Lopez v. World Savings & Loan Assn.

• Decision Date: 23 January 2003
• Docket Number: No. A095666.,A095666.
• Citation: 105 Cal.App.4th 729,130 Cal.Rptr.2d 42
• Parties: Myrtle A. LOPEZ, Plaintiff and Appellant, v. WORLD SAVINGS AND LOAN ASSOCIATION, Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

130 Cal.Rptr.2d 42

105 Cal.App.4th 729

Myrtle A. LOPEZ, Plaintiff and Appellant, v. WORLD SAVINGS AND LOAN ASSOCIATION, Defendant and Respondent.

No. A095666.

Court of Appeal, First District, Division 3.

January 23, 2003.

Review Denied May 14, 2003.

Thomas E. Alborg, Michael John Veiluva, James C. Jardin, Walnut Creek, Alborg, Veiluva & Cannata, for Plaintiff and Appellant Michael A. Lopez.

Bill Lockyer, Attorney General, Richard M. Frank, Chief Assistant Attorney General, Herschel T. Elkins, Senior Assistant Attorney General, Ronald A. Reiter, Supervising Deputy Attorney General, Michele R. Van Gelderen, Deputy Attorney

General, Amicus Curiae for the Attorney General on behalf of Plaintiff and Appellant.

Barry D. Hovis, San Francisco, Walter J.R. Traver, Rancho Mirage, Musick, Peeler & Garrett, LLP, for Defendant and Respondent World Savings & Loan Association.

Carolyn J. Buck, Chief Counsel, Thomas J. Segal, Deputy Chief Counsel, Paul K. Hutson, Senior Attorney, Amicus Curiae for The Office of Thrift Supervision on behalf of Defendant Respondent.

POLLAK, J.

Class action plaintiff challenges the practice of a federal savings and loan association of charging a fee of $10 for the transmission of a payoff demand statement by fax, over and above the fee authorized by Civil Code section 2943, subdivision (e)(6) for furnishing such a statement. Plaintiffs causes of action for violating this section and for engaging in an unfair, deceptive and unlawful business practice in violation of Business and Professions Code section 17200 were dismissed on the ground that the claims are preempted by federal law. Thereafter, summary judgment was granted on the remaining causes of action for breach of contract, fraud and unjust enrichment on the ground that these claims are not viable under state law. We agree that federal law has preempted the claims under section 2943 of the Civil Code and section 17200 of the Business and Professions Code and that the other causes of action were properly rejected. We therefore affirm.

Factual and Procedural Background

Plaintiff and appellant Myrtle Lopez and her deceased husband Michael obtained a real estate loan in 1993 from defendant and respondent World Savings and Loan Association (World), a federally chartered savings and loan association. The loan was secured by a deed of trust which, in conformity with Civil Code section 2943, subdivision (e)(6) as it then read,¹ provided that World "may collect a fee of $60.00 ... for furnishing any statement of obligation with respect to" the secured transaction. In November 1996, Lopez sought to pay off the loan as part of a refinancing. An escrow was opened at Chicago Title Company (Chicago Title) and the escrow officer requested a payoff demand from World and asked that it be returned "via fax" in order to avoid delays and ensure the expeditious close of escrow. World did fax to Chicago Title a payoff demand, which included a $60 fee for the demand and a separately itemized fax fee of $10, which Mr. and Mrs. Lopez signed, indicating their acceptance. The escrow was not in position to close prior to the expiration of the original payoff demand, so an updated statement was requested and provided by fax. The updated demand included an additional $10 fax fee and another $60 fee for the second demand statement, but World did not require payment of the second $60 fee.² The loan, including $20 in fax fees, was paid through the escrow on November 26,1996.

In September 1999, Lopez filed a putative class action complaint against World, alleging that the fax fees were prohibited by the terms of the deed of trust and by Civil Code section 2943, subdivision (e)(6). The first cause of action was based upon California's unfair competition act (UCL), Business and Professions Code section 17200, the second on breach of contract, the third on fraud, the fourth on unjust enrichment, and the fifth on Civil Code section 2943. World answered and moved for judgment on the pleadings as to all causes of action on the ground that the Home Owners Loan Act (HOLA), 12 United States Code section 1461 et seq., and the regulations issued thereunder by the Office of Thrift Supervision (OTS), 12 Code of Federal Regulations (12 C.F.R.) part 560.2, preempted state law with respect to the propriety of these charges. The trial court granted the motion without leave to amend as to the first and fifth causes of action, holding that "12 CFR sec. 560.2 explicitly preempts the field of `... loan-related fees, including without limitation, initial charges, prepayment penalties, servicing fees, and overlimit fees....' There does not seem to be a valid basis for distinguishing these fees from other fees imposed by lenders. Allowing state regulation of these fees would interfere with the federal goal of a `uniform Federal scheme of regulation.'" The court denied the motion with respect to the other three causes of action on the ground that they were "not based totally upon Civil Code section 2943 and Business and Professions Code section 17200."

Thereafter, on Lopez's motion, the court conditionally certified a class "consisting of all persons who were borrowers of [World] and were charged an additional fee for the fax transmission of a payoff demand statement."³ Before notice had been given to class members, World moved for summary adjudication of the remaining causes of action, and the motion was granted based upon an analysis that will be discussed more fully below. Judgment was entered in favor of World, and this timely appeal followed.

Discussion

1. Preemption

Lopez's fifth cause of action alleged that World breached Civil Code section 2943, subdivision (e)(6) by charging a fax fee in addition to the fee authorized by that section for furnishing the demand statement. Subdivision (c) of section 2943 provides that "[a] beneficiary ... shall, on the written demand of an entitled person,⁴ ... prepare and deliver a payoff demand statement to the person demanding it within 21 days of the receipt of the demand." Subdivision (e)(6) of section 2943, as it read prior to an amendment in 2001, provided that "[t]he beneficiary may make a charge not to exceed sixty dollars ($60) for furnishing each required statement."⁵ The first cause of action alleged that by charging a $10 fax fee, in addition to the $60 fee for the statement, World violated both Civil Code section 2943 and the terms of the deed of trust, and thereby engaged in an unfair, deceptive and unlawful business practice in violation of the UCl.

Without questioning whether section 2943 of the Civil Code should properly be read to prohibit the fax fee—an issue that has not been addressed by the parties— World's attack on the sufficiency of the first and fifth causes of action argues that section 2943 is preempted by federal law. World is a federally chartered savings and loan association. Congress enacted HOLA to promote safe and sound lending practices among such associations. "The paramount purpose of HOLA is to ensure the solvency of federal associations" through a uniform scheme of regulation so that the public has access to means of home financing. (People ex rel. Sepulveda v. Highland Fed Savings & Loan (1993) 14 Cal. App.4th 1692, 1712, 19 Cal.Rptr.2d 555 (Highland); see Fidelity Federal Sav. & Loan Assn. v. de la Cuesta (1982) 458 U.S. 141, 159-160, 102 S.Ct. 3014, 73 L.Ed.2d 664 (Fidelity).) HOLA created a system of federal savings and loan associations originally regulated by the Federal Home Loan Bank Board (FHLBB). Subsequently, Congress enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, 12 United States Code section 1462 et seq., which replaced the FHLBB with OTS. Until 1996, the applicable regulations were located in part 545 of title 12 of the Code of Federal Regulations. Part 545.2 expressed the extent of preemption of state law affecting the operations of federal savings associations as follows: "The regulations in this Part 545 are promulgated pursuant to the plenary and exclusive authority of the Office to regulate all aspects of the operations of Federal savings associations, as set forth in section 5(a) of [HOLA]. This exercise of the [OTS's] authority is preemptive of any state law purporting to address the subject of the operations of a Federal savings association." (Italics added.) In 1996, OTS moved the lending regulations to part 560 of 12 C.F.R. and replaced part 545.2 with part 560.2. The new provision provides that "(a) ... OTS hereby occupies the entire field of lending regulation for federal savings associations. OTS intends to give federal savings associations maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation. Accordingly, federal savings associations may extend credit as authorized under federal law ... without regard to state laws purporting to regulate or otherwise affect their credit activities, except to the extent provided in paragraph (c) of this section."⁶ Paragraph (b) lists examples of the types of state laws preempted, including "(5) Loanrelated fees, including without limitation, initial charges, late charges, prepayment penalties, servicing fees, and overlimit fees." Paragraph (c) provides that "State laws of the following types are not preempted to the extent that they only incidentally affect the lending operations of Federal savings associations or are otherwise consistent with the purposes of paragraph (a) ... [¶] (1) Contract and commercial law; [¶] (2) Real property law; [¶] ... [and][¶] (6) Any other law that OTS, upon review, finds: [¶] (i) Furthers a vital state interest; and [¶] (ii) Either has only an incidental effect on lending operations or is not otherwise contrary to the purposes expressed in paragraph (a)."

Under the Supremacy Clause, federal law of course may preempt the operation of state law. "[T]he laws of the United States ... shall be the supreme law of the...