Old West End Ass'n v. Buckeye Federal Sav. & Loan

• Decision Date: 22 July 1987
• Docket Number: No. C85-7814.,C85-7814.
• Court: U.S. District Court — Northern District of Ohio
• Parties: OLD WEST END ASSOCIATION, et al., Plaintiffs, v. BUCKEYE FEDERAL SAVINGS & LOAN, et al., Defendants.

675 F. Supp. 1100

OLD WEST END ASSOCIATION, et al., Plaintiffs, v. BUCKEYE FEDERAL SAVINGS & LOAN, et al., Defendants.

No. C85-7814.

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

July 22, 1987.

Stephen M. Dane, Cooper, Straub, Walinski & Cramer, Toledo, Ohio, for plaintiffs.

Rolf H. Scheidel, Shumaker, Loop & Kendrick, Toledo, Ohio, Nanci L. Danison, Vorys, Sater Seymour & Pease, Columbus, Ohio, for defendants.

OPINION AND ORDER

McQUADE, District Judge.

This action is a housing discrimination case. Plaintiff's suit is brought under 42 U.S.C. § 1981 (the Civil Rights Act of 1870), 42 U.S.C. § 1982 (the Civil Rights Act of 1866), 42 U.S.C. § 3601 et. seq. (Title VIII of the Civil Rights Act of 1968, Title VIII), and 42 U.S.C. § 1985(3). Plaintiffs seek both monetary and injunctive relief. Plaintiffs, the sellers of a Toledo residence, the sellers' real estate agent, and the Old West End Association accuse defendants Mortgage Investors Corporation (MIC), and Buckeye Federal Savings & Loan Association (Buckeye) of engaging in the discriminatory practice of redlining. Plaintiffs allege that defendants have discriminated in the financing of housing based upon the racial composition of the neighborhood in which the property is located. Defendants, MIC and Buckeye, have each filed a motion for summary judgment. Plaintiffs oppose both motions. Each defendant has also filed, with leave of court, a reply to plaintiffs' opposition brief.

The parties involved in the transaction underlying this suit are white. This factor, however, is irrelevant to the determination of defendants' motions for summary judgment. This court has previously found that non-minorities have standing to maintain discrimination actions for injuries suffered by them as a result of racially discriminatory practices. See Trafficante v. Metropolitan Life Insurance Co., 409 U.S. 205, 93 S.Ct. 364, 34 L.Ed.2d 415 (1972); Harrison v. Otto G. Heinzeroth Mortgage Co., 414 F.Supp. 66 (N.D.Ohio 1976); Watts v. Boyd Properties, Inc., 758 F.2d 1482 (11th Cir.1985).

The transaction underlying this dispute involves the sale of residential property located in the Old West End in Toledo, Ohio. In late 1984, plaintiffs Michael and Gale Mahaffey retained plaintiff Michael Murray of the Danberry Company to list and sell their residence. The sellers, in January, 1985, accepted the offer of Michael McMahon and Vicki Plant to purchase the Mahaffey residence. The agreed upon purchase price was $78,500.00. The buyers, McMahon and Plant are not parties to this action.

On behalf of the buyers, the sellers' real estate agent contacted defendant MIC to inquire about interest rates, closing costs, loan details and to review the buyers' financial background and potential creditworthiness. On February 4, 1985, the two buyers met with the real estate agent and defendant MIC. During that meeting, the buyers completed a real estate mortgage loan application and the associated paperwork. Defendants, at that time, requested an appraisal of the Old West End residence. The appraisal arrived at a value equal to the sale price. The appraisal also noted the predominant value of properties in the area to be $70,000.00. Upon completion of the necessary paperwork, MIC packaged and then transmitted the loan application to defendant Buckeye's office in Columbus for its review.

In late February, 1985, Buckeye notified MIC that it was rejecting the McMahon/Plant loan application. The reasons given for the rejection were that: (1) the property did not qualify for maximum financing, and (2) the property appraisal was unacceptable. MIC alleges that it suggested several alternatives to plaintiffs as well as attempted to cure the factors to which Buckeye objected. The evidence indicates that the appraisal showed a predominant value of $70,000.00 for other homes in the area. There is conflicting evidence that the loan would be limited to this figure.

In March 1985, allegedly all parties were notified that the loan application would be rejected absent a reduction of the sale price. After exploring several alternatives to overcome Buckeye's objections to the loan, the parties executed a revised purchase contract, the result of which was that the mortgage loan was reduced to the amount of $70,000.00. MIC submitted a revised loan application package to Buckeye on March 6, 1985. On March 11, 1985, defendant Buckeye approved the new loan application. On March 14, 1985, the closing on the Old West End property took place. Immediately thereafter, the McMahon/Plant mortgage was assigned to defendant Buckeye by defendant MIC. In July of that same year, the mortgage was purchased by Fannie Mae from defendant Buckeye.

The objective of a summary judgment is to pierce the pleadings and to assess the proof to determine if there is a genuine need for trial. Bryant v. Commonwealth of Kentucky, 490 F.2d 1273 (6th Cir.1974). A motion for summary judgment may be granted only when no material facts are in dispute, Fed.R.Civ.P. 56(c); Fitzke v. Shappell, 468 F.2d 1072 (6th Cir.1972), and when those facts when viewed in the light most favorable to the non-moving party, entitle the moving party to judgment as a matter of law. Willetts v. Ford Motor Company, 583 F.2d 852 (6th Cir.1978).

BUCKEYE'S MOTION FOR SUMMARY JUDGMENT

The order of presentation of proof in discrimination cases was established in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973). Although McDonnell Douglas was a Title VII employment discrimination case, its standards have been applied to Title VIII and Sections 1981 and 1982 claims. Shaw v. Cassar, 558 F.Supp. 303 (E.D. Mich.1983); See Drain v. Friedman, 422 F.Supp. 366 (N.D.Ohio 1976); United States v. Parma, 494 F.Supp. 1049 (N.D. Ohio) appeal dismissed 633 F.2d 218 (6th Cir.1980); Smith v. Anchor Bldg. Corp., 536 F.2d 231 (8th Cir.1976). McDonnell Douglas establishes that first, the plaintiff has the burden of demonstrating by a preponderance of the evidence a prima facie case of discrimination. McDonnell Douglas, 411 U.S. at 802, 93 S.Ct. at 1824. Once the plaintiff has established its prima facie case, the defendant must articulate a legitimate, non-discriminatory reason for its action. Id. If the defendant satisfies this burden, the plaintiff must, to be successful, prove that the defendant's legitimate, nondiscriminatory reason is in fact a mere pretext. Id. at 804, 93 S.Ct. at 1825.

The phrase "prima facie case" denotes the establishment of a legal, mandatory, rebuttable presumption. Texas Dept. of Community Affairs v. Burdine, 450 U.S. 248, 254 n. 7, 101 S.Ct. 1089, 1094 n. 7, 67 L.Ed.2d 207 (1981).

Construing, as we must, the evidence most favorably toward the plaintiffs, the plaintiffs have established 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 creditworthy; and (5) that the loan was rejected. These facts, the court believes, are sufficient to establish a prima facie case under both the Fair Housing Act and the Civil Rights Act.

The next step under McDonnell Douglas is that the defendant must produce admissible evidence which would allow a trier of fact rationally to conclude that the decision to reject the loan had not been motivated by a discriminatory animus. Burdine, 450 U.S. at 255, 101 S.Ct. at 1094-95.

Leeb has testified that the property did not qualify for maximum financing because "the value of the property exceeded the predominant value in the area, and therefore, that posed a marketing problem should the borrower default on his loan." Leeb Deposition at 24.

Leeb further testified that in reaching her decision to reject the loan, she utilized "Fannie Mae's guidelines regarding maximum financing...." Id. at 23. The guideline appears in Fannie Mae's underwriting policy, Section 103. Defendant contends that it applied Fannie Mae standards to insure that it could resell its mortgages to Fannie Mae.

Section 103 of Fannie Mae's guidelines states:

When the property has a sales price that approaches the upper price level, the loan is acceptable on maximum terms as long as the lender believes that it does represent a significant overimprovement and that it would appeal to enough qualified purchasers to create an active market. When the property has a sales price that exceeds the upper price level, the loan terms should generally be more conservative since it may not be acceptable to the typical buyer. However, a lender should consider the possibility that a property in an urban area is among those being rehabilitated.

O'Connell Deposition, Exhibit 30.

Patricia Leeb's interpretation of § 103 is disputed by plaintiffs' expert, Calvin Bradford. However, to satisfy its intermediate burden of proof, the defendant need not persuade the trier of fact that the action was lawful. Burdine, 450 U.S. at 257, 101 S.Ct. at 1095-96. This exceeds defendant's burden of production. Id. The prima facie case is rebutted when the defendant articulates lawful reasons for its action. Id. Beyond a doubt, a trier of fact could rationally find that Patricia Leeb's application of the predominant value policy to plaintiffs' loan was not motivated by a discriminatory animus.

Having successfully rebutted the prima facie case, "the factually inquiry proceeds to a new level of specificity." Id. at 255, 101 S.Ct. at 1095. The presumption of discrimination drops from the case. United States Postal Service v. Aikens, 460 U.S. 711, 715, 103 S.Ct. 1478, 1481-82, 75 L.Ed.2d 403 (1981). The factual inquiry in a § 1981, § 1982 and § 1985 case becomes whether the defendant intentionally discriminated against plaintiffs. In terms of Buckeye's motion for summary judgment, the inquiry is whether there is evidence from...