Source: http://openjurist.org/295/f3d/565/paschal-v-flagstar-bank-fsb-fsb
Timestamp: 2013-12-09 02:10:52
Document Index: 545001682

Matched Legal Cases: ['§ 3605', '§ 3617', '§ 100', '§ 1981', '§ 1982', '§ 37', '§ 1981', '§ 37']

295 F3d 565 Paschal v. Flagstar Bank Fsb Fsb | OpenJurist
295 F. 3d 565 - Paschal v. Flagstar Bank Fsb Fsb	Home295 f3d 565 paschal v. flagstar bank fsb fsb
295 F3d 565 Paschal v. Flagstar Bank Fsb Fsb 295 F.3d 565
Gerald PASCHAL, et al., Plaintiffs-Appellees,v.FLAGSTAR BANK, FSB, a Federal Savings Bank, f/k/a First Security Savings Bank, FSB, Defendant-Appellant.
No. 00-1634.
Decided and Filed: July 17, 2002.
Stephen R. Tomkowiak (argued and briefed), Southfield, MI, for Plaintiffs-Appellees.
Francis R. Ortiz (argued and briefed), Paul R. Bernard, Rick A. Haberman (briefed), Dickinson, Wright, PLLC, Detroit, MI, for Defendant-Appellant.
Eight sets of African-American plaintiffs filed a mortgage-lending discrimination lawsuit against Flagstar Bank. Although the district court granted Flagstar summary judgment against three of these sets, the claims of the other five sets proceeded to trial. During jury selection, Flagstar excused the only African-American on the jury panel. But the district court recalled the juror after concluding that Flagstar's peremptory challenge was improperly exercised. The district court also decided a number of evidentiary issues against Flagstar during the trial. A verdict was subsequently returned in favor of Flagstar as to three of the five sets of plaintiffs, but the jury found that the remaining two sets of plaintiffs — the Edwardses and the Paschals — had proven by a preponderance of the evidence that Flagstar racially discriminated against them when they applied for mortgages. Flagstar filed a number of post-trial motions, all of which were denied by the district court. The bank now appeals the various adverse decisions that the district court rendered throughout the case. For the reasons set forth below, we AFFIRM the district court's judgment in favor of the Edwardses, REVERSE its judgment in favor of the Paschals, and REMAND the case with instructions to dismiss the Paschals' complaint.
The district court succinctly stated the general background of this case as follows:
This is a housing discrimination case (mortgage lending) brought under sections 805 and 818 of the Fair Housing Amendment Act of 1988, 42 U.S.C. § 3605 and § 3617, and corresponding regulations promulgated by the Department of Housing and Urban Development pertaining to mortgage lending, 24 C.F.R. §§ 100.120 to 100.130, as well as the Civil Rights Act of 1866 and 1870, 42 U.S.C. § 1981 and § 1982, and section 504 of Michigan's Elliot-Larsen Civil Rights Act, M.C.L. § 37.2504.
In general, plaintiffs claim that they were the subjects of racial discrimination in the manner in which defendant Flagstar Bank (Flagstar), a mortgage bank, handled their mortgage loan applications or in the way the terms and conditions of their mortgage loans were set.
Edwards v. Flagstar Bank, 109 F.Supp.2d 691, 692-93 (E.D.Mich.2000).
Prior to trial, Flagstar filed a motion for summary judgment, arguing that the events underlying the claims of four sets of plaintiffs, including the Paschals, occurred outside of the applicable statute of limitations. Although the district court granted Flagstar's motion for partial summary judgment with regard to the three other sets of plaintiffs, it denied the motion with regard to the Paschals. Flagstar did not contend that the Edwardses' claims were barred by the statute of limitations.
Five sets of plaintiffs went to trial. They are described by the district court as follows:
Audra Carson (Carson) claimed she was the victim of racial discrimination in the manner in which her application for a mortgage loan was handled. She did not close with Flagstar.
Paquita Davis-Friday (Davis-Friday) claimed she was the victim of racial discrimination in the manner in which her application for a mortgage loan was handled. She did not close with Flagstar.
Heath Thomas (Thomas) claimed he was the victim of racial discrimination in the manner in which his application for a mortgage loan was handled. He did not close with Flagstar.
David Edwards and E. Stephanie Edwards, his wife, (the Edwards[es]) claimed they were the victims of racial discrimination in the manner in which their efforts to refinance their mortgage loan with Flagstar was handled. The Edwards[es] eventually obtained a new mortgage loan from Flagstar.
Gerald Paschal and Lisa Paschal (the Paschals) claimed they were the victims of racial discrimination in the manner in which their application for a mortgage loan was handled. The Paschals were approved for a mortgage loan by Flagstar on terms considerably less favorable than for which they applied and eventually obtained a mortgage loan elsewhere.
Edwards, 109 F.Supp.2d at 693.
Because the jury rendered a verdict in favor of the Edwardses and the Paschals, we will describe their claims in more detail. On March 11, 1994, the Edwardses applied for a 15-year mortgage from Flagstar at a fixed interest rate of 7.875%. Their application was denied on May 26, 1994. According to Flagstar, the Edwardses' application was denied because they had insufficient funds to close the loan, inadequate collateral, and Flagstar "do[es] not grant credit to any applicant on the terms and conditions [the Edwardses] requested." The Edwardses claim that the stated reasons were a pretext designed to mask racial discrimination.
In an attempt to answer Flagstar's questions about various credit issues, the Edwardses met with a Flagstar loan officer on June 1, 1994. The Edwardses maintain that these alleged credit issues were old and inconsequential. Nevertheless, on September 16, 1994, Flagstar issued a second credit denial statement. The Edwardses claim that the reasons given for this denial were also pretextual.
After addressing additional questions about various credit issues, the Edwardses applied for a 30-year mortgage at a higher 9.5% interest rate. When this application was also denied, the Edwardses applied once again for a 30-year mortgage, but this time at a 10.875% interest rate. This final application was approved by Flagstar, and the Edwardses agreed to the terms. The Edwardses now claim that, throughout the entire process, Flagstar treated them as "second class citizens" due to their race.
In contrast, the Paschals were prequalified for a $75,000 mortgage at an adjustable 5.625% interest rate in May of 1992, despite having previously filed for bankruptcy. The Paschals were later notified by a loan officer that their mortgage had been tentatively approved. In August of 1992, however, Flagstar prepared a "Statement of Credit Denial, Termination, or Change" in which it informed the Paschals that Flagstar would approve only a $55,000 mortgage. Flagstar asserted that it was making this "counteroffer" because of the Paschals' other credit obligations, their prior bankruptcy, and the bank's inability to verify the Paschals' credit references. According to the Paschals, these reasons were a pretext intended to hide racial discrimination.
Flagstar's loan officer then took the Paschals' loan file to Mortgage Solutions, a/k/a Investaid Corporation, which preliminarily approved a $75,000 mortgage at a fixed 7.99% interest rate. Investaid, however, later withdrew this offer. According to the Paschals, "Flagstar pressured Investaid to not close on the Paschals' application...." The Paschals also allege that Flagstar fired its loan officer who took the Paschals' file to Investaid. On September 24, 1992, Investaid approved a $59,600 mortgage at 16.490%. After refusing this offer and withdrawing their application from Flagstar, the Paschals received a $68,700 mortgage, at an initial interest rate of 10.490%, from another lender.
The district court summarized the jury trial and subsequent verdicts as follows:
Plaintiffs' claims were tried to a jury in November of 1999. The jury returned a verdict in favor of Flagstar on the claims of Carson, Davis-Friday, and Thomas, and returned a verdict in favor of the Edwards[es] and Paschals. Particularly, the jury found the Paschals proved by a preponderance of the evidence that their race or color was one of the reasons why they did not obtain a mortgage loan from Flagstar. The jury awarded the Paschals $250,000 in compensatory damages and $325,000 in punitive damages. As to the Edwards[es], the jury found that they proved by a preponderance of the evidence that their race and color was one of the reasons why they did not obtain a mortgage loan on their initial application with Flagstar. The jury awarded the Edwards[es] $125,000 in compensatory damages.
After the jury returned its verdict, Flagstar filed a motion for judgment as a matter of law pursuant to Rule 50(b) of the Federal Rules of Civil Procedure. It also filed alternative motions for a new trial pursuant to Rule 59 of the Federal Rules of Civil Procedure and for a remittitur. The district court denied all of Flagstar's motions. This timely appeal followed.
Flagstar contends that the district court erred in denying its motion for summary judgment, which was based on its argument that the Paschals' suit was barred by the applicable three-year statute of limitations established by 42 U.S.C. §§ 1981 and 1982 and the Michigan Elliott-Larsen Civil Rights Act. M.C.L. § 37.2504. This court has held, however, that "where summary judgment is denied and the movant subsequently loses after a full trial on the merits, the denial of summary judgment may not be appealed." Jarrett v. Epperly, 896 F.2d 1013, 1016 (6th Cir.1990). The policy behind this rule is based on the conclusion that the potential injustice of allowing the improper denial of a motion for summary judgment is outweighed by the injustice of "depriv[ing] a party of a jury verdict after the evidence was fully presented, on the basis of an appellate court's review of whether the pleadings and affidavits at the time of the summary judgment motion demonstrated the need for a trial." Id. at 1016 n. 1.
Flagstar acknowledges that the denial of summary judgment is generally not appealable "where summary judgment is denied and the movant subsequently loses after a full trial on the merits." Id. at 1016. It claims, however, that the underlying reason for this rule does not apply in this case because "Flagstar's motion was not denied because the trial court found a genuine issue of fact for trial. The trial court instead found that the Paschals' claims were timely under the continuing violations doctrine. There was no fact question for the jury to determine." Flagstar contends that the district court's denial of its motion for summary judgment "effectively granted partial summary judgment against Flagstar on its statute of limitations defense."
A district court's determination that a complaint was filed within the applicable statute of limitations is a conclusion of law. Tolbert v. State of Ohio Dept. of Trans., 172 F.3d 934, 938 (6th Cir.1999). As noted above, the district court denied Flagstar's motion for summary judgment because it found that the Paschals' "allegations are sufficient to allow the Paschals to invoke the continuing violation doctrine to toll the relevant statute of limitations." Flagstar preserved this issue by moving for judgment as a matter of law at the close of the evidence, predicated on "all the reasons known to the law." The district court denied this motion.
Although Flagstar failed to raise this specific issue when it moved for judgment as a matter of law after the jury rendered its verdict, this court has held that a litigant's failure to raise such a defense in a Rule 50(b) motion does not waive appellate review if an appeal of the denial of a motion of summary judgment on the same ground would involve review of a pure question of law. McPherson v. Kelsey, 125 F.3d 989, 995 (6th Cir.1997) (allowing appellate review of a motion for summary judgment on the ground of governmental immunity because, unlike Jarrett, the issue before the court was "purely one of law"). Such an exception is applicable in this case because the legal issue raised in Flagstar's motion for summary judgment does not require the resolution of any disputed facts.
Because the district court's decision is properly before us, we must determine whether the "continuing violations" doctrine is applicable to the Paschals' claims. This court has adopted a three-part inquiry for determining whether a continuing violation exists. "First, the defendant's wrongful conduct must continue after the precipitating event that began the pattern.... Second, injury to the plaintiff must continue to accrue after that event. Finally, further injury to the plaintiffs must have been avoidable if the defendant[] had at any time ceased [its] wrongful conduct." Tolbert, 172 F.3d at 940.
The district court found that Flagstar denied the Paschals' application for a loan more than three years before September 21, 1995, the date on which the Paschals filed their complaint. In considering whether the continuing violations doctrine was applicable, however, the district court focused on the Paschals' allegations that: (1) on September 29, 1992, the Paschals had written Flagstar a letter withdrawing their loan application on the grounds of unfair treatment, and (2) on November 4, 1992, Flagstar had granted the Paschals' request to withdraw their application in a "Statement of Credit Denial, Termination or Change." The district court held that "[t]hese allegations are sufficient to allow the Paschals to invoke the continuing violation doctrine to toll the relevant statute of limitations...."
Contrary to the district court's determination, we conclude that neither of these events constitutes a continuing violation. The first occurrence involves a letter the Paschals wrote to Flagstar. Because the passive receipt of a letter does not constitute "wrongful conduct," this event could not possibly satisfy the first prong of the abovementioned three-part inquiry. Tolbert, 172 F.3d at 940 (holding that "[p]assive inaction ... does not support a continuing violation theory"). The second occurrence was the granting of the Paschals' request to withdraw their application for a mortgage. Although this occurrence required action by Flagstar, it does not constitute a separate act of "wrongful conduct." At most, the granting of the Paschals' request was the continu