Court Opinion

ID: 9778446
Source: CourtListenerOpinion
Date Created: 2023-08-29 21:04:47.162652+00
Date Added: 2024-06-11T07:33:09.115276
License: Public Domain

DONNELLY, Judge,
dissenting.
This situation involves a mortgage-financing arrangement wherein Manchester Bank purchased all of plaintiffs’ notes with North American, several months after their creation, under an agreement which provided the Bank with security in regard to the quasi-loan via a deed of trust on the entire property owned by North American. Manchester Bank thus stood as a mortgagee as to North American, with a deed of trust and blank warranty deeds as security, and as a holder of the notes as to plaintiffs, with the land-sale contracts and blank warranty deeds as security.
The principal opinion concedes that Manchester Bank did not specifically assume the obligations of North American under its Note Purchase Agreement, but finds that the Bank impliedly assumed North American’s obligations. I believe that Manchester Bank did not impliedly assume any obligations to plaintiffs. Manchester Bank’s interest in North American’s solvency and the performance of its obligations went only so far as necessary to insure the stability of its position as a mortgagee. Manchester Bank did not step into the shoes of North American in regard to the developer’s relationship with plaintiffs, and did not obligate itself to satisfy liens filed against the property once North American became unable to satisfy its obligations and maintain clear title to the development.
Manchester Bank’s retaining the land-sale contracts and warranty deeds for security is comparable to the taking by a holder in due course of both a note and security agreement for personal property. Manchester Bank could insert its name in a deed upon a purchaser’s default and thus retain the property. However, this situation is due to the unique quality of a land-sale contract and not to the Bank’s assuming more than a holder’s interest in this transaction. Manchester Bank’s letters to purchasers informing them that it had purchased both their notes and the accompanying contracts likewise are not indicative of an assumption of North American’s obligations to the plaintiffs, but were intended only to inform plaintiffs to whom they were to direct their payments and why.
The principal opinion speaks of the cause of action in this case as “the intent to defraud, which is the basis for the action in tort * *
In 4 Restatement, Law of Torts, Second, § 871 reads as follows:
“One who intentionally deprives another of his legally protected property interest or causes injury to the interest is subject to liability to the other if his conduct is generally culpable and not justifiable under the circumstances.”
In 4 Restatement, Law of Torts, Second, § 890 reads as follows:
“One who otherwise would be liable for a tort is not liable if he acts in pursuance of and within the limits of a privilege of his own or of a privilege of another that was properly delegated to him.”
I would not impose liability in tort on Manchester Bank in this case. The conduct of the Bank is not culpable and is justifiable under the circumstances. The Bank at all *140times acted “in pursuance of and within the limits of a privilege of [its] own.” The principal opinion relies on the holding in Jones v. Garden Park Homes Corporation, 393 S.W.2d 501 (Mo.1965), and then concedes that “the conduct in Jones can be distinguished from the conduct of defendant * * I believe the principal opinion creates a cause of action where none exists. It invents a new cause of action heretofore outside the legal concepts of sua-ble tortious conduct.
The implications of imposing a duty to plaintiffs on the Bank under the circumstances here presented demonstrate that such holding is inappropriate. Aside from the fact that the nature of such duty has been identified only obliquely, if at all, by the principal opinion, it places the Bank in an impossible position. The Bank, as a creditor of both North American and plaintiffs and the holder of a security interest which clouds plaintiffs’ title, necessarily occupies a position adverse to plaintiffs. How, then, can the Bank be expected to render fiduciary obligations to plaintiffs and at the same time protect effectively its own interest in the property? The potential impact of today’s holding on financing of future development in Missouri is indeed alarming.
Even if liability for compensatory damages is conceded, which I do not, I must even more vigorously dissent from the imposition of punitive damages in this case as unwarranted by the facts and by any opinion of this Court. The principal opinion imposes tort liability for compensatory damages on the basis of an implied assumption of contractual obligations by Manchester Bank. From this premise, the principal opinion then imposes liability for punitive damages on the basis of fraudulent intent. It has long been the rule in this state that at least legal malice is required for the imposition of punitive damages. Comment, 42 Mo.L.Rev. 593, 598-600 (1977). As stated in Beggs v. Universal C.I.T. Corporation, 409 S.W.2d 719, 722 (Mo.1966):
“The test to be applied in determining whether malice existed as a basis for the award of punitive damages is whether the defendant did a wrongful act intentionally and without just cause or excuse. ‘This means that defendant not only intended to do the act which is ascertained to be wrongful but that he knew it was wrongful when he did it. There must be, in order to justify punitive damages, some element of wantonness or bad motive, but if one intentionally does a wrongful act and knows at the time that it is wrongful he does it wantonly and with a bad motive.’ * *
Throughout the transactions in this case, Manchester Bank took the position that it was entitled to payment regardless of the status of plaintiffs’ titles due to North American’s downfall financially. Believing they were legally entitled to payment regardless of failure of consideration, Manchester Bank made no false misrepresentations to plaintiffs by directing them to continue their payments to the Bank in return for the Bank’s transmittal of the warranty deeds when payments were completed.
The principal opinion would obligate the Bank to have given legal advice to the plaintiffs on the status of plaintiffs’ warranty deeds and on their obligations to the Bank, a position in which the Bank clearly should not be placed. As we recognized in Pollock v. Brown, 569 S.W.2d 724, 733 (Mo. Banc 1978), a good faith mistake as to the legality of an act has been held to negate legal malice. See also Booth v. Quality Dairy Co., 393 S.W.2d 845 (Mo.App.1965); Comment, 42 Mo.L.Rev. 593 (1977). Surely it must be conceded that the liability imposed by the principal opinion, if such is to be the state of the law, is at least a fundamental change in the area of mortgages and financing. The Bank should not be held liable for punitive damages for intentionally defrauding plaintiffs when the Bank’s obligation to convey good title to plaintiffs could not be foreseen prior to the issuance of the principal opinion.
I respectfully dissent.