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EARL B. LIVINGSTON AND REBECCA J. LIVINGSTON v. VANGUARD FEDERAL SAVINGS BANK (09/08/89)

filed: September 8, 1989.

EARL B. LIVINGSTON AND REBECCA J. LIVINGSTON, HIS WIFE, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, APPELLANTS,
v.
VANGUARD FEDERAL SAVINGS BANK



Appeal from the Order entered December 9, 1988 in the Court of Common Pleas of Westmoreland County, Civil Division, at No. 3077 of 1988.

COUNSEL

Michael P. Malakoff, Pittsburgh, for appellants.

Neal Brendel, Pittsburgh, for appellee.

Cavanaugh, Del Sole and Montgomery, JJ.

Author: Del Sole

[ 386 Pa. Super. Page 498]

Mr. and Mrs. Livingston, as representatives of a class, have taken this appeal from a trial court order sustaining the preliminary objections filed by Vanguard Federal Savings Bank. In so ruling the trial court dismissed Appellants' complaint which alleged that Vanguard's method of computing interest on prepayments made on mobile home loans was not permitted by Pennsylvania law under 69 Pa.S.A. § 623 G.5. The trial court accepted Vanguard's position that the Pennsylvania statute, which prohibits the imposition of prepayment penalties on mobile home installment contracts, was preempted by federal law. We reverse.

The Livingstons initiated this action after learning the amount due to pay-off a loan on a mobile home which they had purchased approximately 4 1/2 years earlier. The sales agreement made between the Livingstons and Keystone Trailer, Inc. declared that Keystone was assigning the contract to Vanguard who was providing the funding to the Livingstons.*fn1 The contract provided that the Livingstons were financing $26,300.00 at a rate of 14% for 15 years. It also stated that the finance charges earned by Vanguard were to be calculated using the accounting method known as the "Rule of 78s". After making payments for 4 1/2 years, the Livingstons informed Vanguard that they would like to pay-off the balance of their loan. Vanguard notified them that the pay-off figure, calculated as described in the contract, was $27,002.58, approximately $700.00 more than the principal amount of the Livingstons' loan.

[ 386 Pa. Super. Page 499]

Alleging that this method of calculation resulted in a prepayment penalty as prohibited by 69 Pa.S.A. § 623,*fn2 the Livingstons as representatives of a class sought to have the court enter an award of damages in their favor and issue an injunction against Vanguard.*fn3 Vanguard then filed preliminary objections contending that this statutory provision was preempted by federal law governing the operation of Vanguard, a federal savings bank. The trial court accepted Vanguard's position that Congress evidenced an intent to preempt state law on this subject by means of its extensive regulation in this area. The court also ruled that this state law directly conflicted with 12 U.S.C. § 1464(a), a regulation issued by the Federal Home Loan Bank Board (the Board) under the authority granted it by the Home Owners' Loan Act of 1933, (HOLA), 12 U.S.C. § 1461 et seq.

Pre-emption may be either expressed or implied by Congress. Toolan v. Trevose Federal Savings and Loan Ass'n, 501 Pa. 477, 462 A.2d 224 (1983), citing Jones v. Rath Packing Co, 430 U.S. 519, 525, 97 S.Ct. 1305, 1309, 51 L.Ed.2d 604 (1977), rehearing denied 431 U.S. 925, 97 S.Ct. 2201, 53 L.Ed.2d 240 (1977) "[W]hen Congress has unmistakably . . . ordained, . . . that its enactments alone are to regulate a part of commerce, state laws regulating that aspect of commerce must fall. This result is compelled whether Congress' command is explicitly stated in the statute's language or implicitly contained in its structure and purpose." Lukus v. Westinghouse Electric Corp., 276 Pa. Super. 232, 419 A.2d 431 at 438, (1980) citing Jones v. Rath Packing Co, supra. Whether examining explicit language or the structure and purpose of a federal scheme of regulation, a court must proceed with caution. "[I]t must

[ 386 Pa. Super. Page 500]

    start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress." Lukus v. Westinghouse Electric Corp., supra, quoting Ray v. Atlantic Richfield Co., 435 U.S. 151, 157, 98 S.Ct. 988, 994, 55 L.Ed.2d 179 (1978), quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447 (1947). This assumption was created to ensure that "the federal-state balance, . . . will not be disturbed unintentionally by Congress or unnecessarily by the courts." Lukus v. Westinghouse Electric Corp., supra, quoting, Jones v. Rath Packing Co., supra, 430 U.S. at 525, 97 S.Ct. at 1409.

In this case the trial court found that preemption could be inferred since Congress had given the Board sufficient authority to entirely dispute state law which would purport to regulate the operation of a federal association. In support of its ...


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