Citizens National Bank v. Maries County Bank

• Decision Date: 31 January 2008
• Docket Number: No. 28164.,28164.
• Citation: 244 S.W.3d 266
• Parties: CITIZENS NATIONAL BANK, Plaintiff-Appellant, v. The MARIES COUNTY BANK, Allen Jones and Leisa Jones, Defendants-Respondents.
• Court: Missouri Court of Appeals

244 S.W.3d 266

CITIZENS NATIONAL BANK, Plaintiff-Appellant, v. The MARIES COUNTY BANK, Allen Jones and Leisa Jones, Defendants-Respondents.

No. 28164.

Missouri Court of Appeals, Southern District, Division Two.

January 31, 2008.

Lee J. Viorel, III, C. Matthew Towns, Springfield, for appellant.

Albert A. Crump, Jr., Vienna, for respondent.

NANCY STEFFEN RAHMEYER, Judge.

Citizens National Bank ("Appellant") asserted a claim of negligence against Maries County Bank ("Respondent") for the proceeds from a closing that was conducted by Respondent when it financed the purchase of a manufactured home for its customers, Allen and Leisa Jones.¹ The Jones' intervened in the suit and counterclaimed for the manufacturer's statement of origin ("MSO") to the manufactured home, which was in Appellant's possession. The trial court rendered a judgment for Respondent and ordered the MSO to be turned over to the Jones'. This appeal followed.

STATEMENT OF FACTS

On March 19, 2003, Appellant and U.K. Homes, L.L.C. ("U.K.Homes"), by Keith Richards, entered into a promissory note, security agreement, and floor plan agreement whereby Appellant financed the floor plan of U.K. Homes for the sale of manufactured homes. Floor plan financing is a method of financing where a lender provides money for the purpose of allowing a dealer of goods to buy inventory that is later resold to the consumer. Appellant advanced funds after the manufacturer advised it that a new manufactured home was to be built. As soon as the manufactured home was built, Appellant would receive an MSO in exchange for the check it issued to U.K. Homes. This allowed U.K. Homes to obtain specific pieces of inventory and, as that inventory was sold to the consumer, the bank was to be repaid the amount that it issued to floor plan the particular item. Appellant was one of three floor plan financiers of U.K. Homes. Appellant' protected its interest through a UCC-1 filing on the U.K. Homes inventory and by holding the MSO. Appellant required that the dealer repay the amount of the floor plan advance to obtain a release of the MSO.

In April of 2003, the Jones' visited the showroom of U.K. Homes in Strafford, Missouri, to find a home to put on their property in Maries County; they decided to purchase a home and placed an order. The Jones' were given a sales invoice that identified the details of what they wanted to purchase. Thereafter, they talked to Bryan Steinman, an agent of Respondent, about the possibility of a loan to purchase the manufactured home they saw. Mr. Steinman indicated that Respondent could make such a loan available to them.

On April 21, 2003, Allen Jones authorized U.K. Homes to proceed with the manufacture of the Fairmont Wellington manufactured home by delivering to U.K. Homes a down payment of $2,000. U.K. Homes then advised one of its manufacturers, Fairmont Homes, Inc., in Indiana, to start manufacturing the home pursuant to the specifications set out by Mr. and Mrs. Jones.

Appellant sent a floor plan commitment to Fairmont Homes, which was received by Fairmont Homes on April 28, 2003, for payment of $23,790 for the creation of the manufactured home, which was the subject of the purchase agreement between U.K. Homes and the Jones'. Fairmont prepared an. MSO on April 28 and mailed the same to Appellant. Appellant received the MSO on May 8, 2003, along with a copy of the invoice and a letter. The documents requested that Appellant forward $23,790 to Fairmont, which it did.

Respondent agreed to act as the settlement agent and to close the loan for the Jones' on May 7, 2003. At that same time, Respondent prepared a closing statement and the loan documents to provide financing to the Jones' to refinance their land mortgage with proceeds to pay for the Fairmont manufactured home. Respondent received a deed of trust and security agreement to secure its advance. The loan documents were prepared and a closing took place on May 7, 2003.

At the closing of the Jones' loan, Respondent did not check with the Missouri Secretary of State for UCC-1 filings on inventory, nor did it attempt to get a title application at the time the security agreement was signed. Respondent asserts that it was relying on U.K. Homes to apply for a title and to get the MSO for the Fairmont Wellington manufactured home. Respondent issued a check dated May 8, 2003, payable to U.K. Homes in the amount of $32,241.50, to the Jones' for the purchase of the manufactured home.

The manufactured home was sent to Strafford, Missouri, and on approximately May 9, 2003, it was brought to Maries County, Missouri. When it was delivered, Allen Jones gave the proceeds check from Respondent to U.K. Homes and Mr. Jones received a bill of sale. U.K. Homes did not forward the proceeds of the check on to Appellant. At no time prior to trial did the Jones', or anyone on their behalf, apply for a title for the manufactured home, which has since been affixed to the real estate.

In June 2004, U.K. Homes defaulted on its loan to Appellant. At that time, Appellant became aware of the sale of eleven manufactured homes out of trust by U.K. Homes, one of which was the Jones' transaction. The principal of U.K. Homes, Keith Richards, and his wife filed for Chapter 7 bankruptcy relief in July of 2005. On April 26, 2006, Appellant obtained a judgment of non-dischargeability from the bankruptcy court and a money judgment against Mr. Richards for $314,993.29. Appellant liquidated all of its collateral and the debt from the judgment remains unsatisfied. Appellant sought payment from Respondent, which ultimately led to the current action in this appeal. Appellant sought damages based on a negligence cause of action from Respondent as a lender and as the closer of the loan transaction in the amount of $23,790. Respondent filed its notice of lien with regard to the manufactured home on October 11, 2005, after this lawsuit was filed. The Jones' sought the MSO from Appellant in order to title the manufactured home.

CLAIM ON APPEAL

On appeal, Appellant brings six points challenging the trial court's application of the UCC and its findings regarding which statutes govern the relevant transactions. For case of discussion, we shall commence our discussion with Appellant's second point. In its second point, Appellant claims the trial court erred in determining that Respondent owed no duty to conform to a standard of conduct toward Appellant while acting as a settlement agent at closing. Appellant asserted that Respondent's breach of duty was in failing to obtain a certificate of origin, or any titling documents at closing or afterward, and to distribute sale proceeds to Appellant even though Appellant perfected its interest in the manufactured home sold to Mr. and Mrs. Jones by filing a UCC-1 statement in the inventory of the dealer of the manufactured home. Appellant claims the law imposes a duty on Respondent based upon a statute, foreseeability, and the relationship of the parties.

In reviewing this court-tried case, an appellate court must affirm the trial court's judgment unless there is no substantial evidence to support it, it is against the weight of the evidence, or erroneously declares or applies the law. Foster v. Village of Broumington, 140 S.W.3d 603, 607 (Mo.App. W.D.2004). This Court is primarily concerned with the correctness of the trial court's result, not the reasoning of the trial court in reaching that result; therefore, the judgment will be affirmed if cognizable under any theory, regardless of whether the reasons advanced by the trial court are wrong or not sufficient to reach that result: Business Men's Assur. Co. of America v. Graham, 984 S.W.2d 501, 506 (Mo. banc 1999).

We are mindful that although both parties have argued extensively on the application of the UCC to these facts, Appellant brought this case against Respondent for common law negligence. Appellant sued Respondent claiming that Respondent owed a duty to Appellant to disburse the loan proceeds to Appellant as the holder of a security interest in the manufactured home. Although the UCC provisions may be relevant to identify the status of the parties involved when the litigation concerns the priority rights of those parties to collateral, the provisions of the UCC do not control the analysis under a common law negligence claim for money damages.

Appellant had to establish negligence by proving that (1) Respondent had a duty to protect Appellant from injury, (2) Respondent failed to perform that duty, (3) Respondent's failure proximately caused injury to Appellant, and (4) actual damages to Appellant's person or property occurred. Sill v. Burlington Northern Railroad, 87 S.W.3d 386, 391 (Mo.App. S.D. 2002). A failure of proof on any of these elements negates the cause of action. Duty is an element of negligence that is determined as a matter of law. Deuschle v. Jobe, 30 S.W.3d 215, 218 (Mo.App. W.D. 2000).

A legal duty owed by one to another may arise from at least three sources: (1) it may be proscribed by the legislative branch; (2) it may arise because the law imposes a duty based on the relationship between the parties or because under a particular set of circumstances an actor must exercise due care to avoid foreseeable injury; or (3) it may arise because a party has assumed a duty by contract (agreement) whether written or oral.

Lumbermens Mut. Cas. Co. v. Thornton, 92 S.W.3d 259, 263 (Mo.App. W.D.2002) (citing Scheibel v. Hillis, 531 S.W.2d 285, 288 (Mo. ban 1976)). Although Appellant argues that a duty is imposed on Respondent from all three sources, we find that the law has imposed no duty on Respondent as to its relationship with Appellant. The trial court did not determine, nor do we make any finding, as to the duty on the part of Respondent to the Jones' as either lender or as closing agent.

First, Appellant asserts that Respondent owes a duty to Appellant that is prescribed by section 700.320.1,² which provides...