guaranty entitlement." S.Rep. No. 260, 96th Cong., 1st Sess. 30, reprinted in 1979 U.S.Code Cong. & Ad.News 1894, 1916. Usury limits in several states were impeding FHA and VA loans, and in Arkansas, the state limit was so low as to have "brought VA loan activity to a virtual halt." Id. The purpose of the preemption provision was to assure, to the maximum extent possible in any jurisdiction in which FHA loans were exempt, that a veteran seeking to use his or her loan-guarantee entitlement for a conventional home, mobile home, or any other authorized purpose would not be discouraged or prevented by reason of a state anti-usury provision. Explanation of House Bill, Senate Amendment, and Compromise Agreement, 125 Cong.Rec. 16,753, reprinted in 1979 U.S.Code Cong. & Ad.News 1966, 1969. Under both the FHA and VA provisions, however, "the State's right to set an interest-rate limitation that overrides the Federal exemption would be preserved." S.Rep. No. 260, supra, at 31, 1979 U.S.Code Cong. & Admin.News at 1917. 4

Within four months after the FHA and VA exemptions became law, Congress enacted a third federal preemption provision, DIDMCA, referred to here as section 501. 5 This statute preempts state usury laws with regard to a broad range of residential loans and lenders. A Senate committee reported that the bill was a response to the finding that in states where usury laws require mortgage rates below market levels of interest, mortgage funds will not be readily available and those funds will flow to other states where market yields are available. This artificial disruption of funds availability is harmful to potential homebuyers in states with such usury laws and frustrates national housing policies and programs. S.Rep. No. 368, 96th Cong., 2d Sess. 19, reprinted in 1980 U.S.Code Cong. & Ad.News 236, 254. 6

Because of "the congressional policy of permitting a state the primary opportunity to determine its usury statutes," id. at 18, 1980 U.S.Code Cong. & Admin.News at 254, however, section 501 provided that an individual state could within three years enact a law specifying that the state intended to override section 501.

In order for mobile home financing to come under the DIDMCA preemption, the financing contract must contain certain consumer protection provisions specified in Federal Home Loan Bank Board regulations. 7

This Court concludes that although the DIDMCA statute encompasses the "federally related" mobile home loans involved in this case and therefore overlaps with the FHA and VA preemptions, this dual coverage does not nullify the FHA and VA preemptions as applied to mobile home loans. FHA or VA lenders may obtain federal preemption under the respective FHA or VA preemption without also satisfying the DIDMCA requirements. If, however, the state has overridden the FHA/VA preemption, the lender may still qualify for federal preemption by complying with the DIDMCA regulations (unless, of course, the state has also overridden the DIDMCA preemption). These conclusions come from the following analysis.

All of the statutes in question were enacted by the 96th Congress in a six-month time span. The same House and Senate committees considered both the FHA and DIDMCA statutes.

The FHA and VA statutes aimed at addressing the specific problem of state usury laws restricting FHA and VA home loan availability to qualified purchasers. In contrast, the purpose of DIDMCA was more wide-ranging. DIDMCA applied not only to federally insured loans but to all home loans, including conventional loans, which were in some way "federally related," a phrase defined broadly in section 501. "The law seeks to facilitate the free flow of capital into states with restrictive interest rates." Recent Developments, 36 Bus.Law. 1237, 1243 (1981). Congress believed the DIDMCA preemption was needed to enhance the stability of the national financial system and to facilitate a national housing policy. 8

It is unreasonable to believe that Congress, in addressing the more immediate concern of FHA and VA loan availability to individual borrowers, would require the lender to comply with the additional DIDMCA regulations in order to obtain federal preemption. The district court and plaintiffs have placed great reliance on the supposedly "better" consumer protection the DIDMCA regulations provide. Nothing, though, indicates that the FHA and VA protections are inadequate. 9 Although the regulations appearing under DIDMCA are not identical to the FHA and VA regulations, 10 they address similar concerns and overlap substantially. Indeed, the House Conference Report accompanying DIDMCA stated: "The conferees intend that in developing [the DIDMCA] regulations the Bank Board should look for guidance to regulations, handbooks and circulars...

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