CitiMortgage, Inc. v. Platinum Home Mortg., Corp., 17-3158

• Decision Date: 06 February 2019
• Docket Number: No. 17-3158,17-3158
• Citation: 915 F.3d 501
• Parties: CITIMORTGAGE, INC., Plaintiff-Appellant v. PLATINUM HOME MORTGAGE, CORP., Defendant-Appellee
• Court: U.S. Court of Appeals — Eighth Circuit

915 F.3d 501

CITIMORTGAGE, INC., Plaintiff-Appellant

v.PLATINUM HOME MORTGAGE, CORP., Defendant-Appellee

No. 17-3158

United States Court of Appeals, Eighth Circuit.

Submitted: September 26, 2018

Filed: February 6, 2019

Counsel who presented argument on behalf of the appellant was Thomas Walsh, of Saint Louis, MO. The following attorney(s) appeared on the appellant brief; Louis Francis Bonacorsi, of Saint Louis, MO., Ketrina Bakewell, of Saint Louis, MO., Stephen Robert Snodgrass, of Saint Louis, MO.

Counsel who presented argument on behalf of the appellee was Jonathan M. Jenkins, of Los Angeles, CA. The following attorney(s) appeared on the appellee brief; Edwin Charles Ernst, IV, of Saint Louis, MO., Lara Kayayan, of Los Angeles, CA., Walter J. Sawicki, of Los Angeles, CA.

Before SMITH, Chief Judge, MELLOY and STRAS, Circuit Judges.

MELLOY, Circuit Judge.

Plaintiff CitiMortgage, Inc. ("CitiMortgage" or "CMI"), a purchaser and reseller of mortgage loans, sued Defendant Platinum Home Mortgage, Corp. ("Platinum"), an originator and seller of mortgage loans. CitiMortgage alleged Platinum breached a contract by failing to repurchase seven allegedly defective loans after CitiMortgage demanded repurchase by sending multiple notices to Platinum for each loan. The district court granted summary judgment for Platinum, holding CitiMortgage failed to satisfy a condition precedent contained in the agreement by failing to prescribe a time within which Platinum could correct or cure the alleged defects. Because we conclude CitiMortgage adequately and substantially complied with the contract (which neither specified a form of notice nor indicated that the prescription of a time for cure had to be contained within the notice), we reverse.

I. Background

Platinum originated mortgage loans. CitiMortgage bought approximately 750 loans from Platinum for more than $140 million. This case involves seven of those loans (valued around $1 million). CitiMortgage had resold the loans at issue in this case to Fannie Mae but was forced by Fannie Mae to repurchase the loans due to Platinum's alleged failures to comply with underwriting standards.

The agreement between Platinum and CitiMortgage was a February 13, 2004 agreement supplemented with an October 14, 2004 addendum. The addendum addressed the delegation of underwriting/loan-origination authority to Platinum and was added years before loan origination for the seven loans at issue in this case. Relevant to the present case, the addendum purported to "add" terms to an existing "Section 11" of the original agreement. By the time the loans at issue in the present case were originated and sold, the underlying agreement between CitiMortgage and Platinum was one integrated agreement. Although we refer to the agreement and to the addendum when identifying specific sources of contractual terms, there is only one integrated agreement at issue in this case.

Pursuant to the agreement, CitiMortgage possessed discretion to determine if a loan under the agreement was defective. This discretion included the right to determine if Platinum had breached the standards applicable for underwriting the loans and to determine if CitiMortgage itself was required to repurchase a loan it had resold to a third party (such as Fannie Mae). This discretion was broad in that it was subject to no express limitations and was identified as CitiMortgage's "sole and exclusive discretion."

The contract provided that Platinum was to be afforded an opportunity to correct or cure an alleged defect and that, absent correction or cure to CitiMortgage's "complete satisfaction," Platinum could be required to repurchase the loan. Moreover, if CitiMortgage itself was required to repurchase a loan after sale to a third party, CitiMortgage could assert the fact of that third party's demand for repurchase as grounds to demand Platinum, in turn, repurchase that same loan.

The material contract provisions of the original agreement (with emphasis added) are as follows:

11. CURE OR REPURCHASE

If CMI [CitiMortgage], in its sole and exclusive discretion, determines any Loan purchased pursuant to this Agreement:

(i) was underwritten and/or originated in violation of any term, condition, requirement or procedure contained in this Agreement or the CMI Manual in effect as of the date CMI purchased such Loan;

(ii) was underwritten and/or originated based on any materially inaccurate information or material misrepresentation made by the Loan borrower(s), Correspondent, Correspondent's directors, officers, employees, agents, independent contractors and/or affiliates, or any other party providing information relating to said Loan;

(iii) was or is capable of being rescinded by the applicable borrower(s) pursuant to the provisions of any applicable federal (including but not limited to the Truth-In-Lending Act) or state law or regulation;

(iv) must be repurchased from any secondary market investor (including but not limited to the Fannie Mae, Freddie Mac, FHA, VA, HUD or Government National Mortgage Association) due to a breach by Correspondent of any representation, warranty or covenant contained in this Agreement or the CMI Manual or a failure by Correspondent to comply in all material respects with the applicable CMI Manual terms, conditions, requirements and procedures; and/or

(v) was subject to an Early Payment Default (as defined in the CMI Manual), an Early Payoff (as defined in the CMI Manual) or any other payment related defect (as defined in the CMI Manual)

Correspondent will, upon notification by CMI, correct or cure such defect within the time prescribed by CMI to the full and complete satisfaction of CMI . If, after receiving such notice from CMI, Correspondent is unable to correct or cure such defect within the prescribed time, Correspondent shall, at CMI's sole discretion, either (i) repurchase such defective Loan from CMI at the price required by CMI ("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 CMI may deem appropriate. If CMI requests a repurchase of a defective Loan, Correspondent shall, within ten (10) business days of Correspondent's receipt of such repurchase request, pay to CMI the Repurchase Price by cashier's check or wire transfer of immediately available federal funds ....

Correspondent agrees and acknowledges that the provisions of this Sec. 11 do not, in any way, eliminate, diminish or impair Correspondent's indemnification obligations contained in Sec. 10.

And, in the addendum, the additional provisions for Section 11 state:

Correspondent expressly agrees that it shall underwrite each Loan in conformity with the applicable underwriting criteria of CMI. If an audit by CMI on any Loan reveals that it was underwritten in violation of the applicable CMI underwriting criteria, Correspondent will, not later than thirty (30) days after receipt of written notice from CMI, repurchase the Loan at the Repurchase Price or provide CMI with written evidence as to why Correspondent believes such underwriting criteria was not violated. If, after reviewing Correspondent's written evidence, CMI, in its sole and independent discretion, determines the Loan was not originated in accordance with the applicable underwriting criteria, Correspondent will, not later than thirty(30)days after receiving further written notice from CMI, repurchase the Loan at the Repurchase Price specified in the Agreement, Manual and/or applicable Bulletin(s).

Here, after Fannie Mae informed CitiMortgage that there were defects in the mortgages, CitiMortgage sent three letters to Platinum for each of the seven loans (twenty-one letters in total).

As to each separate loan, a first letter: (1) identified a "potential breach" and described that breach; (2) invited Platinum to investigate the matter and send a "written response along with any supporting documentation" within "thirty days"; and (3) notified Platinum that if CitiMortgage did not find the resolution satisfactory, repurchase may be required.

As to each loan, after more than the expressly identified thirty days had passed, CitiMortgage sent a second letter describing the breach and stating repurchase was required. Again, CitiMortgage cited a deadline of thirty days. CitiMortgage's second letter as to each loan expressly stated, "Please contact me upon receipt of this letter to confirm the repurchase date on or before thirty (30) days from the date of this letter."

As to each loan, again after more than the expressly identified thirty days had passed, CitiMortgage sent a third letter. In the third letter as to each loan, CitiMortgage again described the breach and stated repurchase was required and needed to be confirmed "on or before thirty (30) days from the date of this letter." For several of the loans, CitiMortgage made express reference to having received documentation or explanation from Platinum in response to earlier letters and having determined such responses were not satisfactory. For other loans, CitiMortgage expressly noted that Platinum had not responded.

More than two years after sending the last letter for the seventh loan, CitiMortgage filed the present suit. Platinum moved for summary judgment, arguing (1) CitiMortgage could not force repurchase because the agreement had been terminated; (2) CitiMortgage could not force repurchase because CitiMortgage had already foreclosed on the underlying mortgage...