Wachovia Bank, N.A. v. Watters

• Decision Date: 30 August 2004
• Docket Number: No. 5:03-CV-105.,5:03-CV-105.
• Citation: 334 F.Supp.2d 957
• Parties: WACHOVIA BANK, N.A. and Wachovia Mortgage Corporation, Plaintiffs, v. Linda A. WATTERS, in her official capacity as Commissioner of the Michigan Office of Insurance and Financial Services, Defendant.
• Court: U.S. District Court — Western District of Michigan

334 F.Supp.2d 957

WACHOVIA BANK, N.A. and Wachovia Mortgage Corporation, Plaintiffs, v. Linda A. WATTERS, in her official capacity as Commissioner of the Michigan Office of Insurance and Financial Services, Defendant.

No. 5:03-CV-105.

United States District Court, W.D. Michigan, Southern Division.

August 30, 2004.

COPYRIGHT MATERIAL OMITTED

Lori McAllister, Dykema Gossett PLLC (Lansing), Lansing, MI, for Wachovia

Bank, N.A., Wachovia Mortgage Corporation, plaintiffs.

John C. Scherbarth, MI Dept Attorney General, (Insurance/Banking), Insurance and Banking Division, Lansing, MI, for Linda A. Watters, in her official capacity as Commissioner of the Michigan Office of Insurance and Financial Services, defendant.

David L. Permut, Goodwin Procter LLP (DC), Washington, DC, for American Bankers Association, America's Community Bankers, Consumer Mortgage Coalition, Consumer Bankers Association, Electronic Financial Services Council, Financial Services Roundtable, The, Michigan Bankers Association.

Kathleen E. Keest, Iowa Department of Attorney General, Des Moines, IA, for William H. Pryor, Jr., Attorney General, State of Alabama, Gregg D. Renkes, Attorney General, State of Alaska, Terry Goddard, Attorney General, State of Arizona, Mike Beebe, Attorney General, State of Arkansas, Bill Lockyer, Attorney General, State of California, Ken Salazar, Attorney General, State of Colorado, Richard Blumenthal, Attorney General, State of Connecticut, M. Jane Brady, Attorney General, State of Delaware, Robert J. Spagnoletti, Corporation Counsel, District of Columbia, Charles J. Crist, Jr., Attorney General, State of Florida, Mark Recktenwald, Director, Office of Consumer Protection, Department of Commerce and Consumer Affairs, State of Hawaii, Lawrence G. Wasden, Attorney General, State of Idaho, Lisa Madigan, Attorney General, State of Illinois, Steve Carter, Attorney General, State of Indiana, Phill Kline, Attorney General, State of Kansas, Gregory D. Stumbo, Attorney General, Commonwealth of Kentucky, Charles C. Foti, Jr., Attorney General, State of Louisiana, G. Steven Rowe, Attorney General, State of Maine, J. Joseph Curran, Jr., Attorney General, State of Maryland, Thomas F. Reilly, Attorney General, State of Massachusetts, Mike Hatch, Attorney General, State of Minnesota, Jim Hood, Attorney General, State of Mississippi, Mike McGrath, Attorney General, State of Montana, Brian Sandoval, Attorney General, State of Nevada, Peter W. Heed, Attorney General, State of New Hampshire, Peter C. Harvey, Attorney General, State of New Jersey, Patricia A. Madrid, Attorney General, State of New Mexico, Eliot Spitzer, Attorney General, State of New York, Wayne Stenehjem, Attorney General, State of North Dakota, Jim Petro, Attorney General, State of Ohio, W.A. Drew Edmondson, Attorney General, State of Oklahoma, Hardy Myers, Attorney General, State of Oregon, Gerald J. Pappert, Attorney General, State of Pennsylvania, Larry Long, Attorney General, State of South Dakota, Paul Summers, Attorney General, State of Tennessee, William H. Sorrell, Attorney General, State of Vermont, Christine O. Gregoire, Attorney General, State of Washington, Darrell V. McGraw, Jr., Attorney General, State of West Virginia, Peggy A. Lautenschlager, Attorney General, State of Wisconsin, Patrick J. Crank, Attorney General, State of Wyoming.

Douglas B. Jordan, Office of the Comptroller of the Currency, Washington, DC, for Office of Comptroller of Currency, amicus.

Gregory L. McClelland, McClelland & Anderson LLP, Lansing, MI, for Nat. Ass'n of Realtors, Michigan Association of Realtors, amicus.

OPINION

ROBERT HOLMES BELL, Chief Judge.

Plaintiffs Wachovia Bank, N.A. ("Wachovia Bank") and Wachovia Mortgage Company ("Wachovia Mortgage") (collectively "Wachovia") seek declaratory and injunctive relief to prohibit the Commissioner of the Michigan Office of Insurance and Financial Services ("Commissioner") from attempting to interfere with the alleged exclusive visitorial rights of the Office of the Comptroller of the Currency ("OCC"). Plaintiffs contend that the state law restrictions at issue are preempted by the National Bank Act and by OCC regulations promulgated pursuant to its authority under the Act. Plaintiffs also contend that the State of Michigan's attempt to regulate Wachovia Mortgage violates 42 U.S.C. § 1983. Plaintiffs' have moved for summary judgment.¹

I.

Wachovia Bank is a national banking association chartered under the National Bank Act, 12 U.S.C. § 21 et seq. (Complaint ¶ 4). Wachovia Mortgage, previously named First Union Mortgage Corporation, originally registered to engage in the business of making first mortgage loans in Michigan under the Mortgage Brokers, Lenders and Servicers Licensing Act, Mich. Comp. Laws § 445.1656 et seq. On January 1,2003, Wachovia Mortgage became a wholly owned operating subsidiary of Wachovia Bank. Wachovia Mortgage is engaged in making first mortgaging loans in various states including Michigan. After July 1, 2003, Wachovia Mortgage also began to engage in the business of making secondary mortgage loans in Michigan.

On April 3, 2002, Wachovia Mortgage advised the State of Michigan that it was surrendering its lending registration for Michigan. The Commissioner responded with a letter advising Wachovia Mortgage that effective July 1, 2003, Wachovia Mortgage would no longer be authorized to conduct mortgage lending activities in Michigan. The Commissioner has not yet sought a cease and desist order in conjunction with its position that Wachovia Mortgage must register with the State of Michigan to engage in mortgage lending.

II.

Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. In evaluating a motion for summary judgment the Court must look beyond the pleadings and assess the proof to determine whether there is a genuine need for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). If Defendants carry their burden of showing there is an absence of evidence to support a claim then Plaintiff must demonstrate by affidavits, depositions, answers to interrogatories, and admissions on file, that there is a genuine issue of material fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324-25, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

"On summary judgment, all reasonable inferences drawn from the evidence must be viewed in the light most favorable to the parties opposing the motion." Hanover Ins. Co. v. American Engineering Co., 33 F.3d 727, 730 (6th Cir.1994) (citing Matsushita, 475 U.S. at 586-88, 106 S.Ct. 1348). Nevertheless, the mere existence of a scintilla of evidence in support of Plaintiff's position is not sufficient to create a genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The proper inquiry is whether the evidence is such that a reasonable jury could return a verdict for Plaintiff. Id. See generally, Street v. J.C. Bradford & Co., 886 F.2d 1472, 1476-80 (6th Cir.1989).

III.

The issue before this Court is whether the State of Michigan through its Office of Insurance and Financial Services may exercise visitorial powers over state-chartered operating subsidiaries of national banks. Visitation, in law, is the act of a superior or superintending officer, who visits a corporation to examine into the corporation's manner of conducting its business and to enforce laws and regulations. First Union Nat'l Bank v. Burke, 48 F.Supp.2d 132, 144 (D.Conn.1999). In the context of national banking, visitorial powers generally refer to the power to visit a national bank to examine its activities and its observance of applicable laws, and encompass any examination of a national bank's records relative to the conduct of its banking business as well as any enforcement action that may be undertaken for violations of law. National City Bank of Indiana v. Boutris, 2003 WL 21536818 (E.D.Cal.2003). Generally, national banks are free from any state visitorial powers. See 12 U.S.C. § 484(a).

A. Michigan's Regulatory Scheme

The State of Michigan regulates the mortgage industry through two acts, the Mortgage Brokers, Lenders, & Servicers Licensing Act, MICH. COMP. LAW § 445.1651 et seq., and the Secondary Mortgage Loan Act, MICH. COMP. LAW § 493.51 et seq. Under these statutes, Wachovia Mortgage is required to register with the State of Michigan, but is not required to obtain a license to operate in the state. See MICH. COMP. LAW §§ 445.1652, 493.52. Under Michigan's regulatory scheme, the state reserves the option to investigate a specific consumer complaint if the complaint is not otherwise being pursued by the OCC. See MICH. COMP. LAW § 445.1663(2) ("the commissioner ... shall make no investigation of the complaint if the complaint is being adequately pursued by the appropriate federal regulatory authority."). The Michigan statutes also require a registrant to provide a financial statement annually, to pay an annual operating fee, to maintain certain documents, and to retain those documents for examination by the Commissioner. See MICH. COMP. LAW §§ 445.1657(2), 493.56a(2), 445.1658(1), 493.54, 445.1671, 493.68.

B. The National Regulatory Scheme

National banks are federally chartered institutions created and governed by the National Bank Act ("the Act"), 12 U.S.C. § 21 et seq. Under the Act, national banks have the authority to receive deposits, loan money and exercise "all such incidental powers as shall be necessary to carry on the business of banking." 12 U.S.C. § 24 Seventh. Further, national banks are authorized to make, arrange and deal in loans secured by interests in real estate. 12 U.S.C. § 371. Under the Act, national banks are generally free from state visitorial powers. Section 484(a) provides that:

No national bank shall...