Pinchot v. Charter One Bank, FSB, No. 2002-0945.

CourtUnited States State Supreme Court of Ohio
Writing for the CourtALICE ROBIE RESNICK, J
Citation792 NE 2d 1105,99 Ohio St.3d 390
PartiesPINCHOT, APPELLEE, v. CHARTER ONE BANK, F.S.B., APPELLANT.
Decision Date20 August 2003
Docket NumberNo. 2002-0945.

99 Ohio St.3d 390
2003-Ohio-4122
792 NE 2d 1105

2003-Ohio-4122

PINCHOT, APPELLEE,
v.
CHARTER ONE BANK, F.S.B., APPELLANT.

No. 2002-0945.

Supreme Court of Ohio.

Submitted May 13, 2003.

Decided August 20, 2003.


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Brian Ruschel; Chester, Willcox & Saxbe, L.L.P., and J. Craig Wright, for appellee.

Baker & Hostetler, L.L.P., Daniel R. Warren, Michael K. Farrell and Brett A. Wall, for appellant.

ALICE ROBIE RESNICK, J.

{¶ 1} In July 1997, plaintiff-appellee Michael J. Pinchot obtained a loan from defendant-appellant Charter One Bank, F.S.B. ("Charter One"). The loan was evidenced by a promissory note and secured by a mortgage lien on Pinchot's residence in Parma, Ohio. At all relevant times, Charter One was a federal savings association organized under the Home Owners' Loan Act ("HOLA") (originally, the Home Owners' Loan Act of 1933), Section 1461 et seq., Title 12, U.S.Code.

{¶ 2} Pinchot fully satisfied his mortgage on December 31, 1998. Charter One, through an agent subsidiary corporation, recorded the fact of the satisfaction in the Cuyahoga County Recorder's Office on April 27, 1999, which was 117 days after the satisfaction. Pinchot brought this action on behalf of himself and a class of persons similarly situated pursuant to R.C. 5301.36, which provides that if the mortgagee of a residential mortgage fails to record the satisfaction within 90 days, the mortgagor may recover damages of $250 in a civil action.

{¶ 3} Charter One moved for summary judgment on grounds that R.C. 5301.36, as applied to federal savings associations, is preempted by Section 560.2, Title 12, C.F.R., which was promulgated by the Department of the Treasury, Office of Thrift Supervision ("OTS") pursuant to its authority under Sections 4(a) and 5(a)

99 Ohio St.3d 391
of the HOLA, Sections 1463(a) and 1464(a), Title 12, U.S.Code. Pinchot moved for partial summary judgment on his claim for $250 in statutory damages, arguing that Section 560.2 permits the application of R.C. 5301.36 to federal mortgage lenders. Without opinion, the trial court granted Charter One's motion for summary judgment, denied Pinchot's motion for partial summary judgment, and overruled Pinchot's motion for class certification as moot

{¶ 4} Finding that federal law does not preempt the application of R.C. 5301.36 to federal savings associations, the court of appeals reversed the summary judgment of the trial court and remanded the cause with instructions for the trial court to enter partial summary judgment in Pinchot's favor and to consider Pinchot's request for class certification.

{¶ 5} The cause is now before this court pursuant to the allowance of a discretionary appeal.

{¶ 6} We are asked to decide whether Section 560.2, Title 12, C.F.R. preempts the application of R.C. 5301.36 to federal savings associations.1

{¶ 7} The HOLA grew out of the Great Depression of the 1930s. It was "intended `to provide emergency relief with respect to home mortgage indebtedness' at a time when as many as half of all home loans in the country were in default. H.R. Conf. Rep. No. 210, 73d Cong., 1st Sess., 1 (1933). Local institutions that had previously supplied funds to finance homes had ceased doing business or had discontinued such long-term loans, so that more than half the counties in the country, containing almost one-fifth of the total population, were without home financing institutions.

{¶ 8} "In order to ameliorate these conditions, Congress enacted the HOLA, `a radical and comprehensive response to the inadequacies of the existing state systems.' Conference of Federal Sav. & Loan Assns. v. Stein, 604 F.2d 1256, 1257 (C.A.9 1979), summarily affd, 445 U.S. 921 100 S.Ct. 1304, 63 L.Ed.2d 754 (1980). The Act provided for the creation of a system of federal savings and loan associations, which would be regulated by the Board Federal Home Loan Bank Board so as to ensure their vitality as `permanent associations to promote the thrift of the people in a cooperative manner, to finance their homes and the homes of their neighbors.' S.Rep. No. 91, 73d Cong., 1st Sess., 2 (1933)." (Citations omitted.) Fid. Fed. S. & L. Assn. v. de la Cuesta (1982), 458 U.S. 141, 160, 102 S.Ct. 3014, 73 L.E.2d 664.

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{¶ 9} Congress gave the FHLBB plenary authority to regulate "the organization, incorporation, examination, operation, and regulation of federal savings and loan associations." Former Section 1464(a)(1), Title 12, U.S.Code, Section 5(a) of HOLA, 48 Stat. 132. Pursuant to this authority, the FHLBB promulgated a uniform scheme of regulations governing "`the powers and operations of every Federal savings and loan association from its cradle to its corporate grave.'" Fid. Fed., 458 U.S. at 145, 102 S.Ct. 3014, 73 L.Ed.2d 664, quoting People v. Coast Fed. S. & L. Assn. (D.Cal.1951), 98 F.Supp. 311, 316.

{¶ 10} In 1989, the HOLA was amended by the Financial Institutions Reform, Recovery, and Enforcement Act ("FIRREA"), which dissolved the FHLBB and transferred its powers and duties to the OTS. Under the FIRREA, the director of OTS was given the same plenary power to prescribe regulations for carrying out the HOLA that was formerly entrusted to the FHLBB. See Sections 1462a(b)(2) and 1464(a), Title 12, U.S.Code.

{¶ 11} Effective October 30, 1996, OTS promulgated Section 560.2, Title 12, C.F.R., which declares preemption of state lending regulations:

{¶ 12} "(a) Occupation of field. * * * To enhance safety and soundness and to enable federal savings associations to conduct their operations in accordance with best practices (by efficiently delivering low-cost credit to the public free from undue regulatory duplication and burden), 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, including this part, 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 or § 560.110 of this part. For purposes of this section, `state law' includes any state statute, regulation, ruling, order or judicial decision.

{¶ 13} "(b) Illustrative examples. Except as provided in § 560.110 of this part, the types of state laws preempted by paragraph (a) of this section include, without limitation, state laws purporting to impose requirements regarding:

{¶ 14} "* * *

{¶ 15} "(4) The terms of credit, including amortization of loans and the deferral and capitalization of interest and adjustments to the interest rate, balance, payments due, or term to maturity of the loan, including the circumstances under which a loan may be called due and payable upon the passage of time or a specified event external to the loan;

{¶ 16} "(5) Loan-related fees, including without limitation, initial charges, late charges, prepayment penalties, servicing fees, and overlimit fees;

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{¶ 17} "* * *

{¶ 18} "(10) Processing, origination, servicing, sale or purchase of, or investment or participation in, mortgages;

{¶ 19} "* * *

{¶ 20} "(c) State laws that are not preempted. 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) of this section:

{¶ 21} "(1) Contract and commercial law;

{¶ 22} "(2) Real property law;

{¶ 23} "* * *

{¶ 24} "(6) Any other law that OTS, upon review, finds:

{¶ 25} "(i) Furthers a vital state interest; and

{¶ 26} "(ii) Either has only an incidental effect on lending operations or is not otherwise contrary to the purposes expressed in paragraph (a) of this section."

{¶ 27} In its policy guidelines, the OTS suggests that courts utilize the following paradigm to determine whether a law is preempted by Section 560.2:

{¶ 28} "When analyzing the status of state laws under § 560.2, the first step will be to determine whether the type of law in question is listed in paragraph (b). If so, the analysis will end there; the law is preempted. If the law is not covered by paragraph (b), the next question is whether the law affects lending. If it does, then, in accordance with paragraph (a), the presumption arises that the law is preempted. This presumption can be reversed only if the law can clearly be shown to fit within the confines of paragraph (c). For these purposes, paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption." 61 F.R. 50951, 50966-50967.

{¶ 29} The parties have raised a number of arguments that concern the appropriate method of analysis in this case. Since these arguments revolve around the validity and proper application of the above guideline, we will deal with them first.

{¶ 30} Pinchot contends that the OTS's suggested method of analysis is inconsistent with the regulation. He points out that the guideline was "never published as a regulation" and argues that the first two sentences of "the above language * * * can't be right because then there could never be a 12 C.F.R. 560.2(c) exception to preemption." Pinchot essentially reasons that the guideline forbids a state law covered under paragraph (b) to escape preemption under paragraph (c). But,...

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  • State ex rel. Yost v. Volkswagen Aktiengesellschaft, 2020-0092
    • United States
    • United States State Supreme Court of Ohio
    • June 29, 2021
    ...435 U.S. 497, 504, 98 S.Ct. 1185, 55 L.Ed.2d 443 (1978). Preemption is thus a question of law, Pinchot v. Charter One Bank, FSB., 99 Ohio St.3d 390, 2003-Ohio-4122, 792 N.E.2d 1105, ¶ 39, and we conduct a de novo review of a judgment that was based on preemption grounds. See Menorah Park Ct......
  • State ex rel. Yost v. Volkswagen Aktiengesellschaft, 2020-0092
    • United States
    • United States State Supreme Court of Ohio
    • June 29, 2021
    ..., 435 U.S. 497, 504, 98 S.Ct. 1185, 55 L.Ed.2d 443 (1978). Preemption is thus a question of law, Pinchot v. Charter One Bank, F.S.B. , 99 Ohio St.3d 390, 2003-Ohio-4122, 792 N.E.2d 1105, ¶ 39, and we conduct a de novo review of a judgment that was based on preemption grounds. See 177 N.E.3d......
  • Wfs Financial, Inc. v. Superior Court, No. C051414.
    • United States
    • California Court of Appeals
    • June 15, 2006
    ...not been satisfied and the credit relationship between the lender and borrower still exists. (See Pinchot v. Charter One Bank (2003) 99 Ohio St.3d 390, 792 N.E.2d 1105 [the recording of a mortgage satisfaction or real estate lien release is not an integral part of lending process as it occu......
  • Radatz v. Fed. Nat'l Mortg. Ass'n, No. 2014–1126.
    • United States
    • United States State Supreme Court of Ohio
    • March 23, 2016
    ...of satisfied mortgages rather than to compensate borrowers in full for actual losses. See Pinchot v. Charter One Bank, F.S.B., 99 Ohio St.3d 390, 2003-Ohio-4122, 792 N.E.2d 1105, ¶ 58, quoting decision below; Pinchot v. Charter One Bank, F.S.B., 8th Dist. Cuyahoga No. 79359, 2002 WL 568400,......
  • Request a trial to view additional results
22 cases
  • State ex rel. Yost v. Volkswagen Aktiengesellschaft, 2020-0092
    • United States
    • United States State Supreme Court of Ohio
    • June 29, 2021
    ...435 U.S. 497, 504, 98 S.Ct. 1185, 55 L.Ed.2d 443 (1978). Preemption is thus a question of law, Pinchot v. Charter One Bank, FSB., 99 Ohio St.3d 390, 2003-Ohio-4122, 792 N.E.2d 1105, ¶ 39, and we conduct a de novo review of a judgment that was based on preemption grounds. See Menorah Park Ct......
  • State ex rel. Yost v. Volkswagen Aktiengesellschaft, 2020-0092
    • United States
    • United States State Supreme Court of Ohio
    • June 29, 2021
    ..., 435 U.S. 497, 504, 98 S.Ct. 1185, 55 L.Ed.2d 443 (1978). Preemption is thus a question of law, Pinchot v. Charter One Bank, F.S.B. , 99 Ohio St.3d 390, 2003-Ohio-4122, 792 N.E.2d 1105, ¶ 39, and we conduct a de novo review of a judgment that was based on preemption grounds. See 177 N.E.3d......
  • Wfs Financial, Inc. v. Superior Court, No. C051414.
    • United States
    • California Court of Appeals
    • June 15, 2006
    ...not been satisfied and the credit relationship between the lender and borrower still exists. (See Pinchot v. Charter One Bank (2003) 99 Ohio St.3d 390, 792 N.E.2d 1105 [the recording of a mortgage satisfaction or real estate lien release is not an integral part of lending process as it occu......
  • Radatz v. Fed. Nat'l Mortg. Ass'n, No. 2014–1126.
    • United States
    • United States State Supreme Court of Ohio
    • March 23, 2016
    ...of satisfied mortgages rather than to compensate borrowers in full for actual losses. See Pinchot v. Charter One Bank, F.S.B., 99 Ohio St.3d 390, 2003-Ohio-4122, 792 N.E.2d 1105, ¶ 58, quoting decision below; Pinchot v. Charter One Bank, F.S.B., 8th Dist. Cuyahoga No. 79359, 2002 WL 568400,......
  • Request a trial to view additional results

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