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08/02/79 Jerry W. Markham and v. Colonial Mortgage Service

August 2, 1979




Before WRIGHT, Chief Judge, SWYGERT, Circuit Judge,*fn1 and ROBB, Circuit Judge.



Appeal from the United States District Court for the District of Columbia (D.C. Civil Action No. 77-0232).



The Equal Credit Opportunity Act, 15 U.S.C. §§ 1691, Et seq., prohibits creditors from discriminating against applicants on the basis of sex or marital status. We are asked to decide whether this prohibition prevents creditors from refusing to aggregate the incomes of two unmarried joint mortgage applicants when determining their creditworthiness in a situation where the incomes of two similarly situated married joint applicants would have been aggregated. The plaintiffs in this action, Jerry and Marcia Markham, appeal the judgment of the district court granting defendant Illinois Federal Service Savings and Loan Association's motion for summary judgment. We reverse. The plaintiffs also appeal the judgment of the district court granting a motion for summary judgment on behalf of defendants Colonial Mortgage Service Co. Associates, Inc., Al Shoemaker, and B.W. Real Estate, Inc. As to this matter, we affirm. I

In November 1976, plaintiffs Marcia J. Harris *fn2 and Jerry Markham announced their engagement and began looking for a residence in the Capitol Hill section of Washington, D.C. One of the real estate firms which they contacted, defendant B.W. Real Estate, Inc., found suitable property for them, and in December 1976, Markham and Harris signed a contract of sale for the property.

Upon the recommendation of B.W. Real Estate, plaintiffs agreed to have defendant Colonial Mortgage Service Co. Associates, Inc. (Colonial Mortgage) conduct a credit check. Plaintiffs subsequently submitted a joint mortgage application to Colonial Mortgage, who in turn submitted it to Colonial Mortgage Service Company (Colonial-Philadelphia), a business entity located in Philadelphia and not a party to this action.

In March 1976, Colonial-Philadelphia had entered into an agreement with defendant Illinois Federal Service Savings and Loan Association (Illinois Federal), whereby Illinois Federal agreed to purchase certain mortgages and trust deeds offered it by Colonial-Philadelphia. Pursuant to this agreement, Colonial-Philadelphia offered plaintiffs' mortgage application to Illinois Federal.

Plaintiffs and B.W. Real Estate had decided that February 4, 1977 would be an appropriate closing date for the purchase of the Capitol Hill residence. Accordingly, plaintiffs arranged to terminate their current leases, change mailing addresses, and begin utility service at the new property. On February 1, the loan committee of Illinois Federal rejected the plaintiffs' application. On February 3, the eve of the settlement date, plaintiffs were informed through a B.W. Real Estate agent that their loan application had been denied because they were not married. They were advised that their application would be resubmitted to the "investor" who was not identified on February 8, but that approval would be contingent upon the submission of a marriage certificate.

On February 8, the Illinois Federal loan committee reconsidered the plaintiffs' application, but again denied it. A letter was sent that date from Illinois Federal to Colonial-Philadelphia, which letter stated that the application had been rejected with the statement: "Separate income not sufficient for loan and job tenure."

On February 9, 1977 plaintiffs filed this suit, alleging violation of the Equal Credit Opportunity Act. After the district court separately granted the motions of Illinois Federal and the other defendants for summary judgment on May 25, 1978, plaintiffs brought this appeal. II A.

We address first the appeal from the district court's summary judgment entered in favor of Illinois Federal. The district court concluded as a matter of law that plaintiffs could not state a claim under the Equal Credit Opportunity Act even if they showed that Illinois Federal's refusal to aggregate their incomes resulted, in whole or in part, in the denial of their loan application. This conclusion was based on the premise that creditors need not ignore the "special legal ties created between two people by the marital bond." It was the court's conclusion that under Illinois law *fn3 the mere fact of marriage provides creditors with greater rights and remedies against married applicants than are available against unmarried applicants. Presumably the district court believed that this excused Illinois Federal under 15 U.S.C. § 1691d(b), which allows a creditor to take "(s)tate property laws directly or indirectly affecting creditworthiness" into consideration in making credit decisions.

We fail to see the relevance of any special legal ties created by marriage with respect to the legal obligations of joint debtors. This was not an instance where a single person is applying for credit individually and claiming income from a third party for purposes of determining creditworthiness. In such an instance, the absence of a legal obligation requiring continuance of the income claimed by the applicant from the third party would reflect on the credit applicant's creditworthiness. Inasmuch as the Markhams applied for their mortgage jointly, they would have been jointly and severally liable on the debt. Each joint debtor would be bound to pay the full amount of the debt; he would then have a right to contribution from his joint debtor. See 4 A. Corbin, Contracts §§ 924, 928 (1951). See also Clayman v. Goodman Properties, Inc., 171 U.S.App.D.C. 88, 518 F.2d 1026 (1973); Welch v. Sherwin, 112 U.S.App.D.C. 124, 300 F.2d 716 (1962); Ill.Ann.Stat. ch. 76, § 3 (Smith-Hurd). While it may be true that judicially-enforceable rights such as support and maintenance are legal consequences of married status, they are irrelevancies as far as the creditworthiness of joint applicants is concerned. Illinois Federal would have had no greater rights against the Markhams had they been married, nor would the ...

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