Pennsylvania Mortg. Bankers Ass'n v. Zimmerman, Civ. A. No. 87-0700.
Decision Date | 26 June 1987 |
Docket Number | Civ. A. No. 87-0700. |
Citation | 664 F. Supp. 186 |
Parties | PENNSYLVANIA MORTGAGE BANKERS ASSOCIATION, and Consolidated Real Estate Service Co., t/a Cresco Mortgage Service, Plaintiffs, v. Hon. LeRoy S. ZIMMERMAN, Attorney General of Commonwealth of Pennsylvania, and Independent Regulatory Review Commission, Defendants. |
Court | U.S. District Court — Middle District of Pennsylvania |
David B. Comroe, Robinson, Greenberg & Lipman, Philadelphia, Pa., E. Robert Levy, Levy, Lybeck, Schwartz & Romankow, P.C., Union, N.J., for plaintiffs.
Thomas B. York, Deputy Atty. Gen., Office of Atty. Gen., Harrisburg, Pa., for Leroy S. Zimmerman, et al.
Defendants, LeRoy S. Zimmerman, Attorney General of the Commonwealth of Pennsylvania, and the Independent Regulatory Review Commission (IRRC), a state agency, have moved to dismiss plaintiffs' complaint. Plaintiffs, Pennsylvania Mortgage Bankers Association and Consolidated Real Estate Service Co., t/a Cresco Mortgage Service (Cresco), allege in this declaratory judgment action that defendants violated their fourteenth amendment rights to equal protection and due process, as well as the contract clause of the federal constitution, in the promulgation of certain regulations dealing with the business conduct of "loan brokers."1 Pendent state claims are also asserted. Plaintiffs have also moved for a preliminary injunction against the enforcement of the regulations. We will grant the motion to dismiss and dismiss the motion for injunctive relief as moot.
The complaint sets forth the following allegations which we accept as true for the purposes of defendants' motion. See Labov v. Lalley, 809 F.2d 220 (3d Cir.1987). Cresco is a mortgage broker engaged in the business of procuring mortgage loans for residential properties from lenders on behalf of borrowers for a fee. Cresco, like other mortgage brokers, does not itself lend money but may provide other services which include originating and processing the loan application. The plaintiff association is a non-profit corporation, whose members include mortgage brokers, mortgage bankers, and others who may also be engaged in processing mortgage loan applications.
Mortgage rates dropped dramatically in 1986, causing a corresponding increase in the number of mortgage applicants. As a result, those engaged in the mortgage business could not handle the demand. Previously, a mortgage commitment could be made within forty-five days with closing on the residence within thirty days after that. The increased demand extended this time frame, often resulting in mortgage applicants being faced with higher mortgage rates than those quoted to them at the time they applied for the mortgage.
As a result of consumer complaints concerning the higher rates, the Attorney General promulgated the following regulations, in pertinent part, pursuant to his authority under the Unfair Trade Practices and Consumer Protection Law, 73 P.S. §§ 201-1, 201-3.1 (Purdon Supp. 1987-88):
37 Pa.Code (Annex A) § 305.1 et seq.
Plaintiffs assert in their brief in support of preliminary injunctive relief that a violation of the regulations may subject a broker to an injunction. A broker may also incur a fine of $5,000 if the injunction is violated with an additional fine of $1,000 if the violation is found to be willful.
Plaintiffs attack the regulations on the following grounds. First, the regulations violate equal protection because they apply only to mortgage brokers and not to others engaged in the same business such as mortgage bankers. Second, they violate due process because they are overbroad, vague and arbitrary. Third, they violate the contract clause because they impair the right of brokers and borrowers to contract. Additionally, a separate due process claim is made against the IRRC for its failure to comply with 45 P.S. § 1201 et seq. (Purdon Pamphlet 1987-88), dealing with the "Promulgation of Regulations And Format of Documents," and the Regulatory Review Act, 71 P.S. § 745.1 et seq. (Purdon Pamphlet 1987-88).2 A state law claim is also set forth against the IRRC, based upon a direct violation of the state statutes underlying the due process claim against it.
We will first discuss an issue not mentioned by any of the parties—whether a case or controversy exists concerning the substance of the regulations as being overbroad, arbitrary and vague.3 This issue often involves a determination of a party's standing to assert the claim. See Valley Forge Christian College v. Americans United For Separation of Church and State, 454 U.S. 464, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982). Concerning the declaratory relief sought, the Third Circuit Court of Appeals has stated the following:
Luis v. Dennis, 751 F.2d 604, 607 (3d Cir. 1984) (brackets in original).
In Luis, the governor of the Virgin Islands had filed a declaratory judgment action contesting the constitutionality of a measure passed by the Virgin Island legislature, modifying the way the legislature confirmed the governor's executive office appointees. Applying the above standard, the court concluded that there was no case or controversy since, among other things, the governor at the time he filed his lawsuit did not have any nominees before the legislature for approval nor was one contemplated at the time. There was a threatened injury but it was not "real or immediate" since several contingencies could happen to prevent the legislation from having an effect upon the governor's choices.
Of particular significance to plaintiffs' standing here is the response of the court to the governor's argument that a case or controversy arose at the moment the legislation was enacted following his unsuccessful veto. The governor asserted that his consideration of potential nominees would be "adversely affected" by the mere existence of the legislation. Rejecting this argument, the court stated:
We find this alleged harm too speculative to permit adjudication by a federal court. The Governor has made no attempt to particularize the elements of his asserted injury. Yet it is difficult for us to see how his appointment powers are in any way chilled by the requirements of the Act. We are...
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