Mazaika v. Bank One, Columbus, N.A.

• Decision Date: 25 May 1995
• Citation: 653 A.2d 640,439 Pa.Super. 95
• Parties: , 63 USLW 2458 Jennifer M. MAZAIKA and Daniel A. Mazaika, on behalf of themselves and all others similarly situated, Appellants, v. BANK ONE, COLUMBUS, N.A., Appellee.
• Court: Pennsylvania Superior Court

Page 640

653 A.2d 640

439 Pa.Super. 95, 63 USLW 2458

Jennifer M. MAZAIKA and Daniel A. Mazaika, on behalf of themselves and all others similarly situated, Appellants, v. BANK ONE, COLUMBUS, N.A., Appellee.

Superior Court of Pennsylvania.

Argued April 18, 1994.

Filed Dec. 14, 1994.

Petition for Allowance of Appeal Granted May 25, 1995.

Michael P. Malakoff, Pittsburgh, for appellants.

Mark A. Aronchick, Philadelphia, for appellee.

Before CAVANAUGH, WIEAND, McEWEN, CIRILLO, BECK, TAMILIA, KELLY, POPOVICH and SAYLOR, JJ.

McEWEN, Judge:

The essential questions presented in this appeal by the demurrer of appellee ¹ are: Did the 38th Congress intend, by the Act of June 3, 1864, to delegate to Ohio the power to define the term "interest" for purposes of preempting all other states' consumer protection laws, and, if, in fact, it did so intend, did the decision of the United States Supreme Court in Marquette National Bank v. First of Omaha Service Corp., 439 U.S. 299, 99 S.Ct. 540, 58 L.Ed.2d 534 (1978), bestow that power upon the Ohio legislature? ² We pose a negative response to these inquiries and, accordingly, reverse the order which dismissed, with prejudice, the complaint filed by appellants.

Our scope of review in an appeal from an order sustaining preliminary objections in the nature of a demurrer is plenary, and, after accepting as true all material facts set forth in the complaint as well as all inferences reasonably deducible therefrom, we determine whether, on the facts averred, the law precludes with certainty a recovery by plaintiff. Where any doubt exists as to whether a demurrer should be sustained, it must be resolved in favor of overruling the demurrer. Kyle v. McNamara & Criste, 506 Pa. 631, 633-34, 487 A.2d 814, 815 (1985); J.M. White v. Kreithen, 435 Pa.Super. 115, 119, 644 A.2d 1262, 1264 (1994); Newtown Village Partnership v. Kimmel, 424 Pa.Super. 53, 55-56, 621 A.2d 1036, 1037 (1993); Solomon v. Gibson, 419 Pa.Super. 284, 286-88, 615 A.2d 367, 368 (1992).

Bank One, Columbus, N.A., is a nationally chartered banking institution located in Columbus, Ohio, which extends open-ended credit accounts to individuals living throughout the United States, including Pennsylvania. Jennifer and Daniel Mazaika are residents of Pennsylvania who obtained a credit card from Bank One pursuant to a card-member agreement which provides for a twenty-four (24%) percent ³ finance charge on all outstanding balances. The cardholder agreement also permits Bank One to charge credit card holders:

An annual fee of twenty ($20) dollars,

A service fee of eighteen ($18) dollars for any checks returned,

A service fee of eighteen ($18) dollars for over-credit-limit charges, and

A service fee of eighteen ($18) dollars if a minimum monthly payment is not received within twenty-five (25) days after the same is due.

Although not termed or computed as interest by appellee in its cardholder agreement or monthly statements, these charges are considered lawful "interest" under Ohio law as a result of the following statutory provision:

[A] bank may charge, collect, and receive, as interest, other fees and charges that are agreed upon by the bank and the borrower, including, but not limited to, periodic membership fees, cash advance fees, charges for exceeding a designated credit limit, charges for late payments, and charges for the return of a dishonored check....

Ohio Revised Code § 1107.262(A) (emphasis supplied).

Appellants contend that Pennsylvania statutory and common law--including the Pennsylvania Goods and Services Installment Sales Act, 69 P.S. §§ 1101 et seq., the Pennsylvania Banking Code of 1965, 7 P.S. §§ 101 et seq., and the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. §§ 201-1 et seq.--prohibit the imposition of the aforementioned fees levied by appellee. Appellee argues that such fees, since the Ohio legislature has characterized them in ORC § 1107.262(A) as "interest", may be lawfully charged to Pennsylvania card holders as a result of the preemption, by Section 85 of the National Bank Act, of all state laws purporting to regulate fees charged in connection with such loans.

All parties agree that the interest rate that appellee, a national bank located in Ohio, ⁴ may lawfully charge its customers, regardless of their domicile, is governed by Section 85 of the National Bank Act of 1864, 13 Stat. 99, which specifically permits a national bank to charge interest "on any loan ... at the rate allowed by the laws of the state ... in which the bank is located". 12 U.S.C. § 85.

The National Bank Act was enacted by the 38th Congress in 1864 to place national banks on a competitive footing with state-chartered banks, and sought to prevent state legislatures from discriminating against national banks. ⁵ Section 85 of the National Bank Act, 12 U.S.C. § 85, more specifically prescribes the amount of interest that a national bank may charge as follows:

Any association may take, receive, reserve, and charge on any loan ... interest at the rate allowed by the laws of the State ... where the bank is located, or at a rate of 1 per centum in excess of the discount rate on ninety-day commercial paper in effect at the Federal reserve bank in the Federal reserve district where the bank is located, whichever may be the greater, and no more....

Appellee contends that all state usury and consumer protection laws which purport to regulate any fees which may be charged by a national bank in connection with a loan, so long as they are characterized as interest by a law of the state in which the bank is "located", have been expressly preempted by this section of the National Bank Act. While we agree that the express language of the National Bank Act preempts any attempt by a state legislature to regulate the rate of interest which may be charged by a national bank located, for purposes of federal law, in another state, we are not persuaded that all Pennsylvania consumer protection laws which purport to prohibit fees and contingent default charges, such as those at issue in the instant case, have been preempted by the provisions of the National Bank Act governing the rate of interest to be charged by national banks.

I. PREEMPTION

Appellee's preemption argument arises from Article VI of the U.S. Constitution which provides that the laws enacted by the U.S. Congress "shall be the supreme Law of the Land; ... any Thing in the Constitution or Laws of any state to the Contrary notwithstanding." Art. VI, cl. 2.

The path to be followed in pre-emption cases is laid out by our cases. It is accepted that Congress has the authority, in exercising its Article I powers, to preempt state law. In the absence of an express statement by Congress that state law is pre-empted, there are two other bases for finding pre-emption. First, when Congress intends that federal law occupy a given field, state law in that field is pre-empted. Pacific Gas & Electric Co. v. State Energy Resources Conservation and Development Comm'n, 461 U.S. 190, 212-213, 103 S.Ct. 1713, 1726-27, 75 L.Ed.2d 752 (1983). Second, even if Congress has not occupied the field, state law is nevertheless pre-empted to the extent it actually conflicts with federal law, that is, when compliance with both state and federal law is impossible, Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-143, 83 S.Ct. 1210, 1217, 10 L.Ed.2d 248 (1963), or when the state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress," Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941). See, e.g., Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248, 104 S.Ct. 615, 621, 78 L.Ed.2d 443 (1984).

Field v. Philadelphia Electric Co., 388 Pa.Super. 400, 408-09, 565 A.2d 1170, 1174 (1989), quoting, California v. ARC America Corp., 490 U.S. 93, 100-101, 109 S.Ct. 1661, 1665, 104 L.Ed.2d 86, 94 (1989). Accord: English v. General Electric Co., 496 U.S. 72, 78-79, 110 S.Ct. 2270, 2274-75, 110 L.Ed.2d 65, 73-74 (1990); Fidelity Federal Savings & Loan Assoc. v. de la Cuesta, 458 U.S. 141, 153, 102 S.Ct. 3014, 3022, 73 L.Ed.2d 664 (1982).

Banking is an area in which Congress has not evidenced an intent to occupy the entire field to the exclusion of the states, and thus state legislatures may legislate in all areas not expressly or impliedly preempted by federal legislation. See, e.g., Lewis v. B.T. Investment Managers, Inc., 447 U.S. 27, 38, 100 S.Ct. 2009, 2016, 64 L.Ed.2d 702 (1980); Anderson National Bank v. Luckett, 321 U.S. 233, 248, 64 S.Ct. 599, 607, 88 L.Ed. 692 (1944); First National Bank in St. Louis v. State of Missouri, supra, 263 U.S. at 656, 44 S.Ct. at 215; Griffith v. Connecticut, 218 U.S. 563, 569, 31 S.Ct. 132, 133, 54 L.Ed. 1151 (1910), aff'd., 218 U.S. 572, 31 S.Ct. 134, 54 L.Ed. 1155 (1910); General Motors Corporation v. Abrams, 897 F.2d 34, 41 (2nd Cir.1990); Smith v. Mitchell, 420 Pa.Super. 137, 139-41, 616 A.2d 17, 19 (1992).

[N]ational banks have traditionally been "governed in their daily course of business far more by the laws of the State than of the Nation. All their contracts are governed and construed by State laws." National Bank v. Commonwealth (1869) 76 U.S. (9 Wall) 353, 362, 19 L.Ed. 701; see Scott, The Dual Banking System: A Model of Competition in Regulation (1977) 30 Stan.L.Rev. 1. As explained in National State Bank, Elizabeth, N.J. v. Long, 630 F.2d 981 (3d Cir.1980), "[w]hatever may be the history of federal-state relations in other fields, regulation of banking has been one of dual control since the passage of the first National Bank Act in 1863.... In only a few instances has Congress explicitly preempted state regulation of national banks. More commonly, it has been left to the courts to delineate the proper boundaries of federal and state supervision. The judicial test has been a tolerant one. [National banks'] right to contract, collect debts, and...