Judgment for seller in failed real estate deal affirmed on appeal

Summary

• Missouri Court of Appeals affirmed a $730,663.62 judgment and $46,555.50 in attorney fees for seller CBAM, LLC.
• Court found buyer Alps Acquisitions breached a commercial real estate sale contract and committed fraudulent misrepresentation.
• Appeals court held a bad-faith lis pendens filing can support a slander of title claim.
• Decision highlights potential liability for parties who use lis pendens filings to improperly cloud title during real estate disputes.

The circuit court correctly entered judgment in favor of a seller in a dispute over a failed real estate sale contract, the Missouri Court of Appeals Eastern District ruled on May 26, affirming an award of $730,663.62 and attorney’s fees in the amount of $46,555.50.

CBAM, LLC owns commercial real property comprised of two contiguous parcels at 3130 Chouteau Avenue and 3123 LaSalle Avenue in the City of St. Louis.

On Nov. 24, 2019, Alps Acquisitions executed a commercial sale contract to purchase the property from CBAM for $1.4 million.

At the time of the contract, the property housed Picturesque Graphics, a company owned by the owner of CBAM, which had outgrown the space and needed a larger property. The goal of securing a replacement property for Picturesque Graphics was communicated to Alps.

About ten days after executing the sale contract with Alps, CBAM identified a new property for Picturesque.

But in January 2020, Alps sought termination of the sale contract and return of the earnest money. The parties negotiated a second amendment and extension to the sale contract; at the last minute, Alps demanded removal of the provision releasing the initial earnest money.

Alps was to draft a separate lease with the terms set out in the contract. But when Alps tendered the draft, it did not contain the agreed lease terms and instead contained terms dramatically more favorable to Alps.

When CBAM refused to sign the non-conforming lease, Alps declared the contract terminated. Despite this stance, CBAM appeared at the title company ready, willing and able to close the sale.

Alps failed to appear and threatened litigation.

CBAM filed suit. It initially sought specific performance of the sale contract and undertook to mitigate its damages by re-marketing the property for sale.

Alps responded by tying up the property as it had threatened by filing a lis pendens and blocking CBAM’s ability to sell the property and mitigate its damages. CBAM then filed an amended petition, asserting claims for breach of contract, fraudulent misrepresentation and slander of title.

Following a bench trial, the trial court entered judgment in favor of CBAM on its claims of breach of contract, fraudulent misrepresentation and slander of title, awarding CBAM $730,663.62 in damages.

Alps appealed.

Judge Angela T. Quigless affirmed, joined by Judge Renee D. Hardin-Tammons.

The filing of a lis pendens under section 527.260 may form the basis for a slander-of-title claim, the court said, rejecting Alps’ contention that Odermann v. Mancuso held that such a filing cannot constitute slander of title.

“Odermann left open the possibility that the motive or intent of a party filing a lis pendens could be considered in the action that gave rise to filing the lis pendens,” the court wrote. “The present case is precisely that type of action. Alps’ motive for filing its specific performance counterclaim and related lis pendens was addressed along with CBAM’s resulting claim for slander of title in the underlying litigation, where Alps failed to present any evidence to prove its specific performance counterclaim and maintained through trial that it had properly terminated the sale contract.”

CBAM also established the elements of slander of title, the court added, as Alps’ actions for nearly a year before filing its counterclaim for specific performance and the lis pendens as soon as CBAM sought to market the property to other potential buyers support a finding that Alps did not reasonably believe it had a valid claim to the property and did not file the lis pendens for the purpose of adjudicating a valid claim — but instead filed in bad faith.

The trial court did not err in concluding that CBAM established the required elements of a breach of contract action, the court found.Real Estate

Although Alps argued that it had the right to terminate the sale contract before the end of the due diligence period and timely did so, Alps did not invoke any of the delineated circumstances when it purported to terminate the contract.

In addition, Alps was the first to breach the sale contract by tendering to CBAM a lease that did not conform to the terms negotiated and agreed by the parties and expressly set forth in the sale contract.

Alps’ challenge to the trial court’s determination that CBAM established its claim of fraudulent misrepresentation also failed.

“Here, the record contains substantial evidence to establish that Alps did not intend to complete the purchase of the [property] according to the terms set forth in the sale contract,” the court said. “Alps did not comply with a single provision of the sale contract.”

The court further affirmed the damages award to CBAM. Not only was the award supported by substantial evidence, CBAM was entitled to damages based on the increased sale price of the new property it sought to purchase due to the delay caused by Alps, as well as the increased interest rate for a commercial real estate loan on a replacement property, the court found.

“We acknowledge the trial court’s judgment did not allocate specific damage awards to specific claims,” the court wrote. “Instead, the trial court looked at the entire matter and granted relief as good conscience dictated, which is what courts sitting in equity are called to do. Remedies for breach of contract, fraudulent misrepresentation, and slander of title all support CBAM’s recovery of damages representing the increased cost of purchasing a replacement property and increased interest rates on commercial real estate loans, especially when considering the totality of Alps’ actions.”

As the prevailing party, CBAM also sought attorney’s fees on appeal, which the court awarded in the amount of $46,555.50.

Judge Thomas C. Clark II filed a dissenting opinion, writing that he would reverse the $490,000 in special damages for the increased acquisition cost of the new property and $89,000 attributable to the increased interest rate for a commercial loan, finding it to be a windfall for CBAM.

Kansas City attorney Jonathan Sternberg represented Alps.

“Obviously my client disagrees with the majority’s holding, and we believe Judge Clark in his dissent was correct,” he said.

He also cautioned attorneys about the filing of lis pendens actions.

“One lesson for lawyers from this decision — if it remains the law — is that it changed existing case law with regard to lis pendens,” he said. “Existing case law is that it doesn’t matter if it is filed with malice, but this court held that if the filing is deemed bad faith, then it is actionable.”

John Hein of Hein, Schneider & Bond in St. Louis, who represented CBAM, did not respond to a request for comment.

The case is CBAM, LLC v. Alps Acquisitions, LLC, No. ED113496.