972 F.2d 931 (8th Cir. 1992), 91-3134, Mueller v. Abdnor

Docket Nº:91-3134.
Citation:972 F.2d 931
Party Name:Marvin MUELLER, Appellant, v. James ABDNOR, Administrator, Small Business Administration, Appellee.
Case Date:August 14, 1992
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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972 F.2d 931 (8th Cir. 1992)

Marvin MUELLER, Appellant,

v.

James ABDNOR, Administrator, Small Business Administration, Appellee.

No. 91-3134.

United States Court of Appeals, Eighth Circuit

August 14, 1992

Submitted April 17, 1992.

As Amended Nov. 18, 1992.

Rehearing Denied Dec. 24, 1992.

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James C. Owen, Chesterfield, Mo., argued, for appellant.

Claire Schenk, St. Louis, Mo., argued (Stephen B. Higgins and Claire M. Schenk, on the brief), for appellee.

Before JOHN R. GIBSON and BEAM, Circuit Judges, and MORRIS SHEPPARD ARNOLD, [*] District Judge.

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MORRIS SHEPPARD ARNOLD, District Judge.

This is an appeal of a judgment for slander of title against Marvin Mueller as counterdefendant and in favor of James Abdnor of the Small Business Administration ("SBA"). The court reverses the judgment of the district court 1 as to damages only.

I.

In 1977, SBA guaranteed a loan to Manco, Inc. The collateral for the SBA guarantee was two parcels of land in Miller County, Missouri, collectively known as the "Max Allen's Zoo" property. By April, 1984, the loan was in default, and SBA prepared to foreclose on its guarantee and to acquire the collateral. In June, 1985, James Hendren appraised the large parcel at $293,250 and the small parcel at $66,000. In June, 1986, Joyce Hilton appraised the large parcel at $140,297 and the small parcel at $19,400. In July, 1986, SBA foreclosed on the large parcel and listed it for sale. No takers were found at an auction in August, 1986.

Mr. Mueller had purchased SBA properties in the past. During that summer, Cornelius Weaver, an employee of SBA, had approached Marvin Mueller about buying the property. Mr. Mueller looked at both parcels, evidently believing that SBA had foreclosed on both; at the time, Mr. Weaver evidently believed that as well. In August, 1986, Mr. Mueller signed a contract for purchase on which the property was described only as "Legal Description to Govern AKA Max Allen's Zoo." The trial court found that no legal description was attached to the sale contract. The contract was signed on behalf of SBA by Darryl Westbrook, Mr. Weaver's supervisor. The trial court found that when the contract was signed, Mr. Mueller believed that it related to both parcels but that, unknown to Mr. Mueller, Mr. Westbrook believed that the contract related only to the larger parcel.

The terms of the contract called for an initial earnest money deposit of $5,000 on execution of the contract; a second earnest money deposit of $15,000 on September 9, 1986; and the balance due of $95,000 at closing, which was specified as October 10, 1986. The sale contract acknowledged receipt of the initial $5,000 deposit. (The check has disappeared; in any event, it was never cashed.) The trial court found that sometime after both parties had signed Mr. Weaver wrote on the contract that the contract was "Extended for Possession." The trial court further found that this alleged extension was neither authorized by Mr. Westbrook nor executed in accordance with SBA requirements.

The trial court found that, in September, 1986, Mr. Mueller failed to tender the additional earnest money required by the contract. His testimony was that Mr. Weaver had told him that the smaller parcel still needed to be acquired by SBA and that the second earnest money deposit did not need to be made until SBA acquired that parcel. Based on Mr. Weaver's representations that the deal was still on, Mr. Mueller expended $1,000 on upkeep in late 1986 and the first half of 1987. He paid $10,000 to SBA in December, 1986 (which was not cashed until April, 1987) and $5,000 in March, 1987. Sometime between September, 1986, and March, 1987, Mr. Westbrook told Mr. Weaver to tell Mr. Mueller that the contract had expired because of Mr. Mueller's failure to tender the additional earnest money, but Mr. Weaver did not do so until at least June or July, 1987. In June, 1987, Mr. Mueller submitted a second proposed contract for purchase of the large parcel. In July, 1987, SBA rejected that offer. In August, 1987, Mr. Mueller recorded his original sale contract with the county clerk, thus creating a cloud on the title of the SBA property.

In October, 1987, Mr. Mueller sued SBA in federal district court for breach of contract, and SBA counterclaimed for slander of title and for quiet title. A bench trial was held in November, 1989, and in May, 1991, the trial court entered its judgment.

As to the breach of contract complaint, the trial court held that no contract had

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ever existed because of the mutual mistake of the parties as to the land being sold. The trial court further held that even if a contract had been formed, SBA had not waived its right to rescind merely because it did not immediately advise Mr. Mueller of the expiration of the contract. The trial court further found that any assurances given by Mr. Weaver to Mr. Mueller that the contract was still in force were not authorized and could not serve as the basis for an estoppel against SBA. The trial court further found that although Mr. Mueller had himself listed the property for sale and had incurred $1,000 in associated expenses, he had failed to prove lost profits to a reasonable certainty. Holding that Mr. Mueller's reliance on Mr. Weaver's assurances was reasonable, however, and that Mr. Mueller had acted to his detriment as a result of those assurances, the trial court found that Mr. Mueller was entitled to recover the $1,000 in expenses and the $15,000 he had paid to SBA.

As to SBA's counterclaim, the trial court found that Mr. Mueller knew at the time he recorded the August, 1986, contract that it had expired. The trial court found, further, that Mr. Mueller had acted with malice and had published a document that placed a cloud upon the title of the large parcel. The trial court further found that a sale by SBA of that land to a prospective buyer fell through on account of the recording of Mr. Mueller's contract, which was discovered by the prospective buyer during a title search. The trial court awarded damages of approximately $100,000 to SBA, based on lost profits, lost interest, and expenses. Only the counterclaim is before this court.

II.

There are five issues on appeal--whether the trial court's finding that Mr. Mueller acted with malice in recording his sale contract was inconsistent with its finding that Mr. Mueller was entitled to reimbursement for expenditures in reasonable reliance on SBA's representations; whether the trial court correctly held that the sale contract was "false"; whether the standard of proof under Missouri law for slander of title is by a preponderance of the evidence or by clear and convincing evidence; whether the trial court improperly considered hearsay regarding SBA's damages; and whether the trial court's finding of consequential damages was based on insufficient evidence.

A.

The trial court found that Mr. Mueller had paid $1,000 in expenses on upkeep of the property in the last quarter of 1986 and the first half of 1987. The trial court also found that by May, 1987, Mr. Mueller had sent $15,000 to SBA that could not properly be applied to any other debt. All of these expenditures, the trial court held, were in reliance on Mr. Weaver's assurances that a contract still existed. Mr. Mueller's reliance was reasonable, the trial court held, in light of the "longstanding business relationship" between Mr. Mueller and Mr. Weaver.

Mr. Mueller argues that he could not have acted with malice, as required for slander of title, 2 if, as the trial court found, his reliance upon Mr. Weaver's assurances was reasonable. SBA argues that by late July, 1987, Mr. Mueller knew that his second proposed contract had been rejected. SBA further argues that Mr. Mueller's own testimony admits that he knew at the time he recorded his sale contract that "SBA considered it invalid" and that he did so "in order to stop" SBA's efforts to sell the property to others. Mr. Mueller replies that he...

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