Appeal from the United States District Court for the Western District of Pennsylvania (Pittsburgh), D.C. Civil No. 83-1571.
Before: SEITZ and MANSMANN, Circuit Judges, and BISSELL, District Judge.*fn*
In this diversity case we are called upon to determine the legal obligations of the defendant Mellon Bank to plaintiff Fiat Motors under a Wholesale Finance Commitment. We also consider a cross-appeal by Fiat regarding the proper amount of prejudgment interest to be awarded. We find that the Commitment constituted a letter of credit and for the reasons given below, we will affirm the judgment of the district court, 649 F. Supp. 245 .
The plaintiff, Fiat Motors of North America, Inc., a New York and New Jersey Corporation ("Fiat"), previously known as Fiat Roosevelt Motors, Inc., entered into a Dealer Sales and Service Agreement ("Dealer Agreement") in 1975 with Bob Raymond Imports, Inc. ("BRI"), a Fiat dealership. In doing so, Fiat relied on a Wholesale Financing Commitment issued by the defendant, Mellon Bank, to Bob Raymond Imports.*fn1 Mellon had security agreements with BRI, and had filed financing statements perfecting its interests.*fn2
On October 2, 1978 Mellon executed another financing commitment ("the Commitment" or "WFC") for the benefit of Fiat. The Commitment provided in relevant part:
In consideration of shipments or deliveries of Fiat Motor vehicles which may hereafter be made by [Fiat] pursuant to written orders of [BRI] [Mellon] hereby agree[s] to pay [Fiat] the total amount shown on invoices covering such shipments and deliveries . . . upon presentation by [Fiat] to [Mellon] of such invoices, or (b) to pay promptly at par drafts drawn on [Mellon] for the total amount of such invoices, provided, however, (i) that [Mellon's] obligation hereunder shall not exceed $50,000.00 aggregate amount of invoices or drafts presented in any one day. . . .
The Commitment was not limited as to time, or as to the number of Fiat motor vehicles ordered by the dealer.*fn3 In addition, the Commitment contained a cancellation clause stating
[Mellon's] obligation hereunder may be cancelled by [Mellon] at any time by giving [Fiat] [Mellon's] written notice of cancellation, provided, however, that no such cancellation shall be effective with respect to motor vehicles shipped or delivered by [Fiat] to [BRI] or [BRI's] designated agent up to and including the second business day following receipt by [Fiat] of such written notice of cancellation. The further explanation on the reverse side of this form has been noted by us.
The reverse side of the Commitment contained the caption "Fiat Motors of North America, Inc. Policy and Drafting Procedure" and ten numbered paragraphs.*fn4
From 1978 to 1981 Fiat shipped over 100 cars to BRI. In April, 1981, BRI opted to participate in a Fiat incentive program. Under the terms and conditions of the program, no payment to Fiat was required until the earlier of 120 days after the invoice date or retail sale. BRI bought 50 Fiats between April and July of 1981. Twelve of those 50 cars gave rise to this case.
Mellon first learned of the incentive program in late April, 1981 when it received invoices from Fiat for BRI orders under the program. Including in an April 30, 1981 mailing were invoices for seven of the twelve cars at issue. On May 7, 1981, Mellon received invoices and corresponding drafts for two of the cars at issue. The next day Mellon informed Fiat that Mellon "will not honor any invoices on the 120 day delayed payment program." On May 11 or 12, 1981, Fiat's invoices and drafts to Mellon totaled $162,318. Mellon immediately reiterated its refusal to honor the program or "to pay invoices totaling more than $50,000 on any one day." The remaining invoices for the twelve cars were dated July 29, 1981. All of the invoices and drafts sent by Fiat to Mellon up to May 15, 1981 were returned unpaid by Mellon. Mellon, however, never exercised its right to cancel the Commitment.
Fiat, as a matter of course, requires its dealers to forward to it a retail delivery receipt upon a selling a car but BRI failed to do so for the twelve vehicles at issue. In November 1981, a monitoring service hired by Fiat conducted a surprise spot check of BRI's inventory and discovered several cars missing. Fiat immediately demanded payment from Mellon and BRI and retrieved the remaining vehicles and Certificates of Origin from BRI. BRI remitted $10,000, but Fiat received no further payments from either BRI or Mellon.
In June 1983, Fiat filed a complaint in the United States District Court for the Western District of Pennsylvania, alleging Mellon's breach of the Commitment. Fiat claimed damages of $101,158 (the total invoice amount for the twelve cars) plus prejudgment interest at prime rate plus one percent. Fiat subsequently moved to permit market rate, instead of the statutory six percent simple interest. The court denied that motion.
Following a bench trial, the district court awarded Fiat $103,083.70. The judgment included the full amounts of the invoices dated May 7 and July 29, 1981, $50,000 of the total invoices date April 30, 1981, and six percent interest thereon. The award deducted from Fiat's claim the $11,842 by which the April 30, 1981 invoices exceeded the ...