filed: April 14, 1989.
HAMILTON BANK AND CORESTATES FINANCIAL CORP., APPELLANTS,
INSURANCE COMPANY OF NORTH AMERICA, APPELLEE
Appeal from the Order of the Court of Common Pleas of Lancaster County, Civil Division at No. 2213 of 1986.
Daniel B. Huyett, Reading, for appellants.
Christopher W. Mattson, Lancaster, for appellee.
Cavanaugh, McEwen and Popovich, JJ.
[ 384 Pa. Super. Page 12]
This is an appeal from an order entered by the Lancaster County Court of Common Pleas, granting the appellee's motion for summary judgment against the appellant. We affirm.
When reviewing a lower court's entry of summary judgment, we are guided by the following standards of review which were recently reiterated in Hower v. Whitmak Associates, 371 Pa. Super. 443, 538 A.2d 524 (1988):
Summary judgment should not be entered unless the case is free from doubt. Weiss v. Keystone Mack Sales, Inc., 310 Pa. Super. 425, 456 A.2d 1009 (1983). Since the moving party has the burden of proving that no genuine issues exist as to the material facts, the record must be examined in a light most favorable to the non-moving party; in doing so all well-pleaded facts in the non-moving party's pleadings are accepted as true and that party is given the benefit of all reasonable inferences to be drawn therefrom. Spain v. Vicente, 315 Pa. Super. 135, 461 A.2d 833 (1983). Summary judgment shall be granted if the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Williams v. Pilgrim Life Insurance Co., 306 Pa. Super. 170, 452 A.2d 269 (1982).
Hower, 371 Pa. Superior Ct. at 445, 538 A.2d at 525; see also Consumer Party of Pa. v. Comm., 510 Pa. 158, 173-75, 507 A.2d 323, 331 (1986); In re Estate of Reinert, 367 Pa. Super. 147, 150-52, 532 A.2d 832, 834 (1987); Huffman v. Aetna Life and Cas. Co., 337 Pa. Super. 274, 276-77, 486 A.2d 1330, 1331 (1984).
The undisputed facts*fn1 are as follows: Between December of 1981 and June of 1982, Hamilton Bank and CoreStates
[ 384 Pa. Super. Page 13]
Financial (hereafter "Bank") made sixteen loans totaling over $1.4 million to nine Mexican companies for the purpose of financing purchases of American goods for importation into Mexico. The loans were procured through Humberto Tamez Garcia, agent for the Mexican companies. Prior to dispersing the loan proceeds, Bank required the following documents: promissory notes signed by the debtor companies, sales invoices issued by the exporter and bills of lading from the carrier. For each of the loans, Bank accepted photocopies of the original counterparts of the bills of lading. After the Mexican borrowers defaulted on the loans, Bank discovered that the carriers' names on the bills of lading had been forged and that the description of the goods allegedly shipped was false.
Bank submitted claims for reimbursement under its export credit insurance provided by the Export-Import Bank of the United States and the Foreign Credit Insurance Association. FCIA denied the claims on the basis that the invoices and/or bills of lading were forged or otherwise fraudulent. Bank then filed its claim for $1.2 million ($1.4 million less policy deductible) with the Insurance Company of North America (hereafter "INA") under its bankers blanket bond.*fn2 Bank alleged that INA, under Insuring
[ 384 Pa. Super. Page 14]
Agreement (E) of bankers blanket bond, agreed to indemnify Bank for losses resulting from Bank's having extended credit based in reliance on the forged bills of lading. In response, INA submitted that it was not liable under the agreement since Bank did not loan funds on the faith of the "original" bills of lading but rather made the loans based on photocopies of the documents. The lower court, ruling upon INA's motion for summary judgment, agreed with INA that, since Bank did not possess the original bills of lading, its claims were not covered under the blanket bond.
Insuring Agreement (E) which is the focal point of this dispute provides:
The Underwriter, in consideration of an agreed premium, subject to the Declarations, Insuring Agreements, General Agreements, Conditions and Limitations and other terms hereof, agrees to indemnify the insured for:
(E) Loss resulting directly form the Insured having, in good faith, for its own accounts or for the accounts of others,
(1) acquired, sold or delivered, or given value, extended credit or assumed liability, on the faith of, or otherwise acted upon, any original
(b) Document of Title,*fn3
(c) deed, mortgage or other instrument conveying title to, or creating or discharging a lien upon real property,
(d) Certificate of Origin or Title,
(e) Evidence of debt,
[ 384 Pa. Super. Page 15]
(f) corporate, partnership or personal Guarantee, or
(g) Security Agreement
(i) bears a signature of any maker, drawer, issuer, endorser, assignor, lessee, transfer agent, registrar, acceptor, surety, guarantor, or of any person signing in any other capacity which is a forgery,*fn4
(ii) is altered, or
(iii) is lost or stolen;
(2) guaranteed in writing or witnessed any signature upon any transfer, assignment, bill of sale, power of attorney, Guarantee, endorsement, or any items listed in (a) through (g) above.
(3) acquired, sold or delivered, or given value, extended credit or assumed liability, on the faith of, or otherwise acted upon, any item listed in (a) through (d) above which is a Counterfeit.
Actual physical possession of the items listed in (a) through (g) above by the Insured, its correspondent bank or other authorized representative is a condition precedent to the Insured's having relied on the faith of, or otherwise acted upon such items.
A mechanically reproduced facsimile signature is treated the same as a hand-written signature. (Emphasis added).
[ 384 Pa. Super. Page 16]
Instantly, we are asked to review the lower court's interpretation of bankers blanket bond. Interpretation of an insurance contract is a question of law. Utica Mutual Insurance Co. v. Contrisciane, 504 Pa. 328, 334, 473 A.2d 1005, 1008 (1984); see also Winters v. Erie Ins. Group, 367 Pa. Super. 253, 257-59, 532 A.2d 885, 887 (1987). When interpreting an insurance contract, our duty is to determine the intent of the parties as manifested by the language of the written agreement. Eddystone Fire Company v. Continental Page 16} Ins., 284 Pa. Super. 260, 264-65, 425 A.2d 803, 805 (1981). The language of the policy, if unambiguous, should be given its ordinary and usual meaning. Winters, 532 A.2d at 887; Techalloy Co. v. Reliance Ins. Co., 338 Pa. Super. 1, 5-7, 487 A.2d 820, 823 (1984); Eddystone Fire, 425 A.2d at 805. However, if the language is contextual or otherwise ambiguous, the insured receives the benefit of the doubt, and the policy language is construed in his favor. Mohn v. American Casualty Co. of Reading, 458 Pa. 576, 584-86, 326 A.2d 346, 351 (1974); Winters, 532 A.2d at 887; Techalloy, 487 A.2d at 823. The policy language is "ambiguous if reasonably intelligent men on considering it in the context of the entire policy would honestly differ as to its meaning." Celley v. Mutual Benefit Health & Accident Ass'n, 229 Pa. Super. 475, 481-83, 324 A.2d 430, 434 (1974).
The appellant raises numerous issues aimed at discrediting the lower court's interpretation of bankers blanket bond. However, applying the aforementioned standards to the case at bar, we are convinced that the lower court correctly interpreted the insurance contract. We find that the language of blanket bond is unambiguous and was drafted in clear and precise terms.
First, the appellant alleges that, since paragraph (1) of Insuring Agreement (E) does not contain the word "possession," requiring Bank to possess the original bills of lading ignores the explicit language of paragraph (1). In the alternative, Bank alleges that paragraph (1)'s requirement of document possession is unclear and ambiguous and should be interpreted in its favor. Here, we must disagree with the appellant and agree with the lower court's interpretation of the policy. If we were to view paragraph (1) in a vacuum, Bank's argument has some merit. However, when we read the Insuring Agreement as a whole, the specious nature of Bank's argument becomes abundantly apparent. Insuring Agreement (E) is quite explicit -- "Actual physical possession" of the bills of lading is "a condition precedent to the [Bank's] having relied on the faith of" the bills. Equally unambiguous is the requirement of paragraph
[ 384 Pa. Super. Page 17]
(1) that recovery is predicated upon Bank's having extended credit "on the faith of . . . original" bills of lading. Therefore, the clear meaning of the blanket bond mandates that Bank must physically possess the original bills of lading at the time of extending credit before it may recover its losses.
Bank further contends that, since the physical possession requirement of Insuring Agreement (E) does not specifically require possession of the "original" document, Bank's possession of photocopies of the original counterparts of the bills of lading is sufficient. However, as stated before, the possession requirement is to be read in conjunction with the paragraph (1) which premises recovery upon the Insured having acted "on the faith of" the "original" documents. When the possession requirement is read in conjunction with paragraph (1), the clear meaning of the policy language is that actual physical possession of the "original" bills of lading is a condition precedent to recovery.
Thus, we are led to the next issue: whether the undefined term "original," when considered in the circumstances of this case, is ambiguous. Here, we again agree with the lower court that the policy language, "original," is clear and free from ambiguity.*fn5 Bank contends that, especially in the commercial setting, "original" is capable of varied meanings, citing Baum Estate, 418 Pa. 404, 410, 211 A.2d 521, 524 (1965) ("original" capable of varied definitional treatment and may vary according to the situation). However, there can be no doubt that, considering the situation before us, mere photocopies of the original counterparts of the bills of lading do not qualify as "original" documents.*fn6 We
[ 384 Pa. Super. Page 18]
find it ludicrous that Bank, which certainly would not honor a photocopy of a check of nominal value, has the audacity to contend that it is reasonable to lend $1.4 million based upon mere photocopies of duplicate bills of lading.
In sum, we find that the bankers blanket bond is clear and free from ambiguity. In order to recover under the provisions of the bond, we find that Bank would have needed to extend the credit in reliance on original bills of lading (not mere photocopies thereof) which should have been in Bank's actual physical possession prior to release of the funds.*fn7 Since no genuine issues of material fact remain and, based on our interpretation of the bankers blanket bond, INA is entitled to judgment as a matter of law, we find that the lower court properly granted summary judgment in favor of INA.