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AIU INS. CO. v. MITSUI O.S.K. LINES

July 14, 1995

AIU INSURANCE COMPANY, a/s/o PROCTOR & GAMBLE FAR EAST, INC., Plaintiff, against MITSUI O.S.K. LINES, LTD., HATTERAS SHIPHOLDING S.A. and M/V/ CAPE HENRY, her engines, boilers, tackle, etc., NORTHWEST AIRLINES, INC. and JOSEPH J. SARCONA TRUCKING CO., Defendants.

Robert L. Carter, U.S.D.J.


The opinion of the court was delivered by: ROBERT L. CARTER

CARTER, District Judge

 Defendant Northwest Airlines, Inc. ("Northwest") moves to amend its answer to add the affirmative defense of accord and satisfaction against plaintiff AIU Insurance Company ("AIU"). Northwest also seeks summary judgment against plaintiff.

 I.

 In January 1993, plaintiff's assured, Proctor & Gamble Far East, Inc. ("PGFE"), bought 116 pallets of polyethylene film from Tredegar Film Products ("Tredegar"). Tredegar contracted with John S. Connor, Inc. ("Connor"), a customs broker and freight forwarder, to arrange for transportation of the film from Tredegar's facility in Richmond, Virginia to PGFE in Kobe, Japan. Connor contracted with Northwest to transport the film from Kennedy Airport, New York to Osaka, Japan.

 Northwest took possession of the film and issued two air waybills numbered 012-7139 8401 ("air waybill 8401") and 012-7139 8412 ("air waybill 8412"), each covering 58 pallets. For reasons that are disputed, Northwest only shipped 5 pallets from air waybill 8401 and 36 pallets from air waybill 8412 by air. The remainder of the pallets was eventually returned to Tredegar and then transported to Kobe by ocean.

 AIU contends that the film was damaged while in Northwest's possession, and in this lawsuit AIU sues to recover for that damage. On March 29, 1993, Connor filed a claim with Northwest in the amount of $ 971.44 for damage to the 5 pallets shipped by air under air waybill 8401, (Goenner Aff. 1/3/ 95 Ex. 2), and on April 28, 1993, Northwest issued a check for $ 971.44. (Goenner Aff. 1/3/ 95 Ex. 4.) On May 12, 1993, however, Connor informed Northwest that it had discovered additional damage to the cargo shipped under both air waybill 8401 and air waybill 8412 and that it would "hold off cashing [the] check until the claim [was] resolved." (Goenner Aff. 1/3/ 95 Ex. 5.) On June 9, 1993, Connor filed a claim for damage to the 530 rolls of film which were transported by ocean under both air waybills, asserting that the value of the rolls of film was $ 59,172.60, plus $ 1,384.83 handling and clearance fee and storage fees of $ 7,000 monthly. (Goenner Aff. 1/3/ 95 Ex. 6.) On February 16, 1994, Northwest issued PGFE a check for $ 1,670.66 for damage to the "air freight shipment" carried under air waybill 8412. The letter accompanying the check stated that the check was intended to be "full settlement of your claim," (Goenner Aff. 1/3/ 95 Ex. 8), and the back of the check bore a similar message. (Goenner Aff. 1/3/ 95 Ex. 9.) PGFE endorsed and cashed the check. On March 23, 1994, Connor requested Northwest to reissue the check that Northwest had issued on April 28, 1993 in the amount of $ 971.44, stating that it had held the check "because there were a number of issues which we understand have now been settled." (Goenner Aff. 1/3/ 95 Ex. 10.) Northwest accordingly reissued the check on April 18, 1994. (Goenner Aff. 1/3/ 95 Ex. 11.) The reissued check bore a notation on the back similar to that on the back of the February 16, 1994 check regarding full settlement of the claim, and PGFE cashed that check as well. Id.

 II.

 Leave to amend a pleading should be "freely given," Rule 15(a), F.R. Civ. P., and leave should be denied only where amendment would be futile, where it is sought in bad faith, or where it would prejudice the opposing party. State Teachers Retirement Bd. v. Fluor Corp., 654 F.2d 843, 856 (2d Cir. 1981). Defendant's motion to amend its answer is unopposed, so leave to amend is granted.

 III.

 Both Northwest and AIU rely on New York law without briefing the choice of law issue. "In the absence of a strong countervailing public policy, the parties to litigation may consent by their conduct to the law to be applied." Walter E. Heller & Co. v. Video Innovations, Inc., 730 F.2d 50, 52 (2d Cir. 1984); see also Wm. Passalacqua Builders, Inc. v. Resnick Developers S., Inc., 933 F.2d 131, 137 (2d Cir. 1991) (citations omitted). Since neither party has objected to its use, the court will apply New York law.

 IV.

 AIU will be entitled to summary judgment as a matter of law if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact." Rule 56(c), F.R. Civ. P. Solely for purposes of this motion, the facts will be viewed in the light most favorable to Northwest, Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986).

 Northwest asserts that all of PGFE's claims under the two air waybills were discharged through accord and satisfaction when PGFE cashed the checks. Northwest has the burden of proving all the essential elements of this defense. Alentino, Ltd. v. Chenson Enters., Inc., 938 F.2d 26 (2d Cir. 1991) (applying New York law). "The process of making an accord, of interpreting the words and acts of the parties, and of determining the legal effect thereof, is the same as in the case of other contracts." 6 Arthur Linton Corbin, Corbin on Contracts § 1277, at 117 (1962). Under the common law doctrine of accord and satisfaction, where a dispute exists over a debt or claim, the creditor's acceptance of partial payment, for example by endorsing a check, will create a new contract which discharges the debt. Horn Waterproofing Corp. v. Bushwick Iron & Steel Co., 66 N.Y.2d 321, 497 N.Y.S.2d 310, 312, 488 N.E.2d 56 (1985). *fn1" A dispute will exist where the amount due is unliquidated. 6 Corbin on Contracts § 1288 at 160. The settlement of the dispute constitutes consideration, and accord and satisfaction occur ...


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