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Citimortgage, Inc. v. Equity Bank, N.A.

United States Court of Appeals, Eighth Circuit

November 6, 2019

CitiMortgage, Inc. Plaintiff - Appellant
Equity Bank, N.A. Defendant-Appellee CitiMortgage, Inc. Plaintiff - Cross Appellee
Equity Bank, N.A. Defendant - Cross Appellant

          Submitted: January 17, 2019

          Appeal from United States District Court for the Eastern District of Missouri - St. Louis

          Before LOKEN, GRASZ, and STRAS, Circuit Judges.


         This appeal involves a dispute over twelve residential-mortgage loans that CitiMortgage, Inc. purchased from Equity Bank, N.A. After discovering problems with the loans, CitiMortgage demanded that Equity repurchase them and then sued when Equity refused. A magistrate judge, [1] acting by consent of the parties, ruled that Equity's duty to repurchase was limited to the six loans that had not gone through foreclosure. We affirm.


         Over the years, CitiMortgage purchased hundreds of residential-mortgage loans from Equity. Rather than negotiate a new deal each time, the parties entered into one overarching contract (the "Agreement"). Generally speaking, the Agreement placed the risk of loss on Equity by requiring it to abide by a long list of representations and warranties, granting CitiMortgage the "sole and exclusive discretion" to identify defects in the loans, and giving CitiMortgage considerable rights if it did. In fact, the Agreement made clear that CitiMortgage had no obligation to review the loans, either at the time of purchase or at any point thereafter, and that its "review of, or failure to review, all or any portion of the Loan documentation [would] not affect" its rights.

         For the twelve loans at issue here, CitiMortgage notified Equity of the defects in writing. It informed Equity that it needed to take action under the Agreement's "cure-or-repurchase" provision, which obligated Equity to

correct or cure [the] defect within the time prescribed by [CitiMortgage] to the full and complete satisfaction of [CitiMortgage]. If, after receiving . . . notice from [CitiMortgage], [Equity] [wa]s unable to correct or cure such defect within the prescribed time, [Equity had to], at [CitiMortgage's] sole discretion, either (i) repurchase such defective Loan from [CitiMortgage] at the price required by [CitiMortgage] ("Repurchase Price") or (ii) agree to such other remedies (including but not limited to additional indemnification and/or refund of a portion of the Loan purchase price) as [CitiMortgage] . . . deem[ed] appropriate.

         By the time CitiMortgage demanded that Equity buy back six of the loans, the mortgages securing them had already been through foreclosure.

         When Equity refused to act, CitiMortgage sued. Both sides requested summary judgment, and the magistrate judge analyzed the loans differently based on whether foreclosure had occurred. For the six in which it had not, the judge ruled that Equity breached the Agreement. For the other six, however, the judge determined that Equity owed nothing to CitiMortgage. Equity and CitiMortgage both appeal the portions of the decision that they lost and raise issues of contractual interpretation that we review de novo. See Hudson Specialty Ins. Co. v. Brash Tygr, LLC, 769 F.3d 586, 590 (8th Cir. 2014).


         The Agreement contained a Missouri choice-of-law provision that the parties acknowledge applies here. See BancorpSouth Bank v. Hazelwood Logistics Ctr., LLC, 706 F.3d 888, 893 (8th Cir. 2013). Our task is to interpret the Agreement by examining "the plain and ordinary meaning of the language used" to determine the parties' obligations, both for the loans that had gone through foreclosure and those that had not. Whelan Sec. Co. v. Kennebrew, 379 S.W.3d 835, 846 (Mo. banc 2012) (internal quotation marks and citation omitted).


         We address the latter category first. Equity does not dispute that all six loans in this group were defective and that it refused to cure or repurchase them. Rather, it argues that CitiMortgage's letters lacked the necessary detail to trigger its duty to perform and that CitiMortgage waited too long to exercise its rights. On both points, we disagree.

         Equity insists that it did not need to act because CitiMortgage's letters never specified the repurchase prices of any of the loans, which it characterizes as a condition precedent to its own performance. It is true that CitiMortgage's letters omitted the repurchase prices. Even so, Missouri law "does not favor conditions precedent and courts will not construe contract provisions" to include them "unless required to do so by plain, unambiguous language or by necessary implication." Kan. City S. Ry. Co. v. St. Louis-S.F. Ry. Co., 509 S.W.2d 457, 460 (Mo. 1974). The cure-or-repurchase provision did not contain any language suggesting that inclusion of the repurchase price was necessary to trigger Equity's obligation to perform, much less include typical "conditional language such as 'provided that' or 'on condition.'" James E. Brady & Co. v. Eno, 992 F.2d 864, 869 (8th Cir. 1993) (citation omitted). If disclosure of the repurchase price was not a condition precedent to Equity's performance, then Equity had to hold up its end of the bargain.

         Equity's other line of argument is that CitiMortgage delayed too long before acting, first by waiting before demanding that Equity repurchase the loans and later by failing to sue in a timely fashion. CitiMortgage took its time, to be sure, waiting more than two years in some cases to demand action from Equity. But nothing in the Agreement required it to act any sooner.

         The Agreement itself did not require CitiMortgage to exercise its rights any more swiftly under the cure-or-repurchase provision than it did. It is true that, in the face of contractual silence, courts will sometimes presume that an option or a right "must be exercised within a reasonable time." Venture Stores, Inc. v. Pac. Beach Co., 980 S.W.2d 176, 183 (Mo.Ct.App. 1998) (per curiam) (internal quotation marks and citation omitted); see also Magee v. Mercantile-Commerce Bank & Tr. Co., 124 S.W.2d 1121, 1124-25 (Mo. 1938); Weis v. Wanstrath, 149 S.W.2d 442, 445-46 (Mo.Ct.App. 1941). But we must also be "leery of imposing time limits" when there is evidence that the "parties to the contract bargained" against them. Venture Stores, 980 S.W.2d at 183; cf. Johnson v. Mo.-Kan.-Tex. R. ...

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