Miles Home Division v. First State Bank Of Joplin

782 S.W.2d 798 (Mo.Ct.App. 1990)

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Nature of the Case

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Facts

Miles (Seller) entered into a retail installment contract with Ames (Buyers) to sell them the materials and plans for the construction of a kit house. The price was $41,151.12 payable in monthly installments of $359.59 for 22 months with a balloon payment of $33.240.00. The contract, signed on February 17, provided that Buyers would secure the purchase price by the first trust deed lien upon the real estate upon which the house was to be built. The contract allowed Seller the right to stop any shipments until it has received all required security instruments. On February 18^th, Buyers purchased three acres of land from Edwards for $8,500. Buyers borrowed $6,800 from First State Bank (Bank) and secured repayment of the same by a mortgage on the three acres. On February 19^th Seller directed an initial credit inquiry to the Bank on information supplied to it by Buyers. The letter contained a number of blanks to be completed by the Buyers and the purchase of the land upon which the home was to be built. The blanks were completed, and the form was signed by the Bank. Seller then advised Buyers that their credit had been approved and Seller sent Buyers a mortgage to secure the purchase price. Seller then sent a letter to Bank dated March 23^rd. The letter advised Bank that Seller had taken a second mortgage position and that it understood that Bank had the first. The letter told Bank that Seller planned to provide materials for Buyer to improve the property. Seller than asked Bank to notify it if the Buyer became seriously delinquent in their monthly payments and notify the Seller prior to any foreclosures so that Seller may protect its position. The second page contained a form to be completed by Bank and contained a commitment that the Bank will notify Seller of serious delinquencies and provide Seller with an opportunity to make the payment before foreclosure was started. The Bank signed the letter. Buyers executed the mortgage and Seller then shipped the materials. Buyers only completed part of the house and then abandoned the project. They were seriously delinquent by November 1983. Lee Edwards who owned the subdivision on which the house sat believed that the uncompleted house detracted from the appearance and further sales. Edwards then bought the note from Bank for $5,125, the unpaid balance on November 6, 1985. On January 3, 1986, Edwards bought the three acres for $6,000 on foreclosure. In February 1986, Edwards sold the three acres for $27,500. Bank did not give Seller notice of the sale of the note nor of any delinquencies in the payment. Seller got no notice of the foreclosure sale. Seller sued Bank. The trial court found Bank’s commitment to notify Seller was supported by consideration and that Bank violated its contractual obligation to Seller by failing to notify. Seller was awarded $22,375.00. Bank appealed.