Legal Document

458 U.S. 141 102 Supreme Court Reporter 3014 73 United States Reports Lawyer’s Edition 2d Series KF101.8 U54 664 FIDELITY FEDERAL SAVINGS AND LOAN ASSOCIATION, et al., Appellantsv.Reginald D. de la CUESTA al. Number 81-750. Argued April 28, 1982. Decided June Syllabus Section 5(a) of the Home Owners' Loan Act 1933 (HOLA) empowers Federal Bank Board (Board), under such regulations as it may prescribe, to provide for organization, operation, and regulation federal savings loan associations. Pursuant this authorization, issued a providing that association "continues have power include . in its instrument" "due-on-sale" clause, i.e., provision permits declare entire balance immediately due payable if property securing is sold or otherwise transferred without association's prior written consent. A preamble stated due-on-sale practices associations shall be governed "exclusively by law" "shall not bound subject any conflicting State law which imposes different requirements." Appellees each purchased California real from one who had borrowed money appellant Fidelity Savings Association (Fidelity). The borrowers given deeds trust on property; deed contained clause. Fidelity, having received notice purchases, proceeded enforce clauses accelerate payment loans, when they were paid, instituted nonjudicial foreclosure proceedings. Each appellee then filed suit against Superior Court, asserting Fidelity's exercise violated principles announced inWellenkamp versus America, 21 Cal.3d 943, 148 Cal.Rptr. 379, 582 Pacific Reporter, 2nd 970, limited lender's right clause cases where lender can demonstrate transfer has impaired security. consolidated actions granted motion summary judgment ground Government totally occupied Appeal reversed, holding Wellenkamp was controlling expressly impliedly pre-empted state law. Held : Board's pre-empts limitations associations, thus bars application rule Pp. 152-170. (a) general governing pre-emption conflicts with are inapplicable here simply because matter special concern States. And no less pre-emptive effect than statutes. Where Congress empowered an administrator promulgate regulations, intended pre-empt unless exceeded his statutory authority acted arbitrarily. 152-154. (b) language especially thereto clearly show intent doctrine. conflict between doctrine does evaporate permits, but compel, their contracts security transferred. While compliance both physical impossibility, forbids at option deprives flexibility Board. therefore creates obstacle accomplishment regulation's purpose. 154-159. (c) within issuing regulation. Both legislative history HOLA indicate authorized regulate lending delegated purpose creating regulating these so ensure would remain financially sound able supply financing home construction purchase. Consistent purpose, reasonably exercised promulgating 159-170. 121 Cal.App.3d 328, 175 467, reversed. Ernest Leff, Beverly Hills, Cal., appellants. Stephen M. Shapiro, Washington, C., FHLBB FHLMC amicus curiae, leave Court. Robert E. Boehmer, Riverside, appellees. Justice BLACKMUN delivered opinion 1 At issue case regulation, permitting use mortgage contracts. dispute displace restrictions imposed clauses. 2 * Atlantic 3 Board, independent regulatory agency, formed 1932 thereafter vested plenary administer (HOLA), 48 Statutes-at-Large 128, amended, 12 Code KF62 § 1461 seq. (1976 ed. Supp. IV).1 HOLA, 1464(a) ed., IV), "under rules incorporation, examination, known 'Federal Associations.' " promulgated "the powers operations every cradle corporate grave." People Coast Sav. & Assn., 98 F.Supp. 311, 316 (S.D.Cal.1951). 4 In 1976, became concerned about increasing controversy clause—a contractual transferred.2 Specifically, felt loan's ability upon number adverse effects: (1) financial stability endangered person whose repay properly maintain inadequate"; (2) "elimination sale will cause substantial reduction cash flow net income offset losses likely forced charge higher interest rates charges loans generally"; (3) restrict impair sell secondary market, making unsalable causing them reduced prices, thereby reducing new funds residential available." 41 Fed.Reg. 6283, 6285 (1976). concluded benefit only sellers, generally economic hardship majority buyers potential buyers." Ibid. 5 Accordingly, 1976 now Regulations 545.8-3(f) (1982),3 provides relevant part: 6 "[A loan] continues include, contract borrower, instrument whereby may, option, sums secured all part borrower Except [otherwise] provided section ., (hereafter called clause) exclusively terms contract, rights remedies fixed contract." 7 accompanying final publication explained law." 18286, 18287 emphasized "[f]ederal Ibid.4 B 8 Appellant (Fidelity) private mutual chartered pursuant HOLA. principal place business Glendale, Rptr. (West’s) Appellees, Cuesta, Moore, Whitcombe, made purchase Fidelity. As loan, property. Two also included provision, identified ¶ 15, jurisdiction Property located." App. 51, 86.5 9 notified appellee's did learn transfer, gave expressed willingness consent however, agreed increase rate then-prevailing market rate. refused accept condition; loan. When proceeding. 10 response, Orange County. asserted that, 970 (1978), California's prohibition unreasonable restraints alienation, Cal.Civ.Code Ann. 711 (West 1982), "unless enforcement necessary protect impairment risk default." Cal.3d, 953, Cal.Rptr., 386, P.2d, 977. complaint sought judicial declaration enforceable first showed harmed interest, injunction procedures based compensatory punitive damages. 5, 49, 84.6 11 three appellants' judgment. court government Loans," held, therefore, decision "cannot extended [federal] loans." Juris. Statement 29a. Fourth Appellate District, reversed adopted portions parallel ruling First Court's controlling. 331, 468 (1981), quoting Panko Pan American 119 916, 174 240 cert. pending, 81-922. found neither nor fully field regulation; example, pointed out, traditionally been respect title, conveyancing, recording, priority liens, 13 likewise rejected contention Although recognized (1982) manifested supersede law, "equate expression requisite congressional intent." Cal.App.3d, 339, 474 (emphasis original).7 14 Finally, evidence reasoning incompatible doctrine, observed, "is substantive law," form "regulation" over loans. 341, 474. Moreover, noted, "merely authorizes compel thereunder." Ibid., 475. discovered purposes designed assist distressed homeowners. 15 derived "further support," 342, 475, two "governed See n. supra. That language, ruled, evinced unmistakable should govern interpretation, validity, deeds.8 16 denied petition review. 28a. 17 Because courts consider question concluded, contrast Appeal, including 545.8-3(f), do loans,9 we noted probable jurisdiction. 455 917, 1272, 71 (1982). II 18 roots Supremacy Clause, U.S.Const., Article VI, cl. 2, requires us examine intent. Pre-emption either express implied, compelled whether Congress' command explicitly statute's implicitly structure purpose." Jones Rath Packing Co., 430 519, 525, 97 1305, 1309, 51 604 (1977). Absent explicit altogether inferred "[t]he scheme pervasive make reasonable inference left room supplement it," touch dominant system assumed preclude laws same subject," object obtained character obligations reveal Rice Santa Fe Elevator Corp., 331 218, 230, 67 1146, 1152, 91 L.Ed. 1447 (1947). 19 Even completely displaced specific area, nullified extent actually Such arises "compliance impossibility." Florida Lime Avocado Growers, Incorporated Paul, 373 132, 142-143, 83 1210, 1217, 248 (1963), "stands execution full objectives Congress," Hines Davidowitz, 312 52, 67, 61 399, 404, 85 581 (1941). U.S., 526, S.Ct., 1310; Bethlehem Steel company New York Labor Relations Bd., 330 767, 773, 1026, 1029, 1234 These States: "The relative importance own material there valid Framers our Constitution must prevail." Free Bland, 369 663, 666, 82 1089, 1092, 180 (1962); see Ridgway Ridgway, 454 46, 54-55, 55, 70 39 (1981). 20 directed discretion, judgments review determine he Shimer, 367 374, 381-382, 81 1554, 1559-1560, 908 (1961). promulgates court's inquiry similarly limited: "If [h]is choice represents accommodation policies committed agency's care statute, disturb appears statute sanctioned." Id., 383, 1560. 22 Blum Bacon, 457 145-146, 2355, 2363-2364, 72 728 (1982); 57, 56 (regulations "unreasonable, unauthorized, inconsistent with" underlying statute); 668, 1093. 23 force depend authorization law; moreover, failed dispositive. 381-383, 1559-1560. Thus, Appeal's narrow focus misdirected. Rather, questions resolution rests meant and, so, action scope authority. III 24 even recognized, unambiguous. plainly power" "at option." courts, contrast, those 25 provisions consciously chosen mandate "because [it] desires afford accommodate situations circumstances." 556.9(f)(1) (1982),10 "a impossibility," forbidden solely option" deprived "flexibility" 26 recently "reiterat[ed] long-standing policy" authorizing "subject Board." 46 39123, 39124 specified 545.8-3(g) (1982).11 unlike confine impaired. addition, exercising adjust long-term mortgage's towards current rates—a practice approved views critical association." Schott Advisory Opinion, 27. 27 By further limiting availability considers essential soundness thrift industry, created "an objectives" 404. Cf. Franklin Nat. York, 347 373, 378, 74 550, 553, 767 (1954) (finding "clear conflict" national banks receive deposits specifically permit—much require—advertising banks, forbade word "savings" advertising business). 28 Contending appellees point second sentence, pertinent 29 "[E]xercise 30 interpret incorporating law—and restricting We note, incorporation signify inapplicability fundamental principle complex polity" mandates Constitution, laws, treaties much local Constitution." Hauenstein Lynham, 100 483, 490, 628 (1880). Testa Katt, 390-392, 810, 812-813 (1947).12 view, sentence makes clear empower parties particular instrument, right. Similarly, agree somehow limit precludes relying more expansive 31 Any ambiguity 545.8-3(f)'s dispelled explaining unequivocally expresses determination law: 32 "Finally, Therefore, controlled [§ 545.8-3] Policy. requirements, attempt avoid delineated ] avoidance permissible (1976) added).13 33 "confirm[ed]" regard inclusion exercise." 556.9(f)(2) conclude conflict.14 IV 34 remains convince ample Act's purposes, consistent purposes. 35 product Great Depression 1930's, "to emergency relief indebtedness" time many half country default. H.R.Conf.Rep.No.210, 73d Cong., 1st Sess., (1933). 77 Cong.Rec. 2499 (1933) (remarks Rep. Hancock); id., 2570 Reilly); Act: Hearings S. 1317 before Subcommittee Senate Committee Banking Currency 9, (Senate Hearings) (statement Horace Russell, drafters bill General Counsel, Atlanta, Ga.). Local institutions previously supplied finance homes ceased doing discontinued counties country, containing almost one-fifth total population, home-financing institutions. 7, 19; H.R.Rep.No.55, (1933); S.Rep.No.91, H.R. 4980 House Currency, 16-17 (House William KF105 F3 Stevenson, Chairman, Board); Comment, Pac.L.J. 1085, 1103 (1980) (by 1933, 1,700 state-chartered failed, some $200 million, one-third value associations). 36 order ameliorate conditions, enacted radical comprehensive response inadequacies existing systems." Conference Assns. Stein, 1256, 1257 (CA9 1979), summarily aff'd, 445 921, 1304, 63 754 (1980). creation regulated vitality "permanent promote people cooperative manner, neighbors." 4974 Sen. Bulkley). 37 Act, loans: 38 "In invest homes, authorized, Associations', banks' charters therefor, giving primary consideration best States." 1464(a)(1) Supp.IV) added). broad limits put it, "[i]t difficult give broader mandate." Glendale Assn. Fox, 459 903, 910 (CD Cal.1978), granted, 481 616 (1979), reversing remanding, 663 1078 1981), 81-1192. delegation "operation" instruments, mortgages central "operation." 21; (Apr. 20, 1933) Board) ("We loaning [savings associations] seven million dollars week pretty largely type contemplated Act"); Tr. Oral Arg. (approximately 78% associations' assets invested contracts). 40 States," state-chartered. 1464(a). stating, envisioned what Board—not State—deemed "best practices." Massachusetts Tax Comm'n, 437 255, 258, 3, 2333, 2335, 57 187 (1978) (observing "protects being into mold"). suggests contemplated, approved, promulgation superseding various sections pre-empting15 incorporating16 contend additional adopt displacing decisions applicability certain aspects imply indicated need feel Supp.IV). cannot read confining areas "specifically described other provisions." Southwestern Cable 392 157, 172, 88 1994, 2002, 1001 (1968); Phelps Dodge Corporation NLRB, 313 177, 193-194, 845, 852, 1271 42 Furthermore, expected conform except itself, needlessly repetitive. decline construe render nugatory, "thereby offending well-settled parts possible, effect." Textile Mfrs. Institute, Donovan, 452 513, 101 2478, 2492, 69 185 Jarecki G. Searle 303, 307-308, 1579, 1582, 859 (1961); cf. 553 find indication phase banking [i.e., advertising] restrictions, done several instances").17 43 exigencies times, hurriedly history, concededly, somewhat sparse.18 But confirm reading Attempting "relief man lose home," set out framework details Board). references discretion newly appear throughout history. Nowhere suggestion 44 Chairman Stevenson's testimony during hearings instruments used Discussing 5(c) 1464(c), Representative Hancock noted: "You departing uniformity you say piece estate excess $20,000." 21, 1933). replied: "That true. good ways. [thrift dire straits loaned way up yonder value, tied hotels, apartment houses things kind, puts desperate situation." 45 prohibit obtaining renting property, Stevenson observed: could covered bill." 14. Asked choose kind in. great 47 Stevenson) (referring after once obtained"); Mr. ("[I]t grant [a 3-year] extension [of payments]."); 18-19 (colloquy Reilly) (noting determining charter association). subsequent debates accepted offer furnished Luce, ranking minority member observed "will accordance building-and-loan practice, N Dec. Immigration Nationality Decisions sure rely [Chairman Stevenson] carry promise." 2480 "It machinery hands Board," "[w]e board act," Luce continued. 2480, 2481. 2481 [as conversion loans] board"); 2501 ("The prudent course board, imposing maximum [rate interest] bill—4 percent borrow, lend—and get lower borrowing opportunity come"); 4987 Sens. Hebert Bulkley) institutions). 49 incorporate practices. establish uniform now," "establish behind them, charter." Stevenson); 1933).19 comprehensively specifically, instruments.20 Contract 50 above, aspect "operation," unquestionably exempting requirements boundless, explore outer discretion. difficulty concluding testifying corporations propose up, want basis very assistance time, managed." referred "permanent" 52 mind. determined valuable often indispensable source protection continued fund commitments." important contract" elimination [e]ffect earning markets, reduce amount available buyers, rise rates." 17-18. 53 analysis proceeds follows: It observes short long—obtaining short-term investing typically 25- 30-year term—combined rising rates, increased cost income. Exercising enables alleviate problem replacing longterm, low-yield prevailing across board. 21-22. like lengthen maturity date mortgages, marketability market. result, fears, eroded reduced." Opinion 34.21 54 Admittedly, wisdom policy uncontroverted.22 arbitrary capricious. judges, function, expertise, evaluate approach. authority, Congress, "local [which] homes." Supp.IV).23 doing, 55 Our ends there. hold associations.24 ordered. POWELL took case. O'CONNOR, concurring. 58 join write separately emphasize limitless.* federally "would sound," ante, 168, permit Nothing "provide regulation" remotely tax statutes zoning ordinances, directly related my nothing contrary. 59 REHNQUIST, whom STEVENS joins, dissenting. 60 today concludes Supp.IV), preempt administrative fiat enforceability held reaches extraordinary result relate "are 'operation' jurisdiction." Ante, 167. (1982), dissent. grants perform role, take account governs transactions interpretation particular. constitutes unsafe means enabling remove unprofitable portfolio. 62 entirely approach taken industry. (FHLBA), 1428, precursor required "relating conveying recording land titles, homestead rights, holders lands (Emphasis added.) further: examination indicate, inadequate collecting advances chapter, withhold operation until satisfactory conditions established." 1428 64 FHLBA deemed economically unsound. Instead, endangers established FHLBA, "withhold operation" California. 65 declaring departed Congress. activities If anything, indicates understanding domain Aronson Quick Point Pencil 440 257, 262, 99 1096, 1099, 296 (1979); Butner States, 48, 914, 918, 136 (1979). intend create common mortgages. Texas Industries, Radcliff Materials, Inc., 451 630, 2061, 68 500 (1981).* 66 upheld gone beyond how, when, manner lend money. recognizes, 146-147, purports instrument. This delineate guarantee notwithstanding case, Without relied entered override laws. placed engage lending. interfered enter agreement regarding invalid Clause lenders eliminate portfolios. courts' unsound, enabled insulate merely declares enforceable. Discharge mission authorize intrude came earlier 736, 1437, bank system. members appointed President, advice Senate, 4-year terms. note following 1437. addition establishment 129, repealed 4(d) 727, 4, instructed Corporation; agency exchange bonds institutions, needy homeowners accrued taxes, maintenance, repairs. developed Mortgage National Association. Paragraph reads: "17. Transfer Property; Assumption. therein Borrower Lender's consent, excluding lien encumbrance subordinate Deed Trust, household appliances, devise, descent death joint tenant (d) leasehold years purchase, Lender Trust payable. waived if, reach writing credit request. paragraph Borrower's successor executed assumption Lender, release Note. exercises accelerate, mail acceleration hereof. period days mailed pay declared due. fails expiration period, demand Borrower, invoke permitted hereof." 50-51, 85-86 codified initially 545.6-11(f) 39108, 39149 adopting interpreted 545.8-3(a) (1982)—a 1948 association"—as provisions, despite contrary, help "full protection" lender. Resolution 75-647, Mission (Schott Opinion), Civ-75-366, Pages 13-15 July 30, 1975), reprinted Exhibit Defendants' Memorandum Points Authorities Opposition Plaintiffs' Motion Preliminary Injunction. reads full: "15. Uniform Trust; Governing Law; Severability. combines covenants non-uniform variations constitute covering located. event Note applicable affect end severable." 51-52, 86-87. slander count, alleging maliciously published false default trust. 54, 89. effective 545.8-3(f). reasoned, deeds. 344, 345, 476-477. ascribe weight absence third here. discussion "not conclusion approval persuasively evidences recognition validity instruments." 346, 477. Nor significant fact commercial rather District Courts See, e.g., Price 524 175, 178 (MD Fla.1981) (§ regulation); Peterson, 516 732, 740 (ND similar California); Dantus 502 658, 661 (Colo.1980) (analogous Colorado law); Bailey 467 1139, 1141 Ill.1979) forecloses loans), appeal dism'd, 636 1221 (CA7 1980); 907 Cal.1978) (same), One Appeal. Holiday Acres Midwest 308 North Western 471 (Minn.1981) clauses). least Appeals, Courts, ruled 1260 ("In control control") (1980); Greenwald, 591 417, 425-426 (CA1 1979) (Board specifying escrow accounts greater requirements); Kupiec Republic 512 147, 150-152 1975) supersedes common-law inspect membership list); Meyers Hills 499 1145, 1147 1974) prepayments associations); Rettig Arlington Heights 405 819 Ill.1975) statements fiduciary duties officers); Lyons 377 Ill.1974) displaces branching loans); 318 (SD Cal.1951) (federal field); Kaski Wis.2d 141-142, 367, loans' practices). Derenco, Benjamin 281 Or. 533, 577 477 reserve insurance payments occupy requiring accounts), denied, 439 1051, 733, 712 (1978). Gulf 651 259, 266 (CA5 1981) internal management disputed provisions), 81-1744. practical matter, few Association, bulk require, buy, years. obtain 28-34; Kinzler, Due-on-Sale Clauses: Economic Legal Issues, U.Pitt.L.Rev. 441, 452-453 Fla. L.Rev. 645, 646, 650 Title applies 31, prohibits four circumstances listed supra created; appliances occurs descent, tenant; prepayment penalty accelerated circumstances, waives provision. leads reject appellees' supra, appellants "law jurisdiction" located; includes well 17—the —¶ purchases 10, added elevate choice-of-law interstate disputes arose mortgage. Brief Amici Curiae 2a (letter Henry L. Judy, Corporation); S.Rep.No.91-761, Page (1970) Arthur Burns, Governors, Reserve System), U.S.Code Cong. Admin.News 1970, 3488. Citing Chrysler Brown, 441 281, 315-316, 1705, 1724, 208 characterize interpretative binding itself contrary look "deference order." Udall Tallman, 380 1, 16, 792, 801, (1965). consider, standing alone. actual decide (exempting formerly organized "any numerical branch offices facilities"); 5(h) 1464(h) (pre-empting taxes "other institutions"). 1433 taxation). (providing institution pertaining discrimination neighborhood geographic Consumer Credit Protection 1601 seq.); 5(b)(3) 1464(b)(3) (authorizing borrow as" so); 5(c)(4)(A) 1464(c)(4)(A) (permitting in, to, development corporation incorporated so). Likewise, 1932, dissent, post, 173, pre-empting speaks ensuring "[a]dequate th[at] chapter ." 1428. purport constrict negate On 13, President Roosevelt wrote asking "legislation small owners relieve portion burden excessive incurred values power." H.R.Doc.No.19, 22. 2585, passed 4995. signed 6198, months requested legislation. postenactment corroborates Financial Institutions Regulatory Interest Rate Control 1978, Public Law 95-630, 92 3641, amended charters. During debate House, Hanley introduced amendment opting convert continue 146, seq., stringent 124 33847 explained: way, course, erode associations; alone branching, anti-discrimination, authority." 33848. St Germain, chairman Supervision, Regulation, Insurance Banking, Finance, Urban Affairs chief sponsor bill, agreed: "This restriction converted intends interfere longstanding, all-inclusive 33849. to. Similar bill. Senator Brooke "we govern." 36148. Then, Depository Deregulation Monetary 1980, 96-221, 94 Congressman might "federal 126 6981 Patterson). Germain responded expand investment "[o]nly permits. Under complete associations." events accorded contemporary confirmation delegate NLRB Bell Aerospace 416 267, 275, 1757, 1762, 134 (1974); Red Lion Broadcasting FCC, 395 380-381, 89 1794, 1801, 371 (1969). extensive govern, fair types collateral required, repayment schedules, initial charges, assignment rents, paid accounts, late servicing prepayments. §§ 545.6, 545.8 Task Force estimates accounted 40% suffered 1981 State—some million. Report projects imposition nationwide create, years, annual $600 $800 $1 $1.3 billion 18, 25. Those subscribing opposite view unrestricted preventing transferring inflationary homeowner prospective homeowner. Patton 118 Ariz. 473, 578 152 (1978); Nichols Ann Arbor Mich.App. 163, 250 804 Williams (CA4 1981); Tierce APS 382 So.2d 485 (Ala.1979); Malouff Midland 181 Colo. 294, 509 1240 (1973); Martin Peoples Mutual 319 220 (Iowa 1982); Occidental Venco Partnership, 206 Neb. 469, 293 843 Crockett 289 N.C. 620, 224 South Eastern 580 (1976); Gunther White, 489 529 (Tenn.1973). extends external matters, relationship borrowers. drawn distinction, F.2d, 266; N.W.2d, 478, support whatever distinction theory, little sense Wisconsin affects control." Wis.2d, 142, 373. fact, discussed text, loans; preservation existence obviously functions Pointing argue applied destroy rights. reason, Appellants respond pre-existing 1971 1972, outright occurred reinforcing provisions. Not decided 1978 cases, automatic encumbered La Sala 864, 849, 1113 (1971), installment Tucker Lassen 629, 116 633, 526 1169 (1974), transfers 880, 859, 1123; 637-638, 638-639, 1174-1175. pre-1976 deeds: executed, never diminished occasion, address effected change today's opinion, states regulation." 159, argued mortgagors. 81-1744; 26, 21.

Classification Label: 9