Trend Export Funding Corp. v. FOREIGN CREDIT INS., 84 Civ. 4839 (LBS).
| Decision Date | 02 January 1987 |
| Docket Number | No. 84 Civ. 4839 (LBS).,84 Civ. 4839 (LBS). |
| Citation | 670 F. Supp. 480 |
| Parties | TREND EXPORT FUNDING CORPORATION, Plaintiffs, v. FOREIGN CREDIT INSURANCE ASSOCIATION, Defendant, Continental Bank International and Banco Totta & Acores, Involuntary Plaintiffs. |
| Court | U.S. District Court — Southern District of New York |
Kraver & Parker, New York City, for plaintiffs; Richard M. Kraver, Lewis S. Fischbein, of counsel.
Fried, Frank, Harris, Shriver & Jacobson, New York City, for defendant; Henry A. Hubschman, Matthew Gluck, of counsel.
Finley, Kumble, Wagner, Heine, Underberg, Manley & Casey, New York City, for involuntary plaintiffs, Banco Totta & Acores; Gregor F. Gregorich, of counsel.
Plaintiff, Trend Export Funding Corporation ("TEFCO"), an international business broker, alleges that defendant, Foreign Credit Insurance Association ("FCIA"), an insurer of such transactions, wrongfully failed to pay on two claims properly submitted by plaintiff totalling $7,060,597.61 plus interest. Defendant has moved pursuant to Rule 56, F.R.Civ.P., for summary judgment and for an order staying discovery. Defendant has also moved for leave to file an amended counterclaim. Plaintiff has cross-moved for summary judgment.1
The underlying facts giving rise to this lawsuit are as follows: TEFCO is in the business of arranging financing for the purchase of vehicles and equipment by foreign entities from United States manufacturers. Affidavit of Philip T. Amico, former Vice President of TEFCO ("Amico Aff.") at ¶ 4. From November 1981 until April 1982, TEFCO provided the financing for certain vehicles sold by General Motors Overseas Distribution Corp. ("GMODC") and certain tractors sold by H.O. Penn Machinery Co., Inc. ("Penn") to Saleh Ben Abd-El Wahab Company ("El Wahab"), of Riyadh, Saudi Arabia. To secure these two business deals against commercial risks, TEFCO obtained separate insurance policies from FCIA. Id. at ¶ 6. FCIA is an unincorporated association of insurance companies which, pursuant to 12 U.S.C. § 635(c)(2), acts as an agent for the Export-Import Bank of the United States ("Eximbank") in making available export credit insurance to United States exporters. Affidavit of Mary Coffey, claims supervisor at FCIA ("Coffey Aff.") at ¶ 2. FCIA issued a medium term-single sale insurance policy (the "single-sale policy") to cover the single sale of the Penn equipment, and a medium term-multiple sale comprehensive export credit insurance policy (the "repetitive-sale policy") to cover the multiple GMODC shipments. Memorandum of Points and Authorities in Support of Defendant's Motion for Summary Judgment at 7. With respect to each specific transaction arranged by TEFCO, FCIA issued separate "transaction endorsements" identifying the given transaction and containing special conditions of coverage. Coffey Aff. at ¶ 5.
The GMODC vehicles and the Penn tractors were shipped to El Wahab, which later defaulted on making the bulk of its payments. In June of 1983, TEFCO filed with FCIA under each of the two policies a separate "notice of claim and proof of loss." After an exchange of letters between the parties, FCIA took the position that it would not pay TEFCO under either policy, prompting TEFCO to bring this action.
In its motion for summary judgment, FCIA avers that it has no liability to TEFCO for the claims in dispute because TEFCO failed to meet those conditions in each insurance policy that triggers FCIA's duty to compensate TEFCO. Specifically, FCIA asserts that both claims were properly denied because TEFCO had allowed the goods to be shipped to El Wahab before El Wahab had made certain required cash down payments. Alternatively, FCIA contends that TEFCO's claims are time-barred by express time limits stated in the policies. Further, FCIA urges that with respect to the repetitive-sale policy that covered the GMODC vehicles, FCIA need not pay TEFCO on certain of those claims because TEFCO had failed to pay FCIA the required insurance premiums or because, contrary to the terms of the policy, the goods shipped to El Wahab were not of American origin. TEFCO cross-moves for summary judgment, asserting that it has met all the conditions precedent to payment by FICA under the policies in question and that the policies are in full force and effect.
For the reasons explained herein, we grant that part of defendant's motion for summary judgment that relates to plaintiff's claims regarding the GMODC vehicles noted above. We deny defendant's motions for summary judgment on the remainder of plaintiff's claims, granting leave for defendant to renew the motion after more discovery is taken. And, finally, we deny plaintiff's cross-motion for summary judgment.
We address first that portion of defendant's summary judgment motion that relates to plaintiff's entire cause of action.
Article III of both the single-sale and repetitive-sale policies provides:
Defendant contends that this language makes clear that the buyer must make a cash down payment at least equal to an amount called for in the transaction endorsement — in this case, 15 percent for each transaction — before a given commercial transaction rises to the level of an "insured transaction" under the policy. Defendant further contends that plaintiff never in fact obtained those payments from El Wahab.
Plaintiff counters by focusing on the phrase "terms which require" in Section III A.3 supra and urges that this language means that the buyer El Wahab need not actually make a cash down payment, but merely agree to make the payment, which plaintiff alleges El Wahab did indeed do. Moreover, plaintiff contends, the alleged requirement that TEFCO obtain a down payment is not a material term of the policy and therefore its breach cannot be used to excuse FCIA's performance. Alternatively, plaintiff argues, if the policy is indeed interpreted to require that the actual down payment be made, then more discovery is needed to determine whether the appropriate payments have in fact been made. Finally, plaintiff contends that defendant has either waived its right to raise or should be estopped from raising the "cash down payment" condition of the insurance policy because after defendant had learned of El Wahab's potential default, defendant had stated it would entertain a rescheduling of El Wahab's debts if TEFCO provided detailed reasons why such a rescheduling was necessary.
For the reasons that follow, we find that the policy required that a 15 percent down payment actually be made, that this requirement was a material condition of the policy and that FCIA neither waived its right to assert that defense nor is it estopped from asserting it. Finally, we find that TEFCO is entitled to certain limited discovery to determine whether El Wahab did indeed make the required payments.
We find, as defendant contends, that the above-quoted Section III, which appears in both policies, clearly and unambiguously calls for a cash down payment to in fact be made. We note that while an ambiguity in a contract raises a factual question about the intention of the parties that is not usually amenable to summary judgment, "the preliminary question of whether an ambiguity exists is a question of law that may be resolved summarily by the court." 10 A Wright & Miller, Federal Practice & Procedure § 2730.1 at 275-79 (1983). Even if the language of Section III, standing alone, could be read as TEFCO urges to call for a mere agreement that a down payment be made, when read in light of other undisputed facts, it is clear that Section III calls for the down payment to actually be made before any liability is assumed by FCIA.
That the parties intended this result can be inferred from an examination of the entire contract, see Murray Oil Prods. v. Royal Exchange Assurance Co., 21 N.Y.2d 440, 288 N.Y.S.2d 618, 235 N.E.2d 762 (1968), as well as from extrinsic evidence evincing the meaning and intent of disputed terms, see Eagle-Picher Industries v. Liberty Mutual Co., 682 F.2d 12, 17 (1st Cir.1982), cert. denied, 460 U.S. 1028, 103 S.Ct. 1279, 75 L.Ed.2d 500 (1983). The transaction endorsements have been incorporated by reference into the policies by Article III A.3, which requires that the goods in question be sold "on the conditions specified in the Transaction Endorsement." The transaction endorsement for the sale of the Penn tractors states on page one that a cash payment of $435,000 (15%) was due on the contract price of $2,900,000, leaving a "financed portion" of $2,465,000. See Exhibit 2 to the Coffey Aff. Similarly, the transaction endorsement for the sale of the GMODC vehicles calls for a "Percentage of Cash Payment for each transaction: 15% (5% required at contract signing)." See Exhibit 3 to Coffey Aff. In addition, an FCIA brochure that was sent to TEFCO's broker, Foreign Credit Brokerage, Inc., states that "under the terms of the medium-term policy, the foreign buyer must make a 15 percent cash payment on or before delivery." Exhibit 27 attached to the Second Affidavit of Mary Coffey ("Second Coffey Aff.") at ¶ 7. Moreover, prior to filing suit, TEFCO's position throughout its protracted correspondence with FCIA revealed an understanding on TEFCO's part that the insurance contract in question required that a down payment in fact be made if the transactions were to be insured. See Letters of Philip T. Amico, Vice President of TEFCO, to Mary Coffey, dated September 9, September 29...
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