Appeal from an order entered in the United States District Court for the Southern District of New York (Lee P. Gagliardi, Judge ), denying an application for a preliminary and permanent injunction prohibiting interference with the sale of a cooperative apartment to plaintiff. Reversed and remanded.
Before Kaufman, Chief Judge, and Newman and Kearse, Circuit Judges.
This is an appeal by plaintiff Bennett Robinson from an order of the United States District Court for the Southern District of New York (Lee P. Gagliardi, Judge), denying an application for a preliminary and permanent injunction under the Fair Housing Act of 1968, 42 U.S.C. §§ 3601-3631 (1976), and the Civil Rights Act of 1866, 42 U.S.C. §§ 1981 and 1982 (1976), directing the defendant 12 Lofts Realty, Inc. (the "corporation") to permit him to purchase a cooperative apartment. For the reasons stated below we reverse and remand for further proceedings.
The defendant corporation owns a twelve-story cooperative apartment building in Manhattan (the "building"). In January 1979, the corporation had ten shareholders; each shareholder owned ten shares and had a proprietary lease of one floor of the building. Defendant Paul Hanley is one of the shareholders of the corporation. He holds a proprietary lease of the seventh floor of the building. All of the building's shareholders are White; there has never been a Black shareholder.
Plaintiff Bennett Robinson, who is Black, resides in a Manhattan rental apartment with his wife and two young daughters. Robinson holds a Ph.D. degree in physics from Stanford University and is employed as a research physicist by IBM. He earns a salary of $26,500 a year, plus $8,000 in benefits and stock options.
On January 22, 1979, Robinson entered into a written contract with Hanley to purchase, for $45,000, six and two-thirds of Hanley's shares and a proprietary lease of the south two-thirds of the seventh floor of the building. The contract made the sale conditional on Hanley's obtaining the consent of the corporation to the transfer.
On February 26, a meeting of the corporation's shareholders was convened to discuss the proposed sale to Robinson. At the meeting the building's manager reported that the second floor of the building was about to be sold to one Donald Kuspit, a White person. Thereafter, there was a "general discussion" of the proposed sale to Robinson. Following the discussion, the shareholders voted to amend the corporation's by-laws to establish a screening committee, which would meet with any prospective buyer and obtain a credit report, a resume, and a recommendation from his former landlord; the committee would then report to the shareholders at large for a final vote.
Following the February 26 meeting a screening committee was formed. The new procedure was not followed with respect to Kuspit, who soon became the corporation's eleventh shareholder.*fn1 The committee eventually met with Robinson and his wife in early May. At the committee interview there was apparently a tenor to some of the committee's questions and comments that Robinson found offensive. The committee asked Robinson whether he had ever been convicted of a crime, whether he was involved in any "after-hours" club, and whether he had underworld connections. One committee member elaborated that they did not want criminal elements in the building, and stated that there had been a rumor floating around the building linking Robinson with criminal elements and an after-hours club. Despite his resentment at the questioning, Robinson answered all questions and assured the committee that he had never been convicted of a crime, had no underworld connections and had no involvement in any after-hours club, and that the space that he sought to purchase from Hanley was to be used as a residence for Robinson and his family.*fn2
The screening committee's written report, dated May 11, 1979, stated that Robinson's credit report, his resume, and a telephonic check with his landlord were all "satisfactory." The report also stated that the "Screening committees (Sic ) questions discussed that Dr. & Mrs. Robinson intended to use the space as their personal residence," and that at the interview the Robinsons had "answered all questions satisfactorily."
On May 17, a combined meeting of directors and shareholders was held to consider Robinson's proposed purchase. The first order of business, after correction and approval of the minutes of the previous meeting, was a review of the corporation's by-laws "to allow the agenda matter (7th fl. partial sale (to Robinson)) to take place with full understanding of the formal procedure required." (Minutes of May 17, 1979 meeting, at 1.) Following a "general discussion of the by-laws," the shareholders voted unanimously to increase the "51% Majority needed for approval" of a proposed resale of stock to 662/3%. (Id.)*fn3 They then voted 10-1 to allow a secret ballot on all resale and sublet decisions. (Id.) Then, after hearing a report of the screening committee, and receiving the committee's written report in which all matters were described as "satisfactory," the shareholders disapproved Robinson's purchase because only seven shareholders out of eleven (I. e., fewer than 2/3) voted in favor of it. (Id. at 2.)
Robinson was thereafter notified of the rejection and brought this suit in the district court under 42 U.S.C. § 3601 Et seq. and 42 U.S.C. §§ 1981 and 1982, seeking damages and injunctive relief. He moved for a preliminary injunction directing the corporation to permit him to consummate his purchase from Hanley and restraining the corporation from taking any action to interfere with that purchase.*fn4 An evidentiary hearing was held on the motion. All of the events described above were brought out during the plaintiff's presentation of his case.
Four of the corporation's shareholders, including Hanley, were called as witnesses for the defense. Richard Wengenroth, the corporation's president and a member of the screening committee, described the May 17 meeting at which Robinson's purchase was disapproved. He testified that he had reported to the shareholders that as to the objective questions considered by the screening committee, Robinson was "acceptable." He ascribed the rejection of Robinson to subjective reactions:
At the same time, there were other questions that did not have to do with what I can only call objective matters, but had to do more with questions of personality exchanges that had been had between various people in the building with the applicant, and those were extended discussions.
(Tr. 110.) Another shareholder, Joseph Russo, testified that "hours of discussion" were devoted to the question of Robinson's purchase, and that
Generally speaking, most of the people who had had any contact with him indicated to the rest of us that he had a personality that generally seemed counter to the personality that we were looking for. He was argumentative, he was caustic, he was sarcastic. In general, he did not get along with most of the people. It was as if he was demanding that space rather than asking, as everyone else had. That was the general tenor of almost all in fact, of all of the comments, possibly with the exception of one that wasn't in that particular vein, but everyone that had met with him indicated that there was an acerbic quality to his personality that came out in every conversation with every member of the group thus far.
(Tr. 80-81.) Russo also testified that it was reported at the May 17 meeting that Robinson had used profanity in a discussion with another shareholder.
Paul Waldman, the shareholder who owned the sixth floor, also supported the view that the shareholders found Robinson "disagreeable" and "did not like him personally":
Oh, the reasons were virtually unanimous, that they felt he was an extremely abrasive person. He was a person who was caustic and abrasive and would not fit into the personality of this family.
(Tr. 97-98.) Waldman also indicated, as had Robinson in his testimony, that there had been sharp conflict between himself and Robinson with respect to Robinson's desire to install plumbing for the seventh floor by running a waste line through the floor and out along the ceiling of the sixth floor. However, Waldman testified that Robinson's desire to follow this procedure was not discussed at either the February 26 or the May 17 meeting.*fn5 Robinson testified that he was aware prior to the May 17 meeting that Waldman would not permit this procedure and that Robinson was leaning toward use of an alternative procedure that had been adopted by Wengenroth.
Following the hearing, the motion for a preliminary injunction was combined with the application for a permanent injunction and the hearing was ordered consolidated with a trial on the merits of the injunction claims*fn6 pursuant to Fed.R.Civ.P. 65(a)(2). The district court noted the defendant corporation's suggestion that it might wish to call additional witnesses but stated that in view of the court's disposition of the matter no further testimony would be required.
The district court denied injunctive relief. It found that although Robinson had made out a prima facie case of housing discrimination, thus shifting to the defendant corporation the burden "to show in a convincing manner that there is a substantial justification for denying the ...