Miles Homes Division v. First State Bank of Joplin

Mr. and Mrs. Ames (Ames) purchased land, with financing from the First State Bank of Joplin (bank) (defendant) in exchange for a note and mortgage on the property. Ames contracted with Miles Homes Division (Miles) (plaintiff) for building materials for a house on the property, and Miles obtained a second mortgage. Miles notified the bank of the second mortgage and that it planned to furnish building materials to Ames. Miles also requested that the bank notify Miles if Ames became delinquent on payments on the first mortgage and if foreclosure proceedings were brought against Ames, so that Miles could protect its interest, and the bank promised to do so. Ames became delinquent on payments. The bank sold the note and mortgage to a third party, who foreclosed on the property, purchased it at the foreclosure sale, and then sold it for $27,500. The bank did not notify Miles that Ames was delinquent or that a foreclosure action had been brought. Miles brought an action against the bank for breach of contract. The trial court found (1) that a contract existed, because the bank’s promise to notify Miles of Ames’ delinquency was supported by consideration, and (2) that the bank breached its contract with Miles when it failed to provide that notice. The trial court awarded Miles the property’s sale price of $27,500, less the unpaid balance of $5,125 on the bank’s note. The bank appealed.