Cunningham v. National City Bank

United States Court of Appeals
For the First Circuit

No. 09-1255

JOHN S. CUNNINGHAM,
on behalf of himself and all others similarly situated;
BRIAN M. DELAURENTIS,
on behalf of himself and all others similarly situated,

Plaintiffs, Appellants,

v.

NATIONAL CITY BANK,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Richard G. Stearns, U.S. District Judge]

Before

Boudin, Stahl, and Lipez, Circuit Judges.

Gregory B. Linkh, with whom Jacqueline Sailer, David Pastor,
and Gilman and Pastor, LLP, were on brief for appellants.
James W. McGarry, with whom Brook L. Ames and Goodwin Procter
LLP, were on brief for appellee.

November 25, 2009
 STAHL, Circuit Judge. Plaintiffs-Appellants John

Cunningham and Brian DeLaurentis (collectively, "Plaintiffs"),

recipients of a home equity line of credit ("HELOC"), filed a

putative class action against the issuer, National City Bank

("National City"), for breach of contract, violation of the Truth

in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., and violation of

the Massachusetts deceptive business practices law, Mass. Gen. Laws

ch. 93A ("Chapter 93A"). National City moved to dismiss

Plaintiffs' complaint pursuant to Fed. R. Civ. P. 12(b)(6), and the

district court granted the motion as to all counts.1 We affirm.

I.

Because this appeal follows the granting of a motion to

dismiss, we state the facts as they are set forth in the amended

complaint, Palmer v. Champion Mortg., 465 F.3d 24, 25 (1st Cir.

2006), and draw all reasonable inferences in the light most

favorable to Plaintiffs, the non-moving party. Andrew Robinson

Int'l, Inc. v. Hartford Fire Ins. Co., 547 F.3d 48, 51 (1st Cir.

2008).

1
Before the December 16, 2008 hearing on National City’s
Motion to Dismiss, the district court informed the parties of its
intention to convert the motion to one for summary judgment under
Fed. R. Civ. P. 12(d). However, the court noted in its January 7,
2009 order ruling on the motion that the practical effect of the
Rule 12(d) conversion was a nullity, as the court had no reason to
resort to extrinsic evidence when evaluating the terms of the
parties’ agreement. The court stated that "[t]he outcome . . .
would be the same under either a motion to dismiss or a summary
judgment standard."

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 On November 26, 2004, Plaintiffs jointly obtained a HELOC

from National City in the amount of $100,000. The HELOC was for a

term of ten years, and it was secured by Plaintiffs’ jointly-owned

home in Provincetown, Massachusetts. The specific terms of the

HELOC are set out in a document titled "Equity Reserve Agreement -

National Home Equity" (the "Agreement").

For several years, Plaintiffs drew on the HELOC and made

timely repayments. As of December 31, 2007, there were no amounts

due under the Agreement. On January 7, 2008, Plaintiffs drew

$50,000 on the HELOC (the "January withdrawal"). National City

sent Plaintiffs an account statement indicating that the due date

for a minimum payment on the January withdrawal was February 22,

2008.2 On February 4, 2008, Plaintiffs drew an additional $49,500

on the HELOC (the "February withdrawal").

On February 27, 2008, Cunningham initiated a payment to

National City through Citibank's online banking service. That

payment, in the amount of $60,050, was intended to repay the

January withdrawal in full and the February withdrawal in part. It

was posted to Plaintiffs' National City HELOC account on March 3,

2008.

In a letter dated February 29, 2008, National City

informed Plaintiffs that their payment was past due and as a result

2
The record contains no information as to the amount of the
minimum payment.

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their HELOC account privileges were being terminated.3 The letter

explained that National City was taking this action "in accordance

with the section of [the] agreement called 'Termination of Equity

Reserve Line' due to [Plaintiffs’] failure to meet the [HELOC’s]

repayment requirements."

After unsuccessfully seeking reinstatement of the HELOC

with National City, Plaintiffs commenced this action on June 2,

2008. According to Plaintiffs, a late-payment-penalty provision in

the Agreement created a ten-day "grace period" which extended the

due date on Plaintiffs' account statements. Plaintiffs argued that

the true due date for payment on their January withdrawal was March

3, 2008, ten days after the listed due date of February 22, 2008,

thereby rendering their payment received on March 3, 2008 timely.

Plaintiffs claimed that by disregarding the "grace period" and

terminating their HELOC, National City breached the Agreement and

unilaterally modified its terms in violation of TILA and Chapter

93A.

National City moved to dismiss, and on January 7, 2009,

the district court entered an order dismissing Plaintiffs’ claims.

The court concluded that National City did not breach the Agreement

as it was entitled to terminate the HELOC under the Agreement’s

express terms. The court also dismissed Plaintiffs’ TILA and

3
National City did not, however, accelerate the repayment of
the outstanding balance owed by Plaintiffs on the HELOC.

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Chapter 93A claims, finding that National City had not modified the

Agreement nor breached any of its provisions. This appeal

followed.

II.

On appeal, Cunningham and DeLaurentis argue that each of

their claims was adequately pled and should be reinstated. We

consider each claim in turn, applying a de novo standard of review

to the district court’s dismissal of the complaint. Martin v.

Applied Cellular Tech., Inc., 284 F.3d 1, 5-6 (1st Cir. 2002)

(citing TAG/ICIB Services, Inc. v. Pan Am. Grain Co., 215 F.3d 172,

175 (1st Cir. 2000)).4 To survive a motion to dismiss, the

complaint must "contain sufficient factual matter, accepted as

true, to 'state a claim to relief that is plausible on its face.'"

Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell

Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

A. Breach of Contract

Regarding their breach of contract claim, Plaintiffs

argue that the district court misinterpreted the Agreement in

4
Though it is not entirely clear whether the district court
dismissed the complaint under Fed. R. Civ. P. 12(b)(6) or Fed. R.
Civ. P. 56, we will treat it as a Rule 12(b)(6) dismissal, as that
was the basis for National City's Motion to Dismiss below. We note
that the outcome would be the same if we were reviewing a grant of
summary judgment. The standard of review for summary judgment
decisions is de novo, GTE Wireless, Inc. v. Cellexis Int'l, Inc.,
341 F.3d 1, 4 (1st Cir. 2003), and summary judgment is appropriate
if there is no genuine dispute as to material facts and the moving
party is entitled to judgment as a matter of law. Fenton v. John
Hancock Mut. Life Ins. Co., 400 F.3d 83, 87 (1st Cir. 2005).

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finding that it permitted National City to terminate the HELOC when

Plaintiffs did not make a required payment by the specified due

date. We disagree.

It is undisputed that the Agreement is governed by Ohio

law. Ohio courts have held that the construction of a written

contract is a matter of law. Ohio Water Dev. Auth. v. W. Reserve

Water Dist., 776 N.E.2d 530, 535 (Ohio Ct. App. 2002). It is for

the court to determine whether the language of the contract is

ambiguous, thus requiring resort to extrinsic evidence to ascertain

the intent of the parties. Id. Contractual language is ambiguous

"where its meaning cannot be derived from the four corners of the

contract or where the language may be reasonably interpreted in

more than one way." Westbrock v. W. Ohio Health Care Corp., 738

N.E.2d 799, 804 (Ohio Ct. App. 2000). If the terms of the contract

are unambiguous, "the court need not go beyond the plain language

of the agreement to determine the parties' rights and obligations."

Uebelacker v. Cincom Sys., Inc., 549 N.E.2d 1210, 1215 (Ohio Ct.

App. 1988).

In interpreting the Agreement, we look first to a section

called "Payments," which provides: "Your payments will be due

monthly. . . . You are required to pay a minimum payment by the Due

Date shown on your statement . . . ." The Agreement later states

(in a section entitled "Termination of Line") that "[National City]

can terminate your [HELOC] and require you to pay the entire

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outstanding balance in one payment if you breach a material

obligation of this Agreement in that . . . [y]ou do not meet the

repayment terms of this Agreement."

These terms are clear and unambiguous. The Agreement

provides that Plaintiffs were required to make a minimum payment by

the due date shown on their statement and that National City could

terminate the HELOC if Plaintiffs did not meet the Agreement’s

repayment terms. Though the Agreement does not specifically define

"repayment terms," at the very least they must include the

provision requiring a minimum payment by the due date shown on the

statement. That provision appears under the "Payments" section of

the Agreement, and among the provisions in that section, the

minimum payment provision is the only one that actually requires

some action by the borrower during the ten-year life of the HELOC.

Plaintiffs clearly violated the minimum payment provision when they

failed to make a payment for the January withdrawal by the due date

of February 22, 2008. Although under the circumstances Plaintiffs

may reasonably view as harsh the bank's decision to terminate the

HELOC based on that breach, the Agreement plainly permitted it to

do so.

Plaintiffs assert that the terms regarding repayment are

modified, or at least rendered ambiguous, by a provision included

in the "Other Charges" section of the Agreement. Among the charges

listed is a late payment fee which the Agreement states "will

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apply" if National City does not receive the borrower’s minimum

payment within ten days of the due date. In other words, a

borrower has ten days after the due date indicated in the monthly

statement to make a minimum payment before National City’s right to

charge a late fee arises. According to Plaintiffs, this provision

establishes a ten-day "grace period" during which any payment

submitted would be considered timely and not in default of the

Agreement. Applying that logic, Plaintiffs’ payment, which posted

on March 3, 2008, would have been timely because it was made within

ten days of the February 22, 2008 due date.

But to apply Plaintiffs’ logic would be to violate the

plain language of the Agreement. The Agreement plainly states that

National City has the right to terminate the HELOC if the borrower

does not meet the Agreement's repayment terms. Plaintiffs contend

that the late fee provision should be included among the "repayment

terms," but even if that were an appropriate reading of the

Agreement, it would not alter the fact that another of the

repayment terms is necessarily the requirement that payment be made

by the due date. The late fee provision does not modify that

requirement.

Effectively, the Agreement gives National City two

independent rights: (1) the right to charge a late fee if payment

is received more than ten days after the due date, and (2) the

right to terminate the HELOC if payment is received at any time

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after the due date. Plaintiffs contend that it is not rational to

assume that the Agreement can be terminated during the ten-day

"grace period" when the Agreement does not allow National City to

impose a minor penalty of a late payment fee during that time. But

it is not irrational for National City to have reserved the option

to terminate the HELOC upon failure to make payment by the due date

and the option to impose a late fee for any payment made more than

ten days after the due date. We "presume that the parties’ intent

resides in the language they employ in the contract," Rosepark

Properties, Ltd. v. Buess, 855 N.E.2d 140, 147 (Ohio Ct. App.

2006), and the language of the Agreement unambiguously conveys

these two independent rights to National City.

Plaintiffs’ reliance on Krivins v. Smyers, C.A. NO. 9935,

1981 WL 3945 (Ohio Ct. App. Apr. 22, 1981), is unavailing.

Plaintiffs argue that Krivins holds, as a rule of Ohio law, that if

a contract provides a penalty for late payments, "it shows that the

[issuer] would, in fact, accept late performance." Id. at *3.

Thus, Plaintiffs contend, in some circumstances, such as in this

case, a late fee provision in a contract precludes the termination

of that contract for late payment.

Krivins does not stand for such a general proposition.

Two points in particular distinguish it from the case before us.

First, the late penalty provision in Krivins was not the only

provision in the contract at issue which suggested that late

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performance would be acceptable. The contract also provided

explicitly for a forty-day grace period during which the purchasers

could make their monthly payment before the seller was permitted to

rescind the contract. Id. at *1. The Agreement in this case

contains no such term. Second, the contract in Krivins was a land

installment contract, and the purchasers faced forfeiture after

failing to make two successive payments within the applicable

forty-day grace periods. In discussing its reasons for holding

that the purchasers were not in default, the Krivins court

specifically noted the disfavor with which Ohio law regards the

forfeiture of land contracts. Id. at *2. In fact, the forty-day

grace period provided in the Krivins contract reflected an Ohio

statutory requirement that a vendee in default under a land

installment contract be given a total of forty days to perform the

terms of the contract before facing forfeiture of the property.5

Id. at *1 (citing Ohio Rev. Code §§ 5313.05, 5313.06). It is

unclear whether the Krivins court would have reached the same

result if the plaintiffs had not faced forfeiture of real property.

The court’s conclusion that a late fee is "inconsistent with the

notion that time is of the essence," id. at *3, appears to be dicta

and is not controlling, particularly not in a case that does not

5
Neither party in this case has cited a similar provision of
the Ohio Code which applies to contracts other than land
installment contracts.

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concern the forfeiture of real property, but merely the forfeiture

of continued access to credit.

Accordingly, we find that the unambiguous terms of the

Agreement permitted National City to terminate the HELOC. National

City did not commit a breach.6

B. TILA

Plaintiffs also argue that the district court erred in

dismissing their TILA claim. Plaintiffs' claim is based on their

contention that the Agreement's late-fee provision created a ten-

day "grace period" during which an otherwise late payment would not

be considered a default. According to Plaintiffs, National City's

"unilateral" elimination of that grace period constituted a

material change in the terms of the Agreement in contravention of

TILA and its companion Regulation Z.7 Plaintiffs further argue

that National City failed to comply with that portion of Regulation

Z which requires a creditor to disclose the payment terms of a home

equity plan, including "[a]n explanation of how the minimum

periodic payment will be determined and the timing of the

payments." 12 C.F.R. § 226.5b(d)(5)(ii). As we find that the

6
Plaintiffs also make a one-paragraph argument in their reply
brief that National City's acceptance of their payment constituted
a waiver of Plaintiffs' purported breach of the Agreement. As this
argument was not raised in Plaintiffs' opening brief, it is deemed
waived. Ouk v. Keisler, 505 F.3d 63, 66 n.3 (1st Cir. 2007)
(citing United States v. Torres, 162 F.3d 6, 11 (1st Cir. 1998)).
7
Regulation Z limits the changes that a creditor may make to
the terms of a home equity plan. 12 C.F.R. § 226.5b(f)(3).

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unambiguous terms of the Agreement did not create a grace period

rendering otherwise late payments timely, Plaintiffs' TILA claim

fails as a matter of law. National City neither changed any term

of the Agreement nor provided Plaintiffs with inaccurate

information regarding their payment obligations. There was no TILA

violation.8

C. Chapter 93A

Plaintiffs' Chapter 93A claim is likewise founded on the

mistaken belief that the late-fee provision created a ten-day

window in which otherwise late payments would be considered timely.

Plaintiffs claim that National City violated Section 2(a) of

Chapter 93A which makes unlawful any "[u]nfair methods of

competition and unfair or deceptive acts or practices in the

conduct of any trade or commerce." Mass. Gen. Laws ch. 93A, §

2(a). The "[u]nfair or deceptive acts" with which Plaintiffs

charge National City are "its improper modification of the terms of

8
Plaintiffs claim that in a May 1, 2008 phone conversation,
DeLaurentis was informed by a National City customer service
representative that National City had ceased honoring the grace
period in its existing agreements in January 2008 in an effort to
limit its credit exposure. Regardless of whether National City may
have enforced the terms of the Agreement less flexibly after
January 2008, there is no evidence that the terms were ever
changed. The Agreement, executed on November 26, 2004, explicitly
provided that National City had the right to terminate the HELOC if
Plaintiffs did not meet the Agreement's repayment terms, which we
have found to include making a minimum payment by the due date
listed on the monthly statement. Perhaps National City was not
exercising that right before January 2008, but that does not mean
that the right did not exist at that time.

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its HELOCs by the unilateral elimination of the grace periods, and

the unlawful termination of HELOCs for payments made after the due

date but within the grace period."

As discussed above, National City did not commit any of

the acts which Plaintiffs allege. There was no "unilateral

elimination" of the grace period as there was no such grace period

to eliminate. Further, the termination of Plaintiffs' HELOC was

not unlawful, as it was explicitly authorized by the Agreement. As

Plaintiffs have alleged no unfair or deceptive conduct by National

City, they have failed to state a 93A claim on which relief can be

granted. See States Resources Corp. v. The Architectural Team,

Inc., 433 F.3d 73, 84 (1st Cir. 2005).

III.

For the foregoing reasons, we affirm the district

court's dismissal of Plaintiffs' complaint.

Affirmed.

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