Affordable Communities of MO v. Federal Nat'l Mortgage Assoc., 815 F.3d 1130

Affordable Communities refinanced Jefferson Arms in 1999 under a loan assigned to Fannie Mae; the loan included a defeasance penalty for prepayment but exempted prepayments "as the result of . . . [a] condemnation award under the Security Instrument."
In 2005 Affordable agreed to sell Jefferson Arms (and another property) to Pyramid; the sales contract described Jefferson Arms as sold "in lieu of threatened condemnation" and required a city letter confirming a condemnation threat.
Pyramid obtained a letter from a city official warning the city might pursue eminent domain if repairs were not made; Cohen (Affordable’s principal) sought that letter to obtain favorable tax treatment under 26 U.S.C. § 1033.
Affordable completed defeasance in 2006, paid Fannie Mae the loan balance plus a roughly $500,000 penalty, and later claimed the condemnation exception applied so the penalty was wrongfully imposed.
After remand from this Court (which found the contract ambiguous as to whether a sale in lieu of condemnation fell within the condemnation exception), the district court held a bench trial, found Affordable’s witnesses not credible, credited Pyramid’s testimony that Cohen intended to sell before any threat, and ruled Fannie Mae not liable; alternatively the court held Affordable was barred by the voluntary payment doctrine.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Jefferson Arms was sold "in lieu of condemnation" so as to trigger the contract's condemnation exception	Cohen/ Affordable: sale was prompted by a threatened condemnation and thus falls within the condemnation award exception	Fannie Mae: no actual or objectively reasonable threat; sale was planned before any city threat letter	Court: sale was not in lieu of condemnation; district court's factual findings upheld (no clear error)
Proper standard for determining a "threat of condemnation"	Affordable: court should consider Cohen's reasonable subjective belief	Fannie Mae: objective reasonableness given surrounding circumstances should govern	Court: applied objective standard by assessing reasonableness; no legal error in approach
Credibility of witnesses and sufficiency of evidence	Affordable: Cohen and its witnesses credible; documentary evidence shows condemnation threat prompted sale	Fannie Mae: Pyramid's witnesses (O'Leary) were credible; evidence showed Cohen solicited letter for tax reasons	Court: credited O'Leary, discredited Cohen/Steffen; substantial evidence supports findings
Applicability of the voluntary payment doctrine barring recovery	Affordable: lacked full knowledge of right to condemnation exception when it paid penalty	Fannie Mae: Affordable had full knowledge, counsel, and experience; payment was voluntary and without fraud/duress	Court: voluntary payment doctrine applies; Affordable cannot recover the paid penalty

Affordable Communities of Mo. v. Fed. Nat'l Mortgage Ass'n, 714 F.3d 1069 (8th Cir. 2013) (prior opinion finding contract ambiguity and remanding)
Outdoor Cent., Inc. v. GreatLodge.com, Inc., 688 F.3d 938 (8th Cir. 2012) (standard of review for bench-trial factual findings)
Sawheny v. Pioneer Hi–Bred Intern., Inc., 93 F.3d 1401 (8th Cir. 1996) (clearly erroneous standard for reviewing factual findings)
Anderson v. City of Bessemer City, N.C., 470 U.S. 564 (U.S. 1985) (deference to credibility determinations where testimony is not implausible)
Huch v. Charter Commc'ns, Inc., 290 S.W.3d 721 (Mo. 2009) (articulating Missouri voluntary payment doctrine)