Brad wanted to buy some land from Harold and build a new home. Harold was willing to
Question:
Brad wanted to buy some land from Harold and build a new home.
Harold was willing to sell 3 acres in his subdivision for $6,000. Company, in another state, was willing to sell Brad a prefabricated home for $40,000, to be delivered to the site and set up by Brad. Bank agreed to loan Brad $6,000 to pay Harold for the land and created a first mortgage in the property. Company was willing to sell the home to Brad for $3,000 down with a promise to pay the balance in installments, but Company, knowing of Bank's involvement, wanted a second mortgage in the land. Company reasoned that the land with a home would be valuable and that even if Brad defaulted, the proceeds from any foreclosure sale would exceed the amount of Bank's loan. The second mortgage was executed, but before shipping the home to Brad, Company obtained a written promise from Bank that if Brad was seriously in default to Bank, Bank would promptly notify Company. Company shipped the home, which Brad attempted to set up. Before the work was done, Brad was seriously in default to Bank. Bank, however, did not notify Company. Rather, Bank sold Brad's note and the first mortgage to Harold for $5,500, the amount due under the loan. Harold then foreclosed the mortgage and, at the foreclosure sale, bid on the property and purchased it for $6,000. Harold then completed construction of the home for $10,000 and sold the lot and completed home to Frank for $30,000.
Company has been advised that it cannot upset the foreclosure sale to Frank (it had notice of the sale but did not attend) and accepts that advice.
But it wants to sue Bank for the failure to give notice of Brad's default. Is Bank's promise enforceable? If so, what damages should Company recover?
Miles Homes Division of Insilco Corp. v. First State Bank of Joplin, 782 S.W.2d 798 (Mo.App. 1990).
Expert Answer:
