Court Opinion

ID: 6350475
Source: CourtListenerOpinion
Date Created: 2022-06-16 18:00:37.973748+00
Date Added: 2024-06-11T09:15:19.078910
License: Public Domain

Case: 21-40309      Document: 00516359464         Page: 1    Date Filed: 06/16/2022

           United States Court of Appeals
                for the Fifth Circuit                                  United States Court of Appeals
                                                                                Fifth Circuit

                                                                              FILED
                                                                          June 16, 2022
                                   No. 21-40309
                                                                         Lyle W. Cayce
                                                                              Clerk
   Brian Burbridge,

                                                            Plaintiff—Appellant,

                                       versus

   CitiMortgage, Incorporated,

                                                            Defendant—Appellee.

                   Appeal from the United States District court
                        for the Eastern District of Texas
                             USDC No. 4:19-CV-647

   Before King, Graves, and Ho, Circuit Judges.
   James C. Ho, Circuit Judge:
          We construe contracts as we do statutes—in a manner faithful to the
   text. So if a contract includes a grace period, we enforce the grace period. If
   a lender sets a deadline for payment, but allows the borrower to make that
   payment anytime “in the month in which it is due,” then the borrower may
   make that payment anytime in the month in which it is due.
          That’s exactly what CitiMortgage offered the borrower here—a
   deadline accompanied by a grace period. Yet CitiMortgage nevertheless
   contends that we should ignore the grace period.
Case: 21-40309      Document: 00516359464            Page: 2   Date Filed: 06/16/2022

                                      No. 21-40309

          Notably, this is not the first time CitiMortgage has presented this
   atextual plea to a federal court. It did so in at least one previous case,
   involving the same language in a nearly identical loan agreement. The court
   there rejected the argument and faithfully enforced the grace period—as
   fidelity to text requires. See Blankenchip v. CitiMortgage, Inc., 2016 WL
   4494465 (E.D. Cal. Aug. 26, 2016). Yet CitiMortgage did not disclose that
   ruling in these proceedings, either before the district court or on appeal.
          Respect for text means that we must respect the grace period. The
   district court reached the contrary conclusion. Accordingly, we reverse.
                                           I.
          Approximately ten years after receiving a home loan from
   CitiMortgage, Brian Burbridge experienced financial difficulties and
   defaulted on his loan. So Burbridge applied for a loan modification.
          In response, CitiMortgage mailed Burbridge an offer to participate in
   a Trial Period Plan (“TPP”). The TPP provided that “[t]he terms of this
   offer are accepted and the terms of your [TPP] are effective on the day you
   make your first trial period payment, provided you have paid it on or before
   the last day of [January 2019].”
          Burbridge effectively accepted the terms of the TPP when he made
   the first trial period payment of $1,293.66 by January 18, 2019.
          The TPP also spelled out exactly what Burbridge needed to do to
   successfully complete the trial period. It stated that, “[i]f you successfully
   complete the [TPP] by making the required payments, you will receive a
   permanent modification with an interest rate of 6.375% which will be fixed for
   480 months from the date the modification is effective.” It explained that,
   “[t]o successfully complete the [TPP],” Burbridge must make three monthly
   payments of $1,293.66 by January 1, February 1, and March 1. It also made

                                           2
Case: 21-40309     Document: 00516359464             Page: 3   Date Filed: 06/16/2022

                                      No. 21-40309

   clear that “TIME IS OF THE ESSENCE.” And in bold lettering, the TPP
   promised that “we will not conduct a foreclosure sale” so long as
   Burbridge satisfied these terms.
          The TPP also included language specifying that Burbridge’s
   payments would be deemed timely so long as they were made within the
   month when due. It stated that, “[i]f you do not make the specified trial
   period payments in full in the month when due, you will not qualify for a
   permanent modification.” Directly below the specified deadlines, it stated
   in bold lettering: “We must receive each payment in the month in which
   it is due.” And elsewhere it made clear that “[i]f you fail to make the first
   trial period payment during the month in which it is due, this offer will be
   revoked and foreclosure proceedings may continue.”
          In addition, the TPP included a provision expressly contemplating
   that Burbridge might make multiple payments within the same month. It
   stated that CitiMortgage “may hold the trial period payments in an account
   until sufficient funds are in the account to pay each of [Burbridge’s] monthly
   trial period payment obligations.”
          The parties do not dispute that Burbridge made weekly payments of
   roughly $350 beginning on December 14, 2018 and ending on March 29,
   2019. Consequently, each of Burbridge’s three aggregate payments of
   $1,293.66 were completed “in the month in which it [wa]s due,” albeit not
   by the first day of each month. (In fact, Burbridge altogether paid $270 over
   what the TPP required.)
          But despite the fact that Burbridge made his final payment in
   compliance with the stated time period, CitiMortgage sent him a letter
   informing him that he was “ineligible” for the loan modification because he
   failed to comply with the terms of the TPP. CitiMortgage then posted
   Burbridge’s property for foreclosure.

                                           3
Case: 21-40309       Document: 00516359464          Page: 4   Date Filed: 06/16/2022

                                     No. 21-40309

            Burbridge filed suit against CitiMortgage in state court, asserting
   claims for, inter alia, breach of contract. CitiMortgage removed to federal
   court.
            The district court granted summary judgment to CitiMortgage. It
   declined to give force to the grace period provisions and accordingly
   concluded that Burbridge failed to comply with the TPP’s payment
   deadlines. Burbridge timely appealed.
                                         II.
            “This court reviews a district court’s grant of summary judgment de
   novo, applying the same standards as the district court.” Johnson v. World
   Alliance Fin. Corp., 830 F.3d 192, 195 (5th Cir. 2016). Summary judgment is
   granted when “there is no genuine issue as to any material fact and the
   moving party is entitled to judgment as a matter of law.” Celotex Corp. v.
   Catrett, 477 U.S. 317, 322 (1986). A genuine dispute of material fact exists
   “if the evidence is such that a reasonable jury could return a verdict for the
   nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
            To establish a breach of contract claim, Texas law requires Burbridge
   to show: “(1) the existence of a valid contract; (2) performance or tendered
   performance by the plaintiff; (3) breach of the contract by the defendant; and
   (4) damages sustained by the plaintiff as a result of the breach.” Smith Int’l,
   Inc. v. Egle Grp., LLC, 490 F.3d 380, 387 (5th Cir. 2007).
            CitiMortgage contends that the TPP is not a valid binding contract.
   But the text of the TPP makes clear that CitiMortgage intended to be bound
   by the terms of the TPP upon Burbridge’s performance: “If you successfully
   complete the [TPP] by making the required payments, you will receive a
   permanent modification with an interest rate of 6.375% which will be fixed for
   480 months from the date the modification is effective.” Elsewhere the TPP
   stated: “If you make your new payments timely we will not conduct a

                                          4
Case: 21-40309      Document: 00516359464           Page: 5    Date Filed: 06/16/2022

                                     No. 21-40309

   foreclosure sale.” And it expressly defined the terms of acceptance: “The
   terms of this offer are accepted and the terms of your [TPP] are effective on
   the day you make your first trial period payment, provided you have paid it
   on or before the last day of [January 2019].” Accordingly, we have no
   difficulty concluding that an enforceable contract was created on January 18,
   2019, when Burbridge completed the first trial period payment of $1,293.66.
          Alternatively, CitiMortgage argues that Burbridge failed to comply
   with the TPP’s requirement that he make payments “in a timely manner.”
   As CitiMortgage contends, the TPP establishes monthly payment deadlines
   of January 1, February 1, and March 1, 2019, and Burbridge did not meet these
   deadlines.
          But the TPP also establishes a grace period. It accepts payment so
   long as it is made “in the month in which it is due.” Neither the TPP nor the
   parties use the term “grace period” to describe this language. But that is
   plainly what the text contemplates. And no one disputes that Burbridge’s
   payments comply with the governing grace periods.
          CitiMortgage responds that we should ignore the grace period because
   it irreconcilably conflicts with the monthly deadlines set forth in the TPP, as
   well as the express statement that “time is of the essence.”
          But we see no conflict. Grace periods are common features of
   contracts. They are based on a simple premise: In the real world, there are
   deadlines, and there are deadlines. Some deadlines cannot be missed, while
   other deadlines operate more as flexible guidelines than rigid mandates. See,
   e.g., Lindsey v. Bio-Med. Applications of La., L.L.C., 9 F.4th 317, 321 (5th Cir.
   2021) (“As anyone who has ever worked in an office environment can attest,
   there are real deadlines and hortatory ones—and everyone understands the
   difference between the two.”).         Grace periods facilitate contractual
   relationships by making clear which deadlines are aspirational and which are

                                          5
Case: 21-40309        Document: 00516359464         Page: 6    Date Filed: 06/16/2022

                                     No. 21-40309

   mission-critical. So the grace period at issue here presents no conflict with
   the TPP’s stated deadlines. To the contrary, grace periods and deadlines co-
   exist by design.
            Nor do we see any conflict between the grace period and the statement
   that “time is of the essence.” That statement simply conveys that timing is
   important to the lender, so borrowers should expect that the lender will
   rigorously enforce compliance with the stated grace periods.
            And even if CitiMortgage could establish an irreconcilable conflict
   between the grace period and the stated monthly deadlines, it would still need
   to articulate a theory as to why we should favor one set of provisions over the
   other.
            When different provisions of a legal text cannot be reconciled, we
   must decide which text to enforce and which to ignore. In such cases,
   “conflict with at least some text is unavoidable.” Greenbrier Hosp., L.L.C. v.
   Azar, 974 F.3d 546, 547 (5th Cir. 2020). So “respect for text requires that
   ‘judges must do the least damage they can.’” Id. (quoting Herrmann v.
   Cencom Cable Assocs., 978 F.2d 978, 983 (7th Cir. 1992)).
            CitiMortgage has offered no reason why favoring the monthly
   deadlines and ignoring the grace period would “do the least damage” to the
   text of the TPP. Id. That’s fatal to CitiMortgage’s position in this case.
   Because “if we are truly unable to discern which provision should control,
   the proper resolution is to apply the unintelligibility canon and to deny effect
   to both provisions.” Id. (cleaned up). That is, we would ignore the monthly
   deadlines as well as the grace period—and thus reverse accordingly.
                                        ***
            Burbridge met his obligations under the TPP by making timely
   payments. CitiMortgage, by contrast, violated its obligations by refusing to

                                          6
Case: 21-40309    Document: 00516359464         Page: 7   Date Filed: 06/16/2022

                                 No. 21-40309

   grant the permanent loan modification and instead proceeding with
   foreclosure.
         Accordingly, we reverse and remand for further proceedings.

                                      7