Phillips v. Hunter Trails Community Ass'n

• Decision Date: 07 September 1982
• Docket Number: No. 81-2372,81-2372
• Citation: 685 F.2d 184
• Parties: William J. PHILLIPS and Dorothy R. Phillips, Plaintiffs-Appellees, v. HUNTER TRAILS COMMUNITY ASSOCIATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 184

685 F.2d 184

William J. PHILLIPS and Dorothy R. Phillips, Plaintiffs-Appellees, v. HUNTER TRAILS COMMUNITY ASSOCIATION, Defendant-Appellant.

No. 81-2372.

United States Court of Appeals Seventh Circuit.

Argued April 8, 1982.

Decided Aug. 3, 1982.

Rehearing and Rehearing En Banc Denied Sept. 7, 1982.

Wayne B. Giampietro, DeJong, Poltrock & Giampietro, Chicago, Ill., for defendant-appellant.

F. Willis Caruso, Leadership Council for Metropolitan Open Communities, Chicago, Ill., for plaintiffs-appellees.

Before CUMMINGS, Chief Judge, POSNER, Circuit Judge, and GRANT, Senior District Judge. ^*

CUMMINGS, Chief Judge.

In 1979 and 1980 William J. Phillips, a successful black businessman, was looking for a new house. He found what he wanted in the Hunter Trails subdivision of Oak Brook, Illinois-a 12,000 square-foot, tri-level home on a large lot. He offered $675,000 for it, and his offer was accepted by the owner, Dennis Broderick, on June 13, 1980. Mr. Phillips deposited $75,000 in earnest money, and a closing date was set for July 21, 1980. In the expectation that they would be able to move into the house as agreed, the Phillipses sold their house in Homewood, Illinois, agreeing to give up possession on July 21, and obtained a mortgage commitment on the new house from Seaway Bank on June 24, 1980.

Between June 24 and July 17, the Phillipses heard nothing about any difficulties with their move. But events were moving rapidly in Hunter Trails. On June 18 fifteen people came to an early morning meeting-officers and directors of the Hunter Trails Community Association and some homeowners-but Mr. Broderick, who had the only first-hand knowledge about the terms of the sale and who was also the vice-president of the Association and a Board member, was not notified of the meeting and did not attend.

One of the covenants that attached to every piece of property in the Hunter Trails subdivision gave the Association a thirty-day right of first refusal on any proposed sale. Accordingly, the Association could have forestalled the Phillipses by buying Broderick's house for $675,000. The outcome of the June 18 meeting was a decision instead to assign the Association's first refusal right to a syndicate or limited partnership. In the days that followed, no such assignee could be found or formed. The Association therefore turned its attentions to Mrs. Jorie Ford Butler as a potential purchaser. Mrs. Butler's family had founded Oak Brook and various members of the Butler family still owned property in Hunter Trails. Mrs. Butler herself had looked at the Broderick house in the early spring of 1980, before the Phillipses saw it, but was not interested in buying it then. When the Association proposal was presented to her in mid-July, however, she agreed to buy the Association's first-refusal option for $10,000 and exercised the option on July 17, agreeing to pay the Brodericks $675,000 for their house. They refused to close the sale on July 19 because she would not indemnify them from possible liability to the Phillipses.

None of these developments were communicated to the Phillips family until July 17, the Thursday before the scheduled Monday closing. By then they were accomplished facts. Predictably, the Phillipses were disappointed, humiliated, and angry. They also had serious practical problems. Having sold their Homewood house, they were forced to live in hotels and with relatives until they found a rental apartment in Hinsdale. They had to put most of their furniture in storage and live out of suitcases. Two of their cars were stolen and other property was lost while they were without a permanent home. And they had to bring a lawsuit to vindicate their right to live in the house they had chosen in Hunter Trails.

That lawsuit was filed on July 22, 1980, under Section 1 of the Civil Rights Act of 1866 (42 U.S.C. § 1982) and the Fair Housing Act, 42 U.S.C. §§ 3601 et seq. The suit sought an immediate injunction to prevent the defendants from concluding the sale of the Broderick house except to the Phillipses, and-on the merits-equitable and declaratory relief, actual and punitive damages, attorneys' fees and costs. After a ten-day trial, Judge Prentice Marshall found for the Phillipses. His final order, entered July 22, 1981, required the house to be sold to them at the agreed price and awarded them actual damages of $52,675 against the Association and Mrs. Butler jointly and severally (but see note 5, infra ), punitive damages of $100,000 against each of the two defendants, $35,000 in attorneys' fees, and $1,016 in costs. The Phillipses moved into the house shortly thereafter, more than a year after the closing was to have taken place. They and Mrs. Butler entered into a post-judgment settlement and she is no longer a party.

The Association has pursued this appeal. It argues that (1) no discriminatory intent was proved as required under Section 1982, (2) the evidence did not support the finding that the Association violated the Fair Housing Act, and (3) damages were excessive. Because we find Judge Marshall's decision amply supported in fact and law, we affirm except as to actual damages.

I

The Association's first argument is that intentional racial discrimination was never made out, although it is concededly an essential element of the Phillipses' Section 1982 claim. (Phillips Br. 19-20, 26; cf. General Building Contractors Assn., Inc. v. Pennsylvania, --- U.S. ----, 102 S.Ct. 3141, 73 L.Ed.2d ---- (1982) (intentional discrimination must be demonstrated in a Section 1981 suit; Sections 1981 and 1982 closely related though neither specifically uses intent language)).

A. Economic defense

The Association goes to considerable lengths to describe its conduct in blocking the proposed sale to the Phillipses as an honest effort to protect property values in the subdivision rather than intentional racial discrimination. To credit this explanation, Judge Marshall would have had to ignore two illogicalities.

First, the Association apparently did not know that Broderick was selling his house for $675,000-less than its estimate of market value. ¹ Broderick consistently-if untruthfully-told the Association that he was selling the house for $675,000 in cash and taking the Phillipses' Homewood house, worth $175,000, to boot. That would have made the total package worth $850,000, a figure to which, the Association admits, "no objection of any kind would have been raised" (Br. 14). As late as the date on which the Board voted to sell its first refusal right to Mrs. Butler, Broderick still described the deal in those terms, although he expressed a willingness to forego its advantages if the Board wished (App. 39). Broderick did not admit that there was no side deal about his receiving the Phillipses' Homewood house until the Phillipses' case was called for trial (App. 36).

Second, even if the Board had all along suspected Broderick's veracity, the only way to protect its notional value of Broderick's property was for the Association to exercise its right to buy the house for $675,000, then hold it until someone offered the desired $850,000. Instead, the Board was prepared to let Mrs. Butler buy the house at the same, allegedly undervalued $675,000 price the Phillipses had offered, plus $10,000, the cost of the Association's option to purchase. This course of conduct raises a powerful inference that price was not the Board's primary concern. To rebut that inference, the Association argues that "the $10,000 could be well-used by the Association" (Br. 8), and that additional, nonmonetary factors made Mrs. Butler's purchase more valuable than the cash price alone would indicate:

(Mrs. Butler's) father, Paul Butler, was the founder of Oak Brook, and * * * had voluntarily donated a great deal of equipment and shrubbery to the Association. Also, the Butler family owned other lots in Hunter Trails. It was felt that Mrs. Butler's presence in the community would ensure the continued interest of the Butler family in the subdivision. Id.

The district judge did not dignify this argument with a detailed refutation. He found, based on substantial evidence, that the Association "was motivated by the race of the Phillips family and the occupation of Mr. Phillips" as the owner of six car-wash establishments (App. 42)-and not by the price that Mrs. Butler would pay for the property (App. 43).

The district judge did not err in finding the Association's economic justifications specious.

B. Direct evidence of racial animus

Judge Marshall did not rely solely on the economic irrationality of the Association's position. He found numerous indications of unalloyed bigotry. The Association on appeal tries to explain away all of them, forgetting that as a reviewing court we owe great deference to the district judge's factual conclusions and credibility determinations. The following examples are illustrative.

(1) The Association calls the June 18 meeting "an informal meeting * * * among some of the homeowners" (Br. 17), although it concedes that all but three members of the Board of Directors were present (id. at 5). Judge Marshall treated the meeting as official (App. 33).

(2) Judge Marshall found that a number of explicitly racist remarks were made at the meeting (App. 33). The Association argues that the ugly atmosphere was dispelled by two Board members' warnings "that the (Phillipses') race was totally irrelevant to the discussion and that it would be illegal to refuse them the opportunity to purchase the house on the basis of their race" (Br. 5). Those Board members themselves admitted that their warnings had little, if any, effect (Phillips Br. 15, n.*).

(3) The Association argues that the failure to notify Board member and Association vice-president Broderick of the meeting was inadvertent (Br. 5, 8); Judge Marshall found that it was deliberate (App. 33).

(4) One of the most damning pieces of evidence was a remark by Mr....