Case Title: Pinchot v. Charter One Bank

Citation: 2003-Ohio-4122

Docket Number: 20020945

State: ohio

Court: Ohio Supreme Court

Date: 2003-08-20T00:00:00Z

Document:
[Cite as Pinchot v. Charter One Bank, 99 Ohio St.3d 390, 2003-Ohio-4122.] 
 
 
PINCHOT, APPELLEE, v. CHARTER ONE BANK, F.S.B., APPELLANT. 
[Cite as Pinchot v. Charter One Bank, F.S.B., 99 Ohio St.3d 390, 2003-Ohio-
4122.] 
Real property — Encumbrances — Section 560.2, Title 12, C.F.R. does not 
preempt the application of R.C. 5301.36’s mortgage-satisfaction 
recording requirements to federal savings associations. 
(No. 2002-0945 — Submitted May 13, 2003 — Decided August 20, 2003.) 
APPEAL from the Court of Appeals for Cuyahoga County, No. 79359, 2002-Ohio-
1654. 
__________________ 
SYLLABUS OF THE COURT 
Section 560.2, Title 12, C.F.R., as promulgated by the Office of Thrift 
Supervision pursuant to its authority under the Home Owners’ Loan Act, 
Section 1461 et seq., Title 12, U.S.Code, does not preempt the application 
of R.C. 5301.36’s mortgage-satisfaction recording requirements to federal 
savings associations. 
__________________ 
 
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. 
SUPREME COURT OF OHIO 
2 
{¶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) 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. 
January Term, 2003 
3 
{¶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 aff’d, 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. 
{¶9} 
Congress gave the FHLBB plenary authority to regulate “the 
organization, incorporation, examination, operation, and regulation of [federal 
                                                 
1 As a matter of jurisdiction, Pinchot contends that the court should dismiss this appeal because the 
Attorney General was not notified of a constitutional challenge as required by R.C. 2721.12(A).  
However, since this case is not a declaratory judgment action filed pursuant to R.C. Chapter 2721, 
service on the Attorney General is not required as a prerequisite to invoking the court’s 
jurisdiction.  Cleveland Bar Assn. v. Picklo, 96 Ohio St.3d 195, 2002-Ohio-3995, 772 N.E.2d 
1187, ¶ 7. 
SUPREME COURT OF OHIO 
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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. 
January Term, 2003 
5 
{¶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; 
{¶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.” 
SUPREME COURT OF OHIO 
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{¶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, according to the regulation, he argues, a state law described in 
paragraph (b) can escape preemption by fitting into one of the exceptions under 
paragraph (c).  Thus, the guideline prohibits what the regulation prescribes.  We 
disagree. 
{¶31} While the OTS guidelines are “not [to be] treated in the same 
manner as binding regulations,” 61 F.R. at 50952, we find no inconsistency 
January Term, 2003 
7 
between this guideline and the regulation.  Under paragraph (a) of section 560.2, 
“state laws purporting to regulate or otherwise affect” the credit activities of 
federal savings associations are preempted “except to the extent provided in 
paragraph (c) * * * or § 560.110.”  Paragraph (b) of Section 560.2 provides a 
nonexhaustive list of the types of state laws that are preempted under paragraph 
(a).  However, paragraph (b) is not a mere sampling of state laws that purport to 
regulate or otherwise affect the lending activities of federal thrifts.  It is a 
sampling of state laws that are “preempted by paragraph (a),” meaning laws that 
are not saved from preemption under paragraph (c).  (Emphasis added.)  It seems 
reasonably clear that the OTS has established the list in paragraph (b) as a sort of 
predetermination that state laws of this type are beyond the boundaries of 
paragraph (c) and, therefore, are not saved from preemption.  In other words, the 
categories of lending activities that are set forth in paragraph (b) are deemed to be 
outside the permissible regulatory scope of state contract, commercial, real 
property, tort, and criminal law for purposes of federal lending. 
{¶32} Pinchot also claims that there is a general presumption against the 
federal invasion of core state functions.  Thus, any preemption analysis must 
begin with the assumption that the historic police powers of the states are not to 
be superseded by federal law, especially in areas traditionally governed by state 
law, such as the security of titles to real estate. 
{¶33} The cases upon which Pinchot relies do establish a general 
presumption against federal preemption.  But they also reveal that the 
presumption is designed to protect the states against unintended federal 
encroachment on their traditional authority.  The presumption against preemption 
is just that—a presumption—and it does not apply where the clear and manifest 
purpose of the statute or, in this case, regulation is to the contrary.  Thus, when the 
examined federal law contains an express preemption clause, as is the case with 
SUPREME COURT OF OHIO 
8 
Section 560.2, the question of state-law displacement depends in the first instance 
not upon any presumption but upon the text of that clause.  See Minton v. Honda 
of Am. Mfg., Inc. (1997), 80 Ohio St.3d 62, 68-70, 684 N.E.2d 648; Jenkins v. 
James B. Day & Co. (1994), 69 Ohio St.3d 541, 544-545, 634 N.E.2d 998; In re 
Miamisburg Train Derailment Litigation (1994), 68 Ohio St.3d 255, 260, 626 
N.E.2d 85; BFP v. Resolution Trust Corp. (1994), 511 U.S. 531, 544, 114 S.Ct. 
1757, 128 L.Ed.2d 556. 
{¶34} On the other hand, we also reject Charter One’s contention that in 
determining “whether recording a mortgage satisfaction falls within one of the 
categories set forth in Paragraph (b), the court [is] required to resolve any doubt in 
favor of preemption.”  The regulation is devoid of presumptive language and the 
guideline does not call for any presumption or resolution of doubt in favor of 
preemption at the stage of determining coverage under paragraph (b).  Under the 
guideline, these interpretive devices do not come into play unless the court 
reaches the question of coverage under paragraph (c), that is, after a determination 
is made that “the law is not covered by paragraph (b)” and that “the law affects 
lending.”  There is no guiding directive that a particular state law is presumed to 
correspond to those laws delineated in paragraph (b) or to affect lending. 
{¶35} As a final matter pertaining to the application of the guideline, 
Charter One maintains that the court of appeals “conduct[ed] its analysis 
backwards.”  In other words, “[r]ather than beginning its analysis with Paragraphs 
(a) and (b) of the regulation, as the OTS intended, the court of appeals first 
decided, under Paragraph (c), that in its view R.C. 5301.36 was consistent with 
the ‘best practices’ of thrift institutions.”  (Emphasis sic.)  Thus, “the court began 
with the exceptions to the rule and not the rule itself.” 
{¶36} This argument, though strongly urged as a ground for reversal, is 
unavailing.  The court of appeals separately considered Charter One’s claim that 
January Term, 2003 
9 
“the recording statute is included as part of loan ‘servicing’ under Section 
560.2(b)(10), Title 12, C.F.R. and thus is expressly and irrefutably preempted.”  
The court specifically rejected this argument, finding that “[t]he recording of real 
property transactions cannot be described as merely loan servicing” and that “the 
recording statute is unlike any of the other lending regulations discussed in 
Section 560.2(b).”  The court then concluded that R.C. 5301.36 “is not preempted 
by Section 560.2(b)(10).”  Thus, the order in which the court of appeals conducted 
its analysis is of no consequence. 
{¶37} Having decided that both the OTS’s guideline and the court of 
appeals’ approach are consistent with the regulation, we now proceed to consider 
in the first instance whether R.C. 5301.36 matches any of the laws delineated in 
Section 560.2(b).  R.C. 5301.36 imposes requirements regarding the recording of 
mortgage satisfactions.2  However, paragraph (b) of Section 560.2 does not 
specifically mention state laws pertaining to the recording of mortgage 
satisfactions or to the filing of mortgage releases or discharges.  Thus, Charter 
One argues that “recording a mortgage satisfaction is a ‘loan servicing’ or ‘loan 
origination’ function under Section 560.2(b)(10).” 
{¶38} In support of this contention, Charter One argues, “The undisputed 
evidence in this case establishes that the recording of a mortgage satisfaction is 
                                                 
2 R.C. 5301.36 provides: 
 
“(B) Within ninety days from the date of the satisfaction of a residential mortgage, the 
mortgagee shall record the fact of the satisfaction in the appropriate county recorder's office and 
pay any fees required for the recording. The mortgagee may, by contract with the mortgagor, 
recover the cost of the fees required for the recording of the satisfaction by the county recorder. 
 
“(C) If the mortgagee fails to comply with division (B) of this section, the mortgagor 
may recover, in a civil action, damages of two hundred fifty dollars. This division does not 
preclude or affect any other legal remedies that may be available to the mortgagor. 
 
“(D) As used in this section, ‘residential mortgage’ means an obligation to pay a sum of 
money evidenced by a note and secured by a lien upon real property located within this state 
containing two or fewer residential units or on which two or fewer residential units are to be  
constructed and shall include such an obligation on a residential condominium or cooperative 
unit.” 
SUPREME COURT OF OHIO 
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either a loan ‘servicing’ or loan ‘origination’ function.  Indeed, all five of the 
experts in this case—three of whom testified on behalf of plaintiff—testified that 
the recording of a mortgage satisfaction is a loan servicing or loan origination 
function.”  (Emphasis sic.) 
{¶39} It is axiomatic, however, that preemption, particularly under the 
HOLA and its implementing regulations, is a question of law.  See Washington 
Mut. Bank, F.A. v. Superior Court of Los Angeles Cty. (2002), 95 Cal.App.4th 606, 
612, 115 Cal.Rptr.2d 765.  Otherwise, any given issue of preemption, such as 
R.C. 5301.36’s application to federal mortgage lenders, could be decided 
differently from case to case depending on the testimony of expert witnesses.  A 
particular state recording or other statute might then be found preempted in one 
case only to be applied in another pursuant to differing panels of experts.  It goes 
without saying that such a potential hodgepodge of varying and inconsistent 
factual decisions would in no small way disrupt the very purpose of preemption to 
attain uniformity, soundness, and stability in a federal scheme of lending 
regulation. 
{¶40} As for legal authority that the recording of a mortgage satisfaction 
can be properly classified as loan or mortgage origination, Charter One offers 
none.  We reject out of hand any definition of loan or mortgage “origination” that 
would encompass an activity that necessarily occurs after the debt is satisfied. 
{¶41} In support of its alternate contention that the recording of a 
mortgage satisfaction is a loan-servicing function, Charter One asserts that “the 
OTS has itself issued two opinion letters that make clear that state laws purporting 
to regulate a federal lender’s handling of a mortgage payoff statement are 
preempted by 560.2(b).”  Specifically, these opinions involve bank fees that are 
charged for the preparation and faxing of payoff or demand statements.  A payoff 
                                                                                                                                     
 
January Term, 2003 
11 
or demand statement is a recitation of all outstanding amounts on an existing 
mortgage, including principal and accrued interest as of a specific date and the per 
diem interest charges accruing after that date.  The OTS considers these charges to 
be “loan-related fees” under the coverage of Section 560.2(b)(5).  See 2000 OTS 
Op. No. P-2000-6 (Apr. 21, 2000), 2000 WL 1455751; 1999 OTS Op. No. P-99-3 
(Mar. 10, 1999). 
{¶42} In addition, Charter One asserts that “two recent decisions based 
on closely analogous facts demonstrate that R.C. 5301.36 is preempted.”  In 
Moskowitz v. Washington Mut. Bank, F.A. (2002), 329 Ill.App.3d 144, 263 
Ill.Dec. 502, 768 N.E.2d 262, it was held, in accord with the OTS opinions, that a 
payoff statement is a “loan-related fee” as listed in Section 560.2(b)(5).  Charter 
One emphasizes that in finding the plaintiff’s breach-of-contract claim preempted, 
the court in Moskowitz stated that “the OTS has described the payoff statement as 
‘an integral part of the lending process’ (emphasis added).”  Id., 329 Ill.App.3d at 
149, 263 Ill.Dec. 502, 768 N.E.2d 262, quoting 2000 OTS Op. No. P-2000-6.  In 
Washington Mut. Bank, F.A. v. Superior Court of Los Angeles Cty., supra, 95 
Cal.App.4th at 621, 115 Cal.Rptr.2d 765, the charging of preclosing interest was 
held to “fall within the category of ‘terms of credit’ as that phrase is used in 
paragraph (b)(4) of * * * section 560.2.” 
{¶43} These decisions are not only distinguishable for the reason that 
they have nothing to do with the issue of mortgage-servicing under Section 
560.2(b)(10), but they actually draw on certain principles that are ultimately 
incompatible with Charter One’s position.  In 2000 OTS Op. No. P-2000-6 (Apr. 
21, 2000), 2000 WL 1455751, upon which the court in Moskowitz relied, the OTS 
explained that “[t]he payoff statement is an integral part of the lending process as 
it provides the information necessary to satisfy the debt and extinguish the 
extension of credit.”  (Emphasis added.)  In Washington Mut. Bank v. Superior 
SUPREME COURT OF OHIO 
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Court, 95 Cal.App.4th at 621, 115 Cal.Rptr.2d 765, the court explained, “The date 
interest begins to accrue and who pays it are as much terms of credit as ‘deferral 
and capitalization of interest and adjustments to the interest rate, balance, payment 
due, or term to maturity’ (12 C.F.R. § 560.2(b)(4)) since all of these items center 
around the essential reason lenders issue home loans, to wit, charging and 
collecting interest.”  (Emphasis added.) 
{¶44} Similarly, in a 1995 memorandum opinion, 1995 WL 550754 (May 
10, 1995), the OTS explained: 
{¶45} “We have found no evidence that the OTS lending regulations 
were intended to preempt state laws requiring lenders to collect loan-related taxes 
from borrowers. * * * [S]tate tax collection laws are different in kind from the 
types of state laws intended to be preempted by the lending regulations.  
[However,] [t]he provisions of the [Georgia Residential] Mortgage Act that 
attempt to impose requirements regarding escrow accounts, disclosure, 
advertising, books and records, registration, and lender fees [all of which are listed 
in Section 560.2(b)] are classic examples of the types of state laws that fall within 
the scope of OTS lending regulation preemption.  Each of these state laws relates 
to lending practices and to the operations of savings associations, i.e., whether and 
how loans are made.”  (Emphasis added.) 
{¶46} These decisions underscore that Section 560.2(b), though broadly 
constructed to fill in much of the sphere of regulatory preemption, is still 
embedded within the functional boundaries of lending and credit-related activity.  
In our opinion, it would constitute an unwarranted extension of those boundaries 
were this court to find that the recording of mortgage satisfactions is a lending or 
credit-related function auxiliary to the “servicing” of mortgages under Section 
560.2(b)(10).  The recording of a mortgage satisfaction or real estate lien release 
is not an integral part of the lending process, as it occurs after the debt is satisfied 
January Term, 2003 
13 
and the extension of credit is extinguished.  Such a recording requirement cannot 
even begin until the mortgage has already been terminated.  It does not center 
around the essential reasons lenders issue home loans, for it has nothing to do 
with charging and collecting interest or any other lending or credit-related 
function.  And such a recording requirement cannot be realistically connected to 
lending practices or to the operations of savings associations because it has no 
concrete significance to whether and how loans are made.  The mortgage is taken 
to secure the loan and filed to perfect the lien.  When the loan is paid, the 
mortgage is satisfied, leaving a cloud on the title to the realty until the satisfaction 
is recorded.  There is nothing in either the lending regulations themselves or in the 
regulatory history to indicate that the OTS intended to occupy the field of clearing 
real estate titles, much less to include the filing of notices of mortgage 
satisfactions within the preempted category of mortgage servicing under Section 
560.2(b)(10). 
{¶47} Charter One also cites the Comptroller’s Handbook published by 
the Office of the Comptroller of the Currency (“OCC”), which regulates national 
banks, as evidence that the recordation of a mortgage satisfaction is a servicing 
function for purposes of Section 560.2(b)(10).  1996 WL 652822.  The handbook 
classifies mortgage banking under four major areas of activities, each of which is 
normally performed by a separate unit or department of the bank.  One of these 
areas involves servicing activities.  Charter One points out that the handbook lists 
“loan setup and payoff” as a servicing function, id. at * 13, and goes on to state, 
“The payoff unit is responsible for processing loan payoffs, including recording 
the mortgage satisfaction * * *.”  Id. at * 16. 
{¶48} However, the fact that the Comptroller’s Handbook places the 
recordation of mortgage satisfactions in the category of loan servicing for 
purposes of ensuring effectiveness of banking operations is of no consequence to 
SUPREME COURT OF OHIO 
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whether the activity is covered under Section 560.2(b) for purposes of preemption.  
In fact, in the very next sentence in the handbook, which Charter One neglects to 
mention, the OCC advises that “[f]ailure to process the mortgage satisfaction in 
accordance with state law may result in monetary fines.”  (Emphasis added.)  Id. 
{¶49} We conclude, therefore, that R.C. 5301.36 does not purport to 
impose requirements regarding the origination or servicing of mortgages for 
purposes of Section 560.2(b)(10), Title 12, C.F.R.  Since the list in Section 
560.2(b) is not exhaustive, however, a state law not specifically covered in 
paragraph (b) does not automatically escape preemption under the regulations.  
Thus, it must still be determined whether R.C. 5301.36 affects the credit activities 
of federal thrifts and, if so, whether it falls within the parameters of paragraph (c) 
of Section 560.2. 
{¶50} Pinchot informs us that while all 50 states have some type of law 
pertaining to the recording of mortgage satisfactions, “[t]he OTS has never said 
mortgage satisfaction [recording] statutes are preempted.”  Pinchot also asserts 
that “neither the OTS nor any other federal authority has passed any laws or 
regulations governing [the recording of] mortgag[e] * * * satisfactions.”  Yet, as 
stated in 61 F.R. at 50965-50966, “in those instances where OTS has detected a 
gap in the federal protections provided to borrowers, the agency has promulgated 
regulations imposing additional consumer protection requirements on federal 
thrifts.”  According to Pinchot, this lack of regulatory interest in the recording of 
mortgage satisfactions “indicates that these laws are not preempted.”  We 
disagree. 
{¶51} The failure on the part of OTS to regulate or specifically preempt a 
particular type of state law is neither determinative nor even probative of 
regulatory intent.  “Where, as here, the agency administering the federal act has 
expressed its intention to occupy the entire field of lending regulations for federal 
January Term, 2003 
15 
savings associations * * * there is no need to find a specific regulation on point.”  
Washington Mut. Bank, supra, 95 Cal.App.4th at 620, 115 Cal.Rptr.2d 765.  “The 
drafters of the regulations were not required to anticipate and specifically describe 
each type of state law falling within the scope of regulatory preemption.”  May 10, 
1995 OTS Memorandum Opinion, supra, 1995 WL 550754.  Thus, the “[f]ailure 
to mention a particular type of state law that affects lending should not be deemed 
to constitute evidence of an intent to permit state laws of that type to apply to 
federal thrifts.”  (Emphasis sic.)  61 F.R. at 50966. 
{¶52} “However, this does not mean that every state law having any 
conceivable connection to the lending operations of federal savings associations is 
preempted.”  May 10, 1995 OTS Memorandum Opinion, supra.  See, also, 
Washington Mut. Bank, supra, 95 Cal.App.4th at 619, 115 Cal.Rptr.2d 765 (“We 
do not read the express preemption set forth in Section 560.2 to mean that every 
state law having any conceivable connection to the lending operations of federal 
savings associations is preempted”).  Thus, in order to fall within the preemptive 
scope of Section 560.2, the state law in question must at least bear a concrete, 
logical, or substantial relation to some aspect or function of lending. 
{¶53} The only case cited by the parties that has any direct bearing on this 
issue is Konynenbelt v. Flagstar Bank, F.S.B. (2000), 242 Mich.App. 21, 617 
N.W.2d 706.  In that case, Flagstar Bank and a class of borrowers entered into 
mortgage agreements providing that “[u]pon payment of all sums secured by this 
Security Instrument, Lender shall prepare and file a discharge of this Security 
Instrument without charge to Borrower.”  After the borrowers prepaid their 
mortgages, however, Flagstar sought to charge them a $9 recording fee, which 
was admittedly a reimbursement for the $9 fee charged by the register of deeds to 
record the discharge.  In their complaint, plaintiff borrowers claimed that Flagstar 
SUPREME COURT OF OHIO 
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had breached their mortgage agreements and violated Mich.Stat. 26.558(1) (MCL 
565.41), which provides: 
{¶54} “A mortgagee or his personal representative, successor or assign, 
within 90 days after a mortgage has been paid or otherwise satisfied and 
discharged, shall prepare and file a discharge thereof with the register of deeds for 
the county where the mortgaged property is located and pay the fee for recording 
the discharge.” 
{¶55} In ruling against preemption, the Michigan Court of Appeals 
concluded that the OTS did not really occupy the entire field of lending for federal 
thrifts, despite its stated intention to the contrary.  But the court’s conclusion in 
this regard, as Charter One puts it, was “not necessary to its decision.”  Regardless 
of whether the OTS’s occupation of the field of lending is complete, it has not 
purported to occupy nonlending-related areas or to preempt state laws having no 
connection to lending.  Thus, no matter how the conceptual interplay among the 
three divisions in Section 560.2 is perceived, the critical issue always becomes 
whether the challenged state law purports to regulate or otherwise affect the credit 
activities of federal savings associations.  On this issue, the court essentially found 
that a state law requiring the mortgagee to file a discharge of mortgage within 90 
days of satisfaction and to pay the recording fee “has nothing to do with the 
lending of money.  The fee is charged after lending has occurred.”  Id., 242 
Mich.App. at 34, 617 N.W.2d 706.  The court’s nonessential conceptual 
difficulties on the issue of field occupation have no bearing on this finding and, 
therefore, do not vitiate its decision. 
{¶56} Since we have now determined that R.C. 5301.36 does not affect 
the lending operations of federal thrift institutions, there is no need to examine the 
exceptions in Section 560.2(c).  A state law need not fall within the purview of 
paragraph (c) in order to escape preemption if it does not affect lending in the first 
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17 
place.  However, even were we to assume that R.C. 5301.36 has some actual or 
substantive effect on the credit activities of federal savings associations, we could 
not agree with Charter One’s contention that R.C. 5301.36 falls outside the 
confines of Section 560.2(c). 
{¶57} According to Charter One, “The costs associated with compliance 
with state recording statutes, standing alone, have more than an incidental effect 
on the lending operations of Charter One,” which “has mortgages in 46 states.”  
Charter One argues that R.C. 5301.36 is inconsistent with the “best practices” of 
federal thrift institutions because it would “allow the costs of credit to increase 
unnecessarily.” 
{¶58} We find it exceedingly difficult to take these arguments seriously, 
however, since Charter One not only undertook to complete the recording process 
in this case subject to a provision in the mortgage agreement requiring Pinchot to 
pay “any recordation costs,” but actually informs us that its corporate subsidiary 
that records mortgage satisfactions “devotes substantial resources to its efforts to 
comply with Ohio’s recording statute and the recording statutes of other states.”  
Short of finding that Charter One has itself chosen to act in contravention of the 
best practices of federal thrifts, we agree with the court of appeals that “R.C. 
5301.36 is intended to promote efficiency and certainty in clearing and 
transferring title in residential real property transactions, and is in all aspects 
consistent with the best practices of thrift institutions.”  It is, as the court of 
appeals explains, “a real property statute not only in name, but in purpose and 
effect, and has only an incidental effect on Charter One’s lending practices.” 
{¶59} Finally, Charter One maintains that “even if R.C. 5301.36 were not 
preempted, it could only be enforced against Charter One by the OTS or the 
OCC.”  However, the cases on which Charter One relies forbid enforcement 
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actions on behalf of the state or by a public official or regulatory body, not by 
private, individual customers. 
{¶60} Based on all of the foregoing, we hold that Section 560.2, Title 12, 
C.F.R., as promulgated by the Office of Thrift Supervision pursuant to its 
authority under the Home Owners’ Loan Act, Section 1461 et seq., Title 12, 
U.S.Code, does not preempt the application of R.C. 5301.36’s mortgage-
satisfaction recording requirements to federal savings associations. 
{¶61} Accordingly, the judgment of the court of appeals is hereby 
affirmed, and the cause is remanded to the trial court for further proceedings. 
Judgment affirmed 
and cause remanded. 
 
MOYER, C.J., F.E. SWEENEY, PFEIFER, SUNDERMANN, LUNDBERG 
STRATTON and O’CONNOR, JJ., concur. 
 
J. HOWARD SUNDERMANN, JR., J., of the First Appellate District, sitting for 
COOK, J. 
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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. 
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