Most teachers consider 'grading papers' to be the process of reading a paper, evaluating merits and granting symbolic value to your academic performance based on the quality of the work.

Even under this understanding of the term, the issue remains. Yes, if you interpret "grade" to mean "read", the teacher's statement becomes true. But then the problem is the omission of the important part: "...and papers I don't 'grade' (=read) receive a score of 0."