American Motorists Ins. Co. v. United Furnace Co., Inc.
| Citation | 876 F.2d 293 |
| Decision Date | 31 May 1989 |
| Docket Number | No. 887,D,887 |
| Parties | AMERICAN MOTORISTS INSURANCE COMPANY, Plaintiff-Appellant, v. UNITED FURNACE CO., INC., f/k/a "United Foundry," Defendant-Appellee. ocket 88-9053. |
| Court | United States Courts of Appeals. United States Court of Appeals (2nd Circuit) |
Mariann Sullivan, New York City (Harvey Barrison, Russotti & Barrison, New York City, of counsel), for plaintiff-appellant.
Edmund Maciorowski, Detroit, Mich. (Galvin Fox & Palmer, New York City, of counsel), for defendant-appellee.
Before MESKILL, MINER and MAHONEY, Circuit Judges.
This is an appeal from a judgment of the United States District Court for the Southern District of New York, Leisure, J. The district court granted the Fed.R.Civ.P. 12(b)(6) motion of defendant-appellee United Furnace Co. (United) on the ground that the case was not yet ripe for review. The cross-motion of plaintiff-appellant American Motorists Insurance Co. (AMICO) for summary judgment, Fed.R.Civ.P. 56, was denied, and AMICO's complaint was dismissed without prejudice. AMICO appeals, arguing that the district court erred both in granting United's dismissal motion and in denying AMICO's summary judgment motion. We reverse the judgment of the district court and remand for further proceedings.
AMICO is incorporated under Illinois law and is licensed as a surety under New York law. AMICO maintains offices in New York City. United is a job shop and foundry, incorporated and located in Michigan.
In early 1986, United contracted with the Ford Motor Company to receive engine block castings from a Ford plant in Essexville, Ontario, machine the castings, melt down resulting waste and return the castings and waste back to the Ford plant in Ontario.
As items imported into the United States, these engine parts, unless exempted, would be subject to duty. See 19 U.S.C. Sec. 1202, General Headnotes 1, 3 (1982 & Supp. IV 1986). The castings were eligible for exemption from duty under the regulations of the United States Customs Service (Customs), provided the castings remained in the United States for less than a year. See 19 C.F.R. Sec. 10.31(a)(1) & n. 34 (1988) (quoting Schedule 8, Part 5C, Tariff Schedules of the United States). To secure such an exemption, United had to guarantee its compliance with the Customs regulations by providing a temporary importation bond on Customs Form 301, the conditions of which are set by regulation. See 19 C.F.R. Sec. 10.31(f); 19 C.F.R. Sec. 113.62 (1988), amended by 53 Fed.Reg. 45,901 (1988); see also 19 U.S.C. Sec. 1623 (1982) ().
On February 21, 1986, United's president, Edward Stroble, executed a bond, with United as principal, AMICO as surety and the United States as obligee. The bond was on a Customs Form 301, and specifically included the conditions set forth by 19 C.F.R. Sec. 113.62. The bond was a continuous bond, "remain[ing] in force for one year beginning with the effective date and for each succeeding annual period, or until terminated." The effective date was March 11, 1986, and the limit of liability was set at $60,000.
Pursuant to what it claims is its general business practice, AMICO insisted, as a condition of its acting as United's surety on the bond, that United execute an independent indemnity agreement. Such an agreement [t]o indemnify and save harmless [AMICO] from and against any and all liability, claim, demand, loss, damage; expense, cost and attorneys' fees which it shall at any time incur by reason of its execution of any bond or its payment of or its liability to pay any claim, and to place [AMICO] in funds to meet all its liability under any bond, promptly upon request and before [AMICO] may be required to make any payment; and the voucher or other evidence of payment or of the fact and amount of [United's] liability to [AMICO] under this agreement shall be prima facie evidence of the fact and amount of [United's] liability to [AMICO] under this agreement. Any demand upon [AMICO] by the [United States] shall be sufficient to conclude that a liability exists and [United] shall then place [AMICO] with sufficient funds as collateral security to cover the liability.
was signed by Stroble for United on the same day the bond was executed, February 21, 1986. The indemnity agreement stated that United, as Indemnitor, undertook the specified obligations "in consideration of the execution by [AMICO] of a bond, or the continuation of any previously executed bond, o[r] the substitution or renewal on any and all bonds, in which the Obligee is THE UNITED STATES OF AMERICA." Paragraph One of the agreement concerned United's payment of a premium for AMICO's suretyship and is not relevant here. In Paragraph Two, however, United undertook and agreed
The agreement specified that it was to be "deemed made in the State of New York," and that the rights and liabilities of the parties were to be determined in accordance with New York law. Additionally, United specifically consented to the personal jurisdiction of local, state and federal courts located in New York as the exclusive forums for litigating disputes arising from the agreement.
Between February and June 1986, Customs released to United perhaps a hundred or more shipments delivered in accordance with the Ford contract. United insists that these shipments were usually exported back to Ontario within days of their receipt.
In an April 23, 1987 letter, United's secretary, Marjola Malinowski, informed the Detroit District Director of Customs that as of that date United had received from Customs thirty demands for payment, totalling $196,721.05, for liquidated damages based on Customs violations for failure to export the engine parts back to Ontario within the temporary importation period. Malinowski insisted that United had shipped the engine parts back to Ontario promptly, in most cases one day after receipt, but in each instance by the end of June 1986 at the latest. She explained that United's Customs paperwork was handled by A.F. Burstrom & Son (Burstrom), and that, upon receiving Customs' demands for payment, she had immediately contacted Burstrom only to learn that the relevant paperwork had never been processed because Burstrom had declared bankruptcy, and all the necessary books and records had been confiscated by Customs.
On May 28, 1987, Malinowski updated her earlier letter, submitting a list of twenty-nine more case numbers, presumably corresponding to twenty-nine more demands for liquidated damages that United had received from Customs. She requested that these case numbers be "add[ed] ... to the original petition of April 23, 1987."
On July 29 and 31 and August 3, 1987, Customs issued to United at least thirty-eight more demands for liquidated damages. AMICO claims that it too received copies of these demands. The demands each appeared on a Customs Form 5955A, a document entitled "NOTICE OF PENALTY OR LIQUIDATED DAMAGES INCURRED AND DEMAND FOR PAYMENT." 1 All the forms cited United's "FAILURE TO EXPORT [ENGINE PARTS] WITHIN THE BOND PERIOD The thirty-eight notices and demands also stated:
OR ANY LAWFUL EXTENSION THEREOF." Specifically, the forms indicated "TEMPORARY IMPORTATION BOND ENTRY DATE[S]" in May and June 1986, with the "BOND EXPIRATION DATE[S]" exactly one year later, in May and June 1987. United was cited for violations of 19 C.F.R. Sec. 10.39(d)(1) (1988), and, accordingly, liquidated damages were demanded in the amount of twice the duty owed. See 19 C.F.R. Sec. 10.39(d)(1). The thirty-eight forms that appear in the record demanded total liquidated damages of $203,563.15, although AMICO's complaint alleges that the demands totalled $242,522.25. All the forms identified AMICO as the surety on the temporary importation bond breached
If you feel there are extenuating circumstances, you have the right to object to the above action. Your petition should explain why you should not be penalized for the cited violation.... Unless the amount herein demanded is paid or a petition for relief is filed with the district director of customs within the indicated time limit, further action will be taken in connection with your bond or the matter will be referred to the United States Attorney.
The "TIME LIMIT FOR PAYMENT OR FILING PETITION FOR RELIEF" was specified as thirty days from the dates of the notices.
In a letter dated August 6, 1987, Malinowski again supplemented her April 23 letter with another list of case numbers. She stated "I beli[e]ve that these are the last of the case numbers to be added to the petition of April 23,[ ]1987." She listed forty-five new case numbers, and these included the thirty-eight demands issued on July 29 and 31 and August 3 that appear in the record.
In a letter of February 11, 1988, Malinowski informed Customs that counsel for AMICO was seeking to collect $60,000 from United. The letter stated that AMICO had paid this amount to Customs in response to the demands for liquidated damages. Malinowski repeated that there had been no Customs violations, and she recounted her earlier efforts to clear up the matter. She stated "[s]ince no other correspondence was received from your office, we assumed that the matter was still under investigation."
Shortly thereafter, on February 23, 1988, AMICO filed its complaint in the instant diversity action. AMICO cited Customs' issuance of the demands against United in late July and early August 1987. The complaint claimed that the "[d]efendant, after due demand, has failed to indemnify the plaintiff and has failed to place the plaintiff with funds under the terms of the indemnity agreement." AMICO sought judgment in the amount of the bond, $60,000, as well as attorneys' fees and costs.
On June 15, 1988, counsel for United wrote to Customs, requesting an extension of time for filing a petition for mitigation of the liquidated damages. Counsel stated that he had just...
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