The URL can be used to link to this page

Home My WebLink About2004-6120 Civil THE WASHINGTON SAVINGS BANK, Plaintiff IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA vs. CIVIL ACTION - LAW NO. 04-6120 CIVIL KEVIN 1. KROVICH, Defendant IN RE: PLAINTIFF'S PRELIMINARY OBJECTIONS TO DEFENDANT'S COUNTERCLAIM BEFORE HESS AND OLER. 1.1. OPINION AND ORDER Washington Savings Bank (the Plaintiff) filed a Complaint in Mortgage Foreclosure on December 7,2004. Kevin Krovich (the Defendant) was properly served on December 27,2004. On January 19, 2005, the Plaintiff served Defendant with Notice of Praecipe for Entry of Default Judgment, notifying the Plaintiff that he had ten days to respond to Plaintiff s Complaint. The Defendant filed an Answer with New Matter and a Counterclaim on January 31,2005. The Plaintiff filed Preliminary Objections to Defendant's Counterclaim on February 14, 2005. These Preliminary Objections have since been argued. Among others, the plaintiff has filed a preliminary objection to the defendant's counterclaim which purports to state a cause of action under the Loan Interest and Protection Law (Usury Law), Act of January 30, 1974, P.L. 13 No.6, 41 P.S. 201 et seq. The plaintiff has demurred to this claim. Their contention is that the Usury Law is preempted, by federal law, in the scenario presented by this case. We agree. NO. 04-6120 CIVIL It is accepted that Congress has the authority to preempt state law. Federal regulations have no less preemptive effect than federal statutes. Fid Fed Sav. & Loan Ass'n v. de la Cuesta, 458 US. 141 (1982). There are three ways federal statutes and regulations can preempt state law. First, state law may be preempted where the statute or regulation expressly preempts the state enactment. Pacific Gas & Electric Co. v. State Energy Resources Conservation and Development Comm 'n, 461 US. 190 (1983). Second, preemption may be found where Congress has legislated in a field so comprehensively that it has implicity expressed an intention to occupy the given field to the exclusion of state law. Schneidewind v. ANR Pipeline Co., 485 U S. 293 (1988). Finally, a state enactment will be preempted where a state law conflicts with a federal law. Id In Section 5 (a) of the Home Owner's Loan Act of 1993 ("HOLA"), Congress authorized the Office of Thrift Supervision ("OTS") to issue regulations governing federal savings associations. See 12 US.C. S 1464 (a) (2000). The Washington Savings Bank, being a federally chartered savings association, is subject to OTS regulations. Section 506.2 titled "Applicability of law" provides: (a) Occupation offield. Pursuant to sections 4(a) and 5(a) of the HOLA, 12 US.C. 1463(a), 1464(a), OTS is authorized to promulgate regulations that preempt state laws affecting the operations of federal savings associations when deemed appropriate to facilitate the safe and sound operation of federal savings associations, to enable federal savings associations to conduct their operations in accordance with the best practices of thrift institutions in the United States, or to further other purposes of the HOLA. To enhance safety and soundness and to enable federal savings associations to conduct their operations in accordance with best practices (by efficiently delivering low-cost credit to the public free from undue regulatory duplication and burden), OTS hereby occupies the entire field oflending 2 NO. 04-6120 CIVIL regulation for federal savings associations. OTS intends to give federal savings associations maximum flexibility to exercise their lending powers in accordance with a uniform federal scheme of regulation. Accordingly, federal savings associations may extend credit as authorized under federal law, including this part, without regard to state laws purporting to regulate or otherwise affect their credit activities, except to the extent provided in paragraph (c) of this section. For purposes of this section, 'state law' includes any state statute, regulation, ruling, order or judicial decision. (b) Illustrative examples. [T]he types of state laws preempted by paragraph (a) of this section include, without limitation, state laws purporting to impose requirements regarding: (1) Licensing, registration, filings, or reports by creditors; (4) The terms of credit, including amortization of loans and the deferral and capitalization of interest and adjustments to the interest rate, balance, payments due, or term to maturity of the loan, including the circumstances under which a loan may be called due and payable upon the passage of time or a specified event external to the loan; (5) Loan related fees, including without limitation, initial charges, late charges, prepayment penalties, servicing fees, and overlimit fees; (8) Access to and use of credit reports; (9) Disclosure and advertising, including laws requiring specific statements, information, or other content to be included in credit application forms, credit solicitations, billing statements, credit contracts, or other credit-related documents and laws requiring creditors to supply copies of credit reports to borrowers or applicants; (12) Usury and interest rate ceilings to the extent provided in 12 US.C. 1735f-7a and part 590 of this chapter and 12 US.C. 1463(g) and Sec. 560.110 of this part. 12 C.F.R. S 560.2 (2001)(emphasis added). 3 NO. 04-6120 CIVIL Defendant alleges that the Plaintiff violated the Usury Act by charging the Defendant a single service charge that exceeded one percent of the original bona fide principle and by charging the Defendant interest at a rate in excess of the maximum lawful rate. The single service charge in dispute is a "loan related fee" as described in 12 C.F.R. S 560.2 (5). This loan related fee is part of the "entire field oflending regulation" that the OTS decided to occupy. 12 C.F.R. S 560.2 (a). Therefore, the OTS regulations preempt the Usury Law regarding loan-related fees. Additionally, the OTS regulations preempt the Usury Law regarding interest rate ceilings. US.C. 1735f-7a. Defendant also alleges that Plaintiff violated Pennsylvania's Mortgage Bankers and Brokers and Consumer Equity Law Act of 1989 by failing to report his payment history quarterly to a nationally recognized consumer credit reporting agency as required by Section 513(a) of that Act. Section 513 imposes a requirement regarding "reports by creditors" and "access to and use of credit reports." Both of these areas are part of the "entire field oflending regulation" that the OTS decided to occupy. 12 C.F.R. S 560.2 (a)(I); 12 C.F.R. S 560.2(a)(8). Therefore, the OTS regulations preempt the Pennsylvania Mortgage Bankers and Brokers and Consumer Equity Protection Law's requirement regarding "reports by creditors" and "access to and use of credit reports." Defendant next contends that Plaintiff s alleged failure to report his payment history to the credit bureaus and Plaintiff s alleged failure to timely pay Defendant's real estate taxes constitute a breach of contract and therefore properly form a basis for a counterclaim under Pa.R.C.P. 1148. Pa.R.c.P. 1148 states: A Defendant may plead a counterclaim which arises from the same transactions or occurrence or 4 NO. 04-6120 CIVIL series of transactions or occurrences from which the Plaintiff s cause of action arose. Counterclaims in a mortgage foreclosure action can only be brought if they are part of, or incident to, the creation of the mortgage. See Chrysler First Business Credit Corp. v. Gourniak, 601 A.2d 338, 340 (Pa. Super. 1992); First Wisconsin Trust Co. v. Strausser, 653 A.2d 688,695 (Pa. Super. 1995). Defendant's breach of contract Counterclaim alleges Plaintiff failed to report Defendant's payment history to credit bureaus and failed to timely pay Defendant's real estate taxes. These allegations are not part of, or incident to, the creation of the mortgage contract. Therefore, the alleged breach of contract is not a proper Counterclaim under Pa.R.C.P. 1148. Finally, Pa.R.C.P. 1028(a)(2) permits preliminary objections based on a failure ofa pleading to conform to law or rule of court or inclusion of scandalous or impertinent matter. Allegations in a pleading are impertinent if they are immaterial and inappropriate to the proof of the cause of action. Common CauseIPennsylvania v. Com., 710 A.2d 108 (Pa. Commw. 1998). The Defendant's Counterclaim makes allegations concerning the nature of copies of settlement documents which he received. It also contains a vague reference to the bank's breach of some unspecified fiduciary duty. These are clearly not pertinent to the question of the Defendant's obligations under the mortgage. Paragraph 25 of Defendant's counterclaim alleges that Plaintiff engaged in abusive, dishonest, fraudulent or illegal practices and/or conduct and engaged in unfair or unethical practices or conduct in connection with the mortgage business. None of Defendant's other 24 paragraphs mention fraudulent behavior. Moreover, allegations of fraud must be stated with particularity. Pa.R.C.P. 1019(b). 5 NO. 04-6120 CIVIL ORDER AND NOW, this day of May, 2005, for the reasons set forth in our opinion filed of even date herewith, the preliminary objections to the counterclaim of the defendant, specifically paragraphs 4 through 25 inclusive, are SUSTAINED and said counterclaim is DISMISSED. BY THE COURT, Kevin A. Hess, 1. Shane F. Crosby, Esquire F or the Plaintiff Kevin 1. Krovich, Pro Se Defendant :rlm 6 THE WASHINGTON SAVINGS BANK, Plaintiff IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA vs. CIVIL ACTION - LAW NO. 04-6120 CIVIL KEVIN 1. KROVICH, Defendant IN RE: PLAINTIFF'S PRELIMINARY OBJECTIONS TO DEFENDANT'S COUNTERCLAIM BEFORE HESS AND OLER. 1.1. ORDER AND NOW, this day of May, 2005, for the reasons set forth in our opinion filed of even date herewith, the preliminary objections to the counterclaim of the defendant, specifically paragraphs 4 through 25 inclusive, are SUSTAINED and said counterclaim is DISMISSED. BY THE COURT, Kevin A. Hess, 1. Shane F. Crosby, Esquire F or the Plaintiff Kevin 1. Krovich, Pro Se Defendant :rlm