Reese v. First Missouri Bank & Trust Co. of Creve Coeur
| Decision Date | 26 July 1983 |
| Docket Number | No. 46064,46064 |
| Citation | 664 S.W.2d 530 |
| Court | Missouri Court of Appeals |
| Parties | 36 UCC Rep.Serv. 1240 Ronald R. REESE and Deborah H. Reese, Plaintiffs-Respondents, v. FIRST MISSOURI BANK & TRUST COMPANY OF CREVE COEUR, and Stephen Hereford, Trustee, Defendants-Appellants. |
Davis Alan Sosne, Clayton, for defendants-appellants.
Sanford Goffstein, Clayton, for plaintiffs-respondents.
Plaintiffs Ronald R. Reese and Deborah H. Reese, his wife, brought this action for an injunction restraining defendants from foreclosing under a deed of trust on land on which plaintiffs had built their new home. The two defendants are First Missouri Bank & Trust Company of Creve Coeur, payee and holder of the secured note, and the trustee. On the theory that default had been made in the payment of the note, the bank had requested its co-defendant to advertise the property for sale under the power of sale contained in the deed of trust.
On March 6, 1981, plaintiffs executed the note in the principal amount of $92,300 in favor of the bank as part of a home loan transaction. The primary issue is whether the note was, as the bank claims, a demand note, or whether it was, as plaintiffs claim and the trial court found, an installment note payable monthly over a period of 36 months. Although other provisions of the note will be mentioned later, the root of the controversy is the meaning of the following language contained in the payment schedule of the note:
After making requested findings of fact, the trial court enjoined the foreclosure proceedings until March 6, 1984, "at which time the remaining amount due and owing [on the note] becomes due and payable." The injunction was conditioned "on the timely payment of all remaining principal and interest payments" by plaintiffs to the bank in accordance with the monthly installments mentioned in the schedule. Since the inception of the loan plaintiffs have made, and the bank has accepted, monthly payments of $1,040.96. The bank appeals.
Although there were some factual disputes, the following summary is consistent with the trial court's findings and fully supported by the record. Since the bank does not question the authority of its various representatives, actions taken by them on behalf of the bank will be attributed to the bank itself.
Plaintiff Ronald Reese was employed by the bank from 1974 until September 1980. During the last five years of his employment Reese was a loan officer and handled "50 to 100" purchase-money real estate loans on behalf of the bank. The record does not disclose the reason for Reese's leaving the bank but apparently the parting was amicable because the following dealings between Reese and the bank commenced in October 1980 and culminated with the filing of this action on September 23, 1981. In that interval the following occurred:
October 5--The Reeses, as purchasers, entered into a written agreement with The Jones Company, as seller, for the purchase of a lot on which the seller was to construct a new house for a total sale price of $123,450, $28,450 of which was to be paid upon or prior to completion of the construction, with the balance of $95,000, secured by a deed of trust, to be paid over 30 years at 13 percent interest. With regard to the latter feature, the Reeses were required "to furnish own financing" and to supply the seller with a copy of a loan commitment within 30 days.
October 6--Reese informed the bank of his need for a loan commitment with respect to the Reese-Jones Company agreement. The bank gave the Reeses a commitment letter for a loan of $95,000, reading in part: The letter required that it be accepted within 10 days. The Reeses did not accept it.
October 24--The bank gave the Reeses a new commitment letter for a loan of $80,000, reading in part: The bank understood that Reese "would give this letter to Mr. Jones, the builder."
November (?) (within 10 days of October 24)--The Reeses accepted the October 24 commitment letter and gave the bank a signed copy of it, together with a $1,600 check in payment of the loan service charge. The bank misplaced the check and the returned copy and the check was never cashed.
January or February--Reese asked the bank why the $1,600 check had not been cashed and was informed it was lost and that he could pay the loan service charge when the loan was closed.
March 6, 1981--The bank and the Reeses agreed to increase the principal of the loan to $92,300. The Reeses paid the bank a loan service charge ("points") of 2 percent of the loan--$1,846. At the loan closing, attended by the Reeses, the bank, and a representative of Jones Company, these documents were executed: promissory note, demand note, deed of trust, and a Federal Truth-in-Lending Statement. Pertinent provisions of those documents are set forth below. 1 The bank also gave the Reeses a document entitled "Amortization of Extended Mortgage Loan" showing the term of the loan to be 25 years, interest rate of 13 percent, "monthly payment $1,040.96." This document showed the principal and interest components of each monthly payment.
March 8--A loan report with regard to the Reese loan was made by the loan officer to the bank's loan committee. The report described the loan's "repayment program" as "36 months on 25-year amortization," with "maturity date" of "three years." It also showed a "fixed interest rate" of 13 percent. This form bore a comment, "This loan was committed back in October when prime was in the 13-14 percent range." The prime interest rate had risen substantially between October and March.
April 14--The bank sent Reese a letter stating that the board of directors A later letter (the April 23 letter) from the bank, to similar effect, did not bear the initials of the secretary who typed it. The secretary testified that she did not initial it because she knew it was false in stating that the $1,600 commitment fee had not been paid and that the acceptance had not been signed by the Reeses.
April 19--Reese wrote a letter to the bank informing them that "the $1,600 commitment fee and the loan commitment letter were returned within the period provided for acceptance."
April 23--The bank, by letter to Reese, stated,
June 26--The bank's attorney, in a letter to the Reeses, made "formal demand" for payment of the "unpaid principal" and "interest" together with attorney's fees of $14,674.81.
August 28--The bank's attorneys mailed to the Reeses a letter, entitled "notice of foreclosure," stating that the trustee would hold a foreclosure sale on September 30.
Of paramount significance is the fact that this is a dispute between the original parties to the loan transaction. For the reasons which follow, this court holds that the parties intended the promissory note set forth in footnote 1 to be an installment note, as the trial court found, and that defendants had no right to institute foreclosure. This conclusion is justified by an analysis of the March 6 documents, construed together as one agreement, in light of the circumstances attending their execution.
With an exception not applicable here, § 400.3-119(1), 2 a statute contained in the Uniform Commercial Code, reads: "As between the obligor and his immediate obligee ... the terms of an instrument may be modified or affected by any other written agreement executed as a part of the same transaction."
The "Missouri Code Comment" under that statute states that it "clarifies the effect of separate contemporaneous agreements arising out of the same transaction ..." The Uniform Commercial Code Comment under the statute states, in pertinent part: "[This section] is intended to resolve conflicts as to the effect of a separate writing upon a negotiable instrument.
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