Steptoe v. Savings of America

Decision Date24 August 1992
Docket NumberNo. 3:89CV7329.,3:89CV7329.
PartiesHersey H. STEPTOE, et al., Plaintiffs, v. SAVINGS OF AMERICA, et al., Defendants.
CourtU.S. District Court — Northern District of Ohio

C. Thomas McCarter, Newcomer, McCarter & Green, Toledo, Ohio, for plaintiffs.

Jennifer J. Dawson, Marshall & Melhorn, Toledo, Ohio, for Savings of America, Residential Loans defendant.

Mary Ann Whipple, Fuller & Henry, Toledo, Ohio, for Rollie Morgan, Individually and in his official capacity as Appraisal Officer of Sav. of America, Residential Loans defendant.

MEMORANDUM AND ORDER

WALINSKI, Senior District Judge.

This cause is before the Court on defendant's motion for summary judgment, plaintiffs' opposition thereto, defendant's reply and plaintiffs' surrebuttal; and on plaintiffs' motion for leave to amend their complaint by interlineation to add Rollie Morgan (Morgan) as a party defendant to this action, Morgan's opposition thereto and plaintiffs' reply. This Court has jurisdiction pursuant to 28 U.S.C. § 1331.

BACKGROUND

Plaintiffs Hersey H. and Lillian Steptoe (the Steptoes) are a black couple who engaged the services of plaintiff Joyce Beauregard (Beauregard), a realtor with Danberry Realty, to help them find and purchase a home in a racially mixed neighborhood. The Steptoes found a home they liked located in the Old West End1 in Toledo, Ohio at 2313 Robinwood (the Robinwood home). It was priced at $129,900. They offered the seller $115,000 for it, contingent upon them obtaining an independent appraisal within five percent of the financing bank's appraisal and on their selling their condominium by July 31, 1987. The seller accepted their offer.

The Steptoes then applied for a mortgage loan with defendant Savings of America (SOA). SOA accepted their application and ordered an appraisal. Mr. Steptoe also engaged Charles DeCant (DeCant), an appraiser recommended by his employer, to conduct an independent appraisal. DeCant told the Steptoes that, in his opinion, the homes in the Old West End were overpriced and the area overrated. He appraised the Robinwood home at $80,000. Lillian Steptoe testified in her deposition that they couldn't believe that as they had looked at a number of homes in the Old West End that were selling for over $100,000 that were not nearly as nice as the Robinwood home.

After DeCant's appraisal, Edward Clunk (Clunk), a staff appraiser at SOA, appraised the Robinwood home. He testified in his deposition that his original appraisal came in at $115,000. However, Rollie Morgan (Morgan),2 SOA's chief appraiser, disagreed with that valuation and allegedly ordered Clunk to redo his appraisal using new comparables.3 They also disagreed on the value of the Robinwood home's finished attic, which the seller had leased to a tenant. Clunk felt that the finished attic added value to the property while Morgan was hesitant to assign any value to it at all. Clunk redid his appraisal, apparently using new comparables, and came back with a value of $94,500.

SOA advised Beauregard that the Robinwood home would not support the Steptoes' loan request of $103,500.4 SOA did not discuss any other options with them. The Steptoes then offered the seller $95,000 but he rejected it and they began looking for another home. Almost one month later, the Robinwood home sold for $115,000.5

Approximately one and one-half years later, Clunk spoke with Michael Murray (Murray), president of plaintiff the Old West End Association. Clunk told Murray about his original appraisal and his conversations with Morgan. Plaintiffs then instituted the present lawsuit, charging SOA with racially discriminatory appraisal and lending practices. They allege that SOA violated their rights under the Fair Housing Act, 42 U.S.C. § 3601 et seq., the Civil Rights Act of 1866, 42 U.S.C. §§ 1981 and 1982, the Civil Rights Act of 1871, 42 U.S.C. § 1985(3) and the Civil Rights Act of 1964, 42 U.S.C. § 2000d et seq. SOA now moves for summary judgment on all counts.

DISCUSSION

Rule 56, Fed.R.Civ.P., directs the disposition of a motion for summary judgment. In relevant part Rule 56(c) states:

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

The Court's function in ruling on a motion for summary judgment is to determine if any genuine issue exists for trial, not to resolve any factual issues, and to deny summary judgment if material facts are in dispute. United States v. Articles of Device, 527 F.2d 1008, 1011 (6th Cir.1976); Tee-Pak, Inc. v. St. Regis Paper Co., 491 F.2d 1193, 1195 (6th Cir.1974). Further, "in ruling on a motion for summary judgment, the evidence must be viewed in a light most favorable to the party opposing the motion." Bouldis v. U.S. Suzuki Motor Corp., 711 F.2d 1319, 1324 (6th Cir. 1983). To summarize, summary judgment is only appropriate when no genuine issue of material fact remains to be decided, and when the undisputed facts, viewed in a light most favorable to the non-moving party, entitle the movant to judgment as a matter of law. Smith v. Pan Am World Airways, 706 F.2d 771, 773 (6th Cir.1983).

A principle purpose of summary judgment "is to isolate and dispose of factually unsupported claims or defenses." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). Rule 56(e) places responsibility on the party against whom summary judgment is sought to demonstrate that summary judgment is improper, either by showing the existence of a material question of fact or that the underlying substantive law does not permit such a decision. In relevant part the provision states:

When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing there is a genuine issue for trial. If he does not so respond, summary judgment, if appropriate, shall be entered against him.

Rule 56(e), Fed.R.Civ.P. Rule 56(e) requires the non-moving party to go beyond the pleadings, and by affidavits, depositions, answers to interrogatories, or admissions on file, designate specific facts showing a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. at 324, 106 S.Ct. at 2553.

In their first claim for relief, plaintiffs allege that SOA's actions violated their rights under the Fair Housing Act (FHA), 42 U.S.C. §§ 3601 et seq. Specifically, plaintiffs allege that SOA violated 42 U.S.C. §§ 3604(a) and (b) and 3605.6 SOA argues that it is entitled to summary judgment on this count because plaintiffs have failed to establish a prima facie case of discrimination.

The parties have cited, and this Court is aware of, only one case dealing with the elements of a prima facie case under §§ 3604 and 3605 where the discrimination alleged is based on a defendant's appraisal practices. In that case, Old West End Ass'n. v. Buckeye Fed. Sav. & Loan, 675 F.Supp. 1100 (N.D.Ohio 1987), a white couple had attempted to purchase a home in the Old West End of Toledo. The court, applying the analysis enunciated by the Supreme Court in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973), held that the plaintiffs had made out a prima facie case under both the Fair Housing Act and the Civil Rights Act by establishing that:

(1) the housing sought to be secured was in a minority neighborhood;
(2) that an application for a loan to purchase the housing located in a minority neighborhood was made;
(3) that an independent appraisal concluded that the value of the housing equaled the sale price;
(4) that the buyers were credit worthy; and
(5) that the loan was rejected.

Id. at 1103.

SOA argues that plaintiffs have failed to establish the fifth element of the Buckeye criteria; i.e. they have failed to come forth with any evidence that the Steptoes' loan application was rejected. SOA argues that the Steptoes withdrew their loan application because Mr. Steptoe felt it was useless to proceed with SOA and because the conditions upon which their offer to purchase the Robinwood home were not satisfied: they failed to obtain an independent appraisal within five per cent of the financing bank's appraisal and they were unable to sell their condominium by the required date. The defendants argue that SOA constructively rejected the Steptoes' loan by intentionally lowballing the appraisal on the Robinwood home so that it would not support the Steptoes' loan request.

The Sixth Circuit has consistently rejected the automatic application of the McDonnell Douglas criteria to discrimination claims out of a fear that such a mechanical application may bar worthy claims or supply a triable claim where none truly exists. See La Grant v. Gulf & Western Mfg. Co., Inc., 748 F.2d 1087 (6th Cir.1984); Sahadi v. Reynolds Chemical, 636 F.2d 1116 (6th Cir.1980); Ackerman v. Diamond Shamrock Corp., 670 F.2d 66 (6th Cir.1982). Instead, each claim must be evaluated on a case-by-case basis. Sahadi, supra at 1118, n. 3. Moreover, in a discrimination case brought pursuant to the FHA, a plaintiff need not prove that the defendant acted with a racially discriminative motive; a prima facie case can be made out by showing that the defendant's actions had a racially discriminatory effect. Robinson v. 12 Lofts Realty, Inc., 610 F.2d 1032, 1036-37 (2nd. Cir.1979) (citations omitted). "Effect, and not motivation, is the touchstone, in part because clever men may easily conceal their motivations." United States v. Black Jack, 508 F.2d 1179, 1185 (8th Cir.1974), cert. denied 422 U.S. 1042, 95 S.Ct. 2656, 45 L.Ed.2d 694 (1975).

In the case sub judice, the importance of not mechanically applying the McDonnell...

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