Evans v. First Federal Sav. Bank of Indiana

Decision Date18 September 1987
Docket NumberH 86-0719 and H 86-0776.,H 86-0712,Civ. No. H 86-711,H 86-0716
Citation669 F. Supp. 915
PartiesJames M. EVANS, Juanita J. Evans and the Northwest Indiana Open Housing Center, Inc., Plaintiffs, v. FIRST FEDERAL SAVINGS BANK OF INDIANA, Randall H. Walker and Frank E. Pavlic, Defendants.
CourtU.S. District Court — Northern District of Indiana

Lawrence G. Albrecht, Valparaiso University School of Law, and Jeffrey A. James, Hoeppner, Wagner & Evans, Valparaiso, Ind., for plaintiffs.

Gregory J. Jordan, Merrillville, Ind., and Stephen E. Smith, Chicago, Ill., for defendants.

ORDER

MOODY, District Judge.

This matter comes before the court on a motion to dismiss filed by defendants First Federal Savings Bank of Indiana ("First Federal"), Randall H. Walker and Frank E. Pavlic on January 7, 1987. The court is also in receipt of the above defendants' additional motion to dismiss filed January 9, 1987. The plaintiffs filed a response in opposition on February 5, 1987 to which the defendants replied on March 9, 1987. For the reasons discussed below, the motion to dismiss is GRANTED in part and DENIED in part.

I.

The plaintiffs in the above-entitled action, James M. Evans, Juanita J. Evans and The Northwest Indiana Open Housing Center, Inc., ("NIOHC"), filed their complaint on October 6, 1986. Subsequently, three similar lawsuits (H86-712, H86-716, H86-719) were filed against First Federal and several of its employees and officers. Because these four lawsuits all sought relief for alleged violations of Sections 1981 and 1982 of the Civil Rights Act of 1866, the Equal Credit Opportunity Act ("ECOA"), 15 U.S.C. §§ 1691-1691f, and the Fair Housing Act ("FHA"), 42 U.S.C. §§ 3604, 3605, the court, finding that they contained common questions of law and fact, consolidated the four cases for all purposes pursuant to Fed.R.Civ.P. 42(a). Additionally, this court consolidated another suit (H86-776) involving the NIOHC and the same defendants which sought similar relief.1 The combined complaints allege that the defendants pursued a "mortgage redlining" practice in relation to their requests for loans. By their present motion, defendants seek to dismiss certain allegations in plaintiffs' complaints on the following grounds: (1) that the plaintiffs have failed to state a claim upon which relief can be granted under section 1982; (2) that the organizational plaintiff NIOHC lacks standing to seek relief under the ECOA; and (3) that the plaintiffs, Willie Hanley, Adelle Hanley and NIOHC, fail to state a claim upon which relief can be granted under the FHA.

In setting out the facts of this case, the court is mindful of the present procedural posture, this matter is before the court on a motion to dismiss for failure to state a claim, Fed.R.Civ.P. 12(b)(6), and the lack of standing, Fed.R.Civ.P. 12(b)(1). Dismissal of a claim for relief is proper under Fed.R. Civ.P. 12(b)(6) only where it appears beyond a doubt that the plaintiff can prove no set of facts which would support that claim. Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957); Ed Miniat, Inc., v. Globe Life Insurance Group, Inc., 805 F.2d 732, 735 (7th Cir. 1986); Papapetropoulous v. Milwaukee Transport Services, 795 F.2d 591, 594 (7th Cir.1986); Action Repari, Inc. v. American Broadcasting Co., 776 F.2d 143, 146 (7th Cir.1985). For purposes of a motion to dismiss, the pleadings are to be construed liberally. Strauss v. City of Chicago, 760 F.2d 765, 776 (7th Cir.1985). Furthermore, the court must accept as true all material allegations of the complaint, Wilson v. Harris Trust & Sav. Bank, 777 F.2d 1246, 1247 (7th Cir.1985), and construe the complaint in favor of the complaining party. Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 2206, 45 L.Ed.2d 343 (1975); Haroco, Inc. v. American National Bank and Trust Co., 747 F.2d 384, 385 (7th Cir.1984), aff'd, 473 U.S. 606, 105 S.Ct. 3291, 87 L.Ed.2d 437 (1985); Ricci v. Chicago Mercantile Exchange, 447 F.2d 713, 715 (7th Cir.1971). Likewise, when ruling on a 12(b)(1) dismissal, the trial court "must accept as true all allegations of the complaint and must construe the complaint in favor of the complaining party." Warth v. Seldin, 422 U.S. at 501, 95 S.Ct. at 2206. Keeping this deferential standard in mind, the court now turns to the facts alleged by plaintiffs in their complaints.

The plaintiffs allege that First Federal discriminated in its lending practices by engaging in "mortgage redlining."2 Plaintiffs claim they were denied home equity or mortgage loans by First Federal because they are black and reside in predominantly black neighborhoods in Gary, Indiana. The plaintiff NIOHC is a not-for-profit corporation organized under the laws of Indiana and supported by private contributions, foundation grants and contracts with certain cities. The purpose of the organization is to further the goals of the FHA and to promote equal opportunity in housing in northwest Indiana. The center's activities include referral services, housing and financial counseling to minority home-seekers, investigation of complaints of housing discrimination and legal representation in actions involving discrimination. The NIOHC, which never applied for a loan itself, is suing on its own behalf claiming that First Federal's alleged redlining significantly impaired, and continues to impair, its ability to provide services to the city of Gary, Indiana and its residents.

The remaining plaintiffs, all of whom personally applied for loans, claim they were directly affected by First Federal's alleged discrimination. However, the plaintiffs' reasons for applying for their respective loans varied. The Evanses (H86-711) applied for a mortgage loan to refinance their existing mortgage in order to make home improvements. The Browns (H86-712) wished to use a previous mortgage commitment to purchase real estate. The Hanleys (H86-716) applied for a home equity loan for the dual purpose of purchasing an automobile and financing a college education. Karen Freeman (H86-719) requested a loan in order to make home improvements. Finally, Jean B. Thurman (H86-776) applied for a home equity loan for the purposes of purchasing an individual retirement account and to make home improvements.

II. Section 1982

Defendants first argue that the plaintiffs in the Evans (H86-711), Freeman (H86-719) and Hanley (H86-716) actions have failed to allege facts necessary to establish a cause of action under section 1982. Plaintiffs contend that First Federal and its officers violated section 1982 by refusing, on the basis of race, to extend mortgage financing on their already-acquired property. First Federal maintains that the procurement of financing is not a protected property interest within the scope of section 1982.

The Civil Rights Act of 1877, 42 U.S.C. § 1982, addresses the property rights of citizens and provides:

All citizens of the United States shall have the same right, in every State and Territory, as is enjoyed by white citizens thereof to inherit, purchase, lease, sell, hold and convey real and personal property.

To allege a violation of section 1982 the complaining party must demonstrate that the defendant's conduct impaired his or her property interest. City of Memphis v. Greene, 451 U.S. 100, 120-24, 101 S.Ct. 1584, 1596-98, 67 L.Ed.2d 769 (1981); Southbend Neighborhood Improvement Association v. County of St. Clair, 743 F.2d 1207, 1211 (1984). The question of whether the procurement of financing (in particular, a second mortgage) is a protected property interest for purposes of section 1982 appears to be one of first impression; the parties have presented no published case law on this issue and the court has been unable to discover any on its own. Nevertheless, the court is guided by several Supreme Court decisions construing the scope of section 1982.

In Memphis, the Court held that section 1982 was designed to "protect not merely the enforceability of property interests acquired by black citizens but also their right to acquire and use property on an equal basis with white citizens." 451 U.S. at 120, 101 S.Ct. at 1596 (emphasis added). The Memphis Court then reviewed its cases discussing the types of interests protected and the activities proscribed by section 1982; the court stated:

Thus, in Hurd v. Hodge, 334 U.S. 24, 92 L.Ed. 1187, 68 S.Ct. 847, the Court refused to permit enforcement of private covenants imposing racial restrictions on the sale of property even though the legal rights of blacks to purchase or to sell other property were unimpaired. In Jones, supra, we held that § 1982 "must encompass every racially motivated refusal to sell or rent." 392 U.S. at 421-422, 20 L.Ed.2d 1189, 88 S.Ct. 2186 2194, 47 Ohio Ops.2d 43. In Sullivan v. Little Hunting Park, Inc., 396 U.S. 229, 24 L.Ed.2d 386, 90 S.Ct. 400, we interpreted the term "lease" in § 1982 to include an assignable membership share in recreational facilities. In Tillman v. Wheaton-Haven Recreation Assn., Inc., 410 U.S. 431, 35 L.Ed.2d 403, 93 S.Ct. 1090, we extended that holding to cover a preference to purchase a nontransferable swim club membership.

Id. at 120-22, 101 S.Ct. at 1596-97 (footnotes omitted). The Court concluded as follows:

Although these cases broadly defined the property rights protected by § 1982, our cases, like the statutory language itself, all concerned the right of black persons to hold and acquire property on an equal basis with white persons and the right of blacks not to have property interests impaired because of their race.

Id. at 122, 101 S.Ct. at 1597-1598 (emphasis added) (footnote omitted). As this discussion in Memphis reveals, the scope of interests protected by section 1982 has been given a broad interpretation by the Court.

In challenging plaintiffs' section-1982-financing claim, First Federal relies principally upon dictum in a 1968 Supreme Court decision. See Jones v. Alfred H. Mayer Co., 392 U.S. 409, 413, 88...

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