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