SIATA INTERNAT'L USA, INC. v. INSURANCE CO. OF NO. AMER.

• Decision Date: 11 June 1974
• Docket Number: No. 73-1835.,73-1835.
• Citation: 498 F.2d 817
• Parties: SIATA INTERNATIONAL U. S. A., INC., Appellee, v. INSURANCE COMPANY OF NORTH AMERICA, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

498 F.2d 817 (1974)

SIATA INTERNATIONAL U. S. A., INC., Appellee, v. INSURANCE COMPANY OF NORTH AMERICA, Appellant.

No. 73-1835.

United States Court of Appeals, Third Circuit.

Argued January 25, 1974.

Decided June 11, 1974.

M. Richard Kalter, Philadelphia, Pa., Steven J. Stein, New York City, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., Proskauer, Rose, Goetz & Mendelsohn, New York City, for appellee.

Joseph Head, William T. Campbell, Jr., Swartz, Campbell & Detweiler, Philadelphia, Pa., for appellant.

Before BIGGS, GIBBONS and GARTH, Circuit Judges.

OPINION OF THE COURT

BIGGS, Circuit Judge.

The plaintiff-appellee, Siata International U.S.A., Inc. (Siata U.S.) was engaged in the business of importing automobiles from Italy to the United States, and entered into a sales agreement dated May 10, 1969 with Siata Auto SPA (Siata Italy), an Italian automobile manufacturer, for the purchase of 1350 "Spring" model automobiles at a price of $1,355.00 each, delivery to be made ex the Siata Italy plant, according to a specified monthly schedule. An "Agreement for Performance Bond" which states that it is "based upon the sales contract of May 10, 1969" for the delivery of 1250 cars¹ was entered into upon some date not shown in the record.

The bond itself, issued by defendant-appellant Insurance Company of North America (INA) (P-4), is designated on its face as an "Advance Payment Bond", and is as follows:

Advance Payment Bond INA

INSURANCE COMPANY OF NORTH AMERICA PHILADELPHIA

Know all men by these presents, That we, Siato Auto S.p.A. Strada di Lanzo 221, Turin, Italy (hereinafter called "Principal"), as Principal, and the Insurance Company of North America, a Corporation organized and existing under the laws of the State of Pennsylvania, United States of America, (hereinafter called "Surety"), as Surety, are held and firmly bound unto Siata International U.S.A., Inc., 116-11 Hillside Avenue, New York, New York (hereinafter called "Obligee"), in the penal sum of One Hundred Thousand and no/100 Dollars ($100,000.00), good and lawful money of the United States of America, for the payment of which, well and truly to be made, we find ourselves, our heirs, administrators, executors, successors and assigns, jointy and severally, firmly by these presents.

Sealed with our seals and dated this 30th day of June A.D. 1969.

Whereas, the above bounden Principal has entered into a certain written contract with the above Named Obligee, dated the 10th day of May, 1969 for furnishing and delivery of One Thousand Two Hundred Fifty (1,250) Spring Model automobiles with delivery to be completed within the period specified in the contract,

And, whereas, the above Named Obligee has agreed to advance to the Principal the total sum of One Hundred Thousand and no/100 Dollars ($100,000.) with such sum to be repaid during the term of the contract by deduction from the agreed purchase price an amount not exceeding Eighty Dollars ($80.00) for each vehicle delivered to the Obligee.

Now, therefore, the condition of the above obligation is such, that if the above bounden Principal shall repay to the above Named Obligee the lesser of the total sum of One Hundred Thousand and no/100 Dollars in the event of non-delivery of all of the 1,250 vehicles; or an amount equal to Eighty Dollars ($80.00) per vehicle for Non-Delivery of each vehicle less than the total of 1,250 vehicles contracted for, then this obligation is void; otherwise to be and remain in full force and effect.

Provided, however, this bond is executed by the Surety, upon the express condition that no right of action shall accrue upon or by reason hereof, to or for the use or benefit of any one other than the Obligee named herein; and the obligation of the Surety is and shall be construed strictly as one of suretyship only.

SIATA AUTO, S.P.A. INSURANCE COMPANY OF NORTH AMERICA

Siata Italy breached the May 10 contract by failing to deliver some portion of the specified number of cars. When demands for payment from Siata Italy under the May 10 contract and from INA under the bond in suit proved fruitless, Siata U.S. instituted this action against INA in the District Court for the Eastern District of Pennsylvania.

It will be observed that the condition of the bond is contained in its next to last paragraph and provides that if Siata Italy shall "repay" to the obligee Siata U.S. the total sum of $100,000 "in the event of non-delivery of all of the 1250 vehicles", "or an amount equal to $80 per vehicle for Non-Delivery of each vehicle less than the total of the 1250 vehicles contracted for, then the obligation is to be void." It is upon the foregoing terms according to the bond that INA stands liable.

Siata U.S., in its amended complaint, premised INA's alleged liability on two distinct interpretations of the bond in issue. Count one of the complaint characterized the agreement as an advance payment bond, intended to ensure that prepayments, which were to be made to Siata Italy and recovered by a reduction in the price of each car, would be repaid in the event Siata Italy failed to deliver. Under this construction, the bond would protect Siata U.S. to a maximum of $100,000.00 in advance payments. Count two of the complaint characterized the agreement as simply a performance bond, intended to ensure that Siata Italy delivered the cars as scheduled and providing a penalty for each car which was not delivered.

The numerous defenses raised by INA in its answer were primarily material to its alleged liability under an advance payment bond.

The first count of the amended complaint was withdrawn by the plaintiff,² who proceeded solely on the basis of the bond being one to secure performance.

The ensuing controversy as to the meaning of the bond was determined by the district court at the beginning of trial. The learned district judge deemed the bond to be a clear and unambiguous obligation, entered into by INA, to pay $80.00 per car for all undelivered cars up to 1250. Subsequently, a directed verdict for plaintiff was granted on the issue of liability and the sole issues submitted to the jury were a determination of the number of cars which were not delivered and the corresponding damages. INA challenges this holding and asserts that the language of the bond unambiguously contemplates a guarantee of repayment of a loan.

On examination of the copy of the bond in evidence, we see that it is designated an "Advance Payment Bond"³ and though the nomenclature is unimportant we find that the first "Whereas" clause states that Siata Italy as principal agreed by a written contract dated May 10, 1969, to furnish and deliver to Siata U.S., 1250 "Spring Model automobiles to be manufactured by Siata Italy . . . within the period specified in the contract . . . ". This may be considered to suggest the bond is a...