First Bank of Marietta v. Hogge

• Decision Date: 06 November 1998
• Docket Number: No. 97-3345,97-3345
• Parties: FIRST BANK OF MARIETTA, Appellant, v. Robert L. HOGGE, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 506

161 F.3d 506

FIRST BANK OF MARIETTA, Appellant, v. Robert L. HOGGE, Appellee.

No. 97-3345.

United States Court of Appeals,

Eighth Circuit.

Submitted Jan. 22, 1998.

Decided Nov. 6, 1998.

Kent L. Brown, Jefferson City, MO, argued, for appellant.

Dean L. Cooper, Jefferson City, MO, argued (Gregory C. Mitchell, on the brief), for appellee.

Before McMILLIAN, FLOYD R. GIBSON, and BOWMAN, ¹ Circuit Judges.

FLOYD R. GIBSON, Circuit Judge.

First Bank of Marietta ("First Bank") appeals the summary judgment that the district court ² entered against it in First Bank's fraudulent misrepresentation case against Robert L. Hogge, the presiding commissioner of Moniteau County, Missouri. For the reasons set forth below, we affirm.

I. BACKGROUND

The following summary is based largely upon the district court's statement of facts and the parties' Agreed Statement as the Record on Appeal.

On December 10, 1990, Moniteau County, Missouri ("County") entered into a lease-purchase agreement with Pioneer Leasing Corporation ("Pioneer") in which the County agreed to lease certain emergency radio equipment. The lease-purchase agreement stated that the lessor makes no warranties regarding the condition, quality, or fitness of the equipment. Pioneer subsequently assigned all of its rights, titles and interests in the lease to Consolidated Financial Services ("Consolidated"). On June 14, 1991, Robert Hogge, the presiding commissioner of the County, executed a Certificate of Acceptance in which he represented that the individual pieces of equipment received pursuant to the lease-purchase agreement were in good working order, were suitable for the County's purposes, and were unconditionally received for all purposes of the lease-purchase agreement.

On June 26, 1991, Consolidated and First Bank signed a bill of sale and assignment in which Consolidated assigned all of its rights, titles and interests in the lease to First Bank. Alan N. Shind, the vice-president of First Bank, stated that First Bank relied upon Hogge's Certificate of Acceptance in purchasing the lease.

Thereafter, Hogge acknowledged that "the equipment described in [the lease-purchase agreement] was not operational on June 14, 1991." Agreed Statement As The R. On Appeal at Ex. 3. Hogge stated that he signed the Certificate of Acceptance at the request of an individual who informed Hogge that "the document was a formality required in order to receive payment, and that the said equipment would be properly installed and made fully functional." Id. Moreover, Hogge indicated that the radio equipment "has never been properly installed and made fully operational." Id. Shind countered that First Bank would not have purchased the lease or disbursed funds had it known that these allegations in Hogge's Certificate of Acceptance were false.

The County's first payment to First Bank of $11,690.72 was due on December 10, 1991. The County did not pay this payment but, instead, rejected the equipment by correspondence to Consolidated, ³ dated December 3, 1991, which claimed that the system was not operational and that much of the equipment was non-conforming. Thereafter, by a letter dated August 21, 1992, the County informed First Bank's counsel that the County did not believe that the lease-purchase agreement was enforceable under the Missouri Supreme Court ruling in Mercantile Bank of Illinois v. School Dist. of Osceola, 834 S.W.2d 737 (Mo.1992). ⁴ In particular, the County explained that

[b]ecause [it] has now been forced to operate on a deficit budget, this contract does not appear to be enforceable under the recent Missouri Supreme Court ruling in Mercantile Bank. ...

As the situation stands, we cannot use the equipment, the equipment is sitting in boxes depreciating every day and a lot of economic waste is occurring.

Agreed Statement As The R. On Appeal at 4-5.

In a second letter dated November 6, 1992, the County again wrote to First Bank's counsel and stated that

[a]s you may have heard in the news, our County Commission has been publicly criticized by State Auditor Margaret Kelly's office because of our budget deficit situation. We were in poor condition prior to having to face the multiple capital murder cases which are now pending. Without a doubt our situation falls squarely within the Missouri Supreme Courts [sic] ruling in Mercantile Bank. ... Please be advised that Moniteau County asserts the additional defense that the contract is voided for the reason that Moniteau County lacks sufficient unencumbered fiscal resources to pay any additional funds as due....

The situation remains that we cannot make the system work and that we are not using any part of it.

Id. at 5.

On February 26, 1993, First Bank filed a petition ⁵ in Moniteau County Circuit Court seeking damages against the County under the lease-purchase agreement. This petition alleged, in pertinent part, as follows:

7. Pursuant to the lease Moniteau County agreed to pay three equal installments of Eleven Thousand, Six Hundred Ninety and 72/001 [sic] ($11,690.72) Dollars with the first payment due December 10, 1991, an additional payment due December 10, 1992, and a final payment due December 10, 1993, for a total of Thirty-five Thousand, Seventy-two and 16/100 ($35,0072.16) (sic) Dollars.

8. Moniteau County has defaulted in making the December 10, 1991 and December 10, 1992 payments.

9. By virtue of Moniteau County's default, [First Bank] has accelerated all payments and the same are now due and payable but Moniteau County has failed and refused, despite demand, to perform its obligations under the lease.

10. By virtue of [the County's] entry into and breach of the lease, First Bank of Marietta is legally entitled to receive the payments referred to in paragraph 7, totaling $35,072.16, along with interest at the highest lawful rate from the due date of each installment payment, and late fees as provided by the lease.

* * *

WHEREFORE, [First Bank] prays this judgment against [the County] in the amount of Thirty-five Thousand, Seventy-two and 16/100 ($35,072.16) Dollars, plus interest at the highest legal rate from December 10, 1991, for late charges as provided in the lease, reasonable attorney's fees, court costs and costs of collection as provided by the agreement, and for such other and further relief as this court deems just and proper.

Id. at 5-6.

The County's answer to First Bank's state court petition, in pertinent part, responded that the lease-purchase agreement "violates on its face Article VI, Section 26(a) of the Constitution of the state of Missouri .... [and that the County] timely informed [First Bank] ... that its obligations, if any, under the lease purchase agreement were voided by inability to constitutionally pay the same." Id. at 6.

On December 10, 1993, the County did not make the third payment to First Bank that was originally due on that date. The total income and revenue received by the County during fiscal year 1991 was greater than the amount of the payment due under the lease-purchase agreement on December 10, 1991, $11,690.72. However, Anita Groepper, the County Clerk, stated that the County did not have available unencumbered funds to pay the entire balance on the lease-purchase agreement, $35,072.16, in fiscal years 1991, 1992, and 1993. ⁶

Later, First Bank voluntarily dismissed its state court action against the County without prejudice. First Bank, then, filed its action claiming damages against Hogge based upon his alleged fraudulent misrepresentation in the Certificate of Acceptance in the United States District Court for the Western District of Missouri, on the basis of diversity jurisdiction. ⁷ After discovery was completed, First Bank and Hogge each filed motions for summary judgment. The district court denied First Bank's motion for summary judgment but granted Hogge's motion for summary judgment. The district court held that (1) First Bank accelerated all payments back to December 10, 1991, the date of default; (2) Hogge's representations were not the proximate cause of First Bank's damages; (3) First Bank had no right to rely on Hogge's representations in the Certificate of Acceptance; and (4) First Bank was unable to present facts which created a triable issue on injury. First Bank appeals.

II. DISCUSSION

We review a grant of summary judgment de novo. Summary judgment is appropriate when the evidence, viewed in the light most favorable to First Bank, demonstrates that there is no genuine issue of material fact and that Hogge is entitled to judgment as a matter of law. See United States v. Dico, Inc., 136 F.3d 572, 578 (8th Cir.1998). Sitting in diversity, we apply the substantive law of the applicable state, in this case, Missouri. See Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). We review de novo the district court's application of state law. See First Colony Life Ins. Co. v. Berube, 130 F.3d 827, 829 (8th Cir.1997). Where state law is ambiguous, we predict how the state's highest court would resolve the issue. See id.

A. Acceleration

On appeal, First Bank contends that the district court erred in finding that First Bank had accelerated all three of the County's lease payments when the County defaulted on the 1991 payment. In particular, First Bank argues that the only evidence of an acceleration was its statements in the state court pleadings and that the district court erred in finding that these statements were binding on First Bank as judicial admissions. First Bank notes that other evidence existed which showed that no acceleration had occurred. ⁸

Missouri law provides that acceleration clauses are not "self-operative." Spires v. Lawless, 493 S.W.2d 65, 73 (Mo.Ct.App.1973). Rather, acceleration clauses confer upon the holder an option to treat the entire debt as due upon default. See id. "In order to effectuate the acceleration and render the entire debt due, the [holder] must perform some affirmative,...