Court Opinion

ID: 6789898
Source: CourtListenerOpinion
Date Created: 2022-07-21 01:09:11.176502+00
Date Added: 2024-06-11T16:03:01.668607
License: Public Domain

O’Connor, J.,
concurring in judgment only.
{¶ 50} I agree with the majority that a court must look at a comprehensive regulatory enactment as a whole when determining whether R.C. 1.63 is a general law. I write separately, however, because I believe that the concept of preemption should play a greater role in the analysis of the ordinances in question.
Preemption in Ohio
{¶ 51} Despite the fact that law of federal preemption is well settled, this court has never adequately explained how the concept of preemption applies in Ohio. Federal legislative preemption power is derived from the Supremacy Clause of the United States Constitution. Hillsborough Cty., Florida v. Automated Med. Laboratories, Inc. (1985), 471 U.S. 707, 712-713, 105 S.Ct. 2371, 85 L.Ed.2d 714. That clause generally invalidates “any Thing in the Constitution or Laws of any State to the Contrary” of federal law, Clause 2, Article VI, United States Constitution, and gives Congress the power to expressly preempt an area of law that was traditionally occupied by state regulation but not solely reserved to the states. Jones v. Rath Packing Co. (1977), 430 U.S. 519, 525, 97 S.Ct. 1305, 51 L.Ed.2d 604.
{¶ 52} The Ohio Constitution, on the other hand, grants municipalities the power to “exercise all powers of local self-government and to adopt and enforce within their limits such local police, sanitary and other similar regulations, as are not in conflict with general laws.” Section 3, Article XVIII, Ohio Constitution. Like the United States Constitution, the Ohio Constitution invalidates any ordinances “in conflict with general laws.” “In conflict with” and “to the contrary” are synonymous, and accordingly we should interpret Section 3, Article XVIII of the Ohio Constitution similarly to the United States Constitution’s Supremacy Clause. In other words, we should interpret the Ohio Constitution to permit the General Assembly to preempt by an explicit statement of preemption certain areas of law not exclusively reserved to the municipalities.
{¶ 53} The General Assembly, of course, should not have unlimited power in preempting any area of law it chooses. Although Section 3, Article XVIII of the Ohio Constitution gave municipalities the exclusive power to govern themselves, as well as some additional power to enact local health and safety measures not in conflict with general laws, “exclusive state power was retained in those areas where a municipality would in no way be affected or where state dominance seemed to be required.” (Emphasis sic.) Vaubel, Municipal Home Rule in Ohio (1978) 1107-1108. That is, where matters of statewide concern are at issue, the state retains the power — despite the Home Rule Amendment and concurrent local interest — -to address and remedy those matters. See Cleveland Elec. Illum. *181Co. v. Painesville (1968), 15 Ohio St.2d 125, 129, 44 O.O.2d 121, 289 N.E.2d 75 (explaining that the “power granted under Section 3 of Article XVIII relates to local matters and even in the regulation of such local matters a municipality may not infringe on matters of general and statewide concern”).
{¶ 54} As we have stated, “ ‘It is a fundamental principle of Ohio law that, pursuant to the “statewide concern” doctrine, a municipality may not, in the regulation of local matters, infringe on matters of general and statewide concern.’ ” Reading v. Pub. Util. Comm., 109 Ohio St.3d 193, 2006-0hio-2181, 846 N.E.2d 840, ¶ 33, quoting State ex rel. Evans v. Moore (1982), 69 Ohio St.2d 88, 89-90, 23 O.O.3d 145, 431 N.E.2d 311. We have consistently upheld this principle. See State ex rel. Evans v. Moore at 90, 23 O.O.3d 145, 431 N.E.2d 311 (prevailing-wage law effective despite ordinance purporting to exempt city from the law); State ex rel. Adkins v. Sobb (1986), 26 Ohio St.3d 46, 48, 26 OBR 39, 496 N.E.2d 994 (vacation-leave credits); Cleveland Elec. Illum. Co. v. Painesville, 15 Ohio St.2d at 129, 44 O.O.2d 121, 239 N.E.2d 75 (siting of high-voltage lines); State ex rel. McElroy v. Akron (1962), 173 Ohio St. 189, 194, 19 O.O.2d 3, 181 N.E.2d 26 (use of the waterways by boaters).
{¶ 55} By allowing the state to preempt areas in accordance with the statewide-concern doctrine, we would acknowledge a principle that the framers of Ohio’s Constitution recognized as well: “a comprehensive statutory plan is, in certain circumstances, necessary to promote the safety and welfare of all the citizens of this state.” Kettering v. State Emp. Relations Bd. (1986), 26 Ohio St.3d 50, 55, 26 OBR 42, 496 N.E.2d 983. As we explained more than 50 years ago, the Home Rule Amendment was designed to give the “broadest possible powers of self-government in connection with all matters which are strictly local,” but the framers of the amendment did not want to “impinge upon matters which are of a state-wide nature or interest.” State ex rel. Hackley v. Edmonds (1948), 150 Ohio St. 203, 212, 37 O.O. 474, 80 N.E.2d 769.
{¶ 56} This court has previously cited two key factors that signal that an issue is one of statewide concern: (1) A need for uniform regulation exists and (2) any local regulation of the matter would have extraterritorial effects. See McElroy, 173 Ohio St. at 194, 19 O.O.2d 3, 181 N.E.2d 26 (an issue of statewide concern is one that “has become of such general interest that it is necessary to make it subject to statewide control so as to require uniform statewide regulation”); State ex rel. Evans v. Moore, 69 Ohio St.2d at 90, 23 O.O.3d 145, 431 N.E.2d 311 (“municipal regulations which have significant extraterritorial effects are matters of statewide concern”). Where these factors exist and the General Assembly passes express preemption language accompanying statewide regulation, we should invalidate any local ordinances that infringe upon that express preemption.
*182Substitute House Bill No. 386
{¶ 57} In this case, the Ohio General Assembly enacted legislation known as Sub.H.B. No. 386 — codified primarily at R.C. 1.63 and 1349.25 through 1349.37— that incorporated much of the federal Home Ownership and Equity Protection Act of 1994. That federal law was designed to ensure that borrowers understand the risks and penalties associated with certain high-cost mortgages before agreeing to be bound by the terms of those loans. See McIntosh v. Irwin Union Bank & Trust Co. (D.Mass.2003), 215 F.R.D. 26, 29.
{¶ 58} The Ohio statutory provisions at issue here likewise require creditors to disclose specified information to borrowers in connection with certain mortgage loan transactions. The loans covered by the Ohio statutes are those that involve property in Ohio and (1) carry an interest rate that exceeds by more than ten percentage points the yield on Treasury securities or (2) require the borrower to pay points and fees at or before closing that exceed the greater of eight percent of the loan or $400. R.C. 1349.25(D) and Section 1602(aa), Title 15, U.S.Code. Persons or entities offering those kinds of loans must provide specific disclosures to borrowers in a conspicuous type size and must include a warning to borrowers that they could lose their homes and any money put into them if they fail to meet their obligations under their loans. R.C. 1349.26(A)(2). Also, any creditor who offers to lend money upon terms regulated by the Ohio statutes must tell the borrower the terms of the transaction, including the interest rate, the monthly payment amount, and the amount of any balloon payment. R.C. 1349.26(B).
{¶ 59} R.C. 1349.27 also prohibits certain lending practices, including certain prepayment penalties (subdivision (A)(1)), negative amortization (subdivision (A)(2)), and the financing of credit life insurance (subdivision (I)). If a covered loan includes any term or practice prohibited by the law, the consumer may rescind the transaction. R.C. 1349.29.
{¶ 60} Creditors who violate the Ohio statutes face felony criminal charges. R.C. 1349.31. In addition, the legislation authorizes the Superintendent of Financial Institutions to pursue civil and administrative remedies against persons who violate the predatory-lending statutes. R.C. 1349.34. The state has also created an office of consumer affairs to educate Ohio residents about borrowing and to receive complaints from consumers. R.C. 1349.37.
{¶ 61} Finally, and most important, Sub.H.B. No. 386 provides that the state is the sole entity authorized to regulate the business of originating, granting, servicing, and collecting loans or other forms of credit in Ohio. R.C. 1.63(A). Any municipal regulations affecting lending practices are expressly preempted by the Ohio statutes. Id.
*183Application of Preemption
{¶ 62} The General Assembly clearly enacted express preemption language intended to cover the entire field of loan regulation. The only questions remaining are whether R.C. 1.63 and the accompanying regulatory enactment serve as “general laws” and whether the legislature may preempt this field of law.
{¶ 63} As noted above, I agree with the majority that we must consider R.C. 1.63 in conjunction with the regulatory enactment in determining whether there is a general law at issue, thus requiring application of Section 3, Article XVIII, Ohio Constitution. Considered as a whole, the regulatory scheme does satisfy the definition of “general laws.”
{¶ 64} After finding that the regulatory enactment including the preemption provision is general law, we then should turn our attention to whether the express preemption of this field is valid. If the preemptive language is valid, there is no need to proceed to any conflict analysis because any municipal ordinance touching upon the preempted area is invalid. If, on the other hand, we find that the General Assembly has attempted to preempt an area where there is no statewide concern, the preemption language is void, and the ordinances may stand.
{¶ 65} Determining whether a matter is of statewide or local concern is not always an easy task, and it is unlikely that any definition of “statewide concern” would resolve all uncertainty when questions about home-rule litigation arise. I believe, however, that the factors of extraterritorial effects and the need for state uniformity should be foremost in that determination. The degree of state legislative activity on the subject, the history of state and local regulation on the subject, the method of enforcement, and the amount of state resources allocated to the subject might also aid a court in deciding whether a statewide concern is at issue. And certainly the General Assembly’s own statement that a matter is one of statewide concern — perhaps expressed through a legislative provision preempting all local regulation on the subject — -is entitled to some weight because matters of public policy are primarily the province of the legislative branch. Consideration of these various factors leads me to conclude that the General Assembly validly preempted the area of loan regulation.
{¶ 66} First, regulation of mortgage lenders historically occurred at the state— not the municipal — level. See, e.g., R.C. 1322.02 et seq. (state licensing of mortgage brokers), R.C. 1322.031 and 1322.041 (state licensing of loan officers), R.C. 1321.51 et seq. (regulating second mortgage loans), R.C. Chapter 1151 (the Savings and Loan Code), R.C. Chapter 1321 (the Small Loans Act), and R.C. Chapter 1101 through Chapter 1129 (the Banking Code). Although the state’s *184efforts to control predatory lending practices are new, the state is certainly not a new player in the mortgage lending field.
{¶ 67} State dominance in this area is not only a historical reality but a present-day necessity. As the California Supreme Court notes, “securities based on home loans in this market are sold not only on a statewide, but on a national level.” Am. Financial Servs. Assn. v. Oakland (2005), 34 Cal.4th 1239, 1256, 23 Cal.Rptr.3d 453, 104 P.3d 813.
{¶ 68} Second, by enacting Sub.H.B. No. 386, the General Assembly expressed its view that predatory lending is an issue of statewide concern that must be addressed in a comprehensive and uniform way. Other states have reached similar conclusions. See, e.g., Ariz.Rev.Stat. 6-631 et seq.; Cal.Fin.Code 4970 et seq.; Conn.Gen.Stat. 36a-746 et seq.; N.C.Gen.Stat. 53-243; 63 Penn.Stat. 456.301 et seq. and 456.501 et seq.; Tex.Fin.Code 343.201 et seq.; and Wash.Rev. Code 31.04.005 et seq.
{¶ 69} The California Supreme Court explained the rationale for comprehensive statewide legislation of predatory lending practices. Am. Financial Servs. Assn. v. Oakland, 34 Cal.4th 1239, 23 Cal.Rptr.3d 453, 104 P.3d 813 (holding that a city ordinance regulating predatory loans was preempted by a state law on the subject). Local regulation in the lending field threatened to “ ‘disrupt secondary market transactions’ ” and to “ ‘divide the state’s economy into tiny geographic markets,’ ” according to the California Supreme Court, which added that “the state’s interest in uniformity in the area of mortgage lending law demonstrably transcends the concerns of a particular municipality.” Id. at 1258, 1259, 23 Cal.Rptr.3d 453, 104 P.3d 813, quoting the brief of American Financial Services Association.
{¶ 70} Likewise, a court in New York has held that a city’s effort to regulate predatory lending practices was preempted by the state’s comprehensive statewide regulatory scheme for predatory loans. See Mayor of New York v. New York City Council (2004), 4 Misc.3d 151, 780 N.Y.S.2d 266. That court held that a local law in the city of New York aimed at regulating predatory loans there “would disrupt the operation of state law” and therefore that the local provision had to give way to the statewide concern addressed by the state statute. Id. at 162, 780 N.Y.S.2d 266.
{¶ 71} I find ample support for the view that loan regulation as formulated in Sub.H.B. No. 386 involves a matter of statewide concern and that the legislature has validly preempted this area. Cleveland’s ordinances, therefore, must yield to the legislation that the state has enacted to address this statewide concern.
{¶ 72} Whether it has plotted the right course or not, the General Assembly chose a path that it believes will protect vulnerable consumers from predatory lending practices without unduly hindering their access to the equity in their own *185homes. Local ordinances like those in Cleveland pose obstacles to the achievement of the state’s lawful objectives, and those ordinances might unintentionally harm the persons that they were designed to protect by restricting the infusion of loan capital into selected local housing markets in the state. Statewide regulation of predatory lending practices provides greater predictability and consistency in the mortgage lending field for consumers and lenders alike in all parts of the state.
{¶ 73} Moreover, by establishing the new Office of Consumer Affairs in the Financial Division of the Ohio Department of Commerce, and by giving state officials the authority to pursue civil and administrative remedies against predatory lenders, Sub.H.B. No. 386 reflects the General Assembly’s commitment of fresh state resources to the problems created by predatory lending. That commitment further illustrates that the problem is one that poses statewide concerns and is not simply a local health and safety issue that might be properly addressed on a city-by-city basis.
Conclusion
{¶ 74} I find, then, that the General Assembly acted on a matter of statewide concern when it enacted regulations aimed at predatory lending practices, and because R.C. 1.63 expressly preempts any local regulations in that area, no further conflict analysis is necessary in this case. As explained above, the Ohio Constitution’s home-rule provision protects municipalities’ authority to govern themselves, and it provides municipalities some authority to control local health and safety matters when the exercise of that authority does not conflict with general laws. But the home-rule provision does not empower municipalities to exercise any authority over matters of statewide concern when the state has enacted statewide legislation and has also chosen to preempt the field. In situations such as this involving statewide preemption on an issue of statewide concern, our inquiry is at an end, and we need not examine whether a local ordinance implemented under a municipality’s police powers poses a conflict with a general law of the state.
{¶ 75} If there were no explicit statement of preemption, as in R.C. 1.63, I would pursue the inquiry that we applied in Canton v. State, 95 Ohio St.3d 149, 2002-Ohio-2005, 766 N.E.2d 963, ¶ 9 (explaining that a state statute “takes precedence over a local ordinance when (1) the ordinance is in conflict with the statute, (2) the ordinance is an exercise of the police power, rather than of local self-government, and (3) the statute is a general law”). That analysis is unnecessary in this case, however, because the issue addressed by Sub.H.B. No. 386 is one of statewide concern, and the preemption provision codified in R.C. 1.63 reflects the General Assembly’s conclusion that there is no room for local police-power regulation of predatory lending practices to fill any cracks left unad*186dressed by the state statutes or to promote local interests even in ways that do not conflict with those provisions. Rather than enacting a patchwork of differing regulations at the municipal level, local officials who want to impose tighter — or looser — controls on mortgage brokers and other creditors should present their concerns to the public officials in Columbus who are charged with addressing matters of statewide concern.
{¶ 76} Accordingly, I concur in resolving the certified questions in the affirmative.