The Missouri Court of Appeals for the Eastern District issued a lender-friendly decision earlier this year regarding the implied duty of good faith and fair dealing regarding a promissory note.
In Reliance Bank v. Paramont Props., LLC, the contract expressly provided that oral representations were unenforceable. Despite this express statement, the Defendant argued that oral statements allegedly made by the Bank violated the implied duty of good faith and fair dealing. The Court found that, because of the express language in the contract, there was no bad faith or unfair dealing because enforcement of oral modifications was not an expected benefit of the contract.
In addition to their arguments regarding good faith and fair dealing, the Defendants brought action for wrongful foreclosure. The Court held that a sale price of 69.2 percent of fair market value was well within the range that Missouri considers adequate for foreclosure.
The Court’s decision is strongly in favor of lenders in Missouri. Provided your Bank already complies with the Missouri Revised Statue § 432.047, requiring language in credit arguments specifying that oral representations are unenforceable, the most important effect of this decision is the additional protection provided against borrowers attempting to expand the application of the implied duty of good faith and fair dealing.
Thank you to Madison Fischer for her contribution to this post.