*1 & LOAN FIDELITY FEDERAL SAVINGS ASSOCIATION v. DE LA CUESTA et a l. et al. April Argued 81-750. 198 2 Decided June
No. *2 J., Blackmun, Burger, opinion Court, delivered the J.,C. joined. JJ., Brennan, White, O’Connor, Marshall, J., J., filed concurring opinion, post, p. 171. O’Connor, Rehnquist, filed a dissenting opinion, post, p. J., in which 172. joined, Stevens, J., no part Powell, took in the of the case. consideration or decision Ernest him argued cause for With appellants. Leff the briefs was E. Andrew Katz. Shapiro
Deputy General Solicitor the cause for the argued Board et al. as amici curiae Bank urging Federal Home Lee, on the brief were Solicitor General him reversal. With Gary Phillips, S. Mater, Smuckler, Maud Carter G. Marilyn Nathanson. E. Boehmer
Robert the cause for appellees. With argued Meyer* John D. him was on the brief urging Goldberg reversal were filed Daniel J. curiae of amici * Briefs Savings League; and Loan Ash for American and Matthew G. McMurry, Grzanka, Peck, Michael R. G. M. C. Steven Howden Aaron Kelly, and Daniel H. Willick for the Fraser, Terry United States O. Savings League of Associations. *3 were urging curiae affirmance filed for the of Mich-
Briefs of amici State Attorney of igan by Kelley, Michigan, Frank General et al. J. Louis J. Iwasko, Caruso, General, Jr., Harry Ianni, and Robert Solicitor G. Assist- General, Clark, Attorneys Attorney Arkansas, ant Steven of John General Attorney Campbell, General, Corbin, and Frederick K. Assistant Robert Attorney Arizona, Anthony Ching, B. General, General of Solicitor MacFarlane, Attorney Colorado, Snider, J. D. of General and Marshall A. Attorney General, Ajello, Attorney Assistant CarlR. of General Connecti- cut, Tyrone Fahner, Attorney Illinois, Pearson, C. General of E. Linley Attorney Indiana, of T. Stephan, Attorney General Robert Kan- General of sas, Alderson, Attorney General, and W. Robert First Deputy E. James Attorney Maine, Tierney, of Spannaus, Attorney General Warren R. Gen- Minnesota, Attain, eral of Attorney Mississippi, William A. General of Greely, Attorney T. Montana, Gregory Smith, Michael of General H. Attor- ney General of New Hampshire, Bingaman, Attorney New General of Jeff Mexico, Edmisten, L. Attorney Carolina, General of Millard North Rufus Rich, Deputy Attorney General, Matthis, Deputy and John R. B. Special Attorney General, Wefald, Attorney Dakota, Robert O. General of North Brown, William J. Attorney Ohio, Frohnmayer, General of Attor- Dave ney Oregon, General of Daniel McLeod, Attorney R. of Car- General South olina, Easton, Jr., Vermont, John J. Attorney General of Kenneth O. Eikenberry, Attorney Follette, General Washington, of La and Bronson C. Attorney Wisconsin; General of Business, Secretary for the Trans- portation and Housing Agency George by State California Deukmejian, Attorney California, Goede, General of Arthur C. De Assist- Attorney ant General, Joseph O’Heron, Deputy Attorney General, M. GaryW. Kurtz; for the by California R. Association Realtors et al. John of the Court. the opinion delivered Blackmun Justice a regula- effect of the pre-emptive this case At issue (Board), Bank Board Home by tion, issued “due- to use associations permitting dis- Appellees contracts. in their clauses on-sale” authority statutory and its intent Board’s both pute the California Supreme by imposed restrictions displace clauses. of these exercise Court
I
A was regulatory agency, Board, independent an au- was vested with plenary and thereafter in 1932 formed Loan Act of 1933 the Home Owners’ to administer thority § 1461 et seq. amended, 12 U. S. C. (HOLA), 48 Stat. 5(a) IV).1 HOLA, (1976 Section ed. and Supp. (1976 1464(a) Board, ed., IV), empowers Supp.
U. S. C. Hansen; A. Protect the Consumer’s Committee to Hetland Charles Alternan; by Irwin M. Georgia for the Assocation Mortgage Rights Kimmel; E. Catherine Inc., by Association of Realtors, for the National Butters; North Robert D. J. William D. and for Charles Realtors Weinberg, Robert L. Gregora, Peter James M. J. Bether et al. Winslow. Jolly, Jr.,
Bruce O. Associa- filed a brief for the Credit Union National *4 tion, Inc., as amicus curiae. 1 § Loan being The Board came Federal Home into under 17 of the earlier Act, 736, amended, 1437, 47 § Bank Stat. 12 the statute U. S. C. system.
created the of the federal home loan bank The three members by President, of the appointed Board are the consent with the advice and Senate, 4-year § In addi following terms. See note 12 1437. U. S. C. providing tion to for the loan associa savings establishment of federal and tions, HOLA, 4(d) by 129, § § the repeаled its of the Federal Stat. Act, Home Loan Bank federal home Stat. which had authorized HOLA, 4, loan banks directly by to make loans to its homeowners. 48 Stat. the instructed to Loan Cor create the Home Owners’ poration; agency this fi exchange by was to mortgages its bonds for held institutions, nancial including loans, and to state-chartered and provide needy maintenance, funds to taxes, and homeowners for accrued repairs. may as it to prescribe, regulations pro- rules and such
“under examination, incorporation, opera- vide for the organization, to associations be known as of ‘Federal tion, Pursuant to Associations.’” this authori- Loan Savings promulgated regulations has zation, governing the Board every of and operations “the powers to its corporate grave.” People its cradle v. from
association Assn., (SD & F. Coast Federal Sav. Supp. 311, 1951). Cal. concerned about the became increasing
In the Board a authority of as to controversy a “due-on-sale” clause —a to exercise contractual
association to the lender declare the entire bal- provision permits if the immediately payable ance of a loan due property the loan is sold or otherwise transferred.2 securing Specifi- many ¶ The due-on-sale clause used loan instruments is 17 of the uni developed by form Mоrtgage instrument the Federal Home Loan Corporation Mortgage and the Paragraph Federal National Association. appears in two of deeds of trust at issue in this case reads: Property; Assumption. any
“17. Transfer of the If all part or Property or an interest therein by is sold or transferred Borrower without (a) prior consent, excluding Lender’s written the creation of a lien or en- (b) Trust, purchase cumbrance subordinate to this of Deed of a creation security (e) money by devise, interest for appliances, household a transfer by operation (d) descent or upon joint or death of tenant grant years containing op- leasehold interest of three or an less purchase, tion may, to Lender se- option, Lender’s declare all the sums cured this Deed Trust to immediately be payable. due and Lender shall have waived option transfer, such if, prior to accelerate to the sale or person Lender and the to whom Property is or transferred sold agreement reach in writing person satisfactory that the credit such Lender and that payable interest on the sums secured this Deed Trust shall atbe such rate request. as Lender shall If Lender waived option provided accelerate if paragraph this 17 and Borrower’s successor interest has executed a assumption agreement written ac- cepted in writing by Lender, Lender shall release Borrower from all ob- ligations under this Deed of Trust and the Note. “If Lender option exercises such accelerate, mail Bor- Lender shall
rower notice of acceleration in paragraph accordance with hereof. Such a and loan’s cally, on that restrictions felt security upon transfer of the ability a loan to accelerate (1) that “the finan- effects: of adverse number have a would stability associations security would be of Federal and cial security property to a is transferred endangered if . . . the properly repay ability maintain the loan person whose (2) inadequate”; that “elimination the due property is reduction of the a substantial cash will cause clause on sale associations, and that of Federal to offset income and net flow likely will be forced that the associations it is such losses charge higher charges on rates and loan home loans interest (3) on generally”; “elimination due sale clause ability impair the of Federal associations to restrict will secondary mortgage market, in the their home loans sell causing making them to loans unsalable or be sold re- such thereby reducing prices, of new funds flow for resi- duced loans, which otherwise would be available.” Fed. dential (1976). Reg. “elim- 6283, 6285 Board concluded that only a ination of the due on sale clause will benefit limited generally sellers, number of home but will economic cause hardship majority buyers potential to the of home home buyers.” Ibid.
Accordingly, regulation gov- the Board a issued erning regulation, due-on-sale clauses. The now 12 CFR §545.8-3(f) (1982),3provides part: in relevant
“[A loan] continues to association power have the a include, as matter of contract be- provision
tween it and the borrower, a loan instru- its provide notice period shall days not less than the no- from the date tice mailed within which may pay Borrower If the sums declared due. pay Borrower fails to such prior expiration period, sums of such may, Lender without Borrower, further notice or demand invoke permitted by remedies paragraph (empha- App. 50-51, 18 hereof.” 85-86 added). sis 3The initially was in 12 codified CFR 545.6— 11(f) (1980). See 44 Fed. Reg. 39108, 39149 *6 may, option, whereby at its declare the association ment payable by immediately sums secured asso- due part security if or instrument all of the real ciation’s by securing property loan is or transferred sold prior the association’s written con- without borrower provided [otherwise] Except in . . . as this section sent. (hereaf- option by of such . the association , . . exercise clause) exclusively gov- shall be called a due-on-sale tеr by rights contract, all the terms erned association and borrower and remedies shall be by governed fixed and that contract.” accompanying publication preamble In the final of the due- regulation, explained on-sale the Board its intent that the practices gov- due-on-sale and loans be “exclusively by Reg. erned Federal law.” Fed. emphasized “[f]ederal The Board associa- subject any conflicting tions shall not be bound or State imposes requirements.” law which . different. . due-on-sale Ibid.4
B Appellant Fidelity Savings and Loan Association (Fidelity) private ais mutual and loan association 5(a) § pursuant chartered the Board Fi HOLA. delity’s principal place Ap of business in Glendale, Cal. 4Even adopting before regulation, due-on-sale the Board had inter preted 545.8-3(a) (1982) 12 CFR regulation promulgated in 1948 that —a requires all loan “provide instruments protection for full to the Federal association” —as authorizing and loans to exercise due-on- provisions, sale despite any contrary, state law to the such clauses because help protection” ensure “full Advisory to the lender. See the Board’s Opinion, 75-647, Resolution No. & Schott v. Mission Federal Sav. (Schott Loan Assn. (CD Advisory Opinion), Civ-75-366, 13-15 pp. No. July 30, 1975), Cal. reprinted as A Exhibit to Defendants’ Memorandum Points and in Opposition Authorities Preliminary to Plaintiffs’ Motion for Injunction. each made a Whitcombe, Moore, pellees, Cuesta, lade property bor from one who had purchase real of California security Fidelity. loan, for the As money from rowed property. Fidelity on the of trust given deed a had borrower clause. Two of a contained of trust Each deed ¶ provision, identified included also the deeds *7 by ju governed the of the “shall the deed stated App. Property 86.5 51, is located.” the in which risdiction appellee’s purchase prior to each Fidelity not notified was gave transfer, the it notice of property; learn of it did when Fidelity ex- clause. the to enforce its intent willingness however, if transfer, to the pressed to consent a agreed interest rate on the loan appellee the to increase the then-prevailing property by market rate. the secured Fidelity accept appellee this then condition; refused Each option loan. When the loan its to accelerate exercised nonjudicial Fidelity paid, a foreclosure instituted was proceeding. Superior appellee response,
In filed suit Court each Orange County. that, under for Each asserted of California by Supreme principles announced the California Court Wellenkamp 3d 582 P. 2d America, v. Bank Cal.
5Paragraph part 15 is also instrument devel of the uniform oped Corрoration Mortgage Federal Home Loan and the 2, supra. Mortgage National reads in paragraph Association. See n. The full: Trust; Law; Severability.
“15. Uniform form Governing Deed This of deed of trust combines and non- uniform covenants for national use uniform covenants with a jurisdiction limited variations to constitute uniform security covering instrument Deed of Trust property. real This governed by shall be jurisdiction Property the law is in which the any located. In the provision event that of Trust or or clause of this Deed the Note conflicts applicable law, with other such shall not affect conflicts provisions of this Deed of with- given Trust or the Note which can be effect conflicting out the provision, provisions and to of the Deed of this end the Trust and the 51-52, Note are App. declared be severable.” 86-87. (1978), Fidelity’s due-on-sale clause vio- exercise prohibition of unreasonable restraints
lated California’s (West §711 1982), Ann. “unless Cal. Civ. Code alienation, reasonably that enforcement nec- demonstrate lender can impairment security essary against protect to its or the 582 P. 3d, 2d, at 977. Each 21 Cal. risk of default.” (1) judicial complaint sought declaration that due-on- Fidelity unless first enforceable showed was not sale clause (2) security had harmed its an interest, that the transfer procedures injunction against based foreclosure on the (3) punitive dаmages. compensatory App. clause, 84.6 Superior consolidated the three The Court actions and summary granted judgment. appellants’ motion government totally explained court that “the oc- subject cupied Savings of Federal Wellenkamp Loans,” held, therefore, that the decision [federal] App. “cannot be extended to and loans.” *8 29a. Juris. Statement Appeal Appellate
The Court for the Fourth District, how judgment. opinion adopted ever, reversed that In an that portions parallel ruling Ap substantial of a the Court of peal Appellate for the First District, it concluded that Supreme opinion Wellenkamp California Court’s con was trolling. App. Rptr. 121 Cal. 3d 175 328, 331, 467, Cal. (1981), quoting Panko v. Pan American Federal & Sav. App. (1981), Rptr. Assn., 119 Cal. 3d 916, Cal. pending, cert. No. 81-922. The court found that expressed had pre-empt neither an intent to state due-on-sale fully occupied nor law the field of federal and regulation; example, pointed out, court federal associ traditionally governed by prop- ations have been state real 6Each complaint also count, alleging Fidelity included slander that had maliciously published false charges appellee that the in default under was Id,., the deed of trust. 9, at 54, 89. conveyancing, respect title, erty law with and proceedings. foreclosure recording, priority liens, rejected appellants’ cоnten- Appeal likewise The Court pre- regulation expressly had Board’s tion that Although Wellenkamp the court rec- doctrine. empted the 545.8-3(f) accompanying 12 CFR preamble ognized reg- (1982) its due-on-sale intent that the Board’s manifested “equate conflicting law, it refused to supersede state ulation requisite congres- expression with of intent the Board’s Rptr., App. at at Cal. 3d, 121 Cal. sional intent.” original).7 (emphasis in Appeal no Finally, found evidence that federal the Court reasoning pre-empted impliedly law, that Cali- state had incompatible with law was fornia’s Wellenkamp “is a observed, the court doctrine, law. property mortgage law,” of California rule substantive “regulation” and loans. over federal not a form of Rptr., App. 474. Moreover, at 175 Cal. at 3d, 121Cal. regulation “merely the Board’s author- noted, court compel in- loan associations to izes does not in their and to exer- clude a due-on-sale clause loan contracts rights Rptr., at 475. Ibid., cise their thereunder.” 175 Cal. Appeal The Court of likewise discovered no conflict between Wellenkamp purposes doctrine and the of the HOLA financially designed because both were to assist distressed homeowners. App. support,”
The court derived 3d, “further 121 Cal. ¶ Rptr., 342, 175 Cal. at for its decision from provided was included in two of the deeds of trust and which “gоverned jurisdic- that the deeds would be the law of *9 7 addition, In of Appeal Court the three deeds of noted two of 545.8-3(f). trust at issue were prior § executed to the effective date of Therefore, reasoned, the court regulation was not Board's due-on-sale applicable to those loan pre-empt instruments and law with could not state respect to those 3d, 344, 345,175 Rptr., deeds. See 121 App. Cal. at Cal. at 476-477.
151 supra. is tion located.” See n. Property ruled, That the court evinced an unmistakable in- language, tent that should govern interpretation, state law validity, of the deeds.8 enforcement Court denied Supreme appellants’ California petition to Statement 28a. review. Juris. App. of courts consider the majority
Because question the decision of have contrast the Court of concluded, Ap- that the Board’s peal, regulations, including 545.8-3(f), do of federal regulation loans,9 state pre-empt we 455 S. 917 noted U. probable jurisdiction.
8 any Appeal weight The Court of refused to ascribe ¶ absence of 15 in the third deed trust at issue here. The court described its earlier ¶ discussion 15 as agreement parties
“not much on an applica- based so between the for the general tion law on of state the conclusion that of a provision use containing language by such with the associations apprоval persuasively recognition by evidences a the Board and federal and loan associations govern that state law would Id., interpretation, validity security and enforcement of instruments.” at Rptr., 175 Cal. 477. significant Nor did the court find the fact that this deed covered commer- cial rather than property. residential 9A number Federal District Courts have concluded that the Board’s regulation pre-empts
due-on-sale See, g., e. Price v. Florida Fed state law. Assn., eral & Loan (MD 1981)(§ 545.8-3(f) Sav. 175, 178 524 F. Supp. Fla. pre-emptive Assn. any regulation); First Federal Sav. & Loan state v. Peterson, (ND (§ 545.8-3(f) Supp. 732, 1981) 516 F. pre-empts Fla. California); Florida due-on-sale restrictions imposed similar to those Dantus v. (Colo. Assn., First Federal Sav. & Supp. 502 F. 1980) (analogous ruling law); Bailey v. First Federal respect with Colorado Assn., &Loan 1979)(§545.8-3(f) Sav. F. Supp. 1139, 1141 (CD Ill. forecloses state of federal sav practices loans), ings (CA7 Fed appeal dism’d, 1980); Glendale F. 2d 1221 1978) eral Sav. & Loan (CD Fox, Assn. Supp. v. 459 F. Cal. (same), summary (1979), final judgment order granted, Supp. F. reversing (CA9 remanding, 1981), pending, 663 F. No. 2d 1078 cert. 81-1192. appears One court agreed Court of have with California Holiday Assn., Appeal. Acres No. 3 Midwest & Loan See Federal Sav. v. *10 152
II
in the
which has its roots
Su-
doctrine,
The pre-emption
VI,
2,
Art.
cl.
us
Const.,
requires
U. S.
Clause,
premacy
be either
Pre-emption may
intent.
examine congressional
545.8-3(f)
1981)(§
(Minn.
regula-
pre-empt
does not
state
471
308 N. W. 2d
clauses).
tion of due-on-sale
Appeals,
several District
Federal Courts
addition,
three
In
at least
that various other
have ruled
Courts,
Supreme Court
and one State
See,
g.,
&
law.
e.
Sav.
supersede state
regulations
Conference of
(CA9
(“In
1979)
1256,
judgment
our
Stein,
1260
F. 2d
v.
604
Loan Assns.
savings
Board over federal
and loan as
the Bank
regulatory
control
control”),
regulatory
for state
to leave no room
pervasive
is so
sociations
(1980);
v.
First Federal Sav. & Loan Assn.
921
summarily aff’d, 445 U. S.
(Board
425-426 (CA7 1979)regulation specifying
Greenwald,
417,
591F. 2d
savings
pay
loans must
interest
federal
the conditions under
imposing greater
require
interest
pre-empts state law
escrow accounts
Assn.,
147,
F. 2d
Loan
512
ments);
Republic Federal Sav. &
Kupiec v.
(Board
(CA7 1975)
right to
regulation supersedes
common-law
150-152
membership list); Meyers Beverly
v.
Hills Fed
inspect savings and loan’s
(CA9 1974)(Board
1145, 1147
regulation
Assn.,
F. 2d
& Loan
499
eral Sav.
asso
prepayments of real estate loans to federal
pre-empts the field of
Assn., 405
Arlington
Loan
ciations);
Heights
v.
Federal Sav. &
Rettig
(ND
(Board
1975)
pre
regulations
policy statements
Supp.
F.
819
Ill.
officers);
fiduciary
savings
duties of
empt the field
federal
Bd.,
Supp.
F.
Lyons
Loan Bank
& Loan Assn. v. Federal Home
Sav.
(Board
(ND
1974)
branching
displaces
regarding
regulation
Ill.
state law
Assn.,
loans);
Loan
savings
People
of federal
v.
Federal Sav. &
Coast
(SD
1951) (federal
Supp. 311,
savings and loans
regulation
98 F.
Cal.
Assn., 72 Wis. 2d
pre-empts
field);
Kaski v. First
& Loan
Federal Sav.
(federal
(1976)
141-142,
supersedes state
240 N. W. 2d
practices). But see
lending
of federal
and loans’
Derenco,
Assn.,
Benjamin
281 Ore.
Inc. v.
Franklin
Federal Sav. &
(Board
P. 2d
and loans
regulation authorizing
not oc
to maintain
does
payments
reserve accounts for
and insurance
tax
payment
cupy
requiring
the field of
pre-empt
reserve accounts or
state law
accounts),
denied,
of interest on such
Cf.
cert.
See also (regulations Ridgway, must not Ridgway 454 U. at 57 S., v. the un- unauthorized, or inconsistent with” “unreasonable, be statute); derlying S., Free 369 U. at 668. Bland, v. regulation’s depend pre-emptive not on ex- force does
A displace congressional press to law; authorization state more- option an the administrator failed to exercise over, whether regulations promulgate is not state law to which did disturb dispositive. S., States v. 367 U. Shimer, not See United Appeal’s Thus, at narrow focus 381-383. Court of Congress’ supersede intent misdirected. to state law was questions upon case rests Rather, which resolution of this pre-empt are whether the Board meant due- to California’s scope if and, so, on-sale whether is law, that action within delegated authority. of the Board’s
Ill Appeal recognized, As even the intent Court of the Board’s pre-empt Wellenkamp unambiguous. The doctrine regulation savings plainly provides due-on-sale that a federal power” loan “continues to a due-on- have the to include in sale clause a loan “at that clause instrument and to enforce §545.8-3(f) option.” (1982). its 12 CFR California The right courts, contrast, have limited a federal association’s provision to exercise a due-on-sale to those cases where the impaired can demonstrate that the transfer lender has its security. evaporate regula-
The not because conflictdoes the Board’s permits, compel, simply tion but does not loans include due-on-sale clauses their contracts and to provisions security property when the enforce those is trans- consciously ferred. The Board has chosen not to mandate [it] use of clauses “because desires to afford asso- flexibility special ciations accommodate situations and 556.9(f)(1) (1982).10 Although circumstances.” CFR §545.8-3(f) compliance Wellenkamp with both and the rule may physical impossibility,” “a Florida Lime & Avo- Growers, v. S., cado Inc. 373 U. Paul, 142-143, the Cali- fornia courts have forbidden a federal and loan to solely option” enforce a due-on-sale clause “at its and have deprived “flexibility”given by lender it the Board. recently long- “reiterat[ed]
Moreover, its policy” standing authorizing asso- only “subject ciations enforce due-on-sale clauses to ex- press imposed by Reg. limitations the Board.” 46 Fed. only specified 39123, 39124 restrictions §545.8-3(g) Board’s are сontained in CFR *13 (1982).11 provision, Wellenkamp That doctrine, unlike the
10 practical matter, however, As a mortgage few instruments are written without Corpora due-on-sale clauses. Mortgage The Federal Home Loan Association, tion and the purchase Federal National Mortgage which bulk of mortgages in secondary market, require, sold in mortgage both they the mortgages buy, enabling provision either a or due-on-sale clause a the lender to payment demand The marketabil years. seven ity loan, of a mortgage the secondary to a and market is critical thereby for it can sell home mortgages additional to obtain funds to make Advisory Kinzler, loans. See 28-34; Schott Due-on-Sale Opinion, at Clauses: The Legal Issues, 452-453 Economic and L. Rev. 43 U. Pitt. (1982); Comment, 645, 646, Fla. State L. Rev. Title 12 (1982), July CFR 545.8-3(g) loans made after applies which 31, 1976, by by secured the bor occupied occupied a home toor be rower, prohibits four exercise of a in the same due-on-sale clause right a to accelerate a federal association’s confine does not security impaired. In is ad- lender’s loan to cases where explicitly Wellenkamp bars a federal dition, long-term adjust exercising a clause to a due-on-sale from mortgage’s market rates —a current interest rate towards approved practice аnd views the Board due-on-sale stability of See the association.” “the financial critical Advisory Opinion, 27. Schott availability option limiting
By of an the Board further in- soundness of the thrift to the economic essential considers accomplish- dustry, created “an obstacle to the State has objectives” purposes theof the full ment execution regulation. atS.,U. Davidowitz, Hines v. U. S. York, v. New Franklin Nat. Bank 67. Cf. (1954) (finding law, between federal a “clear conflict” savings deposits to receive national banks authorized
which permit require specifically less but did not —much —advertis- ing by law, York which forbade them and New banks, such business). advertising “savings” in or their the word use Wellenkamp Contending not incon- doctrine is that the appellees regulation, however, the due-on-sale sistent with provides regulation’s point sentence, second pertinent part: (hereafter
“[Ejxercise by option the association of such clause) exclusively governed called a due-on-sale shall rights by rem- contract, of the loan and all the terms instrument, ¶ see n. in 17 of the uniform listed circumstances security instrument is cre- supra: when a lien to the lender’s subordinate is money security appliances interest for household purchase ated; when a devise, descent, operation of created; or a transfer occurs when tenant; more than joint or when a leasehold interest of a death 545.8-3(g) also years granted option purchase. no Section three with penalty loan is imposing prepayment when a from bars the association clause, provides that, under a due-on-sale accelerated means of option to exercise a due-on- specified circumstances, waives its the lender *14 provision. sale
157 edies of the association and borrower shall be fixed and 545.8-3(f) that governed by (1982). contract.” CFR Appellees interpret this as language state con- incorporating tract law—and therefore state law any the exer- restricting cise of a note, due-on-sale clause. We in- however, that the corporation state law does not signify inapplicability law, for “a fundamental in our principle system of complex national mandates polity” Constitution, “the laws, and treaties of the United are States as much a part State as its every own local laws and Constitution.” Lynham, Hauenstein v. 100 U. S. See also v. Katt, Testa (1947).12 390-392 U. S. Moreover, §545.8-3(f) view, our the second sentence of makes simply clear that does not empower federal savings a loans accelerate loan transfer of the upon security property unless the parties particular instrument, a contract, as matter of have the lender that given right. if Similarly, to a parties contract sоmehow to given agree limit the right association’s to exercise a due-on-sale provi- principle reject appellees’ that, This likewise leads us to contention respect supra, ap containing ¶ with the two deeds of trust see n. pellants agree did in Paragraph provides fact be bound local law. governed by that the is jurisdiction” deed to be the “law of the in which the property located; jurisdiction” but the “law of includes federal well as state law. Moreover, ¶ like mortgage 17—the due-on-sale clause the uniform in- strument, 2, supra typically n. mortgage see must be included ¶— Mortgage Corporation Federal Home Loan or the Federal National
Mortgage purchases secondary mortgage Association in the market. See 10, supra. Paragraph n. to the uniform 15 was added instru- law, provide ment not to elevate state law over federal but to a uniform provision disputes regarding choice-of-law to be used when interstate arose interpretation of mortgage. App. See to Brief for Federal Home as Amici Mortgage Corporation Loan Bank Board and Federal Home Loan (letter Curiae 2a Counsel, Henry Judy, from L. General Federal Home (1970)(let- 91-761, Mortgage Corporation); Rep. p. see also S. No. Burns, Governors, ter from Arthur F. Chairman System). Reserve *15 §545.8-3(f) precludes the lender sentence
sion, second authorizing exрan- more relying sentence the first from of the clause. sive use 3(f)’s by language dispelled §
Any ambiguity is in 545.8— explaining regulation. accompanying preamble expresses unequivocally the Board’s determination preamble displace law: state “Finally, intent . is the Board’s to have . . was and it governed practices of Federal associations due-on-sale exclusively . Therefore, . . law. exercise by Federal associations shall be clauses of due-on-sale solely by [§545.8-3] governed and the and controlled Policy. Federal associations new Statement Board’s any conflicting subject to or State be bound shall not require- imposes . .. due-on-sale law which different attempt . associations to . . nor shall Federal ments, on the exercise of due-on-sale the limitations avoid [§545.8-3(g)] ground on the that clauses delineated permissible under . . . avoidance limitations such (1976) Reg. (emphasis 41 Fed. State law.” added).13 recently “confirm[ed]”
In that addition, the practices and loans “shall due-on-sale of federal pre- governed exclusively by regulations in the Board’s imposed by emption regard without limitations state law on either their or exercise.” CFR inclusion Chrysler Brown, (1979), appel Corp. v. Citing 441 U. 315-316 S. does not preamble lees characterize the that interpretative as an binding have law. pre-empt force of law and statе therefore cannot 3(f) Chrysler Corp. § point But is not on we conclude that because 545.8— preamble supersedes contrary itself look to the law; state we due-on-sale only for “defer regulation, the administrative to which construction of the (1965). Tallman, clearly ence is . . . Udall v. order.” 380 U. S. consider, therefore, preamble We need pre-emptive effect standing alone. 556.9(f)(2) Thus, we conclude that the Board’s due- meant to pre-empt was state conflicting
on-sale regulation practices on the limitations the California Court’s Supreme decision loans, Wellenkamp such a conflict.14 creates
IV remains whether the Board acted within The its question authority issuing pre-emptive statutory The of the history HOLA language convince regulation. Congress delegated ample us that authority of federal lending and loans regulate practices so §545.8~3(f) to further the Act’s and that purposes, as is con- those purposes. sistent with
A HOLA, a of the product Great of the Depression 1930’s, was intended “to provide emergency relief with respect home indebtedness” a time when many at as half of all home loans the country were default. H. R. Conf. (1933). No. 73d 1st 1 Rep. Cong., 77 Sess., See Cong. (remarks of Rep. Hancock); id., at 2570 (1933) (re- Rec. 2499 marks of Rep. Reilly); Home Owners’ Loan Act: on S. Hearings 1317 before Subcommittee the Senate Committee on Bank- ing (1933) (Senate Currency, 73d Cong., Sess., 1st Hear- (statement ings) of Horace one Russell, of the drafters of bill and General Counsel, Federal Board, Home Loan Bank Ga.). Atlanta, Local institutions that had previously supplied funds finance homes had ceased business or had dis- doing continued such long-term loans, so that than half the more counties in the country, almost one-fifth of the containing 14Because we an find law, actual conflict between federal need and state we not decide whether the HOLA or the regulations occupy Board’s the field of due-on-sale law or the entire field of regulation. institutions. home-financing without were population, total 1st No. 73d Cong., H. R. Rep. see also 7, 19; id., See Sess., (1933); 73d 1st Cong., No. Sess., (1933); Rep. S. H. 4980 before the Act: on R. Hearings Loan Home Owners’ 73d 1st Currency, Cong., Banking House Committee (statement (House F. (1933) William Hearings) 16-17 Sess., Board); Loan Bank Com- Federal Home Chairman, Stevenson, (1980) 1933, 1,700 state- 1085, 1103 (by 11 Pac. L. J. ment, losses of some causing had failed, chartered loans in these the value of savings one-third about million, $200 associations). enacted conditions, Congress these
In order to ameliorate response HOLA, comprehensive “a radical state existing systems.” inadequacies Conference 2d F. Assns. v. Stein, &Sav. The Act (CA9 aff’d, 445 U. S. 1979), summarily *17 of federal and savings the creation of a system provided the Board associations, which be regulated would loan associations to vitality their as “permanent as to ensure so in manner, of the a people cooperative the thrift promote and homes of their neighbors.” their homes to finance (1933); see also H. R. Sess., 73d 1st Cong., No. S. Rep. 2 (1933); Cong. Rec. Sess., 1st Cong., No. 73d Rep. (1933) (remarks of Bulkley). Sen. 5(a) plenary § the Board Act, Congress gave in Thus, and governing savings regulations to issue authority loans: mutual thrift in local institutions provide
“In order in invest their funds and order to may pro- which people financing homes, authorized, of vide for and as it regulations may prescribe, such rules under organization, incorporation, examination, for the provide and of associations to be known as operation, and Loan or ‘Federal Associations’, Savings ‘Federal . and there- , banks’. . to issue charters savings mutual giving primary practices for, consideration to the best home-financing of local mutual thrift institutions 1464(a)(1)(1976 the United States.” 12 ed., U. S. C. IV) added). Supp. (emphasis §5(a) language expresses
The broad
no limits on the
authority
regulate
lending practices
Board’s
of federal
put
“[i]t
it,
loans. As one court
would have been
Congress
give
difficult for
the Bank
a
Board broader man
date.” Glendale Federal Sav. & Loan Assn. v. Fox, 459
(CD
Supp.
1978),
summary judgment
F.
903, 910
Cal.
final
granted,
Supp.
(1979),
reversing
481 F.
order
re
(CA9
manding,
1981),
pending,
Moreover, that, directed practices loans, the Board “the consider best home-financing local mutual thrift in the institutions States,” United time were all state-chartered. *18 5(a) 1464(a). § § By stating, 12 HOLA, of the U. S. C. so Congress plainly savings envisioned that federal and loans governed by any particular would be what the Board—not practices.” First State —deemed to be the “best See also Comm’n, Federal Sav. & Loan Assn. v. Massachusetts Tax (1978) (observing n. 3 HOLA 437 U. S. that the being “protects from into federal associations forced the state 162 suggests statutory language the mold”). Thus,
regulatory and approved, contemplated, expressly Congress that state law. superseding regulations promulgation Board’s of the various sections however, point Appellees, law, state incorporating16 and pre-empting15 HOLA explicitly no additional authority that and contend Although law. Congress state displacing regulations adopt of certain aspects applicability about made decisions do not loans, these provisions and savings to federal state law no further of state pre-emption intended that imply the Board with broad au- invested Rather, Congress law. and loans so as to effect savings thority regulate indicated that the Board plainly and statute’s purposes, §5(a) of the state law. existing feel bound need not 1464(a) (1976 IV). ed., can- § We Supp. C. U. S. HOLA, confining delegation power this not read broad state law to those areas “spe- to pre-empt authority Board’s United Act’s other provisions.” described cifically (1976 IV) (ex 1464(a) 5(a) ed., HOLA, Supp. § § of the S. C. U. See formerly organized savings under state law empting federal mutual banks “any from limitations of State law on the establishment of branch numerical 5(h) 1464(h) Act, facilities”); (pre-empting § § offices and other of the savings greater imposed loans than those state taxes on financing cooperative “other similar local mutual or thrift home institu tions”). § § Act, Cf. 13 the Federal Home Loan Bank 12 U. S. C. taxation). (exempting Federal Home Loan Bank bonds from 5(a) 1464(a) (1976 IV) HOLA, (pro § ed., Supp. § of the See U. S. C. viding savings formerly federal mutual state- bank which was subject chartered institution is pertaining to state laws to discrimination lending neighborhoоd based on area, requirements geographic or et imposed § under the Act, Consumer C. 1601 Credit Protection U. S. 5(b)(3) seq.); 1464(b)(3)(1976 IV) § § of Act, ed., (authorizing fed Supp. eral and loans to finance borrow funds from a state agency “to permits same extent as” state law state-chartered §5(c)(4)(A) (1976 so); 1464(c)(4)(A) ed., and loans to do Act, IV) Supp. (permitting in, to, any federal associations or lend busi to invest development ness corporation incorporated credit the same in the “to State so). extent as” state-chartered and loans are authorized do
163 Co., Cable v. Southwestern (1968); States 392 U. S. 172 157, Dodge Phelps Corp. NLRB, 313 U. 177, v. S. 193- see also (1941). 194 if and loans were expected
Furthermore, explicitly where except pre-empted to state conform itself, incorporating specific aspects the Act the provisions We decline to needlessly repetitive. were construe state law nugatory, Act to render these provisions so as “thereby rule that all of a if parts statute, the well-settled offending effect.” American Textile given are to be possible, Mfrs. Institute, Inc. v. Donovan, (1981). 490, 452 U. S. See Co., v. D. G. Searle & Jarecki 367 U. 303, also S. 307-308 York, cf. Franklin Nat. Bank v. New (1961); S.,U. at (“We find indication that no intended to make [i. e., this of national phase banking advertising] subject restrictions, local as it has done by express sev- language instances”).17 eral other
B Becausе of the exigencies times, the HOLA en- was acted hurriedly and its legislative history, concededly, somewhat But that sparse.18 history does confirm our read- 17Likewise, we find nothing §in 8 of the Act Federal Home Loan Bank U. S. C. relied dissent, post, on see suggests any on limit authority pre Board’s regulations to issue empting state law. provision, That HOLA, part which is not even of the speaks only to the Board’s authority governing to examine state laws operation of federal banks, loans, home loan not federal for the purpose of ensuring “[a]dequate protection to a Federal Home Loan Bank making collecting or advances chapter under . . . .” 12 U. C. th[at] S. § 1428. It purport does not to constrict power regulate the Board’s operations of explicit negate loans and does not lan guage history of the HOLA. 18 April 13, 1933, On President F. Congress, asking D. Roosevelt wrote “legislation to protect small home from to re owners foreclosure and lieve portion them of principal burden of excessive interest payments during incurred period higher higher earning values and power.” H. R. Doc. No. Cong., Sess., 73d Hearings 1st were held the House Currency Committee Banking April on *20 plenary statutory language author- ing and the Board’s of the operations ity regulate and loans. of federal to provide Attempting is about “relief of the man who for the general framework set out the home,” his to lose Hearings many House to the Board. of the details left and (statement 20,1933) (Apr. Stevenson, F. Chair- William Board). Bank references to Thus, Federal Home man, newly regulate created the Board’s broad discretion appear throughout legislative loans and suggestion history. a intent some- Nowhere there authority. to limit the Board’s how testimony during hear- the HOLA
Chairman Stevenson’s contemplated ings suggests that federal law the Act that govern used the terms of the loan instruments would 5(c) Discussing HOLA, and loans. §1464(c), Representative Hancock 12 U. amended, S. C. respect uniformity departing with “You are from noted: you say throughout the when associations United States piece on a of real es- cannot loan the thrift associations that (Apr. Hearings 21, $20,000.” in House excess of tate 1933). may replied: true. We are “That The Chairman good many many ways. departing good in a have a We they associations] [thrift are in dire because have that straits yonder they property way up in and have value, loaned on things money up apartment and hotels, tied houses their desperate puts Ibid. them in a situation.” kind, that Similarly, expressed during response to concern hearings prohibit from the Act borrowers that did Senate obtaining
financing renting property, then Chairman regulation. “That would be a matter of observed: Stevenson by regulation the bill.” Senate could under That be covered Currency 1933, Banking and on 21, by the Senate Committee on 28, April approved House on see 77 April 22. The bill was id,., at 4995. The passed the on June see Cong. Rec. Senate id,., 9,1933, signed less than the bill into law June see President requested legislation. after he had first two months Hearings 14. Asked whether the Board would have author- ity promulgate regulation, replied: such a Stevenson
“If the Federal Home Loan Bank Board should choose to put make that kind of it could Ain. many great private put of these local institutions would that kind of a clause their loans.” Ibid. 1933) (statement Hearings (Apr.
See also House Stevenson) (referring regulations Chairman *21 to “the as to the property obtained”); use of the after the id., loan is once at 9 1933)(statement Stevenson) (“[I]t (Apr. of 21, Mr. is in the grant 3-year] [a of discretion the Board when it will exten- payments]”); [of (colloquy sion loan at 18-19 id., between Rep. Reilly) (noting Mr. and Stevenson that the Board determining has discretion association). whether to charter a federal subsequent Congress accepted The debates confirm that Chairman Stevenson’s offer and furnished the Board with power regulate savings broad to the federal and loans. Representative ranking minority Thus, Luce, member of the Banking Currency, House Committee on and observed that savings the federal “will associations be fоrmed building-and-loan practice, in accordance with the best and may rely upon [Chairman Stevenson] I feel sure we and carry promise.” Cong. his Board to out that Rec. 2480 contemplated by put “It is bill before us to machinery in the hands of the Bank Board,” Home Loan and give great power “[w]e Rep- the board to the act,” administer resentative Luce continued. at 2481. Id., 2480, See also (“We things [as id., at 2481 leave such limitations conver- savings loans] sion of federal home loan banks to federal and (“The judgment board”); prudent to the id., of the at 2501 judgment by impos- course to leave this board, ing [rate interest] percent upon a maximum the bill—4 percent upon what we borrow, 5 what we lend—and trust get borrowing this Board ... lower for rates or make come”); id., may the opportunity lending rates lower (observing Bulkley) Hebert Sens. between (colloquy when determining has discretion Board local existing with in areas chartered should loans institutions). thrift local incorporate existing simply did HOLA
Thus, delegated Rather, Congress practices. “a uniform regulate system to establish authority broad where there are not institutions and loan] [savings govern- the force with them to “establish now,” charter.” House Hear- a national them, with ment behind 1933) (statement Stevenson); of Chairman (Apr. ings 1933).19 Board has exercised And the id., at 17 (Apr. the Board’s history the HOEA corroborates postenactment lеnding practices of federal authority regulate the broad Regulatory and Rate Institutions Interest part the Financial As loans. 95-630, amended L. Stat. Act of Pub. Control 5(a) savings banks to obtain federal permit state mutual of the HOLA to House, Hanley Representative introduced During in the charters. debate opting to con mutual banks providing that those an amendment subject to would to be federally chartered institutions continue vert *22 imposed regulations to pertaining lending to discrimination and state law Act, amended, 15 Stat. as under the Consumer Credit Protection seq., et imposed §1601 U. if the Board determined that state law S. C. stringent requirements Cong. Rec. 33847 more than federal law. See Representative course, use Hanley explained: way, “In no would the of requirements interpreted of savings State be Federal mutual banks to erode long-standing plenary authority the Bank Board’s over Federal savings associations; govern and loan Federal law continue alone would anti-discrimination, in these institutions lend- branching, such areas and ing authority.” Id., Germain, Representative of 33848. chairman St the Regulation, Subcommittee on Supervision, Financial Institutions Insurance of Finance, the Af- Banking, House Committee and Urban sponsor only fairs and chief bill, agreed: applies “This restriction banks, converted savings way mutual inter- in no intends to fere with longstanding, the power over the all-inclusive of the Bank Board of branching activities savings associations, au- including and loan thority.” Id., at 33849. The Ibid. agreed amendment was to. Similar expressed views were during on the bill. the Senate debate Senator Brooke observed that “we with the Bank do intend to interfere discretion, comprehensively
that of regulating operations associations, lending and, their including practices these spe- instruments.20 the terms of loan cifically,
C above, a and loan’s savings As we noted mortgage lending of its aspect are critical over which practices “operation,” has jurisdiction. unquestionably Although regulations to promulgate Board’s power exempting from the requirements and loans state law savings may not case we need not be this boundless, explore outer lim- its of the Board’s discretion. We have no conclud- difficulty that is within ing scope under Board’s the HOLA and authority consistent with the Act’s purposes. principal plenary authority associations,
Board’s over Federal area, govern.” Id., this Federal law alone would continue to at 36148. Then, during in the Depository debate House on the Institutions De- regulation Monetary 96-221, Control Act of Pub. L. 94 Stat. Congressman one expressed concern that permitting loans to make residential real estate loans to the same extent national banking associationswere might intеrpreted authorized to do so be as mak- ing “federal subject and loans . . requirements.” . State (1980)(remarks Cong. Patterson). Rec. 6981 Rep. Representative St responded Germain expand the Act in- would the federal associations’ powers “[o]nly vestment if permits. the Federal Home Loan Bank Board Under the Home Act, Owners’ complete authority the Bank Board has by regulation determine the lending practices of Federal associations.” Ibid. Although postenaetment weight these events cannot accorded the contemporary history, they provide Congress’ do further confirmation delegate
intent to lending regulating Board broad discretion practices of Co., federal savings Aerospace and loans. Bell See NLRB v. 416 U. (1974); S. FCC, Broadcasting Red Lion U. S. Co. v. *23 (1969). 367, 380-381 20 The Board’s regulations extensive re govern, example, fair credit quirements, types loans, repayment and required, amount of collateral schedules, charges, initial loan assignment rents, and escrow accounts of paid accounts, interest on loans, servicing those loan charges, late of and payments (1982). prepayments. and 545.6, §§ See CFR 545.8 expressly power Congress delegated for the to the Board creating regulating purpose and loans of financially they insti- sound would remain as to ensure that so financing supply for home construction able to tutions hearings testifying during purchase. House on Thus, new “The cor- Chairman observed: HOLA, the Board’s up up, propose porations them set set we want we that they very assistance will material as a sound basis managed.” financing properly if House time, for all home 1933). Hearings (Apr. House and And the relevant “per- Reports the federal associations referred to Senate Cong., Rep. Sess., 73d 1st No. manent” institutions. S. Cong., (1933); Rep. 1st Sess., 73d H. R. No. promulgated these was with The due-on-sale purposes that due-on- has determined in mind. Board indispensable often source “a valuable and an clauses are sale protection associa- for the soundness of Federal financial ability loan to fund new home and for their continued tions 556.9(f)(1) (1982). Specifically, 12 CFR commitments.” “an im- that the due-on-sale clause is the portant part has concluded that its elimina- contract” and earning power [e]ffect on the have an adverse tion “will impair stability associations, will the abil- financial secondary ity loans in to sell their Federal associations home-financing funds the amount of markets, will reduce generally buyers, potential cause home will available to Advisory Opinion, in home interest rates.” Schott rise 17-18. analysis proceeds It observes The Board’s as follows: practice borrowing lend- short the federal associatiоns’ investing ing long obtaining short-term basis and funds on a — typically long-term loans, have a real estate them in rising 30-year rates, with interest term—combined 25- to these institutions and reduced cost of funds to increased the Exercising clauses enables sav- their income. replacing long- problem by ings this and loans to alleviate
169 term, low-yield loans with loans at the interest prevailing rates and to thereby avoid interest rates across increasing the board. at 21-22. id., Moreover, See the Board has determined that restrictions like the doctrine Wellenkamp lengthen expected date of a lender’s maturity mortgages, thus their reducing in the marketability secondary mortgage market. As a result, “the fears, stability financial of Federal in California associations will eroded and the flow of home loan funds will into California be reduced.” Advisory Schott at 34.21 Opinion, the wisdom of the
Admittedly, Board’s decision is policy not uncontroverted.22 But it neither or arbitrary capri- cious. As it is judges, function, neither our nor within our
21The Board’s Due-on-Sale Task Force estimates that the California Su preme Court’s restrictions on the exercise of due-on-sale clauses accounted for 40% of the total losses suffered 1981 state-chartered associations Board, in the State —some million. See Federal Home Bank $200 Loan (1982). Report 2, Due-on-Sale Task Force 15 projects Thе Task Force imposition of such create, restrictions nationwide would within two years, loans, annual losses of $600 million $800 id., billion for 2, all federal and state $1 $1.3 associations. See 18, 25. subscribing
22 Those
opposite
view contend that the unrestricted
may preclude
assumption
exercise of due-on-sale clauses
mortgages
rates,
preventing
at lower
transferring
interest
thus
the sale of
homes
inflationary
an
burden of
market from the lender to the homeowner and
g.,
e.
prospective
See,
Patton v. First Federal
Loan
homeowner.
Sav. &
Assn.,
473,
Wellenkamp
Bank
(1978);
118 Ariz.
P.
152
Amer
2d
v.
ica,
Nichols v. Ann Arbor Federal
(1978);
21 Cal. 3d
P. 2d
Assn.,
Loan
Sav. &
App. 163,
73 Mich.
Our bars Wel- application due-on-sale Board’s and loan associations.24 savings to federal rule lenkamp is reversed. Appeal Court judgment
It is so ordered. power to contention that the Board’s reject appellees’ 23 Wetherefore internal only extends to the associations’ regulate and loans relationship matters, their not to external such as management and Although one state court have drawn one federal and with borrowers. Home distinction, Federal Sav. & Loan Assn. v. Federal this see Gulf Bd., 2d, 266;Holiday at Acres No. v. Loan Bank 651 F. 3 Midwest Assn., in the lan 2d, support N. we find no Sav. & Loan 308 W. at on the guage legislative history of the HOLA a restriction or its such authority. Board’s
Moreover, it makes little validity theory, has in whatever the distinction recognized, regula- Supreme “[t]he sense here. As the Wisconsin Court opera- practices directly management tion of loan affects the internal con- tions of federal requires associations and therefore uniform 142, 240 2d, trol.” at Assn., Kaski v. First 72 Wis. Federal Sav. & Loan 2d, N. fact, text, W. 373. In Board’s discussed the fi- policy is based on the are essential view that due-on-sale clauses nancial of the associa- loans; preservation soundness of federal very management tions’ obviously existence is related to their internal delegated is one of the Congress. functions Board 24 Pointing prior to the out that two of the deeds of trust were executed 3(f), § effective the due-on-sale appellees argue date that 545.8— Therefore, regulation may rights. applied destroy not be so as to vested appellees reason, re law with California law not conflict with federal does 545.8-3(f) in- spect to those did Appellants respond two deeds. no Powell took the consideration part
Justice or deci- case. sion of this O’Connor, concurring.
Justice I in the opinion Court’s but write join separately to empha authority size that of the Federal Home Loan Bank is not state laws pre-empt limitless.* Although broad Congress delegated power Board to ensure that chartered federally institutions “would re- merely it appellees’ rights terfere with because pre-existing codified law. 4, supra. See n. When two deeds trust were executed 1971 and California *26 permitted the unrestricted exercise of due-on-sale upon clauses out- right security of property, transfer the as occurred here. The Board’s in regulation 1976, reinforcing due-on-sale was then Fidelity’s issued right provisions. to enforce the due-on-sale Not until Wellenkamp was decided right in 1978was a lender’s under California law to a accelerate loan in re- sponse outright to an transfer to security limited cases where the was im- paired. Supreme priоr cases, California Court’s which forbade the provisions automatic enforcement of due-on-sale the when borrower fur- La property securing loan, ther encumbered the Sala American the v.
Savings
Assn.,
& Loan
(1971),
5 Cal. 3d
2d 1113
P.
and when the
borrower entered
covering
into an installment
part
land contract
all or
of
Assn.,
security property,
Savings
Tucker v. Lassen
& Loan
Cal. 3d
(1974), permitted
Because we find the Wellenkamp pre-empted by previously a doctrine promulgated federal sav- inapplicable therefore to ings loans, appellees Fidelity per- deprived rights are if no vested mitted to enforce the pre-1976 due-on-sale clauses in deeds: the two savings right and loan loans, had the to pursuant to accelerate the Califor- law, nia when the executed, deeds were never dimin- power was and that by ished state law. We occasion, therefore, have no consider whether to 545.8-3(f) § may applied give so to broader author- savings a ity to enforce a due-on-sale deed of trust was clause than it had when the 545.8-3(f) executed, or § no appellants’ address effected contention that change in the law. point
* At today’s opinion, one not de “we need the Court states that occuрy cide whether the . entire . . regulations HOLA or the Board’s Ante, field of federal 14. savings regulation.” n. at sound,” ante, that 168, it is clear HOLA financially main of all application to pre-empt the Board permit does not lan- Nothing such institutions. local laws to state and 5(a) the Board “pro- § HOLA, empowers guage examination, opera- incorporation, for the organization, vide and loans, chartered savings tion, federally and regulation” intended Congress permit that remotely suggests tax statutes and laws, zoning such as Board to local displace loan practices. related to directly ordinances, opinion in the Court’s view, nothing in my Accordingly, contrary. should be read Rehnquist, joins, with whom Justice Stevens
Justice dissenting. 5(a) § Home that in Own-
The Court concludes today 1464(a) (1976 12 U. S. C. (HOLA), Act of 1933 ers’ Loan Home authorized the Federal IV), ed., Supp. fiat by Board to administrative California’s pre-empt
Bank enforceability of “due-on-sale” clauses limitations upon and loan insti- held mortgages real estate con- reaches this result extraordinary tutions. The Court loan’s clauses relate cluding a critical of its aspect which “are mortgage lending practices the Board unquestionably jurisdic- over which ‘operation’ *27 Ante, I tion.” at 167. Because conclude that has a such as promulgate regulation not authorized the Board to §545.8-3(f) I dissent. (1982), CFR 5(a) 1464(a) (1976 § HOLA, ed., U. S. C. Section the broad to IV), unquestionably grants authority Supp. the lending of regulate mortgage practices role, In the Board perform and loans. order to this savings account state and contract law which property take into may transactions in and the enforce- general real estate governs in of instruments ability mortgage lending interpretation within the Board’s Thus, power it would be particular. for a lending that it constitutes an unsafe practice
determine property mortgage and loan to concludea real fully without a enforceable due-on-sale It clause. would be authority delegated by Congress within the to it the Board to conclude that due-on-sale clause must be included enabling in a instrument as a means of a fed- unprofitable eral remove loans from its portfolio. entirely ap-
Such a would be consistent with the proach by Congress regulating taken in the § industry. In 8 of the Federal Home Bank Loan Act of 1932 (FHLBA), § precursor C. 1428, U. S. the Con- HOLA, gress required “relating the Board to examine state law conveying recording or of land or titles, to homestead rights, rights and other or to the the holders enforcement of added.) mortgages securing (Emphasis on lands loans.” of Section provides further: any opinion “If such examination shall indicate, any board, that under the laws of . such State . . inadequate protection there would be to a Federal Home making collecting Bank in or advances under this chapter, may operation the board or withhold limit the Federal Home Loan Bank such State until sat- isfactory conditions of . . . shall be established.” added). (emphasis U. S. C. 1428 Thus, there is no in the FHLBA indication that the Board may, by promulgating regulations, pre-empt those state laws economically that are deemed to be if Instead, unsound. upon the Board concludes that California’s limitations enforceability endangers of due-on-sale clauses soundness system FHLBA, established the HOLA and the response contemplated by Congress then the is for the Board operation” system to “withhold or limit the California. declaring
In clause enforceable as a matter departed ap- however, of federal law, Board has from the *28 Although Congress Congress. has proach contemplated lending regulate the activities of fed Board to authorized the savings is no indication in there associations, and loan eral history, legislative in itself, or its the HOLA whether and when empowered Board to determine the govern has enforceability particular provi the law shall federal savings mortgages concluded sions contained §8 anything, FHLBA indi If loan associations. understanding Congress’ in 1932 that the it was cates that enforceability mortgages provisions is a matter state traditionally propеrty are real law. Contract Quick Co., v. Point Pencil Aronson state law. domain of (1979); States, v. United 440 U. Butner S. 440 U. S. Congress did intend cre HOLA, In the 48, 55 mortgages. Texas Indus See common law ate a federal (1981).* Materials, Inc., 451 U. S. tries, Inc. v. Radcliff attempt due-on-sale clauses as to enforce The Board’s upheld regulation of as a matter of federal law cannot lending savings mortgage practices of federal and loan associ- §545.8-3(f), beyond gone regulat- In the Board has ations. savings ing manner a federal how, when, and what money. may mortgage rec- Instead, lend Court purports ognizes, ante, 146-147, the Board’s obliga- rights govern create a rule of law which will parties regu- This tions of the instrument. simply provisions a federal lation does not delineate those mortgage in- or in a and loan must must not include 545.8-3(f) purports guarantee strument. Section notwithstanding enforceability provision of a contractual contrary. is not state law to case, In this regulating operation loan associa- of federal Board, govern however,
* The argued common law does that federal the contractual institutions relationship between Home Loan v. and their Federal Sav. & mortgagors. See Gulf Bd., (CA5 81-1744; Loan Bank No. 1981), pending, 651F. 2d cert. 26, n. 21. as Amici Brief for Federal Home Loan Bank Curiae Board et al. *29 operation of due-on-sale clauses. Without a tions, but explicit congressional more authorization than that relied upon by I Court, conclude the Board has entered a it not authorized to override domain which is state laws. placed upon The limitations the California courts have enforceability impair ability due-on-sale clauses do not regulate the manner in which of the Board engage mortgage lending. and loan associations Califor- nia has not interfered with Board’s determination that it practice lending an constitutes unsafe for a federal agreement fully a loan and loan to enter without a enforce- regarding able due-on-sale clause. California’s rule due-on- pursuant Supremacy sale clauses is invalid Clause simply because it it makes difficult for lenders to eliminate unprofitable mortgage portfolios. loans from their
Although the Board has concluded that the California upon enforceability courts’ limitations of due-on-sale economically agree clauses is I unsound, cannot that Con- gress has enabled the Board to insulate federal merely by loans from promulgating California that declares these clauses to be enforceable. Discharge of its mission to ensure the soundness savings and loans does not authorize the Federal Home Loan Bank Board to property intrude into the domain of state contract law that has left to the States.