Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-05-03766/USCOURTS-ca8-05-03766-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 05-3766

___________

P & O Nedlloyd, Ltd., *

*

Plaintiff, *

*

v. *

*

Sanderson Farms, Inc.; Certain *

Underwriters at Lloyd’s of London, *

*

Defendants, *

*

v. *

*

Sanderson Farms, Inc., * Appeal from the United States

* District Court for the

Third Party Plaintiff/ * Western District of Arkansas.

Appellant, *

*

v. *

*

Certain Underwriters at Lloyd’s * 

of London, Subscribing to Insurance *

Contract No. MC02ADKH, *

*

Third Party Defendant/ *

Appellee. *

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1

During the pendency of this appeal, SMG assigned its rights in this litigation

to Sanderson as part of a settlement agreement between Sanderson and SMG.

Although Sanderson has been substituted as the real party in interest, we refer to SMG

as appellant.

2

The Honorable Jimm Larry Hendren, Chief Judge, United States District Court

for the Western District of Arkansas.

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___________

Submitted: April 11, 2006

Filed: August 30, 2006

___________

Before RILEY, BEAM, and SMITH, Circuit Judges.

___________

RILEY, Circuit Judge.

Sanderson Farms, Inc. (Sanderson), assignee of Sams Management Group, Inc.

(SMG) and the real party in interest,1

 appeals the adverse ruling of the district court2

granting summary judgment in favor of Certain Underwriters at Lloyd’s of London

(Lloyd’s). We affirm.

I. BACKGROUND

The parties adopted the factual summary set out in the district court’s order,

which we briefly summarize. At all times relevant, SMG was a frozen poultry

wholesaler based in Rogers, Arkansas. Sanderson was one of SMG’s chicken

suppliers. SMG contracted to sell twenty-four containers of frozen poultry (cargo) to

KVADRO, a Russian company owned by Leonid Budilin (Budilin). SMG invoices

199 and 206 contained all the contract terms for the sale. Both invoices listed the

shipment terms as “C.I.F.” (cost, insurance, and freight), and the payment terms as

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“20% Down Payment,” “20% Upon Shipping,” and “60% Due 19 days after

Discharge.” 

In connection with its business, SMG acquired a one-year, open cargo insurance

policy from Lloyd’s (Lloyd’s policy), effective February 1, 2002. In accordance with

the Lloyd’s policy, SMG applied for coverage of the cargo and Lloyd’s issued SMG

two certificates of insurance. SMG arranged for shipment of the cargo from New

Orleans, Louisiana, to St. Petersburg, Russia, through P & O Nedlloyd, Ltd. (P & O),

a New Jersey based shipper. P & O shipped the cargo in four separate shipments

arriving in St. Petersburg, Russia, on March 3, March 4, March 26, and April 5, 2002.

On March 27, 2002, at KVADRO’s request, SMG changed the consignee for

the cargo from OOO Diliat to OOO Techpromptorg (Techpromptorg). On April 15,

2002, the Russian government revoked all previously issued veterinary permits for the

import of poultry from the United States. Because Techpromptorg had not arranged

for customs clearance before the revocation, Techpromptorg had to reapply for the

necessary permits. Two months after arriving in port, the cargo still had not cleared

customs as required by Russian regulations (sixty-day rule). Techpromptorg applied

for an extension of the sixty-day rule based on the Russian government’s blanket

revocation, but the request was denied. Although Techpromptorg filed an appeal, as

of June 17, 2002, Techpromptorg had not received new permits or an extension.

On June 8 and June 18, 2002, Russian Federation Officials of the Baltic

Customs House (Russian Federation) issued protocols, seized the cargo, and instituted

an investigation into Techpromptorg’s apparent sixty-day rule violation. The poultry

in fourteen of the twenty-four containers was sold during the pendency of the

investigation and the appeal. 

The Russian Federation ultimately granted Techpromptorg’s request for an

extension of the sixty-day rule and also granted judgment in Techpromptorg’s favor

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on the appeal, ruling the remaining ten containers, as well as the proceeds from the

fourteen containers of sold poultry, should be turned over to the poultry owner.

Before Techpromptorg picked up the ten remaining containers, the containers were

seized anew by Russian authorities as part of a different investigation involving

Techpromptorg. Techpromptorg never enforced the judgment it received from the

Russian Federation. The ten containers were never returned to SMG or P & O. SMG

never received the proceeds from the fourteen containers of sold poultry. SMG never

received payment for the cargo and unsuccessfully pursued an action against Budilin

and KVADRO.

SMG filed a claim with Lloyd’s for recovery of the lost cargo. Lloyd’s denied

the claim. Thereafter, P & O sued SMG to collect for services rendered in connection

with shipping the cargo. SMG filed a counterclaim alleging P & O caused the loss by

failing to provide the promised services. SMG also filed a third-party complaint

against Lloyd’s, seeking recovery of the lost cargo under the Lloyd’s policy. P & O

amended its complaint, adding a third-party beneficiary claim against Lloyd’s.

Lloyd’s moved for summary judgment, arguing (1) P & O was not an intended thirdparty beneficiary of the Lloyd’s policy, (2) SMG had no insurable interest in the cargo

at the time of the loss, (3) the Lloyd’s policy did not cover credit risks, and (4) the

Lloyd’s policy specifically excluded losses arising out of the seizure of insured cargo

by customs officials.

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3

The district court did not state its reason for applying Arkansas law, although

arguably it did so because Arkansas was the forum state. At appellate arguments,

SMG raised the choice of law issue for the first time, arguing the Lloyd’s policy is

subject to English law. Because choice of law is waived if not timely raised, we need

not address the choice of law question for the first time on appeal, Kostelec v. State

Farm Fire & Cas. Co., 64 F.3d 1220, 1224 (8th Cir. 1995); see also Wiser v. Wayne

Farms, 411 F.3d 923, 926-28 (8th Cir. 2005), and we may consider this appeal under

Arkansas law.

4

After the district court granted summary judgment, P & O moved to withdraw

its complaint against SMG. The district court granted the motion and dismissed the

case, rendering the district court’s order on summary judgment a final judgment,

thereby clearing the road for this appeal. See Reinholdson v. Minnesota, 346 F.3d

847, 849 (8th Cir. 2003) (explaining appellate jurisdiction pursuant to 28 U.S.C.

§ 1291, is limited to appeals from “final decisions of the district courts”).

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Applying Arkansas law,3

 the district court granted Lloyd’s motion for summary

judgment, finding P & O was not an intended beneficiary of the Lloyd’s policy and

SMG did not have an insurable interest in the cargo at the time of seizure. The district

court did not reach Lloyd’s remaining arguments. SMG appeals.4

II. DISCUSSION

We review de novo the district court’s grant of summary judgment, applying

the same standard as the district court, and viewing the evidence in the light most

favorable to SMG, the nonmoving party. See Nitsche v. CEO of Osage Valley Elec.

Coop., 446 F.3d 841, 845 (8th Cir. 2006). The moving party is entitled to summary

judgment “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.” Fed. R. Civ. P. 56(c). “[T]he mere existence of some alleged factual

dispute between the parties will not defeat an otherwise properly supported motion for

summary judgment; the requirement is that there be no genuine issue of material

fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986); see also Bloom

v. Metro Heart Group of St. Louis, Inc., 440 F.3d 1025, 1028 (8th Cir. 2006). We

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may affirm on any ground supported by the record. Mo. Prot. & Advocacy Servs. v.

Mo Dep’t of Mental Health, 447 F.3d 1021, 1023 (8th Cir. 2006) (citation omitted).

The question before us is whether under the Lloyd’s policy, “ [SMG had] an

insurable interest in the [cargo] at the time of the loss.” Under Arkansas’s version of

the Uniform Commercial Code, “[t]he seller retains an insurable interest in goods so

long as title to or any security interest in the goods remains in him.” Ark. Code Ann.

§ 4-2-501(2). In order to determine whether SMG retained any insurable interest in

the cargo, we must determine whether title passed from SMG to KVADRO.

“Unless otherwise explicitly agreed title passes to the buyer at the time and

place at which the seller completes his performance with reference to the physical

delivery of the goods . . . . [I]f the contract requires or authorizes the seller to send the

goods to the buyer but does not require him to deliver them at destination, title passes

to the buyer at the time and place of shipment.” Id. § 4-2-401(2)(a). Invoices 199 and

206 state the shipment terms are C.I.F., and under Arkansas law, if the seller has

performed his obligations under a C.I.F. shipment contract, the risk of subsequent loss

or damage passes to the buyer upon shipment. Id. § 4-2-320 cmt. n. 1. “Delivery to

the carrier is delivery to the buyer for purposes of risk and ‘title.’” Id. In a C.I.F.

contract, the seller is required to: (1) “put the goods into the possession of a carrier at

the port for shipment and obtain a negotiable bill or bills of lading covering the entire

transportation to the named destination”; (2) “load the goods and obtain a receipt from

the carrier . . . showing that the freight has been paid or provided for”; (3) “obtain a

policy or certificate of insurance, including any war risk insurance”; (4) “prepare an

invoice of the goods”; and (5) “forward and tender with commercial promptness all

the documents in due form and with any indorsement necessary to perfect the buyer’s

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5

In the district court, Lloyd’s filed a statement of undisputed facts, SMG

responded, contesting certain facts, and the district court found, based on these filings,

“[SMA] complied with all its obligations under the terms of the contract between

Sams and KVADRO.”

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rights.” Id. § 4-2-320(2)(a)-(e). It is undisputed SMG complied with all its

obligations under the contracts with KVADRO.5

 

On appeal, SMG first asserts the term C.I.F. was a typographical or clerical

error and postulates the parties did not intend for cargo to be shipped C.I.F. In

response, Lloyd’s argues (1) the clerical error argument is being raised for the first

time on appeal, and (2) invoices 199 and 206 are unambiguous, clearly indicating the

cargo was shipped C.I.F. The issue of clerical error is raised for the first time on

appeal; therefore, we do not consider it. See Wever v. Lincoln County, Neb., 388

F.3d 601, 608 (8th Cir. 2004) (“Ordinarily, this court will not consider arguments

raised for the first time on appeal.” (citation omitted)). Without an evidentiary record

developed in the district court to prove or disprove a typographical or clerical error,

consideration of this argument on appeal is particularly inappropriate. See Orr v. WalMart Stores, Inc., 297 F.3d 720, 725 (8th Cir. 2002) (“We consider a newly raised

argument only if it is purely legal and requires no additional factual development, or

if a manifest injustice would otherwise result.” (citation omitted)).

For its remaining arguments, SMG points to prior conduct of the parties to show

the parties did not intend invoices 199 and 206 to be C.I.F. shipments. Arkansas’s

parol evidence rule bars the introduction into evidence of any prior agreement of the

parties that contradicts the terms of an unambiguous contract. See Ark. Code Ann.

§ 4-2-202. However, the Arkansas Supreme Court has declared that evidence of “a

course of dealing that explains or supplements a contract is competent evidence of the

parties’ intent and can become a part of a contract.” Bank of Am. v. C.D. Smith

Motor Co., 106 S.W.3d 425, 429-30 (Ark. 2003) (citation omitted).

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6

F.A.S. is a delivery term under which the seller, at his own expense and risk,

must deliver the goods in the manner designated and provided by the buyer, and

obtain and tender a receipt for the goods. Ark. Code Ann. § 4-2-319(2)(a)-(b).

-8-

As proof the parties did not intend the shipment terms on invoices 199 and 206

to be C.I.F., SMG first asks the court to consider prior SMG-KVADRO shipment

invoices, which show the shipping terms as “F.A.S.” (free alongside).6

 This evidence

is offered to contradict the terms of invoices 199 and 206, and therefore is barred by

the parol evidence rule. Furthermore, even if the evidence fell within Arkansas’s

course of dealing exception to the parol evidence rule, it is contradicted by the

testimonies of Andrew Sams (Sams), SMG’s president, and Brant Turner (Turner),

SMG’s accountant. Sams admitted invoices 199 and 206 “definitely show[] C.I.F.”

and “[w]e stated C.I.F. because that’s what we–that’s what we charged [Budilin]. He

was in charge of the port handling fees, the customs clearance, [and] the discharging

from the vessel.” Sams further admitted SMG and KVADRO could have different

terms for different shipments.

Turner also confirmed that the shipment terms on invoices 199 and 206 were

C.I.F. and that SMG “shipped [the cargo] just like we should have.” Also, in an email to an insurance broker attempting to recover the cargo, Turner detailed the

shipment terms of invoices 199 and 206, indicating (1) “The terms of the sale were

C.I.F. . . . This is documented on the invoice, no other contract exist [sic] that I am

aware of”; (2) “The title was to pass with the original [bills of lading] as long as the

customer was in terms”; (3) “Again the contract is the invoice”; (4) “The customer

was responsible for customs in all instances. We have a copy of the customs

payment”; and (5) “All along our invoiced customer, Budilin, has said that he is

working to get the cargo and understands his responsibilities.” Thus, SMG clearly

intended C.I.F. shipment contracts.

 SMG next asks the court to infer from the payment schedule that the parties did

not intend C.I.F. contracts. We decline to do so. SMG argues the credit extended,

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with no final payment until after delivery, constituted an insurable interest. By

extending credit to KVADRO and requiring only a down payment before placing the

cargo with the carrier in New Orleans, SMG did not change the terms of the shipment

contracts or prevent title from passing. Furthermore, Turner testified SMG extended

credit to KVADRO to “get as much poultry on the water on or before March 10th as

possible because we knew that these changes [to veterinary certificates by the Russian

government] would be coming into place.” These credit terms do not change or

modify the C.I.F. contract terms or the clear testimony of SMG’s officers confirming

the C.I.F. shipments. SMG does not argue, nor does the record show, SMG retained

any security interest in the goods after title passed when the cargo was delivered to the

carrier. Therefore, under Arkansas law, SMG did not retain an insurable interest in

the cargo. See Ark. Code Ann. § 4-2-501(2).

We need not consider SMG’s remaining contentions regarding the intentions

of the parties as they amount to mere speculation, and therefore are not enough to

survive a motion for summary judgment. See Bloom, 440 F.3d at 1028. Furthermore,

because we conclude SMG had no insurable interest under the terms of the Lloyd’s

policy, we need not reach Lloyd’s alternative theories for summary judgment.

III. CONCLUSION

We affirm the district court’s grant of summary judgment.

BEAM, Circuit Judge, dissenting.

Lloyd's of London (Lloyd's) issued an insurance policy to Sams Management

Group (SMG), delivered certificates of insurance under the marine risk portions of the

policy purporting to cover two shipments of frozen chicken purchased by KVADRO

for delivery in Russia, collected a premium from SMG for these insurance services but

now contends that its policy was actually illusory, insuring no risks for any party

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7

Arkansas defines an insurable interest as, "any actual, lawful, and substantial

economic interest in the safety or preservation of the subject of the insurance free

from loss, destruction, or pecuniary damage or impairment." Ark. Code Ann. § 23-79-

104. An insurable interest extends beyond a property interest: "in order to have an

insurable interest, a party does not have to have legal title to the property insured, but

some legal basis for the assertion of interest. This legal interest can be based upon '(a)

factual expectation of damages, (b) property interests, (c) legal liability, (d) and

contract right.'" Beatty v. USAA Cas. Ins., 954 S.W.2d 250, 254 (Ark. 1997), quoting

Warren Freedman, Richards on the Law of Insurance § 2:5.

8

A C.I.F. contract "contemplates that before the goods arrive at their destination

they may be sold again and again on C.I.F. terms." Ark. Code Ann. § 4-2-320, cmt.

n.8. The original insurance policy remains with the goods. Id.

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involved in the transactions at issue in this case. Lloyd's contentions are both

unconscionable and contrary to the law and facts. Accordingly, I respectfully dissent.

The district court, accepting Lloyd's gloss on the facts, Lloyd's interpretation

of the involved documents and Lloyd's construction of the Arkansas Uniform

Commercial Code (UCC), held that title to the chicken passed to KVADRO upon

delivery of the products to the ship for transportation, leaving SMG without an

insurable interest.7

 This conclusion is clearly wrong.

It is undisputed that the invoices prepared by SMG selling the chicken to

KVADRO indicated that this was to be a C.I.F. transaction. A C.I.F. sale means that

the price includes the cost of the goods, insurance, and freight. Ark. Code Ann. § 4-2-

320(1). The seller must put the goods in possession of the carrier and obtain bills of

lading; load the goods and obtain a receipt indicating that the freight is paid; obtain

a policy or certificate of insurance; prepare an invoice; and forward all documents to

the buyer. Id. § 4-2-320(2). An insurance policy or certificate should list either the

buyer, in this case KVADRO, or "for the account of whom it may concern," again, in

this case, KVADRO. Id. § 4-2-320, cmt. n.9.8

 A C.I.F. sale is "not a destination but

a shipment contract with risk of subsequent loss or damage to the goods passing to the

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9

The court notes that the district court found that "[i]t is undisputed SMG

complied with all its obligations under the contracts with KVADRO." Ante at 7. This

was a fact advanced by Lloyd's in the context of a C.I.F. contract. While SMG did not

dispute that it had complied with its obligations under the contract, it contended that

the contract was actually an F.A.S. contract, which imposes different contractual

obligations than a C.I.F. contract, particularly with respect to insurance. The district

court's further finding that SMG complied with all C.I.F. obligations seems solely

based on Lloyd's presentation of facts disputed by SMG and was made without the

existence of any insurance policies or certificates naming KVADRO as insured. This

factual determination by the district court was not made under evidence most

favorable to the non-moving party and was an improper exercise of the district court's

authority under a motion for summary judgment.

10Further, the Lloyd's policy contained a third-party exclusion clause that

Lloyd's successfully used to deny benefits to the freight carrier, P & O, and almost

certainly would have been used by Lloyd's to disclaim any benefits to KVADRO.

Appellant's Abstract at 245. This exclusion clause also appears on each of the

insurance certificates. Id. at 296-99.

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buyer upon shipment if the seller has properly performed all his obligations." Id. §

4-2-320, cmt. n.1 (emphasis added). In this case, SMG had an insurable interest at all

times because the seller (SMG) failed to procure insurance from Lloyd's on behalf of

the buyer (KVADRO)9

 and because the payment terms were contrary to a C.I.F.

contract.

I first consider the insurance requirement. The terms of the Lloyd's policy are

found in Exhibit I. Appellant's Abstract at 240-295. The insured is defined as "Sams

Management Group, Inc &/or Morningstar Provisions LLC and/or as Agents and/or

Subsidiary and/or Associated and/or for whom they may have instructions to insure."

Id. at 242. It is certainly arguable that a generic reference to"for whom they may have

instructions to insure" could have made KVADRO an insured. There is absolutely no

evidence, however, that Lloyd's was instructed to or did insure anyone but SMG.10

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11This deficiency may have been the stuff of a claim by KVADRO against

SMG, had KVADRO actually retained a financial interest in the shipment, which it

did not do as established by the record. Appellant's Abstract at 65. But, in any event,

SMG's purported breach of its obligation to KVADRO provides no basis for Lloyd's

to disclaim coverage under its policy or certificates.

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The Lloyd's policy requires the issuance of an insurance certificate for each

transaction. Id. at 254-56. This was done. The certificates issued in conjunction with

this particular sale were, however, "effected for account of Sams Management Group,

Inc. or Order." Id. at 296-99. KVADRO is not mentioned. The UCC does, as earlier

noted, contemplate insurance effected "for the account of whom it may concern" but,

again, no such designation is contained in either certificate. Without a specific

reference to KVADRO or the more general reference to "of whom it may concern,"

the insurance that SMG bought from Lloyd's was not for the benefit of the buyer, as

required under a C.I.F. contract.11 Ark. Code Ann. § 4-2-320, cmt. n.9. Thus, SMG

at all times relevant retained an insurable interest in the chicken, as an insurer.

Under a C.I.F. contract, SMG had an obligation to "obtain a policy or certificate

of insurance." Id. § 4-2-320(2)(c). By failing to have the buyer named, either

specifically or generically, on the certificates of insurance, under Lloyd's insurance

policy which specifically precluded third-party benefits, SMG became the insurer of

the shipment, either intentionally or unintentionally. Kumar Corp. v. Nopal Lines,

Ltd., 462 So.2d 1178, 1184 (Fla. Dist. Ct. App. 1985). As the insurer of the shipment,

SMG was obliged to pay KVADRO, the buyer of the goods, for any loss it might

sustain. Under this scenario and assuming this to be a C.I.F. contract, SMG clearly

retained an insurable interest in the shipment of chicken which interest it indemnified

under the terms and conditions of the policy and certificates of insurance it purchased

and received from Lloyd's.

Second, the payment terms in the contract dictate that this transaction was not

a C.I.F. sale. The court correctly notes that "a course of dealing that explains or

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12Though the UCC allows the existence of a C.I.F. contract with payment due

after the arrival of the goods, Ark. Code Ann. § 4-2-321(3), this C.I.F. variant

nonetheless does not contemplate arrival of the goods as a condition precedent to

payment. Id. at cmt. In contrast, the SMG-KVADRO contract conditioned payment

on the arrival of the goods in St. Petersburg, evidenced by the nonpayment of the final

sixty percent installment, as well as the transfer of KVADRO's previous payments to

subsequent shipments. Appellant's Abstract at 65.

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supplements a contract is competent evidence of the parties' intent and can become a

part of a contract." Bank of Am. v. C.D. Smith Motor Co., 106 S.W.3d 425, 429-30

(Ark. 2003). The "terms or conditions agreed to by the parties must control over the

general reference to C.I.F. contained on the face of [a] document." Steuber Co. v.

Hercules, Inc., 646 F.2d 1093, 1097 (5th Cir. 1981). "'[I]f according to the intention

of the parties the actual delivery of the goods [to the buyer] is an essential condition

of performance, the contract is not a c.i.f. contract.'" Kumar Corp., 462 So.2d at 1184

(quoting C. Schmitthoff, Schmitthoff's Export Trade, The Law and Practice of

International Trade, 39 (7th ed. 1980)) (alteration in original). While the commentary

to the UCC explains that under a C.I.F. contract, title and risk of loss pass to the buyer

upon shipment, Ark. Code Ann. § 4-2-320 cmt. n.1, there is no mention of the risk of

loss in the text of the UCC. See id. § 4-2-320. "The commentary to a statute is not

controlling over the statute's clear language, but is a highly persuasive aid to

construing that statute." Huffman v. Ark. Judicial Discipline and Disability Comm'n,

42 S.W.3d 386, 392 (Ark. 2001). 

Here, final payment by KVADRO was not to be made against the documents

as required under a C.I.F. contract, Arkansas Code Annotated § 4-2-320(4), but was

rather to be made upon delivery of the goods to KVADRO or its designated consignee

in St. Petersburg, Russia.12 The sales contracts required sixty percent payment "due

19 days after discharge" of the chicken from the ship in St. Petersburg, Appellant's

Abstract at 32-33, obviously a payment to be made subsequent to the completion of

"freight to the named destination." Ark. Code Ann. § 4-2-320(1). As can be seen,

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13The fact that SMG owed its supplier for the chicken is likely sufficient to vest

SMG with an insurable interest. See Hartford Ins. Co. v. Stanley, 644 S.W.2d 628,

629 (Ark. Ct. App. 1983) (In examining a situation where a cotton picker had been

sold and delivered to the buyer, because the seller still owed money to his financier,

the court concluded that "as long as [the seller] was legally liable for the purchase

price of the cotton picker he had an insurable interest in it. We do not agree that

passage of title to the machine destroyed that insurable interest.").

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these terms patently flout the C.I.F. requirements of the UCC. Id. Likewise, the

deposition testimony and the actions of SMG and KVADRO run in direct opposition

to the UCC commentary, which would pass the risk of loss to the buyer upon

shipment. Id. § 4-2-320 cmt. n.1. Brant Turner of SMG testified that C.I.F. meant

"[c]ost, insurance, and freight," explaining "I had the freight insurance." Appellant's

Abstract at 39-40. He also explained that the arrangement with SMG's supplier

allowed for SMG to make payments as sales commenced after the product was at its

destination.13 Id. Andrew Sams of SMG explained the difference between F.A.S. and

C.I.F. contracts as billing terms, id. at 315, dependent on whether "our container rate

for shipping included the discharge into the container yard." Id. at 313. Further, SMG

behaved as though it retained both title and risk of loss: SMG retained the third

original of the Bills of Lading, Appellant's Abstract at 40, dealt directly with the

shipper to change the consignee on the Bills of Lading, id. at 43, accepted the loss of

the chicken by crediting KVADRO's payment to other shipments, id. at 65, and never

demanded payment of the final sixty percent KVADRO "didn't have an obligation"

to pay, having never received the product. Id. at 314. Indeed, the Arkansas State

Supreme Court has said that it will adopt the commentary to the Criminal Code unless

"clearly convinced that it is erroneous or that it is contrary to the settled policy of this

state." State v. Reeves, 574 S.W.2d 647, 648-49 (Ark. 1978). Faced with a situation

where the commentary is directly contrary to the intent and actions of the parties, the

court should not insert the UCC commentary into the SMG-KVADRO contract.

Therefore this was not a "true" C.I.F. sale with all the trappings added by the UCC and

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its commentary, title did not pass upon shipment, and SMG retained an insurable

interest in the chicken. 

For the reasons stated, SMG at every step had an insurable interest in the frozen

chicken covered by the Lloyd's policy and certificates of insurance. Thus, I would

reverse the district court and remand for further proceedings.

______________________________

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