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Baker v. F & F Investment Co.

decided: December 6, 1973.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 69 C 15. FRANK J. McGARR, Judge.

Cummings and Stevens, Circuit Judges, and Campbell, Senior District Judge.*fn*

Author: Cummings

CUMMINGS, Circuit Judge.

In their complaint, the Negro plaintiffs alleged that they were charged excessive and discriminatory prices for their homes. Their suit was based on asserted violations of the Fifth, Thirteenth and Fourteenth Amendments and the Civil Rights Acts (42 U.S.C. §§ 1981, 1982, 1983 and 1985(3)). In view of District of Columbia v. Carter, 409 U.S. 418, 34 L. Ed. 2d 613, 93 S. Ct. 602, plaintiffs no longer rely on the Fourteenth Amendment or 42 U.S.C. § 1983. Jurisdiction was predicated on 28 U.S.C. § 1343(4). The pertinent provisions are reproduced in the Appendix hereto. The original defendants were real estate sellers, their assignees, and savings and loan associations.

According to the complaint, the defendant-sellers were real estate speculators who purchased residences from white owners through "block busting" in areas near black neighborhoods. They then resold the properties to plaintiffs under installment sale contracts at excessive prices. The defendant savings and loan associations allegedly made loans to the sellers based on false and excessive appraisals.

The district court held that a cause of action had been stated under Section 1 of the Civil Rights Act of 1866 (42 U.S.C. § 1982) and under the federal and Illinois antitrust laws. Contract Buyers League v. F & F Investment, Inc., 300 F. Supp. 210 (N.D. Ill. 1969). This decision occurred after the United States filed an amicus brief agreeing with plaintiffs' construction of the 1866 statute.

On August 11, 1970, the plaintiffs added Count 7 to their complaint, making a federal official and certain federal agencies parties defendant. They were the Secretary of the Department of Housing and Urban Development (HUD), the Federal Housing Administration (FHA), the Veterans Administration (VA), the Federal Savings and Loan Insurance Corporation (FSLIC), and the Federal Home Loan Bank Board, hereinafter sometimes termed the federal defendants. A month later the VA Administrator was added as a defendant. The district court granted the Federal Home Loan Bank Board's motion to dismiss it as a defendant on the ground that Congress had limited its consent to suits against that Board to federal savings and loan associations and directors and officers thereof. 12 U.S.C. § 1464(d)(1). However, the court refused to dismiss the remaining five federal defendants from the suit. We granted leave to appeal from the interlocutory order denying their motions to dismiss.

Count 7 charged that the former Secretary of HUD had responsibility for implementing the home mortgage insurance program administered by the FHA. Until 1967 that agency is said to have supported racially discriminatory market conditions in Chicago through the administration of its home mortgage insurance programs, thus depriving plaintiffs of an equal opportunity to purchase homes. Since the FHA eliminated the availability of mortgage financing to Negroes in Chicago, plaintiffs allegedly had to purchase homes in segregated areas from real estate speculators and block busters under installment contracts at exorbitant prices.

The VA assertedly followed the same discriminatory policies practiced by the FHA and enabled defendant-sellers similarly to extract excessive prices from plaintiffs.

The FSLIC is described as the successor-in-interest to several defunct defendant-lender savings and loan associations. The complaint predicated the liability of the FSLIC on the illegal activities of those defendant-lenders and on the FSLIC's status as the mortgagee or title holder of properties sold to plaintiffs by defendant-sellers.

Plaintiffs charged that the actions of the federal defendants willfully and wrongfully deprived them of their constitutional rights in violation of 42 U.S.C. §§ 1981 and 1982 and the Fifth and Thirteenth Amendments. Plaintiffs sought actual and consequential damages and punitive damages, as well as reasonable attorneys' fees and costs. They also sought a declaration that the mortgages of the defendant-lenders and the FSLIC are void and unenforceable.

In its unreported opinion, the district court held that §§ 1981 and 1982 of the Civil Rights Acts were founded on the Thirteenth Amendment and applied to acts committed under color of federal law since they prohibit racial discrimination by all persons. The court held that the sue and be sued clauses contained in the enabling legislation governing the defendant agencies constituted a waiver of immunity to suit under the Civil Rights Acts. The court noted that the two individual federal defendants were only "named in their official capacity to meet the requirements set forth in the statutes to properly sue the F.H.A. and the V.A., respectively," with personal liability not being asserted against them.

The FSLIC was held to be a proper defendant because if the defendant savings and loan associations discriminated, the FSLIC would be liable as a successor-in-interest to their liabilities.

Applying our opinion in Baker v. F & F Investment, 420 F.2d 1191 (7th Cir. 1970), certiorari denied, 400 U.S. 821, 91 S. Ct. 40, 27 L. Ed. 2d 49, the district court held that the five-year Illinois catchall statute of limitations applies. Although the Government argued that there was no continuing contractual relationship between the plaintiffs and the federal defendants, so that the statute of limitations had run as to them, the court rejected their argument as follows:

"The plaintiffs are alleging that the federal defendants have discriminated against them by establishing policies which were discriminatory in nature and were in effect throughout the period in question. If these defendants did initiate discriminatory policies, they not only affected the plaintiffs when they first purchased their homes, but also during this entire period when they might have wanted to refinance their homes. Therefore, just as there is a continuing relationship which allows the plaintiffs to maintain this action against the defendant-sellers and lenders, there is the same type of continuing relationship between the plaintiffs and the federal defendants, so that the statute of limitations would not serve as a bar to this action."

We affirm, except as to FSLIC. As to the FSLIC, we affirm in part and reverse in part.

Governmental Liability for Violations of Civil Rights Acts

Blinding itself to landmark decisions of the Supreme Court, the Government urges that neither it nor its instrumentalities are subject to suits for damages under 42 U.S.C. §§ 1981 and 1982 for violations of the Fifth and Thirteenth ...

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