Harper v. Union Sav. Ass'n

• Decision Date: 14 March 1977
• Docket Number: No. C 75-671.,C 75-671.
• Citation: 429 F. Supp. 1254
• Parties: James R. and Janice E. HARPER, Plaintiffs, v. The UNION SAVINGS ASSOCIATION, Defendant.
• Court: U.S. District Court — Northern District of Ohio

429 F. Supp. 1254

James R. and Janice E. HARPER, Plaintiffs, v. The UNION SAVINGS ASSOCIATION, Defendant.

No. C 75-671.

United States District Court, N. D. Ohio, E. D.

March 14, 1977.

Avery S. Friedman, David L. Hoehnen, Cleveland, Ohio, for plaintiff.

Fred W. Friend, Timothy F. McMahon, Cleveland, Ohio, for defendant.

MEMORANDUM AND ORDER

WILLIAM K. THOMAS, District Judge.

On April 10, 1974, Union Savings Association (hereafter Union) filed its action to foreclose its mortgage note and deed issued to James R. Harper and Janice E. Harper (hereafter the Harpers). Union had made a 90% loan to finance the Harpers' purchase of a residence on Rawnsdale Road in Shaker Heights, Ohio, title to the property having been recorded in the Harpers' name on October 20, 1972. On May 28, 1975, Judge Lloyd O. Brown of the Common Pleas Court of Cuyahoga County, after a hearing, overruled the Harpers' motion to stay the sale proceedings.¹ At the sheriff's sale Union bought in the property. On June 24, an order for writ of possession issued to the sheriff, the Harpers having continued to reside in the property throughout the foreclosure proceedings.

The day before the sheriff was to dispossess the Harpers, they filed this action on July 30, 1975. They sought

. . . to enjoin racial discrimination in housing as it relates to mortgage credit as prohibited by the Fair Housing Act of 1968, 42 U.S.C. Sections 3601, et seq. and by the Civil Rights Act of 1866, 42 U.S.C. Sections 1981 and 1982 and by regulations issued by the Federal Home Loan Bank Board, 12 C.F.R. 528 and 531.

Jurisdiction was invoked in this court pursuant to 28 U.S.C. §§ 1343(3) and (4) and 2201, and 42 U.S.C. §§ 3612 and 3617.

On the same date, July 30, 1975, this court conducted a hearing upon plaintiffs' request to temporarily restrain the eviction of the Harpers and their children. The court being informed that the Harpers had found a place in which to move that had not yet opened up, a temporary order restraining the eviction of the Harper family was issued for 14 days. On August 14, 1975, the Harpers vacated the premises. An amended complaint was filed the next day, adding a prayer for damages.

In paragraphs 4, 5, and 6 the plaintiff Harpers allege that they are black persons and citizens of the United States; that defendant Union is a lending institution pursuant to section 805 of the Fair Housing Act, 42 U.S.C. § 3605; and that

Plaintiffs and defendant entered into a mortgage for the purchase of a residential dwelling in October, 1972 on an all white street in Shaker Heights, Ohio.

Answering, defendant Union admits that it is a lending institution subject to the provisions of section 805 of the Fair Housing Act. It further admits the execution of a note and mortgage relating to the purchase of the residential property located at 3652 Rawnsdale Road, Shaker Heights, Ohio, but denies the allegation that this was "an all white street."

In paragraph 7 the plaintiffs allege that "twice in 1973 their checks for monthly payments were not covered by sufficient funds, but plaintiffs took immediate action to cover the payments after notice." While admitting the dishonored checks for insufficient funds, Union denies that "plaintiffs took immediate action to cover payments after notice."

Paragraph 8 alleges that James Harper, in the fall of 1973, "lost his employment and attempted to negotiate interim financing of the dwelling with the defendants;" and paragraph 9 states that "although institutions usually attempt to accommodate mortgagors under such circumstances, all proposals were rejected."

Answering paragraph 8, defendant Union states it is without knowledge as to James Harper's unemployment in the fall of 1973, and "otherwise denies that plaintiffs realistically attempted to negotiate interim financing with defendant." Paragraph 9 is denied, "as constituting argumentative and erroneous conclusions."

In paragraph 10, plaintiffs state that they "sent defendants periodic balances in order to make up mortgage payment deficiencies;" and defendant Union, while admitting some periodic payments, states that "same were insufficient to satisfy the Harpers' obligations."

Remaining paragraphs 11 through 20 of plaintiffs' amended complaint, the allegations of which defendant Union denies, are as follows:

11. Defendant was advised of plaintiff's new employment in January, 1974 and of his capacity to resume regular payment.

12. When defendant sought foreclosure in April, 1974, plaintiff was in arrears in the amount of only one (1) month's payment.

13. In plaintiffs' belief, defendant's action was taken on account of race.

14. Defendant's pursuit of foreclosure against blacks living in integrated or predominantly black areas is not as aggressive or vigorous.

15. Defendant's pursuit of foreclosure against whites living in predominantly white areas is not as aggressive or vigorous.

16. Defendant has interfered with plaintiffs' fundamental rights of equal housing opportunities in their summary rejections of accommodations and aggressive pursuit of foreclosure.

17. Subsequent to the foreclosure order, plaintiffs have offered and continue to offer proposals in order to arrange financing with the defendant to remain in their home.

18. Defendant refused and continues to refuse to negotiate any proposal to date.

19. As a proximate result of the discriminatory conduct of the defendant and its agent, plaintiffs have suffered great humiliation, anxiety, and outrage, along with a substantial loss of personal funds.

20. Plaintiffs are unable to afford legal services in vindicating their rights under federal fair housing statutes FHLBB regulations.

The case has now been tried at length upon the merits. It is imperative to first consider and determine defendant's defense that "plaintiffs' complaint fails to state a claim upon which relief can be granted; " and its defense that "plaintiffs' alleged cause of action is barred by the provisions of the applicable statute of limitations, 42 U.S.C. § 3612." In part I which follows, these two defenses will be considered in that order.

I.

A.

The Thirteenth Amendment empowers Congress to eliminate all badges and incidents of slavery. Title VIII of the Civil Rights Act of 1968, 42 U.S.C. § 3601, et seq. is an exercise of that power. Williams v. Matthews Co., 499 F.2d 819, 825 (8 Cir. 1974); United States v. Hunter, 459 F.2d 205 (4 Cir. 1972). Among the several sections upon which plaintiffs predicate their cause of action against defendant Union, 42 U.S.C. § 3605 alone specifically defines duties that are imposed upon lending institutions. Defendant Union admits that for the purposes of this action it is "subject to the provisions of Section 805 of the Fair Housing Act, 42 U.S.C. Sec. 3605." Entitled "Discrimination in the financing of housing", that section provides:

After December 31, 1968, it shall be unlawful for any bank, building and loan association, . . . to deny a loan or other financial assistance to a person applying therefor, for the purpose of purchasing, constructing, improving, repairing, or maintaining a dwelling, or to discriminate against him in the fixing of the amount, interest rate, duration, or other terms or conditions of such loan or other financial assistance, because of the race, color, religion, sex, or national origin of such person . . . or of the present or prospective owners . . . of the dwelling . . . in relation to which such loan or other financial assistance is to be made or given.

Obviously, there is no express language in section 3605 that prohibits discrimination in the manner in which a lending institution exercises its equitable right to foreclose a delinquent mortgage loan. However, Congress has expressly made it unlawful for a lending institution to deny a loan "because of the race, color, religion, sex, or national origin" of a prospective owner of "the dwelling . . . in relation to which such loan . . . is to be made or given"; and Congress has further made it unlawful to discriminate against such person in the fixing of "terms or conditions of such loan".

The unqualified words "terms or conditions" are entitled to the broadest possible construction; and a mortgage loan is, therefore, found to be within the contemplation of such language. Presumably the mortgage deed executed by the Harpers to Union is a standard mortgage deed. Contemplating the eventuality of foreclosure it provides in paragraph 6 that "if proceedings be brought to foreclose this mortgage or to collect the principal and interest represented by the note hereinbefore recited, a court of competent jurisdiction, . . . may appoint a receiver to take possession of, manage and control said premises . . .." This court concludes that it is the intent of Congress that section 3605's prohibitions against discrimination on the part of lending institutions in connection with real estate loans proscribe discrimination in the manner in which a lending institution forecloses a delinquent or defaulted mortgage note since the right of foreclosure is one of the "terms or conditions of such loan".

Broad construction of section 3605 is in keeping with the Supreme Court's recognition in Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 209, 93 S.Ct. 364, 367, 34 L.Ed.2d 415 (1972), that "the language of the Fair Housing Act is broad and inclusive." Similarly, Marr v. Rife, 503 F.2d 735, 740 (6 Cir. 1974), declares:

An examination of the Act, 42 U.S.C. §§ 3601-3612, reveals a broad legislative plan to eliminate all traces of discrimination within the housing field.

The question of whether a racially discriminatory foreclosure is a violation of 42 U.S.C. § 3605 has apparently only been an issue in two other reported cases. Hunter v. Atchinson, 466 F.2d 490 (6 Cir. 1972); Lindsey v. Modern American Mortgage Corp., 383 F.Supp. 293 (N.D.Tex.1974). The court of appeals in Hunter was not specifically presented with the question of whether...