Barber v. Rancho Mortgage & Investment Corp.

• Decision Date: 28 July 1994
• Docket Number: No. B058529,B058529
• Citation: 32 Cal.Rptr.2d 906,26 Cal.App.4th 1819
• Parties: Florence E. BARBER, et al., Plaintiffs and Respondents, v. RANCHO MORTGAGE & INVESTMENT CORP., et al., Defendants and Appellants.
• Court: California Court of Appeals Court of Appeals

Page 906

32 Cal.Rptr.2d 906

26 Cal.App.4th 1819

Florence E. BARBER, et al., Plaintiffs and Respondents, v. RANCHO MORTGAGE & INVESTMENT CORP., et al., Defendants and Appellants.

No. B058529.

Court of Appeal, Second District, Division 3, California.

July 28, 1994.

Call, Clayton & Jensen, Troy L. Tate, Seth L. Liebman, Newport Beach, Janik, Lester & Dunn, and Michael J. Grobaty, Brea, for defendants and appellants.

Belshaw & Thompson, and B. Elaine Thompson, Torrance, for plaintiffs and respondents.

CROSKEY, Associate Justice.

In this appeal, we examine the merits of a judgment for compensatory and punitive damages, as well as a statutory award of attorneys fees, entered in favor of the plaintiffs and respondents, Florence E. Barber ("Florence") and Joe L. Barber ("Joe") (collectively, the "Barbers"), following a six-day jury trial. The judgment was based, in substantial part, on alleged violations of federal credit and housing discrimination laws ¹ which the jury found to be true. The defendants and appellants, Rancho Mortgage & Investment Corporation ("Rancho"), Forecast Mortgage Corporation ("Forecast") and Walker & Lee, doing business as Great Western Real Estate ("Great Western"), appeal the judgment on several grounds, primarily including claimed errors in jury instructions and the assertion that there was We conclude that there was no error in the credit discrimination case against Rancho and affirm that portion of the judgment. The trial court erred in instructing the jury on the punitive damage claim in the housing discrimination case against Forecast and therefore we reverse that part of the judgment and remand for a new trial on that issue. Finally, we find no substantial evidence whatever of the housing discrimination claim against Great Western and reverse that portion of the judgment with directions to enter judgment in Great Western's favor.

no substantial evidence to support the jury's verdict. ²

Factual and Procedural Background ³

In March 1988, Forecast offered houses for sale in Victorville, California, at a project called "Meadowood." The selling prices were less than the appraised values for the homes and they were thus in great demand. The Barbers, who are black and live in Gardena, California, a suburb of Los Angeles, learned about these homes from their son who then lived in the Victorville area. On March 18, 1988, after viewing the model homes, the Barbers placed their name on a waiting list. The next day their name was called and, with the assistance of one Ron Chapman, an employee of Great Western, they viewed the homes remaining for sale. Finding one that they liked, they filled out a Purchase and Sale Agreement, as well as other related documentation. This offer was accepted by Forecast, subject to the contingency that the Barbers obtain financing for the purchase price, and an escrow was opened.

As a first step in obtaining the required financing, the Barbers also spoke with one Glen Wilson, a "loan application taker" employed by Rancho, who was working at the site where Forecast was selling the homes. ⁴ He looked at their financial documents and pre-qualified them for a FHA loan from Rancho. At Chapman's suggestion, the Barbers decided to formally apply for an FHA loan to finance their purchase. Such a loan required a low 5% downpayment but was available only to borrowers who intended to live in the purchased home. This is the so-called "owner-occupied" rule which is very much at the heart of the dispute in this matter. On March 20, 1988, the Barbers completed and submitted a Residential Loan Application to Rancho. ⁵

Subsequently, on March 24, 1988, Rancho requested additional documentation which the Barbers supplied. ⁶ On May 9, 1988, they had a meeting with one of Rancho's loan processors. Both Joe and Florence testified that the processor treated them with both rudeness and belligerence. ⁷ Documents and information which had previously been supplied were requested again. The processor asked them a lot of questions about whether they really intended to live in Victorville and commute to work in Los Angeles. ⁸ The Barbers insisted that it was their intent to make The Barbers heard nothing more about their loan application until May 22, 1988, when Florence received a telephone call from Anne Merryfield, a loan officer at Rancho. Merryfield advised them that Rancho had not approved the Barbers for an "owner-occupied" loan because it appeared that they were really investors who had no intent to live in the home as required. The decision to deny a loan to the Barbers was made by Darlene Tennent, one of Rancho's underwriters. She had the sole responsibility for deciding whether to qualify the Barbers for an owner-occupied loan. She testified at trial that her decision to deny the Barbers' application was based on FHA guidelines which indicated that applicants who (1) already had a primary residence which was reasonably close to their long-standing places of employment, (2) owned other rental units ⁹ and (3) would be required to engage in a long commute to work were more likely to be investors rather than persons who would really occupy the home for which the FHA loan was being sought. Tennent testified that when she discussed these circumstances with an official at FHA she was advised to reject the application. However, testimony by another FHA official was to the effect that the FHA did not make recommendations or give direction to lenders regarding the acceptance or rejection of loan applications. ¹⁰ The testimony of the Barbers, which we must accept as true, was that they had consistently expressed their intent to live in the house and that they did in fact have such an intent.

such a commute; indeed, they intended to carpool with their son and daughter-in-law who also worked in Los Angeles. They very much wanted to get out of the crowded and [26 Cal.App.4th 1829] crime-ridden urban area in which they lived. They also responded to every demand made upon them by Rancho for additional documents and information, including those which were duplicative.

Neither Tennent nor anyone else at Rancho gave the Barbers any written confirmation or explanation for the rejection of their loan. This itself was a violation of the Credit Act. ¹¹ Indeed, the record demonstrates that after the Barbers were informed on May 22, 1988, that their loan application had been rejected they made several attempts to obtain more information but neither anyone at Rancho nor anyone at the FHA would ever return their calls, except for one FHA official who promised to set up a meeting with a representative from Rancho but never did. Thus, it was never explained to them why their expressed intention to immediately occupy the home was not accepted as true; nor were they ever told by any of the defendants that they could have (1) applied for a non-FHA loan, (2) obtained a loan from a source other than Rancho or (3) simply paid On or about July 20, 1988, the Barbers were notified that the escrow, which had previously been opened to handle their purchase of the home, had been cancelled as of that date. The escrow officer testified that she had been instructed by Forecast to cancel the escrow and return the Barbers' cash downpayment which had accompanied their original offer. Since Forecast had a back-up offer for the home, it was promptly sold to another buyer. ¹³

cash for the home which, the Barbers testified, they were capable of doing. ¹²

Plaintiffs then filed this action. ¹⁴ They alleged six separate counts: (1) Credit Discrimination (against Rancho only), (2) Housing Discrimination (against Forecast and Great Western only), (3) Conspiracy to Discriminate (against all defendants), (4) Breach of Contract (against Forecast only), (5) Conspiracy to Breach Contract (against all defendants) and (6) Intentional Infliction of Emotional Distress (against all defendants).

After a six-day jury trial, the trial court granted defendants' motions for a directed verdict as to the third and fifth causes of action relating to a conspiracy (1) to discriminate against the Barbers (2) and to cause Forecast to breach the sale agreement. ¹⁵ The trial court also granted defendants' directed verdict motion as to the sixth cause of action for infliction of emotional distress. ¹⁶ The case went to the jury on (1) the credit discrimination claim against Rancho, (2) the housing discrimination claim against Forecast and Great Western and (3) the breach of contract claim against Forecast.

On February 26, 1991, the jury returned a verdict in favor of the Barbers on all three of their remaining causes of action. They found that Rancho had committed acts of credit discrimination proscribed by federal law and awarded general damages to the Barbers in the sum of $25,000. The jury also concluded that punitive damages should be awarded against Rancho. The trial judge subsequently set the amount of such damages at $10,000.

The jury concluded that Forecast had breached its contract of sale with the Barbers and awarded compensatory damages in the amount of $11,725. ¹⁷ The jury also found that Forecast had engaged in acts of housing discrimination proscribed by federal law and awarded the Barbers general damages of $25,000 and punitive damages of $150,000.

                Similarly, they found Great Western likewise liable for housing discrimination and awarded the Barbers $25,000 general damages and $125,000 punitive damages.  A judgment reflecting these damage awards was filed on March 11, 1991. 18  Thereafter, on May 2, 1991, after denying the defendants' motions for a new trial and [26 Cal.App.4th 1832] judgment notwithstanding the verdict, the court granted Barbers' motion for an award of statutory attorneys fees ($60,000) and costs ($2,709.30)
                

The defendants filed this timely appeal.

CONTENTIONS OF THE PARTIES

The defendants contend there was no substantial evidence of either credit or housing discrimination against the Barbers. They...