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Hawley Fuel Coalmart Inc. v. GMBH

decided: July 15, 1986.

HAWLEY FUEL COALMART, INC., AND HAWLEY FUEL COAL, INC., PLAINTIFFS-APPELLANTS,
v.
STEAG HANDEL GMBH, DEFENDANT-APPELLEE



Appeal from an order of the United States District Court for the Southern District of New York, John E. Sprizzo, Judge, setting aside a jury verdict in favor of plaintiffs on grounds that the New York statute of frauds had not been satisfied. Reversed.

Author: Oakes

FRIENDLY,*fn* OAKES, and WINTER, Circuit Judges.

OAKES, Circuit Judge :

This diversity case involves the question whether a combination of writings satisfied the New York statute of frauds. The United States District Court for the Southern District of New York, John E. Sprizzo, Judge, held that it did not and therefore set aside a jury verdict of $1,481,249.34 plus interest in favor of appellants Hawley Fuel Coalmart, Inc., and Hawley Fuel Coal, Inc. (jointly "Hawley"), in their suit against appellee, Steag Handel GmbH ("Steag"), for breach of a contract of guarantee. 614 F. Supp. 361 (S.D.N.Y. 1985). We reverse and direct entry of judgment on the verdict.

Hawley, a supplier of coal to Alla-Ohio Valley Coals, Inc. ("Alla"), had terminated that relationship because of Alla's late payments. Subsequently, Steag and Alla entered into agreements under which Steag undertook to finance coal purchases by Alla through the medium of documentary letters of credit drawn on Steag's New York City bank, Commerzbank. The letters of credit were to be drawn in Alla's favor and Alla was then to transfer the letters to coal suppliers. After Steag and Alla established this relationship, an agreement was worked out in June, 1981, under which Hawley would again sell coal to Alla. Steag was to advise Alla of its requirements, Alla in turn would issue a purchase order to Hawley to meet them, Steag would approve the order and direct Commerzbank to issue a documentary letter of credit, which Alla would then transfer to Hawley. Hawley would subsequently deliver coal in accordance with the purchase orders and present its delivery documents to Commerzbank for payment. Commerzbank would pay Hawley and charge Steag's letter of credit account. This arrangement apparently functioned only until August of 1981 when Hawley began to build up an accounts receivable backlog because of delays in obtaining letters of credit and amendments to those letters. By early October, 1981, Hawley was owed approximately $2.2 million for coal delivered to Alla under the agreement.

In mid-October of 1981 the parties met at the Carlyle Hotel in New York City at Hawley's request. Hawley was represented by its president, Jean-Paul Ruff, and vice president/treasurer, Martin Farber. Steag was represented by Thomas Mulert and Jens Klien, two of its managing directors. The accounts presented at trial varied as to what happened at that meeting. The jury, however, apparently credited Hawley's version, as follows. Hawley indicated that, unless it received immediate payment of the $2.2 million owed either for coal that had been shipped or that was in the process of being shipped under open purchase order, it would stop all further shipments and direct counsel to attempt to reclaim coal in transit or at the ports awaiting loading. Mulert in response said that he was going to Washington on on October 15 and asked that a breakdown of the $2.2 million be sent to Max Bonner, who was scheduled to become Alla's president, in Washington; Hawley agreed to send this information. Mulert then stated that Steag would make a $500,000 cash down payment to Hawley on the amounts due and owing under the letters of credit and that Steag would guarantee payment of the balance of the coal shipped or to be shipped under existing purchase orders by means of a new letter of credit. Ruff and Farber agreed that Hawley would take no further steps to reclaim the coal and asked that Steag's agreement be confirmed in writing. Mulert agreed to provide this confirmation when he reached Washington.

On October 15, 1981, Farber telexed Bonner the requested breakdown. The telex listed invoices submitted to Commerzbank that had not been paid because promised letters of credit had not been issued, outstanding invoices sent directly to Alla, and invoices that were to be submitted to Commerzbank after letters of credit had been issued. That same day Mulert, on behalf of Steag, telexed Hawley, attention Mr. Ruff, as follows: URGENT URGENT URGENT

THIS IS TO CONFIRM ON BEHALF OF STEAG

HANDEL GMBH, THAT WE SHALL PAY TO

YOU OUT OF OUR BANK ACCOUNT AT COMMERZBANK

IN NEW YORK A DOWNPAYMENT

FOR COAL SHIPPED BY YOU TO ALLA-OHIO

IN THE AMOUNT OF US DOLLARS, 500,000.

THE PAYMENT SHALL BE EFFECTED BY

TELEGRAPHIC TRANSFER ON ...


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