Wood v. R.R. Donnelley & Sons Co.
| Citation | 888 F.2d 313 |
| Decision Date | 01 November 1989 |
| Docket Number | No. 89-1292,89-1292 |
| Parties | 10 UCC Rep.Serv.2d 468 Albert J. WOOD, Appellant, v. R.R. DONNELLEY & SONS COMPANY and Donnelley Receivables. |
| Court | United States Courts of Appeals. United States Court of Appeals (3rd Circuit) |
Ira P. Tiger (argued), Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for appellant.
Thomas P. Preston (argued), Duane, Morris & Heckscher, Wilmington, Del., for appellees.
Before SLOVITER and GREENBERG, Circuit Judges, and FISHER, District Judge. *
Before us is an appeal from an order granting summary judgment against appellant's diversity suit for fraud. Because our review is plenary, we address the record and the issues in the same manner as would a district court when ruling on a summary judgment motion. Ashenbaugh v. Crucible, Inc., 1975 Salaried Retirement Plan, 854 F.2d 1516, 1522 (3d Cir.1988), cert. denied, --- U.S. ----, 109 S.Ct. 3155, 104 L.Ed.2d 1019 (1989); Bushman v. Halm, 798 F.2d 651, 656 (3d Cir.1986). For the reasons discussed below, we have concluded that the lower court incorrectly granted summary judgment. We will reverse and remand.
Appellant, Albert J. Wood, is a retired businessman. In the summer of 1987 he was approached by Cahill Magee, President of Impirex International, Ltd. ("Impirex"). Impirex wanted Wood's financial backing in order to print Welcome magazine, a publication designed to commemorate the visit of His Holiness John Paul II to the United States in September of 1987. Proceeds from the magazine's sale were to be divided between printing costs and various charitable organizations.
Impirex also negotiated with R.R. Donnelley & Sons Company ("Donnelley & Sons"), in order to print Welcome contemporaneously with the Pope's visit. Impirex envisioned a print run of 1.3 million copies, and Donnelley & Sons estimated the cost of printing at $547,000. Because Donnelley & Sons did not wish to rely on sales for its payment, it asked to be made the beneficiary of standby letters of credit. Two letters of credit were eventually issued in Donnelley & Sons' favor. The first, for $110,000, was made on behalf of Owen Traynor, a California businessman. The second, for $80,000, was posted by Wood through Continental Bank, N.A. ("Continental").
Wood testified 1 that Donnelley & Sons had told him that Welcome would not be printed until the company had been made the beneficiary of three letters of credit. Under this alleged promise, one letter was to be ordered by Traynor for $110,000. The second and third letters were to be ordered by Wood and a Dr. Rocco Martino for $80,000 each. Wood also said that he had been told the three letters would guarantee only the first $270,000 of Donnelley & Sons' costs and would be drawn upon pro rata to satisfy that amount. 2 Wood claimed that he had ordered the letter of credit on the basis of these alleged representations.
Donnelley & Sons asserted that it had never made the issuing of three letters a prerequisite for printing Welcome. Moreover, the company claimed that it had clearly told Wood that his $80,000 letter would be drawn upon to the extent necessary to cover all the printing costs. The printer's witnesses testified that Wood may have suggested the above scheme to Donnelley & Sons and others, but that the printer had clearly explained appellant's liability to him.
On August 4, 1987, Wood caused Continental to issue an "Irrevocable Stand-By Letter of Credit" for $80,000. The letter named Donnelley & Sons, "as Agents for Donnelley Receivables, Inc.," as the beneficiary. The letter also refers to Wood as an "Account Party." Id. The letter stated that it could be drawn down upon presentation of a signed statement that:
Payment[s] required under a certain Contract by and between R.R. Donnelley & Sons Company and Impirex International Ltd., Dublin, Ireland in connection with the printing of the Papal Souvenir Magazine has (have) not been received by Donnelley Receivables, Inc.
The document also contained an integration clause stating that it "set[ ] forth in full the terms of [the parties'] undertaking and such undertaking shall not be in any way modified, amended, or amplified" by collateral documents, agreements or representations.
When the time to print Welcome arrived, only Traynor and Wood had issued their letters of credit; Martino had not issued his own letter. Steven Korol, Senior Sales Representative of Donnelley & Sons' Magazine Group, testified about his discussions with Wood as the deadline approached:
Mr. Wood and I had numerous conversations the day that we were ready to hit the press and actually almost rolling the paper up to press. I kept--told him, made it very clear that we still don't have [Dr. Martino's] letter of credit and Mr. Wood's response was "Come on, print the job, go ahead."
Korol also testified that Wood had not expressly approved of Donnelley & Sons' commencing printing without Martino's letter. Wood himself said he was "annoyed" and "disturbed" that Donnelley & Sons had printed Welcome without Martino's letter in hand.
The magazine had been printed and distributed by the end of October. On October 30, 1987, Wood's letter of credit was amended to expire on February 29, 1988. On February 11, Wood wrote Donnelley & Sons to explain his own understanding of his commitment. Wood also expressed his conclusion that Donnelley & Sons had reneged on its promise and his consequent determination to withdraw his financial support from Welcome.
Wood's letter was answered by Ruby Kerr, Donnelley & Sons' Corporate Credit Manager. In a letter from Kerr dated February 18, Kerr informed Wood that Donnelley & Sons considered Wood's commitment to be an irrevocable one for $80,000. Kerr acknowledged that Donnelley & Sons had printed Welcome without having been made the beneficiary of a letter of credit from Martino. The doctor's failure to issue his letter, she concluded, "is [Donnelley & Sons'] misfortune, but it does not have any effect on the enforceability of the two letters of credit" already made out to the company by Wood and Traynor.
Kerr's letter also announced Donnelley & Sons' intention to draw on both letters no later than February 24. She offered each man "an extension of another 30 days, so long as it is understood that no conditions attach to [the company's] utilizing the letters of credit." Kerr notified both investors that any extensions were to be received by Donnelley & Sons no later than February 22, 1988.
On the same day Kerr wrote Wood, Traynor's attorney, Thomas Fournie, addressed a letter to Don Reeves, Donnelley & Sons' Senior Vice President of Magazine Sales. Fournie's letter purports to summarize an agreement reached through telephone conversations among himself, Wood and Reeves. Fournie summarized their agreement that Donnelley & Sons would refrain from drawing on Wood's and Traynor's letters until Welcome's sales revenues had been accounted for and until "the parties concerned have had an opportunity to review all the pertinent facts and fully discuss the situation." Fournie also wrote that the above "points of agreement" did not negate the existence of a "controversy as to Donnelley's rights to draw against these letters of credit." Fournie suggested that the extensions could be made by monthly amendment to the letters until the whole business had been straightened out.
Wood received and read both Fournie's and Kerr's letters. Some time after these exchanges Continental amended Wood's letter of credit to expire on April 29, 1988. The date on the amended letter of credit is February 22, 1988. The record also contains a letter from Wood to Bert MacKay, a Vice President of Continental Bank. This letter is dated February 24 and purports to confirm a "telephone conversation today asking you [MacKay] to please extend Wood's letter of credit to R.R. Donnelley for 60 days subject to Mr. Thomas A. Fournie's letter dated 1/18/88." Wood testified that he had never signed the amendment to the letter of credit and asserted that the amendment may not actually have issued on February 22. February 24, the date of Wood's letter to Continental, is one day after the expiration of Kerr's deadline.
The record contains another letter by Fournie, addressed to Donnelley & Sons' general counsel and dated March 3, 1988. Fournie wrote to protest assertions in Donnelley & Sons' response to Fournie's February letter and stressed that "Messrs. Traynor and Wood were not waiving any rights by extending the letters of credit to protest Donnelley's entitlement to the funds," and that a dispute remained among all parties as to whether "the letters of credit ... were induced in the first place by Donnelley's concealment." Fournie reiterated his understanding that the parties had agreed to disagree while awaiting Welcome's final sales figures.
The magazine's sales tallies demonstrated that revenues were insufficient to cover Donnelley & Sons' actual printing cost of $564,697. On April 22, 1988, Donnelley & Sons presented a sight draft to Continental and requested that $80,000 be paid to Donnelley & Sons under the terms of Wood's letter. Five days later Wood sought injunctive relief in the Court of Common Pleas in Philadelphia.
Wood's claim came on before the Hon. Sandra Mazer Moss of the Court of Common Pleas. Judge Moss denied Wood's request and explained her reasons:
I ... cannot find irreparable harm.... I think the defendant is a solvent company. I think there is an action at law, and should there be a finding of fraud, a judgment can be paid and if that fraud is found and if it is found to be wilful and malicious, counsel fees and punitive damages will lie. Accordingly, that's the basis of my decision.
Continental Bank paid Donnelley & Sons $80,000 on May 2, 1988.
Wood then filed an amended complaint that dropped Continental and kept only Donnelley & Sons and Donnelley...
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