                                                                                                                           Opinions of the United
1999 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


12-10-1999

Sanford Inv. Co. Inc. v. Ahlstrom Machinery
Precedential or Non-Precedential:

Docket 98-2036




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Recommended Citation
"Sanford Inv. Co. Inc. v. Ahlstrom Machinery" (1999). 1999 Decisions. Paper 321.
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Filed December 10, 1999

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 98-2036

SANFORD INVESTMENT COMPANY, INC.,

       Appellant

v.

AHLSTROM MACHINERY HOLDINGS, INC.

On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civ. No. 97-07978)
District Judge: Honorable Edmund V. Ludwig

Argued November 5, 1999

BEFORE: BECKER, Chief Judge, and GREENBERG
and CUDAHY,* Circuit Judges

(Filed: December 10, 1999)

       Peter F. Marvin (argued)
       Justin K. Miller
       Toll, Ebby, Langer & Marvin
       Two Logan Square
       18th Floor
       Philadelphia, Pa. 19103

        Attorneys for Appellant



_________________________________________________________________
* Honorable Richard D. Cudahy, Senior Judge of the United States Court
of Appeals for the Seventh Circuit, sitting by designation.
       Jeffrey G. Weil (argued)
       Michael S. Doluisio
       Dechert, Price & Rhoads
       1717 Arch Street
       4000 Bell Atlantic Tower
       Philadelphia, Pa. 19103

        Attorney for Appellee

OPINION OF THE COURT

GREENBERG, Circuit Judge.

I. INTRODUCTION

This matter is before this court on an appeal from an
order for summary judgment in this diversity of citizenship
commercial litigation dispute. The litigation stems from a
series of business relationships formed to finance,
construct and operate a waste paper recycling facility in
Sanford, West Virginia (the "Project"). The owner/developer
of the project was American Power Recyclers, L.P., later
known as American Fiber Resources, Limited Partnership
(the "Partnership"). The Partnership included two general
partners and two limited partners. The general partners
were American Power Corporation ("APC"), the predecessor-
in-interest to the plaintiff, Sanford Investment Company,
Inc., and Adirondack G.P. Inc. ("AGP"). AGP is related to
Ahlstrom Kamyr, Inc., the predecessor-in-interest to
defendant Ahlstrom Machinery Holdings, Inc. We refer to
the Ahlstrom entitites simply as "Ahlstrom" although the
contracting party was Ahlstrom Kamyr, Inc. and the party
to the litigation is Ahlstrom Machinery Holdings, Inc. The
limited partners were Adirondack Recycle, L.P. ("ARLP"), a
company related to Ahlstrom, and American Power
Investors ("API"), a company related to APC. We will refer to
the appellant Sanford and its predecessor-in-interest APC
as "American" but it should not be confused with American
Fiber Resources, i.e., the Partnership.

On November 2, 1993, the Partnership entered into a
contract with Ahlstrom referred to as the "EPC/Initial

                                  2
Operation and Performance Testing Agreement" ("EPC
contract"). The EPC contract provided that Ahlstrom would
develop, construct and initially operate the Project. In
return, the Partnership agreed to pay Ahlstrom an amount
designated as the "Base Fee" during the initial operation of
the Project. A different paragraph of the EPC contract
provided that the Partnership would pay Ahlstrom a"Bonus
Fee" under certain conditions. The Base Fee and the Bonus
Fee were distinct payments under the EPC contract
calculated in different ways. Moreover, the Bonus Fee,
unlike the Base Fee, was conditional. The EPC contract
provided the circumstances in which Ahlstrom was to
receive the Base Fee, which is at issue in this lawsuit.

After the execution of the EPC contract, Ahlstrom and
American negotiated a division of the Base Fee that they
memorialized in a Letter Agreement dated December 29,
1993 (the "1993 Letter Agreement"). The 1993 Letter
Agreement provides that

       25% of the base fee payable to [Ahlstrom] under Phase
       II of the EPC/Initial Operation and Performance
       Testing Agreement shall be payable by [Ahlstrom] to
       [American].

American predicates this action on Ahlstrom's purported
obligation to remit this 25% payment as set forth in the
1993 Letter Agreement. American contends that Ahlstrom
breached the contract as of January 31, 1996, by failing to
remit payments of that portion of the Base Fee due under
the 1993 Letter Agreement.

The background surrounding this breach of contract case
was complicated by three agreements entered into following
the execution of the foregoing basic agreements. In 1995,
the Partnership sought additional funding from the County
Commission of Marion County, West Virginia ("Marion
County"). Marion County contemplated obtaining the
additional funding through the issuance of tax-free
industrial development bonds.

A problem with the funding arose, however, because
American was in default of its obligation under a Cash
Shortfall Funding Agreement (the "CSF Agreement") dated
February 13, 1995. Apparently, Marion County would not

                                3
approve the additional funding unless American satisfied its
obligations under the CSF Agreement.

To cure its default under the CSF Agreement and clear
the way for the additional funding, American sought a loan
from one of its affiliates, the Conduit and Foundation
Corporation ("Conduit" or "C&F "). It was contemplated that
the loan would be funded by monies due and owing to
Conduit from Kamtech, Inc. ("Kamtech"), an affiliate of
Ahlstrom that Ahlstrom hired to construct the Project.

The plan called for Conduit to loan American the funds
owed to it by Kamtech so that American could meet its
obligation under the CSF Agreement and thus permit the
Partnership to receive additional funds from Marion
County. In order for Conduit to loan the funds due from
Kamtech to American the approval of Conduit's surety,
National Union Fire Insurance Company of Pittsburgh,
Pennsylvania, was required.

The arrangements among the parties arising from these
circumstances were evidenced in three documents executed
in December 1995. The parties refer to the first document
as the "Bonus Fee Agreement" and the second document
which accompanied the first as the "Bonus Fee
Assignment." The final agreement was the "Surety Loan
Agreement." The Bonus Fee Agreement and Bonus Fee
Assignment were executed on December 20, 1995, and the
Surety Loan Agreement was executed on December 26,
1995. The parties to this litigation dispute the legal effect of
these agreements, in particular language found in the
Surety Loan Agreement. Because the terms of the three
contracts are central to the outcome of the appeal, we set
forth their relevant provisions in some detail.

Each member of the Partnership signed the Bonus Fee
Agreement: (1) AGP (Ahlstrom's affiliate); (2) American; (3)
ARLP (Ahlstrom's affiliate); and (4) API (American's affiliate).
Among other things, the Bonus Fee Agreement provided for
an "assignment" of 24% of the Bonus Fee due to Ahlstrom
under the EPC contract to American or its affiliate.
Paragraph 4 states in pertinent part:

       Assignment of 24% of the Bonus Fee to APC. AGP shall
       cause its Affiliate, [Ahlstrom], to deliver to [American]

                               4
       or its designee upon the closing of the Bond Offering
       an Assignment . . . through which [Ahlstrom] assigns,
       sells and transfers to [American] or its designee, the
       right to receive twenty-four percent (24%) of
       [Ahlstrom's] Bonus Fee under paragraph 13.3 of the
       EPC Contract, as amended (the `Bonus Fee'), when
       earned. . . . AGP acknowledges that APC has
       designated The Conduit and Foundation Corporation
       (`C&F ') [an affiliate of American] as its designee under
       this paragraph 4.

        . . . .

        [O]nce the amount of the Bonus Fee has been finally
       determined in accordance with the EPC Contract,
       [American] shall have the right thereafter to assert a
       claim for its 24% of such Bonus Fee directly against
       [the Partnership and original signatory to the EPC
       Contract] and the payment of such amount to C&F or
       National Union (as defined below) shall not be subject
       to offset against the obligations of [American]. Nothing
       in this Agreement is intended to, nor shall, give
       [American] or its designee or any of their Affiliates any
       additional rights or obligations under the EPC
       Contract, including, but not limited to, any rights as a
       third party beneficiary to the EPC Contract, except as
       they may currently possess as a General or Limited
       Partner and except for the right to enforce payment of
       the 24% of the Bonus Fee assigned to [American] as
       hereinabove provided.

App. at 112-13 (second emphasis added). With respect to
National Union's rights under the Bonus Fee Agreement,
section 8(k) provides:

       Limitation on Rights of Others. No person or entity other
       that the parties hereto shall have any legal or equitable
       right or interest, remedy or claim under or in respect of
       this Agreement; provided, however, that it is
       acknowledged that C&F and its surety, National Union
       . . . are creditor and/or donee third party beneficiaries
       in respect of the rights of [American] to receive the 24%
       of the Bonus Fee assigned to it pursuant to paragraph
       4 hereof and to enforce the payment of said amount
       against [the Partnership] as hereinabove provided.

                               5
App. at 115.

The second agreement, the Bonus Fee Assignment, was
executed by Ahlstrom as assignor and Conduit as assignee
and designee of American in the form that accompanied the
Bonus Fee Agreement. The Bonus Fee Assignment
effectuates the assignment of Ahlstrom's interest in 24% of
the Bonus Fee provided under the EPC contract to Conduit
as American's designee. The Assignment provides in
relevant part:

       1. Assignor [Ahlstrom] hereby assigns, sells and
       transfers to Assignee [Conduit], and Assignee hereby
       accepts the assignment of, the right to receive . . .
       twenty-four percent (24%) of Assignor's Bonus Fee
       under . . . the EPC Contract, . . . when earned.

App. at 120. The provisions in the Bonus Fee Assignment
that follow the foregoing quoted language reiterate again
American's right (as Conduit's affiliate) to assert a claim
against the Partnership to collect its portion of the Bonus
Fee provided in the EPC Contract assigned to it under this
assignment. The next paragraph then provides the
following:

       4. Assignee [Conduit] hereby irrevocably dir ects that
       any amounts otherwise payable to it with respect to the
       24% of the Bonus Fee assigned to it hereby shall be
       paid directly to [National Union], and Assignor
       [Ahlstrom] hereby agrees to so pay any such amounts
       that it shall receive from AFR. . . . It is acknowledged
       that [National Union] is a creditor and/or donee third
       party beneficiary in respect of the right to receive and
       enforce payment of the 24% Bonus Fee assigned to
       Assignee as provided herein.

App. at 115 (emphasis added). Thus, under the Bonus Fee
Agreement and Assignment, Ahlstrom assigned its right to
receive 24% of the Bonus Fee to Conduit, which was the
designee of American (as set forth in the Bonus Fee
Agreement). By the assignment, Conduit, as assignee,
received the right to enforce payment of 24% of the Bonus
Fee from the Partnership, and National Union was deemed
the third-party beneficiary of the assignment. Moreover,

                               6
Ahlstrom was to pay Conduit's portion of the Bonus Fee by
sending it directly to National Union.

As we have indicated, the third and final agreement
evidencing the parties' arrangement is the Surety Loan
Agreement, which the following parties executed: (1)
American; (2) API (American's affiliate); (3) Conduit
(American's affiliate); (4) Richard Halloran (Conduit's
indemnitor under prior March 1995 Surety Agreement); and
(5) National Union (the Surety). In the Surety Loan
Agreement, National Union agreed to defer receipt of funds
Conduit owed to it, and permitted the funds to be used by
American to satisfy its obligations under the CSF. In
return, American and its affiliates agreed to the following
provision:

       4. In further consideration of the Surety's consen t to
       the deferral by Conduit of the receipt of the Loaned
       Funds [i.e., the monies due from Kamtech],[American
       and its affiliates]:

        A. hereby transfer, assign, convey, gr ant a security
       interest in, pledge and mortgage to [National Union] all
       income, dividends, distributions, loan repayments,
       proceeds . . . related in any way to the Project, or any
       other payments of any kind payable to [American or its
       affiliates] or any of their designees from[the
       Partnership], [Ahlstrom], AGP, ARLP, Kamtech or any
       of their designees . . . (including but not limited to the
       Bonus Fees . . .) coupled with the rights to enforce the
       payments of same . . . as further collateral security and
       as a source for the repayment of all indebtedness of
       [the signatories] under the Contractor/Surety
       Agreement and this Surety Loan Agreement.

App. at 85 (emphasis added). Unlike the Bonus Fee
Agreement and Bonus Fee Assignment, Ahlstrom was not a
signatory to the Surety Loan Agreement. To implement the
Surety Loan Agreement, American sent Ahlstrom a letter
dated March 27, 1996, directing that all payments related
to the recycling facility be paid directly to National Union.

II. PROCEDURAL HISTORY

Notwithstanding its assignment to National Union,
American filed this action in December 1997, to recover

                               7
from Ahlstrom $324,470, together with interest, an amount
allegedly representing that portion of the Base Fee, i.e.,
25% owed to it under the 1993 Letter Agreement. According
to the complaint, American had received payments under
the 1993 Letter Agreement through January 31, 1996, but
not thereafter. Ahlstrom filed a motion for summary
judgment on July 8, 1998, contending that American did
not have standing to sue Ahlstrom for its percentage of the
Base Fee due under the 1993 Letter Agreement because it
had assigned its right to enforce that agreement to National
Union in the Surety Loan Agreement.

The district court heard oral argument on the matter on
October 8, 1998, and on October 16, 1998, entered an
order granting Ahlstrom's motion. Then on October 29,
1998, the court entered a memorandum in support of its
order.

The district court determined that American lacked
standing to sue Ahlstrom for the Base Fee payments under
the 1993 Letter Agreement because of its complete
assignment of that right to National Union pursuant to the
Surety Loan Agreement. Under Pennsylvania law, which the
parties treat as applicable, a contracting party that has
assigned its contract rights to a third party does not have
standing to enforce that contract. See West Penn Admin.,
Inc. v. Pittsburgh Nat'l Bank, 433 A.2d 896, 902 (Pa. Super.
Ct. 1981). While the district court accepted American's
argument that the Surety Loan Agreement should be read
together with the Bonus Fee Agreement and Bonus Fee
Assignment because the three agreements were part of a
larger transaction, the court nonetheless determined that
nothing in the prior agreements rendered ambiguous the
unequivocal language of the assignment in the Surety Loan
Agreement.

American appeals from the district court's order granting
Ahlstrom's motion. We have jurisdiction under 28 U.S.C.
S 1291 and exercise plenary review. See Nelson v. Upsala
College, 51 F.3d 383, 385 (3d Cir. 1995); Allegheny Int'l,
Inc. v. Allegheny Ludlum Steel Corp., 40 F.3d 1416, 1423
(3d Cir. 1994).

                                8
III. DISCUSSION

American contends that the district court's interpretation
of the Bonus Fee Agreement, Bonus Fee Assignment, and
Surety Loan Agreement was erroneous. It maintains that it
has offered an interpretation of the Surety Loan Agreement
which is reasonable given the language used and the
circumstances surrounding the series of transactions.
Accordingly, it contends that summary judgment was
inappropriate because the relevant provision in the Surety
Loan Agreement was ambiguous. American further
contends that the district court erred in not construing the
three contracts together, by not considering the commercial
context in which the agreements were executed, and by not
addressing Ahlstrom's subsequent performance under the
1993 Letter Agreement even though its conduct was
consistent with American's construction of the agreements.
This reference to subsequent performance related to
Ahlstrom's payment in January 1996, after the execution of
the Surety Loan Agreement, of a portion of the Base Fee
directly to American. Finally, citing Fed. R. Civ. P. 17,
American contends that the district court failed to weigh
the fact that American was the real party in interest to the
Surety Loan Agreement.

"To affirm a grant of summary judgment on an issue of
contract interpretation, we must conclude that the
contractual language is subject to only one reasonable
interpretation." Arnold M. Diamond, Inc. v. Gulf Coast
Trailing Co., 180 F.3d 518, 521 (3d Cir. 1999). Thus, the
overarching question on appeal is whether American has
provided a reasonable alternative reading of the assignment
clause in the Surety Loan Agreement under which Ahlstrom
would not be entitled to judgment as a matter of law.

A court's purpose in examining a contract is to interpret
the intent of the contracting parties, as they objectively
manifest it. See Duquesne Light Co. v. Westinghouse Elec.
Corp., 66 F.3d 604, 613 (3d Cir. 1995); Mellon Bank, N.A.
v. Aetna Business Credit, Inc., 619 F.2d 1001, 1009 (3d Cir.
1980). The process of interpreting a contract proceeds in
two steps. First, the court must make a preliminary inquiry
as to whether the contract before it is ambiguous. See
Duquesne, 66 F.3d at 613; Allegheny, 40 F.3d at 1424. This

                               9
question is an issue of law for the court to resolve. A term
is ambiguous if it is susceptible to reasonable alternative
interpretations. See Duquesne, 66 F.3d at 614; Mellon
Bank, 619 F.2d at 1011 (defining ambiguity as an
"[i]ntellectual uncertainty [or] the condition of admitting two
or more meanings, of being understood in more than one
way, or referring to two or more things at the same time
. . . ."). If the court determines that a given term in a
contract is ambiguous, then the interpretation of that term
is a question of fact for the trier of fact to resolve in light
of the extrinsic evidence offered by the parties in support of
their respective interpretations. See Hullett v. Towers,
Perrin, Forster & Crosby, Inc., 38 F.3d 107, 111 (3d Cir.
1994).

"In determining whether a contract is ambiguous, the
court assumes the intent of the parties to an instrument is
embodied in the writing itself, and when the words are clear
and unambiguous the intent is to be discovered only from
the express language of the agreement." Pacitti v. Macy's,
193 F.3d 766, 773 (3d Cir. 1999) (citing and quoting
Hullett, 38 F.3d at 111) (quotation marks omitted);
Allegheny, 40 F.3d at 1424. Nevertheless, in that
undertaking a court is not always confined to the four
corners of a document. Rather, it may not be apparent
whether a contract is ambiguous without an examination of
the context in which the contract was made. See Hullett, 38
F.3d at 111; see also Pacitti, 193 F.3d at 773 (noting that
in determining if a contract is ambiguous, court is not
confined to its four corners and may read the contract in
the context in which it was made). Therefore, to determine
the parties' intentions, the court may consider, among
other things, "the words of the contract, the alternative
meaning suggested by counsel, and the nature of the
objective evidence to be offered in support of that meaning."
Hullett, 38 F.3d at 111 (quoting Mellon Bank , 619 F.2d at
1011).

Under Pennsylvania law, "when two or more writings are
executed at the same time and involve the same
transaction, they should be construed as a whole." Western
United Assurance Co. v. Hayden, 64 F.3d 833, 842 (3d Cir.
1995) (citations omitted). If the court finds that the

                                10
contracts pertain to the same transaction, the fact that the
signatories are different does not mean that this rule does
not apply. See id. This rule applies equally where several
agreements are made as part of one transaction even
though they are executed at different times. See id.

In this case, the district court concluded that the Surety
Loan Agreement was unambiguous and capable of only one
reasonable interpretation -- i.e., American assigned
National Union the right to enforce the Base Fee
arrangement set forth in the 1993 Letter Agreement. Thus,
because the Surety Loan Agreement effectuated a complete
assignment to National Union, American, as the assignor of
the right to receipt of the Base Fee, did not retain the right
to sue Ahlstrom for its portion of the Base Fee as provided
under the 1993 Letter Agreement.

American contends, however, that there is a reasonable
alternative interpretation of the assignment of rights
embodied in the Surety Loan Agreement when it is
considered together with the Bonus Fee Agreement and
Bonus Fee Assignment as a unified transaction. Its
interpretation begins with the language of the Surety Loan
Agreement, recognizing that by its terms, American and its
affiliates assigned to the Surety "all income .. . related in
any way to the Project . . . (including but not limited to the
Bonus Fees . . .) coupled with the rights to enforce the
payments of same. . . ." American states that while this
language makes it clear that American and Conduit
assigned to National Union certain rights with respect to
the Base Fee and the Bonus Fee, "the nature and extent of
the rights assigned are less than clear." It then turns to the
language in the Bonus Fee Agreement and Bonus Fee
Assignment which designates National Union as a"third-
party beneficiary" of Conduit's right to receive the Bonus
Fee from Ahlstrom as effectuated by the assignment.
Pointing to that language, it claims that "[c]onstruing these
documents together . . . the Surety's right to receive `all
income' from the Project and to `enforce payments' of the
income [quoting from the Surety Loan Agreement], are the
rights of a third-party beneficiary, not a promisee."

Thus, by a "parity of reasoning," it concludes that if the
surety was assigned a third-party beneficiary interest in the

                               11
Bonus Fee, National Union also was assigned a third-party
beneficiary interest with respect to Ahlstrom's payment of
the Base Fee and any other income from the Project. Of
course, interpreting the assignment in the Surety Loan
Agreement in this manner would inure to American's
benefit, as "both a promisee and an intended third party
beneficiary may sue to enforce a contract." See In re
Kaplan, 143 F.3d 807, 813 (3d Cir. 1998) (applying Illinois
law); see also Restatement (Second) of Contracts S 305
(1981) (describing promisor's overlapping duties to
beneficiary and promisee).

Applying the standards of contract interpretation
discussed above, we reject American's alternate
interpretation which would compel the conclusion that the
relevant provision in the Surety Loan Agreement is
ambiguous. The plain language of the assignment found in
paragraph four of the Surety Loan Agreement, states that
American and its affiliates hereby "transfer, assign, convey
. . . to [National Union] all income . . . related in any way
to the Project, or any other payments of any kind payable
to [American and its affiliates] . . . (including but not
limited to the Bonus Fees) . . . coupled with the rights to
enforce the payments of the same." This language
inescapably and unambiguously expresses an intent to
assign to National Union all of the assignors' rights to
income or payments of any kind, along with the rights to
enforce the same. See Western United, 64 F.3d at 838.
There is no language in this paragraph limiting in any way
National Union's interest in the assigned property; nor is
there any language which indicates that the assignment
should be construed as partial rather than complete. See
Gordon v. Hartford Sterling Co., 179 A. 234, 236 (Pa. 1935)
("Where part of a chose in action has been assigned, the
assignor and the assignee may unite in a suit for the
enforcement of the chose; the assignor may sue alone, but
the assignee may not sue on it in his own name."); see also
6A Charles Allan Wright et al., Federal Practice and
Procedure S 1545, at 351-53 (2d ed. 1990).

While, as we have indicated, the plain language of the
assignment informs our result, we also observe that an
examination of the Bonus Fee Agreement, Bonus Fee

                               12
Assignment, and Surety Loan Agreement demonstrates that
the three agreements are complementary rather than
contradictory and are consistent with the plain language of
the Surety Loan Agreement. Clearly, the Bonus Fee
Agreement, Bonus Fee Assignment, and Surety Loan
Agreement each represent distinct aspects of the overall
transaction among the parties and accomplish different
results. Because each document sets forth different aspects
of the overall transaction, the provisions of each must be
understood in that context and applied so as to recognize
their distinct purpose. See Shehadi v. Northeastern Nat'l
Bank, 378 A.2d 304, 306 (Pa. 1977); Flatley v. Penman, 632
A.2d 1342, 1344 (Pa. Super. Ct. 1993). Thus, we consider
the documents together.

The first document is the Bonus Fee Agreement, entered
into by the four members of the Partnership, AGP, ARLP,
API and American. The only relevant aspect of the Bonus
Fee Agreement for purposes of this analysis is its provision
which states that AGP (Ahlstrom's affiliate) agrees to cause
Ahlstrom to effectuate an assignment of its right to 24% of
the Bonus Fee to American's designee Conduit. The second
document, the Bonus Fee Assignment, in turn, is an
assignment between Ahlstrom (as assignor) and Conduit (as
assignee and the designee of American). Its purpose was to
assign or transfer Ahlstrom's right to 24% of the Bonus Fee
under the EPC contract to Conduit. National Union was not
a signatory to either the Bonus Fee Agreement or the
Bonus Fee Assignment.

The third document, the Surety Loan Agreement,
effectuated an assignment from American and its affiliates
(as assignors) to National Union (as assignee). We repeat
that the document assigned to National Union "all income
. . . related in any way to the Project . . . or any other
payments of any kind payable to [American and its
affiliates] . . . from [Ahlstrom and its affiliates] (including
but not limited to the Bonus Fees) . . . coupled with the
rights to enforce the payments of same. . . ." Ahlstrom was
not a signatory to the Surety Loan Agreement. The Surety
Loan Agreement, with its broad-based assignment of all of
American's and its affiliates' rights to any income or
payments received from the Project, by its very terms had

                               13
to occur subsequently to Ahlstrom's assignment to Conduit.
After all, prior to the execution of the Bonus Fee Agreement
and Bonus Fee Assignment, Conduit had no right or
interest in the Bonus Fee to assign to National Union.
Moreover, the assignment in the Surety Loan Agreement
was central to completion of the overall transaction, as it
was bargained for in exchange for National Union's
agreement to permit Conduit to loan the funds to American
so that American could meet its obligations under the CSF
Agreement.

As the foregoing analysis demonstrates, there is nothing
in the Bonus Fee Agreement or Bonus fee Assignment
which is inconsistent with the assignment in the Surety
Loan Agreement. The only assignment in the Bonus Fee
Assignment was from Ahlstrom (assignor) to Conduit
(assignee) of Ahlstrom's right to receive 24% of Ahlstrom's
Bonus Fee as set forth in the EPC contract. ("Assignor
hereby assigns . . . to Assignee . . . the right to receive . . .
twenty-four percent (24%) of Assignor's Bonus Fee under
paragraph 13.3 of the EPC Contract."). Thus, the Bonus
Fee Assignment did not effectuate an "assignment" from
Conduit to National Union of Conduit's right to a portion of
the Bonus Fee. To be sure, the agreement directed that any
amounts otherwise payable to Conduit with respect to 24%
of the Bonus Fee assigned to it by Ahlstrom should be paid
directly to National Union as Surety. However, that
arrangement is not the legal equivalent of an express
assignment of rights. See 3 E. Allan Farnsworth,
Farnsworth on Contracts S 11.3, at 69 (2d ed. 1998)
(discussing transactions which would not qualify as
assignments, and providing the following example:
"Sometimes an obligee (B) orders the obligor (A) to pay a
debt to a third person (C), rather than the obligee. If the
order is given directly to the obligor (A), courts have little
difficulty in concluding that the obligee did not intend to
make an assignment. . . .").

Moreover, the designation in the Bonus Fee Agreement
and Bonus Fee Assignment of National Union as the third-
party beneficiary is entirely consistent with American's and
its affiliates' subsequent complete assignment to National
Union of the rights to any income or payments related to

                               14
the Project. National Union's designation as a third-party
beneficiary in the Bonus Fee Assignment and subsequent
status as an assignee which received not only an
unencumbered right to the Bonus Fee but also the right to
"any income" or "any other payments of any kind" owed to
American and its affiliates, does not render the third-party
beneficiary provision in the Bonus Fee Assignment
inconsistent with the assignment in the Surety Loan
Agreement.

We acknowledge that the assignment in the Surety Loan
Agreement elevated National Union's rights from the status
of a third-party beneficiary (as articulated in the Bonus Fee
Assignment) to that of an assignee. In that regard, however,
the assignment in the Surety Loan Agreement cannot be
viewed as irreconcilable with the third-party beneficiary
designation in the Bonus Fee Assignment. Cf. Flatley, 632
A.2d at 1344 (where appellee sought construction of one
paragraph of release which flatly conflicted with next
paragraph of release, court invoked rule of construction
that terms in contract should be read as consistent with
one another, and one part should not be construed so as to
nullify other terms). Indeed, for National Union to have any
interest in the Bonus Fee Assignment, it had to be
designated as a third-party beneficiary in that agreement,
or at the very least clearly have been intended by the
parties to the agreement to be its intended beneficiary, as
it was not a party to that agreement. See Visor Builders,
Inc. v. Devon E. Tranter, Inc., 470 F. Supp. 911, 923 (M.D.
Pa. 1978) (noting that a third-party beneficiary is "one who,
although not a party to the contract, and hence, not in
privity with the promisor . . . is permitted to enforce the
contract between the promisor and the promisee for its (the
third-party beneficiary's) benefit").

As we set forth above, assignments in the Bonus Fee
Assignment and the Surety Loan Agreement occurred
sequentially and involved different assignors and assignees.
Accordingly, the provisions of each assignment must be
interpreted with that reality in mind. When viewed in that
light, it is clear that the parties' designation of National
Union as a third-party beneficiary in the Bonus Fee
Assignment is wholly consistent with its later status as an

                               15
assignee in the Surety Loan Agreement, given the sequence
of events and the contemplated structure of the overall
transaction. Thus, we reject American's contention that the
Surety Loan Agreement, if read as a complete assignment,
is inconsistent with the third-party beneficiary designation
in the Bonus Fee Agreement and Assignment.

Finally, there is nothing in the Surety Loan Agreement
indicating that the parties intended that American's right to
collect any delinquent payments owed to it, i.e. , 25% of the
Base Fee, would be preserved. In any event, the Bonus Fee
Assignment does not include a "reservation of rights" clause
that theoretically could be imported into the Surety Loan
Agreement so that the latter document could be interpreted
as having reserved in American a right to sue Ahlstrom for
25% of the Base Fee. Paragraph three of the Bonus Fee
Assignment merely declares Conduit's right (as assignee) to
enforce payment of 24% of the Bonus Fee. Because Conduit
assigned that right to National Union by virtue of the
Surety Loan Agreement, the rights declared in paragraph
three of the Bonus Fee Assignment cannot be imported into
the Surety Loan Agreement. As previously mentioned, the
Bonus Fee Assignment and the Surety Loan Agreement
were two distinct documents with two distinct purposes.
Thus, a clause in the former document cannot be imported
wholesale into the latter so as to create an ambiguity where
none exists on the face of the Surety Loan Agreement. In
this regard we point out that even when several
instruments pertaining to one transaction are considered
together, the instruments do not become a single document
for all purposes. See USX Corp. v. Prime Leasing Inc., 988
F.2d 433, 437-38 (3d Cir. 1993).

Additionally, as Ahlstrom correctly observes, American's
right as a promisee under the Bonus Fee Agreement to sue
the Partnership for unpaid Bonus Fees is unhelpful in
determining whether the Surety Loan Agreement similarly
preserves American's right to sue Ahlstrom for unpaid Base
Fees. As our emphasis indicates, there is language in the
Bonus Fee Agreement that sets forth with particularity
American's right to sue the Partnership, not Ahlstrom,
should American not receive any portion of the Bonus Fee
due under that agreement. Moreover, the right to sue,

                                16
which the Bonus Fee Agreement provides, is for the Bonus
Fees, not the Base Fee. Accordingly, if we were to adopt
American's "reasonable alternative interpretation" of these
agreements, not only would we have to import language
from the Bonus Fee Agreement to the Surety Loan
Agreement, after we imported it we next would have to
stretch and mangle the language to reach the conclusion
that the Surety Loan Agreement's broad assignment also
was intended to preserve American's right to sue Ahlstrom
for the Base Fee. The parties are highly sophisticated and
have demonstrated their ability to create third-party
beneficiary rights when they saw fit, and to create an
assignment where they deemed one appropriate. They will
get no help from us in rewriting the plain terms of their
agreements.

For each of these reasons, we find that these agreements,
while part of the same transaction, clearly and purposefully
accomplished distinct results. This conclusion renders the
Bonus Fee Agreement, Bonus Fee Assignment and Surety
Loan Agreement entirely consistent, and confirms our
determination that the assignment in the Surety Loan
Agreement unambiguously conveyed American's right to
sue for 25% of the Base Fee to National Union.

Finally, we reject American's subsequent performance
argument. While it does appear that Ahlstrom made a Base
Fee payment to American in January 1996 after the
execution of the Surety Loan Agreement, we see no
significance to that payment as Ahlstrom was not a party to
the agreement and it made the payment before the
execution of the March 27, 1996 letter directing it to make
payments to National Union.

IV. CONCLUSION

For the foregoing reasons we will affirm the district
court's order of summary judgment entered October 16,
1998, to Ahlstrom. Plainly American does not have standing
as the real party in interest under Fed. R. Civ. P. 17.
American completely assigned its right to enforce payment
under the 1993 Letter Agreement to National, and
consequently, American lacks standing to sue Ahlstrom.

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A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

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