Doane v. National Westminster Bank USA

Citations: 938 F. Supp. 149; 1996 U.S. Dist. LEXIS 14080; 1996 WL 543423Docket: CV 95 1181 (RJD)

Court: District Court, E.D. New York; September 24, 1996; Federal District Court

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Plaintiff Thomas L. Doane alleges that National Westminster Bank (NatWest) unlawfully denied a mortgage loan to the African-American buyers of his home based on the racial composition of the neighborhood and the buyers' race, violating the Fair Housing Act and the Civil Rights Act. NatWest has moved to dismiss Doane's claims under sections 1981 and 1982 for lack of standing, while not contesting the Fair Housing Act claim. The court must accept the allegations in Doane's complaint as true for this motion. 

Doane, a white male, owned a two-family brownstone in Bedford Stuyvesant from 1979 to 1995. The neighborhood's racial demographic was predominantly African-American. In December 1991, Doane entered a contract to sell his home to Beverly Scott and Cheryl Sims, both African-American, contingent on them securing a mortgage from NatWest. After a lower appraisal and a subsequent price reduction agreed upon by Doane, NatWest denied the mortgage application citing insufficient income and inadequate collateral. The buyers subsequently declared the contract void due to their inability to secure financing. 

Doane later sold the house for a higher price to different buyers and claims that NatWest's actions resulted in financial and personal hardships, including forced changes to his living situation and credit issues. The court will assess the standing issue based on constitutional and prudential criteria, noting that prudential limits do not apply to Fair Housing Act claims.

To meet the Article III case-or-controversy requirement, a plaintiff must demonstrate injury-in-fact, meaning actual or threatened harm caused by the defendant's actions that is remediable by a court. The defendant does not dispute the plaintiff's claim of injury due to the refusal to issue a mortgage but contends that the plaintiff fails to meet the prudential standing requirements. Generally, a plaintiff must assert their own legal rights, not those of third parties, to satisfy these prudential limitations. This principle, termed jus tertii, aims to prevent the court from adjudicating rights of absent parties and ensures that the most effective advocate for the rights at issue is present. Determining whether a party is vindicating third-party rights can be complex, as cases may appear to involve such rights but actually concern first-party rights. For instance, both individuals applying for a mortgage and the homeowner selling their property have rights against racial discrimination. The plaintiff, as a homeowner in a minority neighborhood, is asserting his own rights under the Civil Rights Act to sell his property free from discrimination. Courts have allowed claims under sections 1981 and 1982 to proceed based on discriminatory conduct motivated by the race of others, allowing for standing even when the plaintiff is not a member of the affected racial group. Relevant case law illustrates that non-minority plaintiffs can have standing to challenge discrimination affecting others or themselves.

The district court evaluated the defendants' motion for summary judgment, emphasizing that the racial identity of the parties involved in the underlying transaction is not a determining factor. It highlighted prior rulings establishing that non-minorities can pursue discrimination claims for injuries caused by racially discriminatory practices. The court referenced the case of Old West End Association, where plaintiffs established a prima facie case under the Fair Housing Act and the Civil Rights Act by demonstrating that they applied for a mortgage in a minority neighborhood, had creditworthy buyers, received an independent appraisal valuing the property, and faced rejection of their loan application. 

Similarly, the plaintiff in the present case has alleged sufficient facts to establish a prima facie case under sections 1981 and 1982, stating the property is in a predominantly minority neighborhood and that their mortgage application was denied despite being creditworthy and having an appraisal valuing the home at $197,000 in 1991. The court noted the precedent that plaintiffs in section 1982 cases have standing to assert their own rights, even when those rights overlap with others, as illustrated in cases like City of New York v. Fillmore Real Estate, Ltd. and City of Evanston v. Baird, Warner, Inc., where municipalities brought actions based on the impact of discriminatory practices on property values and tax revenues.

The defendants cited Mackey v. Nationwide Ins. Cos. to support their motion, where the court ruled that the plaintiff, an insurance agent, lacked standing as he was not a direct victim of discrimination. However, the court distinguished this case from the current one, asserting that the plaintiff is indeed a direct victim of discriminatory lending practices, unlike the insurance agent in Mackey. The court rejected the defendants' argument that only borrowers, not homeowners, can claim discrimination in lending cases, reaffirming the homeowner’s right to sell property free from discrimination based on neighborhood racial composition. Consequently, the court denied the defendant's motion to dismiss the plaintiff's claims under sections 1981 and 1982.