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CitiMortgage, Inc. v. Platinum Home Mortgage, Corp.

United States Court of Appeals, Eighth Circuit

February 6, 2019

CitiMortgage, Inc. Plaintiff - Appellant
v.
Platinum Home Mortgage, Corp. Defendant-Appellee

          Submitted: September 26, 2018

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

          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 ...

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