# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

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No. 1 5- 13 75

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Ci ti Mo rtg ag e, In c.

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el le e

v.

Ch ic ag o B an co rp , Inc

.

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t - Ap pe ll an t

__ __ __ __ __ __

App eal fro m

Uni te d S ta te s Di st ric t Co ur t

fo r th e Eas te rn Dis tri ct of M is so ur i - St . Lou is

__ __ __ __ __ __

Su bm it te d: Sep te m

be r 21 , 20 15

Fil ed : Dec em

be r 21 , 20 15

__ __ __ __ __ __

Befo re WOL LMAN, COLLOTON , and KELLY , Cir cu it Ju dg es

.

__ __ __ __ __ __

W OLLMAN, Circ ui t J ud ge

.

Ci ti Mo rtg ag e, In c. (CM I) an d Ch ic ag o Ba n c o r p
, In c. (Ban co rp ) en te red in to

a co nt ract un de r whi ch CMI ag reed to bu y res id en ti al m or tg ag e lo an s un de rwri tt en

o r o rig in at ed by Ban co rp
, an d Ban co rp ag reed to cu re or rep ur ch as e an y su ch l o a n

th at CMI

, in it s “ so le an d ex cl us iv e di sc ret io n,” de te rm in ed di d no t co nf or m wit h th e

te rm s of th e co nt ract

. Afte r Ban co rp refu se d to cu re or rep ur ch as e el ev en lo an s, CMIfil ed th is br each -o f-co nt ract su it

. The di st ric t co ur t co nc lu de d th at Ban co rp ha d 1

br each ed th e co nt ract by refu si ng to cu re or rep ur ch as e ei gh t of th e el ev en lo an s, an d

it gr an te d CMI ’s m ot io n fo r su m m ary jud gm en t wit h res pe ct to th os e lo an s. Ban co rp 2

ap pe al s, an d we a ffi rm

.

CMI pu rch as es m or tg ag es or ig in at ed or un de rwri tt en by cert ai n ap pr ov ed

le nd ers , i nc l u d i n g B a n co rp , a nd res el ls m os t of th os e lo an s to th e Fed eral Nati on al

Mo rtg ag e Ass oc ia ti on (Fan ni e Mae ), th e Fed eral Hom e Loa n Mo rtg ag e Co rp or at io n (Fre dd ie Mac ), or ot he r in ve st or s in th e se co nd ary m or tg ag e m ark et . In 2 00 4, CMI

an d Ban co rp en te red in to CMI ’s st an da rd “ Co rres po nd en t Agr eem en t Fo rm 20 0” (th e

ag reem en t), whi ch se t fo rth th e te rm s an d co nd it io ns go ve rn i n g B a n co rp ’s sa le of

lo an s to CMI an d in co rp or at ed CMI’s, as well as F an ni e Ma e’s, de ta il ed gu id el in es

fo r an al yz in g bo rro wer an d pr op ert y da ta (CM I Man ua l). The ag reem en t req ui red

Ban co rp to cu re or rep u r c h a s e a n y l o an it so ld to CMI if CMI

, in it s “ so le an d

ex cl us iv e di sc ret io n,” de te rm in ed (1 ) th at th e lo an ha d be e n “u n d erwri tt en an d/ or

or ig in at ed in vi ol at io n of an y te rm
, co nd it io n, req ui rem en t or pr oc ed ur e co nt ai ne d in ”

th e ag reem en t or th e CM I Man ua l; (2) th at th e lo an ha d b een “ un de rwri tt en an d/ or

or ig in at e d b as ed on an y m at eri al ly in accu rat e in fo rm at io n or m at eri al

m is rep res en ta ti on ” by a bo rro wer or by Ban co rp ; or (3 ) th at th e lo an ha d to “ be

rep ur ch as ed [b y CMI ] fro m an y se co nd ary m ark et in ve st or ” as a res ul t of Ban co rp ’s

fai lu re to co m

pl y wit h an y req ui rem en t se t fo rth in th e ag reem en t or th e CMI Man ua l.

Add . of Ap pe ll an t 6 4.

The Hon or ab le Cat he rin e D. Perr y , Ch ie f Ju dg e, Uni te d St at es Dis tri ct Co ur t 1

fo r th e Eas te rn Dis tri ct of M is so ur i.

The di st ric t co ur t de ni ed su m m ary jud gm en t on th ree o f th e lo an s o rig in al ly 2

id en ti fie d by CMI

, an d it la te r gr an te d CMI ’s m ot i o n t o d i sm is s wit h pr ejud ic e th e cl ai m s re la te d t o t ho se lo an s.

-2

-Fro m 20 04 to 20 09

, Ban co rp so ld m or e th an 4,7 00 lo a n s t o C M I un de r th e

ag reem en t. Bas ed on in t e r n a l r e vi ews or th ird -p art y rep or ts

, CMI de te rm in ed th at

el ev en of th os e lo an s were de fect iv e un de r th e te rm s of th e ag reem en t. CMI

fo rward ed no ti ce of it s de te rm in at io n to Ban co rp
, de m an di ng th a t Ban co rp cu re or

rep ur ch as e th e de fect iv e lo an s. W he n Ban co rp refu se d, CMI fil ed su it to reco ve r th e

rep ur ch as e pr ic e, as se t fo rth in th e ag r e e men t

. A s st at ed ab ov e, th e di st ric t co ur t

gr an te d su m

m ary jud gm en t to CMI on ei gh t of th e el ev en lo an s (th e Ben ne tt

, Bro wn,

Cu rti s, Han se n, Mag gi o, Mil le r, Pere z, an d Vill ares lo an s)

. App lying Mi ss ou ri la w

an d co ns id eri ng th e pl ai n la ng ua ge of th e ag reem en t an d th e un di sp ut ed ev id en ce, th e

di st ric t cou rt con cl ud ed th at Ban co rp ha d br each ed th e ag reem en t by fai li ng to cu re

or rep ur ch as e th e ei gh t l o an s at is su e. The co ur t fu rth er co nc lu de d th at Ban co rp

fai le d to es ta bl is h th at CMI act ed in ba d fai th , e it he r in i t s de te rm in at io n th at th os e

lo an s were de fect iv e un de r th e ag reem en t or in it s su bs eq ue nt tre at m en t or di sp os it io n

of th e un de rlyin g pr op ert ie s. CMI vo lu nt ari ly di sm is se d it s cl ai m s on th e rem ai ni ng

th ree l oa ns (th e Gel at ka , McDo na ld , and W ad e lo an s) wit h p reju di ce, an d t he co ur t

en te red fin al jud gm en t, award in g CMI $1 ,28 3,0 68 .07 un de r th e a g reem en t’s

rep ur ch as e p ric e fo rm

ul a.

Ban co rp arg ue s on ap pe al th at su m m ary jud gm en t was in ap pr op ria te be cau se

th ere were ge nu in e is su es of m at eri al fact reg ard in g CMI ’s go od fai th in de te rm in in g

th e m at eri al it y of th e al le ge d m is rep res en ta ti on s or in accu raci es in t h e Bro wn,

Han se n, Mag gi o, an d Pere z lo an ap pl ic at io ns an d in th e cal cu la ti on of th e am ou nt of

da m ag es du e on th e Ben ne tt an d Bro wn lo an s. Ban co rp al so arg ue s th at th e di st ric t 3

co ur t erre d in co nc lu di ng th at it was ob li ga te d to cu re or r e pu rch as e th e Cu rti s,
Mag gi o, an d Vil la res lo an s, be cau se CMI was th e un de rwri te r of th os e lo an s an d was

th us res po ns ib le for an y

m is rep res en ta ti on s o r in accu raci es in th os e lo an s.

Ban co rp do es no t ap pe al th e di st ric t c ou rt’s or de r wit h res pe ct to th e Mi ll er 3

lo an

.

-3

-W e rev ie w a gr an t of su m m ary jud gm en t de no vo , vi ewin g th e fact s in th e li gh t

m os t fav or ab le to th e no nm ov in g pa rty, an d affi rm in g if th ere is no ge nu in e is su e of

m at eri al fact an d t he m ov an t i s en ti tl ed to jud gm en t as a m at te r of law. Re si de nt ia l

Fu nd in g Co

. v. Terrac e Mo rtg

. Co

., 72 5 F.3 d 91 0, 91 5 (8 th Ci r. 20 13 ). To es ta bl is h

a ge nu in e is su e of m at eri al fact , a pa rty m us t pr ov id e su ffi ci e n t p ro ba ti ve ev id en ce

to pe rm it a fi nd in g i n i ts fav or . Id.

Ban co rp fir st as se rts th at th ere were ge nu in e is su es of m at eri al fact reg ard in g

whe th er CMI m a d e a go od -fai th de te rm in at io n th at th e m is rep res en ta ti on s or

in accu raci es in cl ud ed in th e lo an ap pl ic at io ns of b or ro wers Bro wn (m is rep res en te d

in co m e an d im

pe rm is si ble de bt-to -in co m e rat io ), Han se n (m is rep res en te d em pl oyer),

Mag gi o (m is rep res en te d in co m e an d im pe rm is si bl e de bt -to -in co m e rat io ), an d Pere z 4

(u nd is cl os ed se co nd m or tg ag e on un di sc lo se d ad di ti on al pr op ert y ) were “ m at eri al ”

un de r th e te rm s of th e ag reem en t. CM I res po nd s th at Ban co rp ’s arg um en ts are

fo recl os ed by o u r d eci si on in Res id en ti al Fu nd in g, in whi ch a bu y er of res id en ti al

mort ga ge lo an s br ou gh t a br each -o f-co nt ract cl ai m whe n th e se ll er refu se d t o

rep ur ch as e lo an s de em ed de fect iv e by th e bu y er. The pa rti es ’ ag reem en t gr an te d th e

bu y er so le di sc ret io n to de te rm in e whe th er a lo an was de f e c t i v e a n d req ui red th e

se ll er to rep ur ch as e if th e bu y er m ad e su ch a de te rm in at io n. The se ll er ha d th e rig ht

to ap pe al th e bu y er’s de fect iv en es s de te rm in at io n, bu t th e bu y er al so ret ai ne d th e so le

d i s c r et io n to de te rm in e th e va li di ty of an y su ch ap pe al

. W e fir st no te d th at un de r

Mi nn es ot a la w, a co ur t in te rp ret in g a co nt ract m us t “ at te m

pt to de te rm in e th e in te nt

CMI so ld th e Pere z lo an to Fan n i e Mae

, whi ch la te r di sc ov ered th e 4

m is rep res en ta ti on an d de m an de d th at CMI rep ur ch as e th e lo an

. CMI arg ue d ag ai ns t

it s own ob li ga ti on to rep ur ch as e fro m Fan ni e Mae

, bu t th at fact al on e is in su ffi ci en t

to es ta bl is h CMI ’s bad fai th . See, e.g ., BJC Heal th Sy s. v . Col um bi a Cas . C o., 47 8

F.3 d 90 8, 91 4 (8 th Ci r. 20 07 ) (co nc lu di ng un de r Mi ss ou ri la w th at pr oo f of “ fla wed

or un reas on ab le ” di sc ret io na ry de ci si on is in su ffi ci en t; ba d fait h req ui res pr oo f th at

di sc ret io na ry de ci si on was in te nd ed “ to ev ad e th e sp iri t of th e tra ns act io n or

. . . to

de ny [th e o th er p art y ] th e ex pe ct ed be ne fit of t he co nt ract ” (ci ta ti on om it te d) ).

-4

-of th e pa rti es

. . . fro m th e la ng ua ge of th e co nt ract .” Id

. at 91 6 (ci ta ti on s o mi t t e d )

.

And whe n th e la ng ua ge in a co nt ract is un am bi gu ou s, “ co ur ts sh ou ld no t rewri te

,

m od ify, or li m it it s ef

fect .” Id . (ci ta ti on om it te d)

.

W e wen t on to ho ld th at be cau se th e op erat iv e la ng ua ge of th e ag reem en t was

cl ear an d un am

bi gu ou s, we were no t en ti tl ed to lo ok be y on d th e ag reem en t’s te rm s.

W e no te d th at th e ag reem en t was “ free ly ne go ti at ed

. . . be twee n two so ph is ti cat ed

pa rti es ” an d th at th e se ll er “ wil li ng ly ag reed to pl ace it se lf in th is si tu at io n[ ,]

. . . ha d

th e op po rtu ni ty to ob ta in ad vi ce fro m ab le co un se l, an d m ad e it s own de ci si on to

en te r in to th e co nt ract .” Id . at 9 17 . W e rea so ne d t ha t t he sel le r co ul d n ot “ co nt ract

away jud ic ia l rev ie w by gr an ti ng [th e bu y er] th e ex cl us i v e rig ht to de te rm in e”

whe th er a lo an was de fect iv e, “ on ly to la te r as k a co ur t to in de pe nd en tl y rev ie w [th e

bu y er’s] det erm in at io n.” Id. at 91 5- 16

.

In reac hi ng th is co nc lu si on
, we ack no wled ge d th at Mi nn es ot a co ur ts im pl y a

co ve na nt of go od fai th in ev ery co nt ract

, whi ch pr ev en ts a pa rty fro m “ un jus ti fia bl y

hi nd er[i ng ] th e pe rfo rm an ce of an ot he r pa rty” or fro m refu si ng to fu lfi ll a co nt ract ua l

ob li ga ti on “ ba se d on an ul te rio r m ot iv e.” Id

. at 91 7- 18

. Bu t we reject ed th e se ll er’s

al le ga ti on s th at th e bu y er act ed in ba d fai th in de te r mi n i n g th at sp eci fic lo an s were

de fect iv e, be cau se “ [a] pa rty to a co nt ract do es no t a ct in ba d fai th by as se rti ng or

en fo rci ng it s le ga l an d c on tra ct ua l ri gh ts .” Id . at 9 18 (ci ta ti on an d qu ot at io n m ark s

om it te d)

. In ot he r wor ds

, th e bu y er “ di d ex act ly wha t th e co nt ract al lo wed it to do ,”

na m el y , de te rm in e th at a lo an was de fect iv e an d de m an d rep ur ch as e. Id

. W e refu se d

to co ns id er th e se ll er’s arg um en ts of ba d fai th rel at ed to sp eci fic lo an s, be cau se it was

un di sp ut ed th at th e bu y er de te rmi n e d th at th os e lo an s were de fect iv e un de r th e

ag reem en t, a de te rm in at io n le ft to it s so le an d ab so lu te di sc ret io n. W e co nc lu de d th at

fo r th e co ur t “ [t]o in qu ire fu rth er by rev ie w i n g th e va li di ty of ” th at de te rm in at io n

wo u l d “ co nt rad ic t un am

bi gu ou s co nt ract la ng ua ge ” in vi ol at io n of Mi nn es ot a la w.

Id . at 9 20

.

-5

-W e co nc lu de th at Res id en ti al Fu nd in g co nt ro ls ou r a n al y si s he re. Lik e

Mi nn es ot a co ur ts

, Mi ss ou ri co ur ts in t e rp ret a co nt ract to gi ve effe ct to th e pa rti es ’

in te nt an d, whe n a co nt ract is un am bi gu ou s, in te nt “i s di sc ern ed so le ly fro m th e

co nt ract ’s la ng ua ge .” The Ar b o r s at Su ga r Cree k Hom eo wne rs Ass ’n v. Je ffer so n

B a n k & Tr. Co

., 46 4 S.W .3d 17 7, 18 3 (Mo

. 20 15 ). Und er Mi ss ou ri la w, a s u n d e r

Mi nn es ot a la w, a co ve na nt of go od fai th an d fai r de al in g is im pl ie d in ev ery co nt ract

, bu t “ th ere can be no br each of th e im pl i e d

. . . c o v en an t

. . . whe re th e co nt ract

ex pr es sl y pe rm it s th e act io ns be in g ch al le ng ed

, an d th e de fen da nt act s in acco rd an ce

wit h th e ex pr es s te rm s of th e co nt ract .” I d

. a t 1 8 5 ( ci ta ti on s om it te d)

. Si m il arl y ,

un de r bo th Mi ss ou ri a nd Mi nn es ot a la w, th e im pl ie d c ov en an t i s b reac he d o nl y if a

pa rty “ ex erci se s a jud gm en t co nf erre d by th e ex pr es s te rm s o f t h e a g reem en t in a

m an ne r th at ev ad es th e sp iri t o f t h e a gr eem en t an d de ni es th e [o th er pa rty] th e

ex pe ct ed b en efi t of th e ag reem en t.” Glen n v. Heal th Lin k HMO, In c., 36 0 S.W .3d

86 6, 87 7 (Mo

. Ct

. App

. 20 12 ); se e Mi nn wes t Ban k Cen t. v. Fl ag sh ip Pro ps

. LLC, 68 9

N.W .2d 29 5, 30 3 (Mi nn

. Ct

. App

. 20 04 ) (n ot in g th at th e im pl ie d co ve na n t “b a r s a

pa rty fro m un

jus ti fia bl y hi nd eri ng th e ot he r pa rty’ s pe rfo rm an ce”)

. Lik ewis e, whe n

th ere ha s be en “ no su bt erfu ge ,” an d th e co nt ract ’s “ ex pr es s te rm s” al lo wed fo r th e

ch al le ng ed act io n, t he re is no ba d fa it h a nd th us no bre ach of t he im pl ie d c ov en an t.

The Arb or s, 46 4 S.W .3d at 18 5; se e Mi nn wes t Ban k Cen t., 68 9 N.W .2d at 30 3

(n ot in g th at to pr ov e a vi ol at io n of th e im pl ie d co ve na nt

, “ a pa rty m us t es ta bl is h ba d

fai th by de m on st rat in g th at th e ad ve rs e pa rty ha s an ul te rio r m ot iv e fo r it s refu sa l to

pe rfo rm a co nt ract ua l d ut y ”).

Lik e th e bu y er in Res id en ti al Fu nd in g, CMI ha d “ so le an d ex cl us iv e di sc ret io n
[to ] de te rm in e” whe th er a lo an was de fect iv e, in cl ud in g whe th er it was “ ba se d on an y

m at eri al ly in accu rat e in fo rm at io n or m at eri al m is rep res en ta ti on .” Add

. of App el la nt

64

. CMI an d Ban co rp
, two so ph is ti cat ed bu si ne ss en ti ti es
, vo lu nt ari ly ne go ti at ed an d

en te red in to th e ag reem en t, an d th ere is no th in g am bi gu ou s ab ou t th e la ng ua ge us ed

th erei n. Lik e th e se ll er in R e s i d e n ti al Fu nd in g, Ban co rp ch al le ng es th e accu racy,

m at erial it y , an d go od fai th of CMI ’s lo an -d efec ti ve ne ss de te rm inati ons. A lth ough the

-6

-d i s t r ic t co ur t en ga ge d in a lo an -b y -lo an an al y si s to de ci de th at CMI ex erci se d i t s

di sc ret io n in go od fai th

, we co nc lu de th at Res id en ti al Fu nd i n g p r e c lu de s su ch a

co ns id erat io n. Our ho ld in g in Res id en ti al Fu nd in g is fat al to Ban co rp ’s al le ga ti on s

tha t CMI ex erci se d it s un fet te red di sc ret io n un de r th e ag reem en t in ba d fai th

, be caus e,

li ke th e bu y er in th at cas e, CMI “ di d ex act ly wha t th e co nt rac t a l l o w e d i t to do ” in

de te rm in in g whe th er Ban co rp ’s lo a n s w e r e d efec ti ve
, an d CMI di d “ no t act in ba d

fai th by as se rti ng or en fo rci ng it s le ga l an d co nt ract ua l rig ht s.” Res id en ti al Fu nd in g,

72 5 F.3 d at 91 8 (c it at io n o m it te d) . “ To i nq ui re fu rth er b y rev ie win g t he va li di ty of

[CM I’s de fect iv en es s] de te rm in at io n [wo ul d be to ] co nt rad ic t un am bi gu ou s co nt ract

la ng ua ge ,” so m et hi ng Mi ss ou ri l aw do es no t al lo w us to do . Id. at 92 0.

And ev en if CMI erro ne ou sl y ex erci se d it s “ so le an d ex cl us iv e di sc ret io n”

un de r th e co nt ract

, Ban co rp ha s no t pr ov id ed ev id en ce to es ta bl is h th at CMI act ed in

ba d fai th

. It is no t en ou gh “ to sh ow th at a pa r t y in ve st ed wit h di sc ret io n m ad e an

erro ne ou s de ci si on .” BJ C Heal th Sy s. v. Co lu m bi a Cas

. Co

., 47 8 F.3 d 90 8, 91 4 (8 th

Ci r. 20 07 ) (in te rp ret in g Mi ss ou ri l a w )

. Rat he r, Ban co rp was req ui red to pr ov id e

ev id en ce tha t CMI exerc is ed it s di sc ret io n in a way in te nd ed “ to ev ad e th e sp iri t of

th e t r a n s a c t i o n or

. . . to de ny [Ban co rp ] th e ex pe ct ed be ne fit of th e co nt ract .” Id

. (n o t i n g th at it is in su ffi ci en t to pr ov id e ev id en ce th at a di sc ret io na ry de te rm in at io n

“wa s fla wed or un reas on ab le ”) (ci ta ti on om it te d) ; se e al so Arm ou r & Co

. v. In ve r

Gro ve Heig ht s, 2 F.3 d 27 6, 27 9 (8 th Ci r. 19 93 ) (n ot in g th at “ [c]on cl us or y affi da vi ts

do no t p ro vi de a ba si s u po n wh ic h t o d en y m ot io ns for su m

m ary jud gm en t” ).

Ban co rp ha s pr es en te d no ev id en ce th at CMI ex erci se d it s di sc ret io n un de r th e

ag r e em en t in a m an ne r in te nd ed to sa bo ta ge or ev ad e th e sp iri t of th e ag reem en t or

to de ny Ban co rp th e ex pe ct ed be ne fit of it s ba rg ai n. See BJ C Heal th Sy s., 47 8 F.3 d

at 91 4 (n ot in g t ha t t he bu rd en of p ro of is on th e pa rty ass ert in g a ba d- fai th ex erci se

of di sc ret io n)

. Acco rd in gl y , we co nc lu de th at th e di st ric t co ur t di d no t err in gr an ti ng

su m m ary jud gm en t on th e Bro wn, Han se n, Mag gi o, an d Pere z lo an s. CMI ex erci se d

it s so le an d ab so lu te di sc ret io n un de r th e un am bi gu ou s la ng ua ge of th e ag reem en t to

-7

-de te rm in e th at each of th es e lo an s was ba se d o n a mat e r i al m is rep res en ta ti on or

in accu racy an d was t h u s d efec ti ve

. Ban co rp ha s pr ov id ed no ev id en ce th at CMI

ex erci se d it s di sc ret io n in a m an ne r th at was in te nd ed t o “ev a d e[] th e sp iri t of th e

ag reem en t an d de n[ y ] [Ban co rp ] th e ex pe ct ed be ne fit of th e ag reem en t.” Glen n, 36 0

S.W .3d at 87 7. Ban co rp “ wil li ng ly ag reed to pl ace it se lf in th is si tu at io n” by gr an ti ng

CMI so le an d ex cl us iv e di sc ret io n to d e t e r mi ne th e de fect iv en es s of an y lo an

pu rch as ed fro m Ban co rp —t he ve ry de te rm in at io ns th at it no w se ek s to ch al le ng e.

See R es id en ti al Fu nd in g, 7 25 F.3d at 9 17

.

Ban co rp ne xt arg ue s th at th e di st ric t co ur t erre d in gr an ti ng su m m ary jud gm en t

in fav or of CMI on th e Ben ne tt an d Bro wn lo an s be cau se ge nu in e is su es of m at eri al

fact ex is t wit h res pe ct to th e ap pr op ria te cal cu la ti on of th e rep ur ch as e pr ic e un de r th e

ag reem en t. Ban co rp co nt en ds th at CMI un reas on ab ly de la y ed in di sp os in g of th es e

5

pr op ert ie s by sp eci fic al ly refu si ng to ap pr ov e a de ed in li eu of fo recl os ur e or a sh or t

sa le th at wou ld ha ve li m it ed th e de cl in e in th e pr op ert ie s’ va lu e an d th e res ul ti ng

rep ur ch as e pr ic e. Ba n c or p arg ue s th at CMI ’s c on du ct an d th e res ul ti ng in crea se in

th e rep ur ch as e pr ic e was no t reas on ab ly fo res eeab le to Ban co rp an d was a vi ol at io n

of CMI’s d ut y

to m it ig at e d am ag es

.

The “ Cu re or Rep ur ch as e” se ct io n of th e ag reem en t st at es th a t i f Ban co rp is

un ab le to cu re a de fect iv e lo an
, Ban co rp m us t rep ur ch as e th at lo an at th e “ Rep ur ch as e

Pri ce,” wh ic h i s d efi ne d a s t he su m of:

To th e ex te nt Ban co rp arg ue s th at a g e n u i n e is su e of m at eri al fact ex is ts 5

reg ard in g whe th er CMI un reas on ab ly fai le d to m it ig at e da m ag es on th e Bro wn lo an be cau se CMI c ed ed ti tl e to th e un de rlyin g pro pe rty to th e Ci ty of Ch ic ag o a fte r fi re

an d va nd al is m d a m ag e to th e dwe ll in g pr om pt ed th e Ci ty t o raze it , B an co rp fai le d

to rai se th is arg um en t be fo re th e di st ric t co ur t, an d we wil l no t co ns id er it fo r th e fir st

ti m e on ap pe al

. See Dub in sk y v. Mer m art

, LLC, 59 5 F.3 d 81 2, 81 9 (8 th Ci r. 20 10 ).

-8

-(i) th e cu rren t pr in ci pa l ba la nc e on th e lo an as of th e pa id -to da te ; (ii ) th e

accr u e d in te res t cal cu la te d at th e m or tg ag e lo an Not e rat e fro m th e

m or tg ag e lo an pa id -to da te up to an d in cl ud in g th e rep ur ch as e da te ; (ii i)

al l u n r e i m

bu rs ed ad va nc es (in cl ud in g bu t no t li m it ed to ta x an d

in su ran ce ad va nc es
, de li nq ue nc y an d/ or fo recl o s ur e ex pe ns es
, et c.)

in cu rred in co nn ect io n wit h th e se rv ic in g of th e m or tg a g e l o a n[ ;] (iv )

an y pr ic e pa id in ex ces s of par by [CM I] on th e fu nd in g dat e[; ] an d (v)

an y ot he r fees

, co st s, or ex pe ns es ch arg ed by or pa id to an ot he r in ve st or in co nn ect io n wit h th e rep ur ch as e of th e m or tg ag e lo an fro m su ch

in ve st or bu t on ly to th e ex te nt su ch fees

, co st s an d ex pe ns es ex ceed th e

to ta l o f it em s (i ) th ro ug h (i v) ab ov e.

Su pp l. App ’x of App el le e 84

. Ban co rp do es no t arg ue th at th is l a n g u a g e is

am bi gu ou s or th at CMI ’s cal cu la ti on s un de r th is fo rm ul a were erro ne ou s wit h res pe ct

to th e Ben ne tt an d Bro wn lo an s. In st ead

, i t c o n t e n ds th at th e le ga l do ct rin es of

fo res eeab i l i t y, miti ga ti on
, an d go od fai th ap pl y to m od ify th is la ng ua ge ; th at CMI

fai le d to m it ig at e th e am ou nt of th e rep ur ch as e pr ic e du e on th es e lo an s in vi ol at io n

of th e im pl ie d co ve na nt of go od fai th an d fai r de al in g; an d th at Ban co rp is no t li ab le

f o r th e fu ll rep ur ch as e pr ic e be cau se th e am ou nt of th e rep ur ch as e pr ic e on th e s e

lo an s w a s n o t r e as on ab ly fo res eeab le whe n th e pa rti es en te red in to th e ag reem en t.

The di st ric t co ur t reject ed th is arg um en t. It ob se rv ed th at “ CMI ’s feet -d rag gi ng ” in

di sp os in g of th e un de rlyin g pr op ert ie s “ m ay ha ve le d to in crea se d da m ag es ” bu t

ne ve rth el es s co nc lu de d th at th e rep ur ch as e pr ic e pr ov is io n was “ th e m ea s u r e th e

pa rti es ag reed to

. The da m ag es in cu rred

. . . were no t un fo res eeab le ; rat he r, th ey were

ex pl ic it ly barg ai ne d fo r.” Add . of Ap pe ll an t 4 5. We agre e.

The ag reem en t was th e r es ul t of an arm ’s le ng th ne go ti at io n be twee n two

so ph is ti cat ed co m

m erci al en ti ti es

. By en te rin g in to it

, Ban co rp kn owi ng ly acce pt ed

t h e r i s k s e t fo rth by th e pl ai n la ng ua ge th erei n, na m el y , th at th e am ou nt of t h e

rep ur ch as e pr ic e o n a de fect iv e lo an co ul d in crea se if Ban co rp refu se d to cu re or

rep ur ch as e th e lo a n i n acco rd an ce wit h th e te rm s of th e ag reem en t. Had Ban co rp

rep ur ch as ed th es e lo an s at th e ti me of CMI ’s in it ia l de m an d, th e qu es ti on s of

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-fo res eeab il it y an d m it ig at io n wou ld no t ha ve ari se n. See Res ol ut io n Tr. Co rp

. v. Key

Fi n. Serv s., In c., 28 0 F.3 d 12

, 18 & n.14 (1 st Ci r. 20 02 ) (ap pl y in g New Yor k la w to

a sim ila r pr ovi si on
, de cl in in g to ap pl y da m ag e-l im it in g le ga l do ct rin es an d no ti ng th at

th e pr ov is io n was “d e s i g n e d t o sh ift th e ris k to th e se ll in g pa rty in th e ev en t th at a

di sp ut e ari se s,” m ak in g it “ irr el ev an t th at th e lo an s m ay ha ve su ffer ed a lo ss in va lu e

be cau se of ch an gi ng m ark et co nd it io ns r a t h er th an ” de fic ie nc ie s in th e lo an s

th em se lv es ); se e al so S. Fi n. Grp

., LLC v. McF arl an d St at e Ban k, 76 3 F.3 d 73 5, 74 2

(7 th Ci r. 20 14 ) (n ot in g th at whe n th e se ll er in Key Fi na nc ia l fai le d to rep ur ch as e on

de m an d, th e bu y er was le ft “ ho ld in g th e ba g as th e va lu e of th e m or tg ag es de cl in ed

, th us pi nn in g th e ris k of lo s s e s o n t h e bu y er whe n th e pa rti es ha d ag reed th at th os e

lo ss es wou ld fal l o n t he sel le r”).

The ag reem en t ob li ga te d Ban co rp to rep ur ch as e de fe c t i v e l oa ns on de m an d,

th us “fr o m t he m om en t a pr op er rep ur ch as e de m an d was m ad e, [Ban co rp ]—no t

[CM I]—sh ou ld ha ve bo rn e th e ris k of an y m ark et flu ct ua ti on s.” Key Fi n. Serv s., In c.,

28 0 F .3d at 1 8 n .14 . As th e d is tri ct co ur t n ot ed , th e p art ie s ex pl ic it ly barg ai ne d fo r

an d ag reed to th e fo rm

ul a se t fo rth in th e rep ur ch as e pr ic e pr ov is io n, an d th e am ou nt s

cal cu la te d th ereu nd er were no t un fo res eeab le

. See Add

. of App el la nt at 45 ; se e al so

Ci ti Mo rtg ag e, In c. v. All ie d Mo rtg . Grp., In c., 4: 10 CV1 86 3, 2 01 2 WL 5 25 87 45 , a t

* 1 3 (E.D. Mo

. Oct. 24

, 20 12 ) (“ By en te rin g in to th e [lo an -rep ur ch as e] Agr eem en t

, All ie d co ns en te d to th is m et ho d of cal cu la ti n g C M I ’s da m ag es ba se d up on

ap p l i c a t i o n o f th e Rep ur ch as e Pri ce fo rm ul a se t fo rth in

. . . th e Agr eem en t” );

Ci ti Mo rtg ag e, In c. v. Reu ni on Mo rtg

., In c., 4: 10 CV1 63 2, 20 12 W L 54 71 16 5, at *1 3

(E.D. Mo

. Nov

. 9, 20 12 ). “ The ki nd of ‘reaso na bl en es s’ arg um en t[s ] fo r whi ch [th e

de fen da nt ] gr as ps [are ] no t pr es en t in th e la ng ua ge of th e co nt ract

. . . . [T]he di st ric t

co ur t co rrec tl y rel ie d on th e la ng ua ge of th e co nt ract th at th es e pa rti es free ly si gn ed .”

Res id en ti al Fu nd in g, 72 5 F.3 d at 92 2. The da m ag e-l im it in g d o c t r in es ci te d by

B a n c o r p d o no t tru m

p th e pl ai n, un am

bi gu ou s, an d ba rg ai ne d- fo r la ng ua ge of th e

ag reem en t. Ban co rp ’s “ cri es of in jus ti ce fal l on de af ears
, as [it ] free ly co nt ract ed fo r

th e ob li ga ti on s by whi ch it no w fin ds it se lf bo un d.” Key Fi n. Serv s., Inc., 28 0 F.3 d

-1 0-at 18 . The d is tri ct co ur t p ro pe rly awarde d CMI th e rep ur ch as e pr ic e fo r th e Bro wn

an d B en ne tt lo an s, as cal cu la te d u si ng th e fo rm ul a se t fo rth in th e ag reem en t.

Fi na ll y , Ban co rp arg ue s th at su m m ary jud gm en t was im

pr op er o n t he Cu rti s,
Mag gi o, an d Vil la res lo an s be cau se th ere is a ge nu in e is su e of m at eri al fact reg ard in g

whi ch pa rty’ s ne gl ig en t un de rwri ti ng cau se d th e lo an s to be de fect iv e. Ban co rp
, th e

or ig in at or of th es e lo an s, arg ue s th at be cau s e CMI was th e un de rwri te r, CMI was

res po ns ib le fo r ve rif

y in g em pl oym en t an d in co m e in fo rm at io n on th es e lo an s. Here

ag ai n, th e la ng ua ge of th e ag reem en t is cl ear an d un equiv oc al —B anco rp was req ui red

to cu re or repu rch as e a lo an if CMI, in it s so le an d exc lu si ve di sc ret io n, det erm in ed

th at an y lo an was “ un de rwri tt en an d/ or or ig in at ed ” ba se d on a n y mat eri al ly

ina ccu rat e in fo rm at io n or m is rep res en ta ti on

. Add

. of App el la nt 64 (em ph as is ad de d).

Ban co rp or ig in at ed th es e lo an s, an d CMI ex erci se d it s di sc ret io n in de te rm in in g th at

th ey were or ig in at ed ba se d on m at eri al m is rep res en ta ti on s. The di st ric t co ur t th us di d

no t er r in gra nt in g s um m ary jud gm en t o n t he se lo an s.

The jud gm en t i s af

fir m ed

.

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