Court Opinion

ID: 9579800
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:58:45.954957+00
Date Added: 2024-06-11T13:35:47.232255
License: Public Domain

HENDERSON, Retired Justice (on reassignment).

PROCEDURAL HISTORY/ISSUES

James F. Weber filed suit on January 13, 1993, against First Federal Bank of Beres-ford, South Dakota, alleging wrongful discharge, breach of implied contract, and deceit. By rationale in a September 30, 1993, Memorandum Opinion, the trial court granted an order of summary judgment on the same date in favor of First Federal. Trial court ruled that Weber’s complaint did not *721present any genuine issue of material fact because applicable federal law on employment relations at federally chartered banks preempted South Dakota law. Weber raises the following issues on appeal:
I. Was Weber’s claim of deceit preempted by federal law?
II. Was the employment agreement between First Federal and Weber ultra vires and void?
III. Did the trial court err in determining that all of Weber’s employment rights were preempted by federal banking provisions?
Whereas federal law does preempt South Dakota law on this matter, we affirm summary judgment.

FACTS

First Federal is chartered as a federal mutual savings bank pursuant to Section 5 of the Home Owners’ Loan Act of 1933 (HOLA), 12 U.S.C. § 1464 (1992). See generally 12 U.S.C. §§ 1461 et seq. (1992). HOLA provisions establish the Office of Thrift Supervision (OTS), establish its Director, and provide authority for the Director to prescribe regulations and issue orders as necessary for carrying out HOLA. See 12 U.S.C. § 1462a(b)(l)-(2); 12 C.F.R. §§ 500-599 (1989). These regulations provide for the organization, incorporation, examination, operation, and regulation of associations to be known as federal savings associations and banks, and encourage such institutions to safely and soundly provide credit for housing. 12 U.S.C. § 1464(a)(1).
Federal mutual savings banks are required to “operate under bylaws that contain provisions that comply with all requirements specified by the OTS.” 12 C.F.R. § 544.5(a). Certain regulations list the powers of the board of directors of an association, including the power to fix the compensation of officers and employees, remove any officer or employee at any time with or without cause, and enter into and terminate employment contracts. 12 C.F.R. §§ 544.5(b)(ll)(ii), 563.39(a)-(b).
Weber served as CEO and president of First Federal. Both he and his wife, Yula, were members of the five-member Board of Directors (Board) of First Federal. After the other three members sought his resignation, Weber left on August 14, 1992, on the condition that he be named manager of the First Federal branch in Yankton, South Dakota at $60,000 annually plus benefits. On September 25, 1992, those same three Board members terminated him as branch manager for 'cause due to violating policies and regulations on loan files, incompatibility with other employees, and requesting a co-employee to falsify the amount on an appraisal. Weber maintains this termination violated both the August 14 agreement and the termination procedure required by First Federal’s employment manual. He sought remedy under South Dakota law. Citing federal preemption, the trial court held that Weber could not bring an action against First Federal under state law. Weber appeals.

DECISION

Federal banking law preempts state law on Weber’s claim.

In reviewing a grant of summary judgment, we must determine if the moving party demonstrated the absence of any genuine issue of material fact and established entitlement to any judgment on the merits as a matter of law. The evidence must be viewed most favorably to the nonmoving party and reasonable doubts should be resolved against the moving party. The nonmoving party, however, must present specific facts showing that a genuine, material issue for trial exists. Our task on appeal is to determine only if a genuine issue of material fact exists and if the law was correctly applied. Waddell v. Dewey County Bank, 471 N.W.2d 591, 593 (S.D.1991); Wilson v. Great Northern Ry. Co., 83 S.D. 207, 212,157 N.W.2d 19, 21 (1968). Where no genuine issues of material fact exist and the trial court resolves the questions of law in a party’s favor, summary judgment is appropriate. King v. John Hancock Mut. Life Ins., 500 N.W.2d 619 (S.D. 1993).
First Federal received the benefits of summary judgment because the trial court ruled that federal law preempted Weber from seeking damages under South Dakota *722law. Apparently, there are two different possible lines of authority on this matter: (1) our previous decision in Blote v. First Federal Sav. & Loan Ass’n, 422 N.W.2d 834 (S.D. 1988), and federal law; and (2) three cases from Wyoming, New Jersey and California addressing HOLA.
Blote held that state law was preempted by the Federal Home Loan Bank Act. Federal supremacy reigns true again with HOLA. Under various subsections of 12 C.F.R. § 544.5, federal savings associations, such as First Federal Bank of Beresford, are required to operate under and comply with the requirements of the OTS, which is responsible for the administration and enforcement of HOLA. According to 12 C.F.R. § 545.2:
The regulations in this part 5⅜5 are promulgated pursuant to the plenary and exclusive authority of the Office [of Thrift Supervision] to regulate all aspects of operations of Federal savings associations, as set forth in Section 5(a) of the Act. This exercise of the Office’s authority is preemptive of any state law purporting to address the subject of the operations of a Federal savings association. (Emphasis added.)
Such explicit language is pertinent when considering 12 C.F.R. § 545.122: “A Federal savings association, upon specific approval of its board of directors, may enter into employment contracts with its officers and other employees in accordance with § 563.39 of this chapter.” (Emphasis added.) § 563.39, in turn, authorizes officers and employees to be terminated at-will and for cause. Thus, § 12 C.F.R. 545.2, which applies to First Federal, results in preemption.
Because First Federal was established under Federal regulations other than HOLA, Weber asserts Blote is inapplicable and cites three wrongful termination eases which interpreted HOLA and applied 12 C.F.R. § 563.39. See Hall v. Great Western Bank, 231 Cal.App.3d 713, 282 Cal.Rptr. 640 (1991); Cole v. Carteret Savings Bank, 224 N.J.Super. 446, 540 A.2d 923 (1988); and Dynan v. Rocky Mountain Federal Savings & Loan, 792 P.2d 631 (Wyo.1990). These courts held that the language of the regulation did not mandate federal preemption of state law wrongful termination claims.
We are not persuaded by these cases. As outlined above, there is a simpler path to follow. 12 C.F.R. § 545.2 exercises preemptive authority and incorporates § 563.39 (the termination provision in dispute), via § 545.122. Application of state law to this alleged wrongful termination is preempted. Furthermore, federal supremacy in this matter is apparent under other federal authorities. See 12 U.S.C. 1464(d) and 12 C.F.R. §§ 508, 544.5(b)(ll). Blote and applicable federal laws outweigh the interpretations of foreign courts. Hence, the arguments behind Weber’s claims of wrongful termination were not material to the trial court’s grant of summary judgment. First Federal prevails as a matter of law. Blote, 422 N.W.2d at 837.
Affirmed.
MILLER, C.J. and AMUNDSON, J., concur.
SABERS, J., concurs in result.
WUEST, J., dissents.
KONENKAMP, J., not having been a member of the Court at the time this case was submitted, did not participate.