Simms v. First Gibraltar Bank

• Citation: 83 F.3d 1546
• Decision Date: 31 May 1996
• Docket Number: No. 94-20386,94-20386
• Parties: Gordon D. SIMMS, et al., Plaintiffs, Gordon D. Simms, Plaintiff-Appellee, v. FIRST GIBRALTAR BANK, et al., Defendants, First Gibraltar Bank, FSB, now known as First Madison Bank, FSB, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 1546

83 F.3d 1546

64 USLW 2799

Gordon D. SIMMS, et al., Plaintiffs, Gordon D. Simms, Plaintiff-Appellee, v. FIRST GIBRALTAR BANK, et al., Defendants,

First Gibraltar Bank, FSB, now known as First Madison Bank,

FSB, Defendant-Appellant.

No. 94-20386.

United States Court of Appeals,

Fifth Circuit.

May 31, 1996.

David E. Keltner, Sharon N. Freytag, Haynes & Boone, Ft. Worth, TX, Laura Gibson, Bonnie J. White, Ogden, Gibson White, Houston, TX, for Appellant.

Raymond M. Hill, Houston, TX, for Appellee Riviana Bldg.

F. Willis Caruso, Michael P. Seng, Ronald D. Haze, John Marshall Law School, Chicago, IL, for Amicus Curiae.

Appeal from the United States District Court for the Southern District of Texas.

Before JOLLY, DAVIS and EMILIO M. GARZA, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

In this Fair Housing Act case, Gordon D. Simms, a white landlord, contends that First Gibraltar Bank violated the Act when it refused to issue a commitment letter to refinance its existing loan on Simms' apartment complex in a predominantly minority area with a loan to a cooperative housing corporation that probably would be minority owned. We hold that Simms failed to identify any discriminatory policy, procedure, or practice on which to base a discriminatory effects claim. We also hold that Simms failed to adduce sufficient evidence from which a reasonable jury could infer intentional discrimination under a discriminatory treatment theory of liability. Accordingly, we reverse the judgment of the district court and remand for entry of judgment in favor of First Gibraltar.

I

A

Simms owned the Forest Garden Apartments (the "apartment complex"), a fifty-eight unit complex located in a predominantly minority neighborhood in Houston, Texas. Simms purchased the apartment complex in 1979, in part by assuming an existing non-recourse loan from Gibraltar Savings Association ("GSA") secured by a first lien deed of trust on the property. Although GSA waived a "due-on-sale" clause ¹ contained in the deed of trust, the clause continued in effect after the transaction.

Simms encountered numerous difficulties with the apartment complex, including tenant problems and deteriorating conditions. He realized soon after purchasing the apartment complex that it was not producing enough income to make all the necessary repairs. Simms eventually decided to pursue a plan to convert the apartment complex into cooperative housing by rehabilitating and selling it to a cooperative corporation that he planned to establish for that purpose (the "co-op"). ²

B

The Department of Housing and Urban Development ("HUD") rental rehabilitation funds from the city of Houston and permanent financing from National Cooperative Bank ("NCB") ³ became crucial components of Simms' plan. After years of negotiations between the city and Simms, the city agreed that HUD rehabilitation funds could be used for cooperative housing. The city's planning department, by letter dated November 2, 1988, notified Simms that it had retained on its active waiting list his application for rehabilitation funds in the amount of $406,000. As a condition precedent to retaining Simms' application on priority funding status, the planning department imposed a December 17, 1988 deadline on Simms to present evidence of a private lender's commitment to provide matching loan funds for the cooperative rehabilitation. Simms failed to do so.

NCB apparently was to be the source of the matching funds required by the city. In an unexecuted commitment letter ⁴ dated July 1, 1988, NCB offered to issue a commitment letter evidencing its promise to provide permanent financing for the co-op in the amount of $500,000. Under the terms of the proposed commitment, NCB promised to provide financing if the co-op satisfied, inter alia, the following conditions at least sixty days prior to the scheduled closing date of the loan, July 15, 1989: (1) evidence of another lender's commitment of not less than $240,000, (2) a first lien deed of trust on the apartment complex, and (3) proof of $372,000 in committed grant funds from Houston. In another portion of the letter, NCB stated that it would consider a second lien position on a loan equal to or shorter than the first lien loan term at a higher interest rate. Simms had to accept NCB's commitment no later than August 15, 1988, by signing and returning the letter along with a non-refundable commitment fee of one percent of the loan amount, or $5,000. Simms never accepted NCB's offer.

C

On July 19, 1988, Simms spoke to Brenda Tomlinson, an employee of GSA in Houston, about his proposed cooperative conversion. He requested that GSA agree to waive the due-on-sale clause in the deed of trust so that the proposed cooperative corporation could assume the existing loan. GSA's waiver of the due-on-sale clause apparently would have satisfied NCB's condition that another lender commit not less than $240,000 to the project. Tomlinson instructed Simms that because of the scope of the request, a refinancing of the existing loan, i.e., the substitution of a new loan for the existing loan, not a waiver of the due-on-sale clause, would be the appropriate course of action. Simms wrote to Tomlinson in response to this conversation requesting a commitment letter for a new loan of $232,000, at the market interest rate of 10.5%, to replace GSA's existing loan on the apartment complex of $276,000 at 7.25%. Simms indicated in this letter that GSA would retain its first lien on the apartment complex. In other words, Simms was not asking GSA to extend any additional funds--GSA would receive $44,000 at closing, plus a higher interest rate on a lower loan balance, and a continued first lien position on a renovated piece of collateral. As a condition to closing on the new loan, Simms proposed pre-sale of fifty of the fifty-eight apartment units in the apartment complex. He included with this letter a summary of the project indicating the city's willingness to provide $400,000 in rehabilitation funds and NCB's willingness to provide permanent financing in the amount of $500,000.

On November 27, 1988, Simms again contacted Tomlinson concerning his proposal for a commitment letter. Tomlinson told Simms that she was not authorized to review the proposal and that she would forward it to Del Chastain, an asset manager in GSA's Dallas office. ⁵ Tomlinson sent Chastain a memorandum dated November 30 outlining in general terms Simms' proposal.

Simms apparently called Chastain in early December and then sent him a package on December 7 containing the November 2 letter from the city of Houston, the unexecuted and expired NCB commitment letter, and the financial details of his cooperative conversion plan. ⁶ Simms stated at the close of the cover letter to the package:

[T]he Gibraltar refinance would not occur until after the property is at least 80 percent sold (or leased with option to buy) to co-op buyers, and construction is completed and approved by city inspectors. At present, only a firm letter of commitment, contingent on the foregoing, is requested.

Simms indicated in this cover letter that GSA would retain its first lien position. He stated that he had been in contact with the city concerning the looming December 17 deadline for supplying the requested commitment letter. Simms stressed that the deadline was actually a "target, not a limit," and gave the name and number of a city official who could provide additional information about the rehabilitation funds and the deadline. He also gave a contact name and number at NCB, although he did not mention the fact that the deadline for accepting NCB's commitment letter had expired.

Simms' package did not contain any information on cooperative housing, even though no co-ops existed in Texas at that time. He did not explain that it was shares in the co-op itself that would be sold to co-op buyers, but instead said in his cover letter to Chastain that the "property" would be sold to co-op buyers. Even the unexecuted NCB commitment letter spoke in terms of "presales of 50 of the 58 units." ⁷

In mid-December, Chastain apparently called Simms to discuss the conversion proposal. Simms testified that they had a lengthy conversation, with Chastain asking a number of general questions about the project. Neither Simms nor Chastain, however, could recall many of the details of the conversation.

D

In the meantime, GSA joined the lengthy list of failed savings and loans in Texas. As a result, GSA is no more. On December 28, 1988, in an agreement with the Federal Savings and Loan Insurance Corporation (the "FSLIC"), appellant-defendant First Gibraltar Bank ("First Gibraltar") ⁸ purchased certain assets of GSA (and four other failed thrifts) from the FSLIC, ⁹ including the loan on the apartment complex. First Gibraltar did not assume the liabilities of GSA. ¹⁰

At some point in late December or early January, Chastain presented Simms' proposal to Rick Carlton, his supervisor, and Zac Isaacs, legal counsel to the bank. On January 5, 1989, Chastain, who continued in the employ of First Gibraltar, called Simms to inform him that First Gibraltar had rejected his proposal. First Gibraltar never sent a written rejection of the proposal. Simms testified that he was given no reason for this rejection other than that First Gibraltar "did not wish to participate," though he did admit that they "talked in generalities" about the proposal. Chastain apparently told Simms that Simms "would be wasting [his] time" to come to Dallas to talk about the proposal. Chastain allegedly dissuaded Simms from talking to the president of First Gibraltar, Carl Webb. ¹¹ Simms testified that he considered his proposal "dead" and thus did not take any other action in the immediate aftermath of First Gibraltar's rejection. Simms did not approach any other lenders about his proposal.

E

The deterioration of the apartment complex accelerated over the ensuing months. A rainstorm in ...