In fact, you probably did not get the quote from reading the document, but from googling, as the text is quite clear what Augustine is saying here. He says quite clearly in a number of writings that Grace is not given according to merit-- that is, human merit. Rather, Augustine's position is that Grace is given for Grace, which is what he affirms a few sentences lower from this quotation. "[G]race is not rendered to works, but is given freely, it must be confessed without any doubt, that eternal life is called grace for the reason that it is rendered to those merits which grace has conferred upon man. Because that saying is rightly understood which in the gospel is read, "grace for grace,"[ 1]--that is, for those merits which grace has conferred."
In other words, the Christian is he who "shows mercy" because God moves him to be merciful, and then crowns his own gifts. The grace that is given to Christians to make them merciful is given without regard to human merit, whether forseen or otherwise, or without foresight of the human will. Rather, this grace works to give men a good will and mercy.
As for the location of the quote in question.... after reading through the whole book again I realized it was not there, and upon further searching I realize now I have put the wrong citation. It is, in fact, from a letter, and the correct citation is: August. ad Bonifac. Ep. 106.