                   United States Court of Appeals
                             FOR THE EIGHTH CIRCUIT
                                ________________

                                   No. 05-2778
                                ________________

Stephen Cordry, doing business as        *
Cordry Mobile Homes,                     *
                                         *
            Appellant,                   *
                                         *
      v.                                 *
                                         *
Vanderbilt Mortgage & Finance,           *
Inc.,                                    *
                                         *
          Appellee.                      *     Appeal from the United States
___________________________              *     District Court for the Western
                                         *     District of Missouri.
21st Mortgage Corporation,               *
                                         *
            Appellee,                    *
                                         *
      v.                                 *
                                         *
Stephen Cordry,                          *
                                         *
            Appellant.                   *

                                ________________

                             Submitted: March 13, 2006
                                 Filed: April 28, 2006
                                ________________

Before COLLOTON, HEANEY and GRUENDER, Circuit Judges.
                       ________________
GRUENDER, Circuit Judge.

        Stephen Cordry appeals the order of the district court1 granting summary
judgment to defendant Vanderbilt Mortgage and Finance (“Vanderbilt”) on all of
Cordry’s claims and Vanderbilt’s counterclaim.2 For the reasons discussed below, we
affirm the judgment of the district court.

I.    BACKGROUND

       Cordry has operated mobile home retail sales lots since 1987. Such retail sales
lots rely on “floor-plan financing,” in which a finance company lends a certain
percentage of a mobile home’s value to enable the retailer to purchase and place the
home on its lot. The finance company retains a security interest in the financed
homes. The retailer pays back the finance company with interest when the home is
sold to a customer. The finance company conducts a risk analysis to determine what
percentage of a home’s value it is willing to loan, based on the age and condition of
the home, the dealer’s circumstances and other variables.

      In November 2001, Cordry executed a floor-plan financing agreement,
supplemented by an addendum, with Deutsche Financial Services (“DFS”). The
financing agreement established a $925,000 revolving credit line for new mobile
homes and a $75,000 revolving credit line for used homes. Paragraph 1.2 of the
addendum set the terms for used home financing:

      1
        The Honorable John T. Maughmer, Chief Magistrate Judge for the Western
District of Missouri, presiding by consent of the parties pursuant to 28 U.S.C. §
636(c)(1).
      2
      Vanderbilt’s counterclaim interest was subsequently assigned to 21st Mortgage
Corporation, and 21st Mortgage was substituted as plaintiff on the counterclaim.
Following the convention of the parties, we continue to refer to the claim as
“Vanderbilt’s counterclaim.”

                                         -2-
      DFS, in its sole discretion, may loan to [Cordry] an amount up to: (a)
      Sixty-Five percent (65%) of the Base NADA wholesale value . . . of
      Used Manufactured Homes which are no more than five (5) model years
      old . . . ; and (b) Sixty percent (60%) of the Base NADA wholesale value
      . . . of Used Manufactured Homes which are between six (6) and ten (10)
      model years old . . . .

        The parties agree that the term “Base NADA wholesale value” refers to a value
for each manufactured home as set by the NADA Manufactured Housing Appraisal
Guide, which is analogous to the Kelley Blue Book for automobiles. However, the
parties disagree as to which NADA value applies, wholesale or retail. The NADA
guide lists retail values for mobile homes and provides formulae for reducing those
retail values to wholesale values. Despite the statement in ¶ 1.2 that DFS would loan
up to 60 or 65 percent of the NADA wholesale value, the DFS employees who dealt
with Cordry’s financing requests for used mobile homes actually loaned Cordry 60
or 65 percent of the listed retail NADA value. Those employees testified that they
were not aware of the NADA provisions and formulae for reducing retail to wholesale
value.

       In November 2002, after a series of assignments by DFS, Cordry executed a
Letter of Direction drafted by Vanderbilt authorizing an assignment of DFS’s duties
under the agreement to Vanderbilt. The letter stated:

      [Cordry] is giving this authorization based on Vanderbilt’s assurance that
      Vanderbilt will continue to extend a credit facility to [Cordry] under the
      same credit line which DFS has provided to [Cordry], and the same
      terms and conditions of the dealer agreements originally between DFS
      and [Cordry] (as long as [Cordry] is in compliance with all terms and
      conditions).

     After the assignment, Vanderbilt continued to finance new mobile homes to
Cordry’s satisfaction. Trouble arose when Cordry expected financing on four used


                                         -3-
homes in the amount of $39,500, based on the percentage of NADA retail value he
was accustomed to receiving from DFS. Instead, Vanderbilt offered to finance three
of the used homes for a total of $12,500, calculated as a percentage of the NADA
wholesale value. According to Cordry, this figure represented about 35 percent of the
listed NADA retail value of the homes.

       Cordry brought this diversity action against Vanderbilt for breach of ¶ 1.2 of
the addendum, breach of the implied covenant of good faith and fair dealing,
fraudulent or negligent misrepresentation in the Letter of Direction and tortious
interference with a business expectancy.3 Cordry argued that the denial of the $75,000
revolving credit line for used homes at 60 or 65 percent of NADA retail value forced
him to close a recently opened retail sales lot, proximately resulting in over $1 million
in damages. Vanderbilt counterclaimed for amounts Cordry failed to repay upon the
sale of new homes financed by Vanderbilt. On competing motions for summary
judgment, the district court granted summary judgment to Vanderbilt on all claims,
finding Vanderbilt neither breached the express or implied terms of the financing
agreement nor made false statements in the Letter of Direction. Cordry appeals.

II.   DISCUSSION

       “We review a grant of summary judgment de novo and apply the same
standards as the district court.” Bockelman v. MCI Worldcom, Inc., 403 F.3d 528, 531
(8th Cir. 2005). “Summary judgment is warranted if the evidence, viewed in the light
most favorable to the nonmoving party, shows that no genuine issue of material fact
exists and that the moving party is entitled to judgment as a matter of law.” Id. The
parties agree that Missouri contract law applies in this diversity action. See Mountain
Pure, LLC v. Turner Holdings, LLC, 439 F.3d 920, 923 (8th Cir. 2006).



      3
       On appeal, Cordry abandons his tortious interference claim.

                                          -4-
      A.     Breach of ¶ 1.2 of the Addendum

       Cordry devotes much of his argument to the meaning of the contract term “Base
NADA wholesale value.” No matter how that term is defined, however, Vanderbilt
did not breach ¶ 1.2 of the addendum by lending less than the full 60 or 65 percent of
NADA value on the used homes. “Parties are generally free to contract as they wish,
and courts will enforce contracts according to their plain meaning, unless induced by
fraud, duress, or undue influence.” Util. Serv. & Maint., Inc. v. Noranda Aluminum,
Inc., 163 S.W.3d 910, 913 (Mo. banc 2005). The express terms in ¶ 1.2 of the
addendum were that “DFS, in its sole discretion, may loan to [Cordry] an amount up
to” 60 or 65 percent of the Base NADA wholesale value. (Emphasis added). By its
plain language, the addendum provided the finance company discretion to lend less
than 60 or 65 percent of the NADA value on any given used home.

       Cordry suggests that Vanderbilt’s discretion under ¶ 1.2 of the addendum to
lend any amount less than 60 or 65 percent for any used home, including lending
nothing if it chooses, renders the contract illusory. “The phrase ‘illusory promise’
means ‘words in promissory form that promise nothing.’ An illusory promise is not
a promise at all and cannot act as consideration; therefore no contract is formed.”
Magruder Quarry & Co. v. Briscoe, 83 S.W.3d 647, 650 (Mo. Ct. App. 2002)
(quoting Corbin on Contracts § 5.28). However, it is well-settled that “an implied
obligation to use good faith is enough to avoid finding a contract null and void due to
an illusory promise.” Id. at 650-51. For example, Magruder Quarry held that a
quarry lease was not void as illusory, even though the lessees had the discretion not
to mine any rock at all, because the lessees were under an implied covenant of good
faith and fair dealing to use reasonable efforts to mine rock. Id. at 650-52. Similarly,
in the instant case Vanderbilt was bound by the implied covenant of good faith and
fair dealing to use reasonable efforts to finance used homes for Cordry, as the
covenant is implied in all contracts in Missouri. Id. at 651. Therefore, the discretion
granted by ¶ 1.2 does not render the agreement illusory.

                                          -5-
      Cordry next argues that DFS’s practice of lending the full 60 or 65 percent of
the NADA retail value for each used home it financed became part of the financing
agreement and bound Vanderbilt to lend that amount after the assignment. First,
Cordry asserts that the individual Statements of Transaction for each used mobile
home financed by DFS must be read as part of the financing agreement assigned to
Vanderbilt. The Statements of Transaction are described in ¶ 2 of the financing
agreement:

      [Cordry] and DFS agree that certain financial terms of any advance made
      by DFS under this Agreement . . . are not set forth herein because such
      terms depend, in part, upon the availability of Vendor discounts,
      payment terms or other incentives, prevailing economic conditions, DFS’
      floorplanning volume with [Cordry] and with [Cordry’s] Vendors, and
      other economic factors which may vary over time. [Cordry] and DFS
      further agree that it is therefore in their mutual best interest to set forth
      in this Agreement only the general terms of [Cordry’s] financing
      arrangement with DFS. Upon agreeing to finance a particular item of
      inventory for [Cordry], DFS will send [Cordry] a Statement of
      Transaction identifying such inventory and the applicable financial
      terms.

       This contractual language demonstrates that the parties did not intend the
agreed financing levels for individual mobile homes, as set forth in each Statement of
Transaction, to bind the finance company to offer, or the retailer to accept, the same
financing level for future individual mobile homes. Furthermore, although ¶ 1.2 of
the addendum adds some specificity to the financing terms for used mobile homes, ¶
1.3 of the addendum reiterates that “[a]pplicable financial terms . . . will be set forth
on the Statement of Transaction” and ¶ 2 of the addendum states that the addendum
modifies no other terms of the agreement. The only reasonable conclusion is that,
under ¶ 2 of the financing agreement, the Statements of Transaction memorializing
DFS’s decision to lend the full 60 or 65 percent of the NADA retail value for the used
homes it already had financed would not have bound DFS to continue to lend the same


                                          -6-
amount for future used homes. Consequently, Vanderbilt, which steps into the shoes
of DFS as an assignee, also cannot be so bound. See Carlund Corp. v. Crown Ctr.
Redev., 849 S.W.2d 647, 651 (Mo. Ct. App. 1993).

       Similarly, Cordry argues that DFS’s practice of lending the full 60 or 65 percent
of the NADA retail value for each used home it financed is a “course of dealing” that
modified the agreement and bound Vanderbilt after the assignment. This argument
also fails. Paragraph 25 of the financing agreement expressly states that the terms of
the agreement cannot be modified by any non-compliant course of dealing between
the parties. Under Missouri law, a written agreement cannot be modified by the later
conduct of the parties unless the evidence shows mutual assent and additional
consideration for the modification.4 Peterson v. Cont’l Boiler Works, Inc., 783
S.W.2d 896, 901-02 (Mo. banc 1990). Cordry presents no evidence that he provided
consideration to DFS or Vanderbilt in return for a relinquishment of their discretion
to lend less than 60 or 65 percent. We conclude that the course of dealing between
DFS and Cordry did not alter the terms of the agreement.

      B.     Misrepresentation in the Letter of Direction

       Cordry argues that Vanderbilt made a fraudulent or negligent misrepresentation
in the Letter of Direction by promising to honor “the same terms and conditions of the
dealer agreements originally between DFS and [Cordry].” In particular, Cordry
argues that this statement was made fraudulently or negligently because Vanderbilt
always intended to use its own risk-evaluation program and spreadsheets, rather than
DFS’s risk-evaluation program and spreadsheets, to determine finance levels for
Cordry’s used manufactured homes.

      4
        This rule would not apply to a sale of goods under the Uniform Commercial
Code, provided that sufficient evidence established the alleged course of conduct.
See, e.g., School Dist. v. Transamerica Ins. Co., 633 S.W.2d 238, 247 (Mo. Ct. App.
1982). However, the instant case involves a finance agreement, not a sale of goods.

                                          -7-
       The elements of fraudulent misrepresentation under Missouri law are: (1) the
representation is false; (2) the representation is material; (3) the speaker knows of the
representation’s falsity; (4) the speaker intends the hearer to act on the representation
“in the manner reasonably contemplated”; (5) the hearer is ignorant of the
representation’s falsity; (6) the hearer relies on the representation’s truth; (7) the
hearer has a right to rely on the representation; and (8) the hearer is consequently and
proximately injured. Joel Bianco Kawasaki Plus, Inc. v. Meramec Valley Bank, 81
S.W.3d 528, 536 (Mo. banc 2002). Negligent misrepresentation differs primarily in
that the speaker must only fail “to exercise reasonable care or competence in obtaining
or communicating th[e] information,” rather than know of its falsity. M & H Enters.
v. Tri-State Delta Chems., Inc., 35 S.W.3d 899, 904 (Mo. Ct. App. 2001).

       Vanderbilt represented that it would honor the terms and conditions of the
“dealer agreements originally between DFS and [Cordry].” The dealer agreements
originally between DFS and Cordry were the financing agreement and addendum. To
show that Vanderbilt’s intention to use its own risk-evaluation program and
spreadsheets rendered the representation false, Cordry must show that the terms and
conditions of the financing agreement and addendum bound the finance company to
use a particular risk-evaluation program and spreadsheets. The record indicates that
a finance company uses its risk-evaluation program and spreadsheets to determine an
appropriate financing level based on the details of the mobile home to be financed, the
retailer’s circumstances and other variables. As discussed above, ¶ 2 of the financing
agreement carefully excludes from the agreement any binding constraints on how such
variables are to be used to determine a finance level for each mobile home. The only
reasonable conclusion is that the parties did not intend to require the finance company
to use a particular risk-evaluation program and spreadsheets throughout the duration
of the agreement. Therefore, Vanderbilt’s intention to use its own program and
spreadsheets does not render false its promise to honor the terms of the dealer
agreements, and Cordry’s misrepresentation claims must fail.



                                          -8-
      C.     Breach of the Implied Covenant of Good Faith and Fair Dealing

        Cordry contends that Vanderbilt breached the implied covenant of good faith
and fair dealing by exercising its discretion under ¶ 1.2 of the addendum to lend less
than the full 60 or 65 percent. “Missouri law implies a covenant of good faith and fair
dealing in every contract.” Farmers’ Elec. Coop., Inc. v. Missouri Dep’t of Corr., 977
S.W.2d 266, 271 (Mo. banc 1998). A breach of the covenant of good faith and fair
dealing occurs where one party “exercise[s] a judgment conferred by the express terms
of the agreement in such a manner as to evade the spirit of the transaction or so as to
deny [the other party] the expected benefit of the contract.” Mo. Consol. Health Care
Plan v. Cmty. Health Plan, 81 S.W.3d 34, 46 (Mo. Ct. App. 2002). “When a decision
is left to the discretion of one party, the question is not whether the party made an
erroneous decision but whether the decision was made in bad faith or was arbitrary or
capricious so as to amount to an abuse of discretion.” Id. at 48. In other words, there
is no breach if the party exercised its discretion based on good-faith business
judgment. See id. at 48-49.

       In the instant case, Cordry presents no evidence that Vanderbilt was using
anything other than its good-faith business judgment when it calculated a financing
level for the used homes presented by Cordry. Indeed, Cordry’s complaint is that the
business program used by Vanderbilt to evaluate financing levels is not as favorable
to Cordry as the business program previously used by DFS. This evidence does not
support a finding of bad faith or arbitrariness by Vanderbilt. Therefore, we find no
breach of the implied covenant of good faith and fair dealing.5


      5
        Cordry also contends that Vanderbilt breached the implied covenant of good
faith and fair dealing by failing to use diligence to determine the prior course of
dealing between DFS and Cordry before accepting the assignment of the financing
agreement. However, as discussed previously, ¶ 2 and ¶ 25 of the financing
agreement make clear that the details of previous financing transactions between the
parties would not affect the terms of the agreement. Thus, an assignee would have no

                                         -9-
       D.    Vanderbilt’s Counterclaim

       Vanderbilt seeks payment for amounts Cordry failed to repay upon his sale of
eight new homes financed by Vanderbilt. Cordry withheld payment under the “first
to breach” rule. The “first to breach” rule holds that “a party to a contract cannot
claim its benefit where he is the first to violate it.” Classic Kitchens & Interiors v.
Johnson, 110 S.W.3d 412, 417 (Mo. Ct. App. 2003) (quotations omitted). Because
we find that Vanderbilt did not breach the agreement, Cordry has no defense to the
counterclaim. The district court did not err in granting summary judgment to
Vanderbilt on this claim.

III.   CONCLUSION

      We conclude that the district court did not err in granting summary judgment
to Vanderbilt on all of Cordry’s claims and Vanderbilt’s counterclaim. Therefore, we
affirm the judgment of the district court.
                         ______________________________




reason to make a detailed inquiry into the matter.

                                         -10-
