United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 03-3423

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Alvin L. Phipps; Linda L. Phipps; *

John A. St. Clair; Elizabeth R. St. Clair; *

Shawn V. Starkey; Lorene A. Starkey, *

*

Appellants, *

*

v. *

*

Federal Deposit Insurance Corporation; *

GMAC-Residential Funding *

Corporation, a Minnesota Corporation; * Appeal from the United States

Residential Funding Mortgage Securities* District Court for the Western

II, Inc., a Minnesota corporation; Chase * District of Missouri.

Manhattan Bank, as Indenture Trustee *

of the GMAC-RFC and RFMS *

Securitized Trusts; Wilmington Trust *

Company, as Owner Trustee of the *

GMAC-RFC and RFMS Securitized *

Trusts; Homecomings Financial *

Network, Inc., a Delaware corporation; *

Household Finance, Inc., a Delaware *

corporation; Does, 1 through 25, *

*

Appellees. *

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Submitted: March 17, 2005

Filed: July 28, 2005

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1

The Honorable Gary A. Fenner, United States District Judge for the Western

District of Missouri.

2

After briefing on appeal, the Federal Deposit Insurance Corporation (FDIC)

was appointed as Receiver for GNBT, pursuant to 12 U.S.C. §§ 191 and 1821(c), and

was granted leave to substitute itself for GNBT as an appellee in this case. The FDIC

substitution clearly establishes federal court jurisdiction to resolve this case. “Under

the Financial Institutions Reform, Recovery and Enforcement Act of 1989

(‘FIRREA’), suits to which the FDIC is party are generally deemed to arise under the

laws of the United States and, as such, should be litigated in federal court.” Dewey

v. Lutz, 930 F.2d 597, 598 (8th Cir. 1991). Indeed, 12 U.S.C. § 1819(b)(2)(A)

provides, with certain exceptions not germane to this appeal, that “all suits of a civil

nature at common law or in equity to which the [FDIC], in any capacity, is a party

shall be deemed to arise under the laws of the United States.” The FDIC’s

appointment as receiver “conferred instant subject matter jurisdiction over the case.”

Heaton v. Monogram Credit Card Bank of Ga., 297 F.3d 416, 426 (5th Cir. 2002).

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Before RILEY, BOWMAN, and GRUENDER, Circuit Judges.

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RILEY, Circuit Judge.

The plaintiffs, Alvin and Linda Phipps (Phipps), John and Elizabeth St. Clair

(St. Clair), and Shawn and Lorene Starkey (Starkey) filed a putative class action

lawsuit in Missouri state court, seeking to recover allegedly unlawful fees charged on

second mortgage loans by Guaranty National Bank of Tallahassee (GNBT). GNBT

and other defendants removed to the federal district court,1

 which denied the

plaintiffs’ motion to remand and granted the defendants’ motions to dismiss. We

affirm.

I. BACKGROUND

The plaintiffs purport to represent a class of Missouri borrowers who took out

second mortgage loans from GNBT, a federally chartered national bank located in

Florida and regulated by the Office of the Comptroller of Currency (OCC).2

 The
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plaintiffs filed a putative class action in Missouri state court against GNBT, and also

against GMAC-Residential Funding Corporation (RFC), Household Finance

Corporation III (Household), and other defendants. The plaintiffs alleged GNBT

charged them unlawful fees on their second mortgage loans, in violation of

Missouri’s Second Mortgage Loan Act (SMLA), Mo. Rev. Stat. §§ 480.231-.241, and

later sold the second mortgage loans to the other defendants, including RFC and

Household. The plaintiffs claim GNBT unlawfully charged loan origination, loan

discount, underwriting, and application fees; settlement fees; abstract fees; title search

and examination fees; and document review fees, “together with charging high

interest rates all as part of a scheme to make high-cost loans to Missouri borrowers,

as well as borrowers across the country.” The plaintiffs also claim the loan

origination and loan discount fees actually were “finder’s fees” paid to a third party,

Equity Guaranty LLC (Equity), although the plaintiffs signed Settlement Statements

(HUD-1s) with the Department of Housing and Urban Development (HUD) stating

these fees were paid to GNBT. The plaintiffs further claim GNBT and Equity

conspired “to give the appearance of making these loans through a national

bank . . . to . . . avoid the consumer protection laws of the states.”

In their state court petition (complaint), the plaintiffs sought a refund of the

allegedly unlawful fees and interest paid and also sought to enjoin the defendants

from collecting interest on the loans. Phipps allege they were charged 16.99%

interest on a 15-year loan, and St. Clair and Starkey claim they were charged 11.99%

interest on 25- and 15-year loans, respectively. The district court noted Missouri’s

usury law currently caps interest rates at 10%. See Mo. Rev. Stat. § 408.030.1.

However, the plaintiffs strenuously argue their claims are based on unlawful fees

charged, not unlawful interest.

The defendants removed the case to federal court based on federal question

jurisdiction. The plaintiffs sought remand, claiming they had not stated a claim for

excessive interest against the defendants, so federal jurisdiction did not exist. In
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response, the defendants argued the plaintiffs’ claims are usury claims against a

national bank. The defendants contended federal law preempts the claims, because

the fees charged were actually “interest” under the broad definition afforded that term

under federal law. Thus, the defendants argued the federal court had jurisdiction.

Further, the defendants moved to dismiss the plaintiffs’ claims, because the complaint

did not state a claim for which relief could be granted. Household also moved to

dismiss, claiming the plaintiffs lacked standing to sue Household, as it did not hold

any of the plaintiffs’ mortgages.

The district court denied the plaintiffs’ motion to remand, concluding the loan

origination and discount fees fit within the OCC’s definition of interest, so under

federal law, the plaintiffs’ claims were for interest, not fees. The court ruled federal

statutes governing national banks create an exclusive cause of action against national

banks for usury; thus, no state law cause of action exists. Next, because the plaintiffs

attempted to assert a usury claim against a national bank based upon the SMLA, a

Missouri statute, the district court dismissed the complaint for failure to state a claim

for which relief could be granted. Finally, the court concluded Household’s motion

to dismiss was moot, but granted the motion, because the claims against Household

derived from those against GNBT.

II. DISCUSSION

“We review the district court’s denial of a motion to remand and its dismissal

of the complaint on grounds of preemption under a de novo standard.” Gore v. TWA,

210 F.3d 944, 948 (8th Cir. 2000). As to the motion to dismiss, under Federal Rule

of Civil Procedure 12(b)(6), we must accept the plaintiffs’ factual allegations as true

and grant all reasonable inferences in the plaintiffs’ favor. MM&S Fin., Inc. v. Nat’l

Ass’n of Sec. Dealers, Inc., 364 F.3d 908, 909 (8th Cir. 2004). We may affirm the

district court’s dismissal on any basis supported by the record. In re K-tel Int’l, Inc.

Sec. Litig., 300 F.3d 881, 889 (8th Cir. 2001) (citation omitted).
3

Because GNBT is located in Florida, it is allowed to charge interest at the rate

allowed by Florida law. Florida’s usury rate is currently set at 18%. See Fla. Stat.

Ann. § 687.03(1).

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A. Preemption

A defendant may remove a state law claim to federal court when the federal

court would have had original jurisdiction if the suit originally had been filed there.

See 28 U.S.C. § 1441(b). Removal based on federal question jurisdiction is usually

governed by the “well-pleaded complaint” rule. Krispin v. May Dep’t Stores Co., 218

F.3d 919, 922 (8th Cir. 2000). This rule provides that federal jurisdiction may be

invoked “only where a federal question is presented on the face of the plaintiff’s

properly pleaded complaint.” Id. The rule also “makes the plaintiff the master of the

claim,” allowing the plaintiff to “avoid federal jurisdiction by exclusive reliance on

state law.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). An independent

corollary to this general rule is the “complete preemption” doctrine, “under which the

preemptive force of certain federal statutes is deemed so ‘extraordinary’ as to convert

complaints purportedly based on the preempted state law into complaints stating

federal claims from their inception.” Krispin, 218 F.3d at 922 (citing Caterpillar Inc.,

482 U.S. at 393). Only claims falling within the preemptive scope of a federal statute

are considered to invoke federal question jurisdiction, and the presence of even a

single federal claim gives the defendant the right to remove an entire case to federal

court. Gaming Corp. of Am. v. Dorsey & Whitney, 88 F.3d 536, 543 (8th Cir. 1996).

The National Bank Act (NBA), 12 U.S.C. §§ 21-216d, authorizes a national

bank “to charge interest at the rate allowed by the laws of the state in which the bank

is located.” Krispin, 218 F.3d at 922 (citing 12 U.S.C. § 85).3

 The NBA preempts

actions challenging the lawfulness of the interest charged by a national bank. In

Beneficial National Bank v. Anderson, 539 U.S. 1, 11 (2003), the Supreme Court held

sections 85 and 86 of the NBA “supersede both the substantive and the remedial

provisions of state usury laws and create a federal remedy for overcharges that is
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exclusive, even when a state complainant . . . relies entirely on state law.” The Court

reasoned “[u]niform rules limiting the liability of national banks and prescribing

exclusive remedies for their overcharges are an integral part of a banking system that

needed protection from ‘possible unfriendly State legislation.’” Id. at 10 (citation

omitted). “Because §§ 85 and 86 provide the exclusive cause of action for such

claims, there is, in short, no such thing as a state-law claim of usury against a national

bank. Even though the complaint makes no mention of federal law, it unquestionably

and unambiguously claims that petitioners violated usury laws.” Id. at 11; see also

Krispin, 218 F.3d at 922 (“We have held that sections 85 and 86 . . . completely

preempt state law claims of usury brought against a national bank.”).

As the district court observed, the remand issue here boils down to whether the

plaintiffs brought a claim of unlawful interest charged by the defendants,

notwithstanding the plaintiffs’ protestations their claims focused on unlawful fees.

The plaintiffs argue the loan origination and discount fees were merely “finder’s fees”

paid to Equity, which they contend are excluded from the OCC’s definition of

interest. However, we are required to look beyond the plaintiffs’ artful attempts to

characterize their claims to avoid federal jurisdiction, M. Nahas & Co., Inc. v. First

Nat’l Bank of Hot Springs, 930 F.2d 608, 611-12 (8th Cir. 1991), to determine

whether the plaintiffs actually allege unlawful interest claims without expressly using

the word “interest.”

For purposes of 12 U.S.C. § 85, interest is defined as “any payment

compensating a creditor or prospective creditor for an extension of credit, making

available of a line of credit, or any default or breach by a borrower of a condition

upon which credit was extended.” 12 C.F.R. § 7.4001(a). Among other things,

interest includes certain fees associated with credit extension or availability, such as

“numerical periodic rates, late fees, creditor-imposed not sufficient funds (NSF)

fees . . . , overlimit fees, annual fees, cash advance fees, and membership fees.” Id.

However, interest “does not ordinarily include appraisal fees, premiums and
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commissions attributable to insurance guaranteeing repayment of any extension of

credit, finder’s fees, fees for document preparation or notarization, or fees incurred

to obtain credit reports.” Id. If any of the fees charged in the present case fall within

the definition of interest, the NBA preempts those claims and removal of the entire

case was proper. See Gaming Corp. of Am., 88 F.3d at 543.

The Supreme Court has held various fees, such as late fees, are not excluded

from the NBA’s definition of interest simply because the fees do not vary depending

on the amount owed or the length of the delay. Smiley v. Citibank (S.D.), N.A., 517

U.S. 735, 745 (1996). The Court found no indication from prior decisions that

interest is “limited to charges expressed as a function of time or of amount owing.”

Id. The Court explained “[i]t would be surprising to find such a requirement in the

Act, if only because it would be so pointless. Any flat charge may, of course, readily

be converted to a percentage charge–which was indeed the basis for 19th-century

decisions holding that flat charges violated state usury laws establishing maximum

‘rates.’” Id. at 745-46. The Court concluded it was rational to consider as interest

those expenses “assessed for simply making the loan.” Id. at 741-42. The Court

opined the OCC’s definition draws a reasonable line between (1) payments

compensating creditors for extending credit or making a line of credit available, and

(2) “all other payments.” Id. at 741. Several courts, including our own, have held

charges similar to those in this case are considered interest. See, e.g., Fisher v. First

Nat’l Bank, 548 F.2d 255, 258-61 (8th Cir. 1977) (cash-advance fee considered

interest); Cronkleton v. Hall, 66 F.2d 384, 387 (8th Cir. 1933) (commissions and

bonuses considered interest); see also Greenwood Trust Co. v. Mass., 971 F.2d 818,

825 (1st Cir. 1992) (late fees and other “kindred charges” considered interest); Am.

Timber & Trading Co. v. First Nat’l Bank, 690 F.2d 781, 787-88 (9th Cir. 1982)

(“compensating balance requirement” as condition for receiving loan considered

interest). But see Hancock v. Bank of Am., 272 F. Supp. 2d 608, 610 (W.D. Ky.

2003) (fax fee not considered interest); Video Trax v. NationsBank, N.A., 33 F. Supp.

2d 1041, 1059 (S.D. Fla. 1998) (bank overdraft fee not considered interest).
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In this case, most, if not all, the fees the plaintiffs claim are unlawful fall within

the OCC’s definition of interest. Clearly, the loan origination and discount fees

qualify as interest. Origination fees are “charged by a lender for preparing and

processing a loan.” Black’s Law Dictionary 648 (8th ed. 2004). Unlike the charges

normally incurred regardless of whether a loan is made, a loan origination fee is one

assessed after a loan is approved. Similarly, a loan discount fee is assessed by the

lender to reduce the interest rate charged on a loan. As the district court noted, the

OCC has reasoned that fees charged for opening an account with a bank are interest,

because these fees are payments made to compensate a creditor for extending credit

rather than a charge “‘specifically assigned’ to cover the cost of an activity or

service.” See OCC Interpretive Letter No. 803, 1998 WL 320183, at *3 (citation

omitted). The HUD-1 Settlement Statements the plaintiffs signed list the loan

origination, loan discount, underwriting, and application fees under the subheading

“Items Payable in Connection with Loan,” further convincing us these alleged fees

actually were payments compensating the creditor for an extension of credit. See

Smiley, 517 U.S. at 741-42. Furthermore, the instructions for completing the

Settlement Statements provide that Line 801, the line listing the loan origination fee,

“is used to record the fee charged by the Lender for processing or originating the

loan,” while “Line 802 is used to record the loan discount or ‘points’ charged by the

Lender.” 24 C.F.R. § 3500, App. A. The loan origination and loan discount fees, as

well as the underwriting and application fees, clearly were charged as compensation

to GNBT for extending credit, rendering these charges interest within the OCC’s

definition.

The plaintiffs’ characterization of the various fees as non-interest “finder’s

fees” paid to Equity is unavailing. Courts must look at “the originating entity (the

bank), and not the ongoing assignee . . . in determining whether the NBA applies.”

Krispin, 218 F.3d at 924; see 12 C.F.R. § 7.1004(a) (“A national bank may use the

services of, and compensate persons not employed by, the bank for originating

loans.”). In this case, the plaintiffs signed numerous loan documents in which they
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acknowledged GNBT was the lender that funded and made the loans and charged the

fees. And the plaintiffs’ complaint repeatedly states GNBT was the lender. The

district court correctly disregarded the plaintiffs’ “finder’s fees” argument.

The plaintiffs argue our court has no jurisdiction to review whether the charges

at issue in this case actually were interest, because the plaintiffs dispute the assertion

that the charges were interest. The plaintiffs’ complaint did not include claims for

usurious interest, so the issue whether the claims involve interest is disputed. The

plaintiffs contend removal jurisdiction does not exist unless a plaintiff’s claims

indisputably are based on excessive interest. Any assertion that a federal court’s

jurisdiction somehow depends upon a lack of objection by a litigant is misguided.

Subject matter jurisdiction is not controlled by the desires of one of the parties, see

Dale v. Weller, 956 F.2d 813, 815 (8th Cir. 1992) (noting “subject matter jurisdiction

cannot be conferred by the parties by waiver or otherwise”), and “[a] plaintiff’s

characterization of a claim as based solely on state law is not dispositive of whether

federal question jurisdiction exists,” Peters v. Union Pac. R.R. Co., 80 F.3d 257, 260

(8th Cir. 1996). As noted above, we simply are not required to look only to the

plaintiffs’ artful pleading and characterizations of the evidence to determine our

jurisdiction. M. Nahas & Co., 930 F.2d at 612. The district court properly concluded

some of the fees the plaintiffs challenge actually were interest within the OCC’s

definition. Accordingly, the court rightly concluded federal law preempted those

claims and provided removal jurisdiction.

B. Dismissal

Once the district court determined the plaintiffs’ claims are preempted, it was

a short step to conclude these claims must be dismissed. The court found it

“impossible . . . to retain jurisdiction but not dismiss the case. If the [plaintiffs’] case

is completely preempted by federal law, the claims are anomalous and must be

dismissed. If the Court declines jurisdiction, the Court lacks authority to rule on the

motions to dismiss and they are thus moot.” As the court stated, the plaintiffs’
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“complaint attempts to state what does not exist, to wit: a usurious claim against a

national bank premised on Missouri law. This is not a claim for which relief may be

granted.” Because “there is . . . no such thing as a state-law claim for usury against

a national bank,” Beneficial, 539 U.S. at 11, the district court properly dismissed the

plaintiffs’ claims. 

Even if we assume all the fees the plaintiffs contest could not be considered

interest within the OCC’s definition and, therefore, are not preempted, any claims

based on those fees would be considered removable under 28 U.S.C. § 1441(c) as part

of the court’s supplemental jurisdiction under 28 U.S.C. § 1367(a). Although the

district court determined it could not reach these claims based upon its ruling

dismissing the plaintiffs’ complaint, the record supports dismissal under the SMLA.

See K-tel, 300 F.3d at 889 (stating we may affirm dismissal on any basis supported

by the record). The SMLA requires, as an essential element of a claim thereunder,

that the interest rate a bank charges exceed the rate limits provided by Missouri

statute. “To state a civil claim under these provisions of the SMLA, [the plaintiffs]

had to plead facts establishing that: (1) they obtained a secondary mortgage loan;

(2) an unlawful rate of interest was charged on the loan; and (3) the fees charged in

connection with the loan were not authorized by Section 408.233.” Avila v. Cmty.

Bank of Va., 143 S.W.3d 1, 4-5 (Mo. Ct. App. 2003). The SMLA “shall not apply

to any loans on which the rate of interest . . . charged [is] lawful . . . .” Mo. Rev. Stat.

§ 408.232.4. The plaintiffs argue they do not allege a claim for unlawful interest;

therefore, they have failed to state a claim under Missouri law for which relief may

be granted.

Furthermore, even assuming the plaintiffs attempted to claim they were charged

an unlawful interest rate, they would not have a claim for which relief could be

granted, because GNBT, as a national bank from Florida, was allowed to “export” the

maximum interest rate it could have charged under Florida law, even if that rate

would be unlawful in Missouri. See Smiley, 517 U.S. at 743-44; Marquette Nat’l
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Bank of Minneapolis v. First of Omaha Serv. Corp., 439 U.S. 299, 314, 318-19

(1978); Krispin, 218 F.3d at 922. At the time of the transactions in this case, the

maximum interest rate permissible under Florida law was 18%, see Fla. Stat. Ann.

§ 687.03(1), so none of the plaintiffs were charged an unlawful interest rate.

Accordingly, even if the plaintiffs asserted they were charged an illegal interest rate,

the plaintiffs would have failed to make out a valid SMLA claim, and dismissal of

their complaint would have been proper.

Additionally, for the reasons stated in the district court’s opinion, we affirm its

dismissal of Household.

III. CONCLUSION 

We affirm the district court’s order denying the plaintiffs’ motion to remand

and dismissing the plaintiffs’ complaint.

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