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01-455 Franconia Associates, et al. v. U.S.

By: dmc-admin//June 17, 2002//

01-455 Franconia Associates, et al. v. U.S.

By: dmc-admin//June 17, 2002//

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Under applicable general contract law principles, whether petitioners’ claims were filed “within six years after [they] first accrue[d],” sec.2501, depends upon when the Government breached the prepayment undertaking stated in the promissory notes. In declaring ELIHPA a present breach of petitioners’ loan contracts, the Federal Circuit reasoned that the Government had but one obligation under those agreements: to continue to allow borrowers the unfettered right to prepay their loans at any time. If that continuing duty was breached, the court maintained, the breach occurred immediately, totally and definitively, when ELIHPA took away the borrowers’ unfettered right to prepay. In so ruling, the court incorrectly characterized the performance allegedly due from the Government under the promissory notes. The Government’s pledged performance is properly comprehended as an obligation to accept prepayment. Once the Government’s obligation is thus correctly characterized, the decisions below lose force. A promisor’s failure to perform at the time indicated for performance in the contract establishes an immediate breach. But the promisor’s renunciation of a contractual duty before the time fixed in the contract for performance is a repudiation, which ripens into a breach prior to the time for performance only if the promisee elects to treat it as such, see Roehm v. Horst, 178 U.S. 1, 13. Viewed in this light, ELIHPA effected a repudiation of the FmHA loan contracts, not an immediate breach. ELIHPA conveyed the Government’s announcement that it would not perform as represented in the promissory notes if and when, at some point in the future, petitioners attempted to prepay their mortgages. Unless petitioners treated ELIHPA as a present breach by filing suit prior to the date indicated for performance, breach would occur when a borrower attempted to prepay, for only then would the

Government’s responsive performance become due.

240 F.3d 1358; 7 Fed. Appx. 928, reversed and remanded.

Ginsburg, J.

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