Opinion ID: 2612211
Heading Depth: 3
Heading Rank: 5

Heading: Late Charges.

Text: The promissory note executed by the parties contained a provision that allowed First Federal to increase the rate of interest upon the balance of the note one per cent (1%) per annum during the period that [any] delinquency continues. Pursuant to this provision, First Federal collected approximately $5,700 in late charges. Appellant argues that the late charges collected by First Federal should be nullified as a penalty under state law because they constitute an unreasonable assessment of liquidated damages. Additionally, Collins contends that under state law, the late charges he paid should be added in the usury calculation as interest. See, e.g., Garrett v. Coast and So. Federal Savings and Loan Ass'n, 9 Cal.3d 731, 108 Cal. Rptr. 845, 511 P.2d 1197 (Cal. 1973) (late charges invalid unless reasonably related to actual damages); Consolidated Loans, Inc. v. Smith, 190 So.2d 522 (La. App. 1966) (late charges constitute additional interest). The lower court found that the federal regulations which permit federal savings and loan associations to include late charge provisions in their loan agreements, see 12 C.F.R. § 545.8-3 (1982), preempt any state law purporting to govern this question. Appellant argues, however, that the lower court improperly granted summary judgment in respondents' favor because the question of whether state law governs the validity of the late charges imposed on appellant's loan by First Federal involves complex constitutional issues of large public import. Although it is true that a motion for summary judgment should be denied if the record below is inadequate for consideration of the constitutional issues presented or to determine whether genuine issues of material fact exist, see, e.g., Carter v. Stanton, 405 U.S. 669, 92 S.Ct. 1232, 31 L.Ed.2d 569 (1972) (record inadequate); Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970) (genuine issue of material fact present), a case may be disposed of by summary judgment if the constitutional question has been foreclosed by previous decisions. Agustin v. Quern, 611 F.2d 206 (7th Cir.1979). See also Veterans and Reservists for Peace in Vietnam v. Regional Commissioner of Customs, 459 F.2d 676 (3d Cir.1972) (summary judgment for government affirmed in action challenging constitutionality of Trading with the Enemy Act), cert. denied, 409 U.S. 933, 93 S.Ct. 232, 34 L.Ed.2d 188 (1972); Teague v. Regional Commissioner of Customs, 404 F.2d 441 (2d Cir.1968) (constitutionality of Trading with the Enemy Act upheld on motion for summary judgment), cert. denied, 394 U.S. 977, 89 S.Ct. 1457, 22 L.Ed.2d 756 (1969); Hawthorne v. United States, 115 F.2d 805 (5th Cir.1940) (constitutionality of cotton-marketing quota provisions of the Agricultural Adjustment Act upheld after lower court rendered summary judgment in government's favor). In Agustin v. Quern, supra , the circuit court affirmed the district court's summary judgment denying the plaintiff's claim that a retrospective application of an amendment to a state law was tantamount to an ex post facto law. There, a well-developed body of ex post facto law permitted the lower court to render a summary judgment. [3] Id. at 209. Recently, the U.S. Supreme Court held that regulations issued by the Federal Bank Board allowing federal savings and loan associations to include in their loan agreements due-on-sale clauses preempted California decisional law which prohibited those clauses as unreasonable restraints on alienation. [4] Fidelity Federal Savings and Loan Ass'n v. de la Cuesta, ___ U.S. ___, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982) (Rhenquist, Stevens, J.J., dissenting). Because the federal regulations authorizing the imposition of late charges were adopted in the same document as were the due-on-sale regulations, see 12 C.F.R. 545.6-11(d)-(f) (1977); 41 Fed.Reg. 6283 (1976), and shared equally the Bank Board's expressions of preemptive intent, see 41 Fed.Reg. 6283, 6284 (1976), we hold that Fidelity, supra, is dispositive of the preemption issue. In the preamble accompanying the final publication of the late charge regulation, the Board explained its intent that the late charges imposed by federal savings and loans be governed exclusively by federal law. 41 Fed.Reg. 18286, 18287 (1976). The Board stated that it was and is the Board's intent to have late charges ... of federal associations governed exclusively by federal law. Therefore, charging of late charges ... by federal associations shall be governed and controlled solely by § 545.6-11 [now 12 C.F.R. § 545.8-3 (1982)].... Federal associations shall not be bound by or subject to any conflicting state law which imposes different late charges ... nor shall federal associations attempt to impose a higher late charge than permitted in § 545.6-11(e) ... on the ground that such higher charge is permissible under state law. 41 Fed.Reg. 18286, 18287 (1976) (emphasis added). The Board has unequivocally expressed its determination to displace state law respecting the imposition of late charges. [5] Federal regulations have no less preemptive effect than federal statutes... . When [an] administrator promulgates regulation intended to pre-empt state law the regulation will be upheld unless it exceeded the administrator's statutory authority or constituted an abuse of the administrator's discretion. Fidelity, 102 S.Ct. 3022. After reviewing the language and history of the Home Owners' Loan Act of 1933, 48 Stat. 128, as amended, 12 U.S.C. § 1461 et seq. (1976 ed. and Supp. IV), in light of the court's decision in Fidelity, there is no doubt that the promulgation of 12 C.F.R. § 545.8-3(d) was within the administrator's statutory authority and did not constitute an abuse of discretion. See Fidelity, 102 S.Ct. at 3025-3031. Accordingly, we hold that the Board's late charge regulation preempts application of any state law concerning the imposition, assessment or collection of late charges to federal savings and loan associations. Therefore, the late charges assessed and collected by First Federal do not constitute an unreasonable assessment of liquidated damages and were properly not calculated as interest. [6] See C.F.R. 545.6-11(d) (1977); 41 Fed. Reg. 6283, 6284 (1976) (amendments proposed February 6, 1976).