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PORKY PRODS. v. NIPPON EXPRESS U.S.A.

August 20, 1997

PORKY PRODUCTS, INC., Plaintiff, against NIPPON EXPRESS U.S.A. (ILLINOIS), INC., NIPPON EXPRESS U.S.A., INC., individually and as agent for Nippon Express U.S.A. (Illinois), Inc., and NIPPON EXPRESS CO., LTD., individually and as agent for Nippon Express U.S.A. (Illinois), Inc., Defendants.


The opinion of the court was delivered by: GRUBIN

OPINION

 SHARON E. GRUBIN, United States Magistrate Judge:

 Plaintiff has brought this case in diversity alleging breach of contract and conversion. By consent of the parties, it has been assigned to me for all purposes pursuant to 28 U.S.C. ยง 636(c). The significant facts of the case are undisputed, and all parties have moved for summary judgment. For the following reasons, judgment is granted to plaintiff against all defendants in the amount of $ 77,569.97 plus prejudgment interest and costs.

 FACTUAL BACKGROUND

 Plaintiff Porky Products, Inc. ("Porky") is a New Jersey corporation which sells meat products. In February 1995, Daiichi Bussan Co., Ltd. ("Daiichi Bussan"), a Japanese company, placed four orders with Porky for meat products to be delivered to it in Japan. Porky contacted Nippon Express U.S.A., Inc. ("NEU"), a New York corporation, to arrange the transport. NEU issued four bills of lading which showed Nippon Express U.S.A. (Illinois), Inc. ("NEI") as carrier and were signed by NEU "AS AGENT FOR THE CARRIER." NEI, a subsidiary of NEU, is a non-vessel operating common carrier, and NEU is the agent appointed by NEI to conduct business on its behalf in the United States. The bills of lading were forwarded to Porky, and Porky turned them over, unaltered, to its bank, Standard Chartered Bank, which forwarded them to Daiichi Bussan's bank, Fuji Bank, in Japan. Each bill of lading contained on its face in the upper right-hand corner the following provision: "This Bill of Lading duly endorsed must be surrendered in exchange for the goods or delivery order" ("surrender clause"). Standard Chartered Bank also sent to Fuji Bank sight drafts and "Collection Instructions" for each order which stated, inter alia, the following: "Documents are to be released against payment."

 NEU loaded the shipment onto two ships, and Nippon Express Co., Ltd. ("NEC"), NEU's parent corporation headquartered in Japan and NEU's and NEI's sole agent in Japan, was responsible for proper release of the cargo upon arrival in Japan. NEC released the shipment to Daiichi Bussan without receipt of either the bills of lading or payment for Porky. Instead, NEC took letters of guarantee from Daiichi Bussan to hold it harmless from any liability arising out of release of the shipment without the bills of lading. Because Daiichi Bussan never made payment of the sight drafts to Fuji Bank or Porky, it never obtained possession of the bills of lading that had been sent to Fuji Bank. In March 1995 Daiichi Bussan filed bankruptcy proceedings in Japan, and plaintiff has not been paid the $ 92,059.89 owed for the orders. *fn1"

 DISCUSSION

 Under Fed. R. Civ. P. 56(c), a motion for summary judgment must be granted "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 and that the moving party is entitled to a judgment as a matter of law." The moving party must initially satisfy a burden of demonstrating the absence of a genuine issue of material fact, which can be done merely by pointing out that there is an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 323-25, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). The nonmoving party then must meet a burden of coming forward with "specific facts showing that there is a genuine issue for trial," Fed. R. Civ. P. 56(e), by "a showing sufficient to establish the existence of [every] element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. at 322.

 The court "must resolve all ambiguities and draw all reasonable inferences in favor of the party defending against the motion." Eastway Constr. Corp. v. City of New York, 762 F.2d 243, 249 (2d Cir. 1985); see also Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970); Hathaway v. Coughlin, 841 F.2d 48, 50 (2d Cir. 1988); Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986), cert. denied, 480 U.S. 932, 94 L. Ed. 2d 762, 107 S. Ct. 1570 (1987). But the court is to inquire whether "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party," Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986), and to grant summary judgment where the nonmovant's evidence is irrelevant or merely colorable, conclusory, speculative or not significantly probative. Id. at 249-50; Knight v. U.S. Fire Ins. Co., 804 F.2d at 12, 15; Argus Inc. v. Eastman Kodak Co., 801 F.2d 38, 45 (2d Cir. 1986), cert. denied, 479 U.S. 1088, 94 L. Ed. 2d 151, 107 S. Ct. 1295 (1987). To determine whether the non-moving party has met his or her burden, the court must focus on both the materiality and the genuineness of the factual issues raised by the nonmovant. As to materiality, "it is the substantive law's identification of which facts are critical and which facts are irrelevant that governs," and a dispute over irrelevant or unnecessary facts will not preclude summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. at 248. In sum, if the court determines that "the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.'" Matsushita Elec. Indus. Co., v. Zenith Radio Corp., 475 U.S. 574, 587, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986)(quoting First Nat'l Bank v. Cities Service Co., 391 U.S. 253, 289, 20 L. Ed. 2d 569, 88 S. Ct. 1575 (1968)).

 A bill of lading is a contract between a shipper and a carrier and, thus, is subject to the law of contract. International Knitwear Co. v. M/V Zim Canada, 1994 U.S. Dist. LEXIS 14180, No. 92 Civ. 7508 (PKL), 1994 U.S. Dist. LEXIS 14180 at *8 (S.D.N.Y. Oct. 6, 1994). It is, moreover, a contract of adhesion by the carrier and therefore is to be strictly construed against that carrier. Allied Chemical Int'l Corp. v. Companhia de Navegacao Lloyd Brasileiro, 775 F.2d 476, 482 (2d Cir. 1985); Mitsui & Co. v. American Export Lines, Inc., 636 F.2d 807, 822-23 (2d Cir. 1981); International Knitwear Co. v. M/V Zim Canada, 1994 U.S. Dist. LEXIS 14180 at *8. The court's duty in a case involving a contractual dispute is to determine the intent of the parties and to give effect to their intentions as expressed in the agreement. Record Club of America, Inc. v. United Artists Records, Inc., 890 F.2d 1264, 1271 (2d Cir. 1989). If a contract is found to be ambiguous on an issue, extrinsic evidence of the parties' intent may be considered to determine what meaning is to be ascribed to the contract. See Sayers v. Rochester Tel. Corp. Supplemental Mgmt. Pension Plan, 7 F.3d 1091, 1095 (2d Cir. 1993); Brass v. American Film Technologies, Inc., 987 F.2d 142, 149 (2d Cir. 1993); Curry Road Ltd. v. K Mart Corp., 893 F.2d 509, 511-12 (2d Cir. 1990). And, "when resort to extrinsic evidence is necessary to shed light on the parties' intent summary judgment ordinarily is not an appropriate remedy...and must be denied unless, viewing the evidence in a light most favorable to the nonmovant and resolving all doubts in its favor, no reasonable trier of fact could find against the movant." Christiania General Ins. Corp. v. Great American Ins. Co., 979 F.2d 268, 274 (2d Cir. 1992); John Hancock Mut. Life Insur. Co. v. Amerford Int'l Corp., 22 F.3d 458, 461 (2d Cir. 1994) ("In a contract dispute, a motion for summary judgment may be granted only where the agreement's language is unambiguous and conveys a definite meaning").

 However, when language contained in a contract is clear or where any ambiguity may be resolved by reference to other parts of the contract itself, the court is to construe the contract and grant summary judgment without reference to extrinsic evidence. Sayers v. Rochester Tel. Corp. Supplemental Mgmt. Pension Plan, 7 F.3d at 1094-95; Brass v. American Film Technologies, Inc., 987 F.2d at 148; International Knitwear Co. v. M/V Zim Canada, 1994 U.S. Dist. LEXIS 14180 at *8-9. A contract provision is not ambiguous "when it has a definite and precise meaning, unattended by danger of misconception in the purport of the [contract] itself, and concerning which there is no reasonable basis for a difference of opinion." John Hancock Mut. Life Insur. Co. v. Amerford Int'l Corp., 22 F.3d at 461 (citations omitted). Furthermore, the Second Circuit has emphasized that "ambiguity itself is not enough to preclude summary judgment" where there is no relevant extrinsic evidence of the parties' actual intent. Mellon Bank, N.A. v. United Bank Corp., 31 F.3d 113, 116 (2d Cir. 1994); Williams and Sons Erectors, Inc. v. South Carolina Steel Corp., 983 F.2d 1176, 1183-84 (2d Cir. 1993). "Whether an ambiguity exists in a contract is a threshold question of law to be resolved by the court." Brass v. American Film Technologies, Inc., 987 F.2d at 149. See also International Knitwear Co. v. M/V Zim Canada, 1994 U.S. Dist. LEXIS 14180 at *9-10.

 The instant case is a simple one, made seemingly complex by the defendants' contentions on these motions which lengthily argue positions that would alter centuries of clearly established principles of contract law and negate case law that has dealt with essentially the same events involved here. In Pere Marquette Ry. Co. v. J.F. French & Co., 254 U.S. 538, 65 L. Ed. 391, 41 S. Ct. 195 (1921), where the bill of lading had contained the clause "The surrender of this original bill of lading properly endorsed shall be required before delivery of the property," the Supreme Court held that this provision resulted in liability on the carrier who delivered the goods without insisting on the production and surrender of the bill of lading where the shipper suffered a loss as a result. The Court pointed out that "such liability arises, not from the statute [the predecessor to the Pomerene Act], but from the obligation which the carrier assumes under the bill of lading." 254 U.S. at 546 (emphasis added). Similarly, in Iowa Beef Processors, Inc. v. Grand Trunk Western R.R. Co., 493 F.2d 665 (6th Cir. 1974), where the bills of lading required the defendant to obtain them prior to delivery to the consignee, defendant was held liable because it "breached the condition of the bill of lading." 493 F.2d at 666 (emphasis added). In Allied Chemical Int'l Corp. v. Companhia de Navegacao Lloyd Brasilero, the Second Circuit pointed out that "'delivery to a person not entitled to the goods without production of the bill of lading is prima facie a conversion of the goods and a breach of contract.'" 775 F.2d at 482 (emphasis added) (quoting 2 T.G. Carver, Carriage by Sea P 1593 (13th ed. 1982)). In B.M.A. Industries, Ltd. v. Nigerian Star Line, Ltd., 786 F.2d 90 (2d Cir. 1986), the Second Circuit affirmed a grant of summary judgment by this court to the plaintiff for breach of contract by the carrier who delivered the cargo against a warehouse delivery order instead of the original bills of lading where the bills stated, "Cargo to be released only against submission of original duly endorsed bills of lading." 786 F.2d at 91. In C-Art, Ltd. v. Hong Kong Islands Line America, S.A., 940 F.2d 530 (9th Cir. 1991), again like here, bills of lading stated delivery was to be made only "upon surrender of the original, properly endorsed bill of lading." 940 F.2d at 532. The Ninth Circuit, quoting the Second Circuit in Allied Chemical with approval, explained simply that the carrier, which had delivered the goods in exchange for a corporate guaranty rather than the actual bills of lading, was liable to the shipper for breach of contract. International Knitwear Co. v. M/V Zim Canada, 1994 U.S. Dist. LEXIS 14180 (S.D.N.Y. Oct. 6, 1994), is a decision of particular import because it presented a situation factually identical to that here. A shipment of goods by the carrier, Zim Israel Navigation Company, was pursuant to a bill of lading issued by Zim that contained the provision "One of the originals of this Bill of Lading must be surrendered duly endorsed in exchange for the goods or Delivery Order." 1994 U.S. Dist. LEXIS 14180 at *3. As here, the carrier delivered the goods to the consignee in exchange for a letter of guarantee rather than the bill of lading. As here, the original bill of lading was being held by a bank which had received a collection instruction that the bill of lading was to be released to the consignee only upon payment, and the consignee had not paid. The Honorable Peter K. Leisure granted summary judgment to the plaintiff on its breach of contract claim, finding that the surrender clause was "unambiguous and conveyed a definite meaning" and that "reasonable persons could not read this passage of the bill and differ as to its clear meaning." Id. at *11. Judge Leisure further held that "even assuming arguendo, that there were some ambiguity in the bill of lading," the extrinsic evidence supported the plain reading of the language of the bill of lading, pointing specifically to the letter of guarantee in which, like here, the consignee agreed to hold the carrier harmless of any liability that might result from releasing the goods without presentation of the bill of lading. Judge Leisure reasoned:

 
If the clause of the bill at issue herein had been of no effect, and if the bill had been a straight bill, the consignee would not have needed to produce an original bill in order to receive the goods and, accordingly, Stateside would not have presented carrier with a letter of indemnification, agreeing to hold defendants harmless of any liability that they ...

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