[ PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
MAY 25 2000
No. 99-11396 THOMAS K. KAHN
CLERK
D.C. Docket No. 96-02969-CIV-ASG
ARKWRIGHT MUTUAL INSURANCE CO.,
Plaintiff-Appellant,
versus
NATIONSBANK, N.A., (SOUTH),
f.k.a. NationsBank of Florida, N.A.,
NATIONSBANK, N.A. (SOUTH),
Defendant-Appellee.
Appeal from the United States District Court
for the Southern District of Florida
(May 25, 2000)
Before COX, Circuit Judge, GODBOLD and MESKILL*, Senior Circuit Judges.
_______________
*Honorable Thomas J. Meskill, Senior U.S. Circuit Judge for the Second Circuit, sitting by
designation.
PER CURIAM:
This case arose from the forgery of 27 checks drawn on a Florida Power and
Light PMIS disbursement bank account at NationsBank. Between June and October
of 1993 forgers created 27 fake checks totaling $4,387,057.05 and paid by banks
across the United States. Arkwright Mutual Insurance Company is a commercial
crime insurer that reimbursed Florida Power and Light (FPL) for the forged check
losses. After FPL notified NationsBank of the forged checks, NationsBank
unsuccessfully attempted to recover the funds from the collecting banks that received
payment for the forged checks. Because it did not receive reimbursement from the
collecting banks NationsBank refused to credit FPL’s account. NationsBank
contended that its banking contract with FPL shifted the risk for loss by forgery to
FPL because the bank allowed FPL to use a facsimile signature machine. Arkwright
filed this diversity suit in an attempt to recover the losses from the forgeries. The
district court granted NationsBank’s summary judgment motion after finding that the
parties contractually agreed to shift the risk of loss to FPL and that NationsBank’s
exercised ordinary care when it processed the forged checks. We must decide whether
this interpretation of the banking contract is correct and whether summary judgment
was properly granted. We agree with the district court that the contract shifted the risk
of loss to FPL and affirm that portion of the district court’s decision. However, the
record is not sufficiently developed to determine whether NationsBank acted with
ordinary care. Therefore we reverse and remand the case for further proceedings to
2
determine if NationsBank acted with ordinary care when it processed the forged
checks.
Arkwright sued Nationsbank to recover the amount debited from FPL’s
account for violations of Florida’s version of the U.C.C. and for breach of the banking
contract.1 Ordinarily, a drawee bank is absolutely liable to its customer for payment
of a forged check. Because a forged check is not a “properly payable item,” Fla. Stat.
§ 673.4031 (1993); see also Perini Corp. v. First Nat'l Bank, 553 F.2d 398, 403 (5th
Cir.1977), a forged maker's signature is wholly inoperative as the professed drawer's
signature. Perini, 553 F.2d at 403. Any payment on such an instrument is not to the
professed drawer's order and violates the drawee bank's strict duty to charge the
account of its customer only for properly payable items. Perini, 553 F.2d at 404.
Arkwright’s U.C.C. cause of action is based on Florida Uniform Commercial Code
Statute § 674.401 which provides that a bank may only charge against its customer’s
account an item that is properly payable from the account. Arkwright’s breach of
contract action alleges that the account agreement did not permit NationsBank to pay
and charge forged checks against the FPL account.
1
Arkwright is equitably surrogated to any claims FPL may have against the
person or persons liable for the loss and has obtained an assignment of FPL’s claims
against the person or persons liable for the loss.
3
NationsBank contends that it had no duty to reimburse FPL’s account because
the banking contract incorporated language in an FPL Corporate Resolution that
instructed the bank to accept, honor, and pay all checks “bearing or purporting to
bear” the facsimile signature of FPL’s authorized representative. Florida’s version of
the U.C.C. allows a bank and its customer to contract around the default rules set forth
in U.C.C. Fla. Stat. § 674.103(1);2 19B Fla. Stat. Ann., U.C.C. Comment to § 674.103
(1993) (indicating that § 674.103(1) “permits within wide limits variation of the
effects of provisions of the article by Agreement.”). Under Fla. Stat. § 674.401(1), a
check that would not otherwise be properly payable becomes properly payable if it is
authorized by the customer and is in accordance with the banking agreement. This
statute is consistent with Florida common law which recognizes that the relationship
between a bank and its customer is contractual in nature. See Federal Ins. Co. v.
NCNB Nat. Bank of N.C., 958 F.2d 1544, 1548 (11th Cir. 1992). However,
Arkwright contends that the checks at issue were not properly payable because no
2
The effect of the provisions of this chapter may be varied
by agreement, but the parties to the agreement cannot
disclaim a bank’s responsibility for lack of good faith or
failure to exercise ordinary care or limit the measure of
damages for the lack of failure. However, the parties may
determine by agreement the standards by which the bank’s
responsibility is to be measured if those standards are not
manifestly unreasonable.
Fla. Stat. § 674.103(1).
4
clause in its banking contract authorized NationsBank to pay checks with forged
facsimile signatures.
The parties agreed that NationsBank would move for summary judgment to
determine whether the bank had a duty to reimburse FPL under the banking contract.
NationsBank filed its motion for summary judgment and included several affidavits
attesting that NationsBank acted with ordinary care. FPL objected to the inclusion of
any facts contained in NationsBank’s summary judgment motion relating to the
ordinary care issue because discovery had not yet been conducted. After the district
court asked the parties to clarify the facts necessary to resolve NationsBank’s
summary judgment motion, the parties submitted a joint stipulation setting forth the
relevant facts and clarifying the issue before the court. The issue before the district
court, as clarified by the stipulation, stated:
The Issue on Summary Judgment
NationsBank’s Motion for Summary Judgment raises a specific, narrow
issue: whether the FPL/NationsBank banking contract shifts the risk of
loss due to forgery from NationsBank to FPL.
The parties stipulated that 1) NationsBank paid forged checks drawn against FPL’s
account, 2) the checks bore a forgery of FPL’s authorized facsimile signature,
although the checks appeared to be authentic,3 and 3) NationsBank paid the forged
3
Each check bore a different serial number corresponding to actual FPL checks
that FPL had internally voided or canceled through its check production process
without notice to Nationsbank.
5
checks under the U.C.C. definition of “good faith.”4 The parties did not stipulate, nor
do they agree, that NationsBank exercised ordinary care when it paid the checks, and
both parties reserved the right to conduct further discovery pending the district court’s
interpretation of the banking contract.
The banking contract between FPL and NationsBank consisted of 1) a
Corporate Resolution of FPL dated July 16, 1992; 2) a Corporate Resolution of FPL
dated September 9, 1993; 3) an unsigned and undated Deposit Agreement; 4) the FPL
signature cards; 5) Master Agreement for Treasury Management Accounts and
Services dated June 18, 1993; 6) the Controlled Disbursement Service Agreement
dated June 18, 1993, with Addendum dated July 21, 1993; and 7) an Account
Reconciliation Service Agreement dated June 18, 1993.
Arkwright contends that two sections of the contract indicate that there was no
agreement shifting the risk of loss to FPL. First, a handwritten provision was included
in the Account Reconciliation Service Agreement:
Except as specifically amended by this Agreement, nothing herein shall
alter or affect Bank’s liabilities with respect to items improperly paid
from Customer’s Account, under the Uniform Commercial Code
applicable to such items.
4
This means that NationsBank acted honestly and not corruptly or in concert
with the forgers.
6
Second, § 8 of the Deposit Agreement states that NationsBank remains liable for “any
amount improperly paid out of the account due to an unauthorized signature.”
NationsBank contends that other provisions in the contract expressly modify
the bank’s liabilities. First, § 8 is qualified by two other sections in the Deposit
Agreement. Section 5(b) sets forth FPL’s responsibilities regarding the use of
facsimile signatures:
Facsimile Signatures: If your items are signed using any facsimile
signature or non-manual form of signature, you acknowledge that it is
solely for your benefit and convenience. You accept sole responsibility
for maintaining security over any device affixing the signature. Such
signature will be effective as your signature regardless of whether the
person affixing it was authorized to do so.
§ 5(b). (emphasis added). Second, § 1(c) of the Deposit Agreement allows
NationsBank to “recognize” resolutions adopted by FPL affecting the account. On
July 16, 1992 an FPL Corporate Resolution gave NationsBank authority to pay all
facsimile authorized checks up to $500,000 on the PMIS account.
Resolved, [NationsBank] is hereby authorized and requested to
accept, honor and pay, without further inquiry and until written notice of
revocation of the authority, hereinafter provided for is received by it, all
checks, drafts or other orders for the payment or withdrawal of the
monies of the Company as follows:
...
b. With respect to the PMIS Disbursement Account,
i. For payments of $500,000 or less, when bearing or
purporting to bear the facsimile signature of the
Treasurer, Controller or an Assistant Treasurer.
7
§ (b)(i)(emphasis added). A subsequent corporate resolution dated September 9, 1993
amended subsection (b)(i) of the July 16, 1992 Corporate Resolution. The September
9 Corporate Resolution authorized NationsBank to accept, honor, and pay all checks
drawn on the PMIS Disbursement Account:
(b)(i) 1) when bearing or purporting to bear the facsimile or
actual signature of its Treasurer, Controller, or an Assistant
Treasurer; or 2) when bearing the actual signature of its
President, any Vice President (excluding the Vice President
of Accounting), its Secretary or an Assistant Secretary, or
any other person or persons designated from time to time in
writing to a bank or trust company by the Chairman of the
Board or the President . . .
§ (b)(i) (1-2) (emphasis added). Twenty-four of the twenty-seven checks were drawn
on the PMIS Disbursement Account before the September 9, 1993 FPL Corporate
Resolution. Two were drawn after this date and the date of one check is uncertain.
CONTRACTUAL INTERPRETATION
We review the district court’s interpretation of a contract de novo. Because the
parties stipulated that the signatures on the checks were forgeries the outcome of this
issue depends on our interpretation of the phrase “when bearing or purporting to
bear.” Arkwright contends that this phrase is not a risk shifting clause and served only
to allow the bank to pay checks with facsimile signatures that have some technical
defect in the ink such as a smudge or a smear. We disagree.
8
The plain meaning of the phrase includes a much broader class of checks.
Blacks Law Dictionary defines “purport” as “The idea or meaning that is conveyed
or expressed, especially by a formal document; to profess or claim falsely; to seem to
be.” Blacks Law Dictionary 1250 (7th ed. 1999). A forgery by its very definition
“purports to bear.” Because the parties stipulated that the signatures on the checks
were exact duplicates of the facsimile signatures, the signature on these checks “seem
to be” the authentic signature of the authorized FPL representative. Therefore the
checks would be properly payable under the contract because they purport to bear an
authorized signature. Arkwright’s contention that the September 9, 1993 Corporate
Resolution removed this authority is incorrect because it also contains the phrase
“bearing or purporting to bear.”
The Fifth Circuit reached the same conclusion on similar facts in Perini Corp.
v. First Nat’l Bank of Habersham County, 553 F.2d 398 (5th Cir. 1977). Perini is
binding on us. See Bonner v. City of Pritchard, 661 F.2d 1206, 1209 (11th Cir. 1981).
In Perini the bank and Perini entered into a banking contract that allowed the bank to
incorporate corporate resolutions into the contract. Perini passed a corporate
resolution that authorized the bank
to honor all checks, drafts, and other orders of payment of money drawn
in the name of Perini Corporation on its Regular Accounts . . . when
bearing or purporting to bear the single facsimile signature of R.A.
Munroe . . . said banks shall be entitled to honor and charge Perini
Corporation for all such checks, . . . regardless of by whom or by what
9
means the actual or purported facsimile signature thereon may have been
affixed thereto, if such facsimile signature resembles the facsimile
specimen from time to time filed with said banks.
Perini, 553 F.2d at 400. At a later date someone stole a number of pre-printed checks
and gained access to the signature machine or developed a perfect copy of the
facsimile signature it produced. Perini sought to be reimbursed after the bank paid on
the forged checks. Id. at 401. However, the Fifth Circuit stated that through the
language in this corporate resolution Perini contractually assumed the risk of loss for
the convenient use of the facsimile signature machine. Id. at 400. The first sentence
of the holding reiterated Perini’s assumption of the risk: “One answer is clear,
however. Perini has no recourse on the unauthorized signature of R. A. Munroe
against Morgan or Brown Brothers. Perini's resolution authorizing the drawees’
payment of checks bearing signatures resembling the machine-embossed facsimile
signature precludes that course of action.” Id. at 403. See also Jefferson Parish School
Bd. v. First Commerce Corp., 669 So. 2d 1298 (La. Ct. App. 1996) (same holding
with similar facts, citing to Perini). Therefore Perini forfeited any claim he had
against the bank for good faith payments on forged instruments. Id.
We do not find Perini distinguishable. Although the corporate resolution in
Perini did contain additional language in the clause with the phrase “bearing or
purporting to bear,” the additional language is not necessary to ascertain the plain
meaning of the phrase “purporting to bear.” This is especially true in the present case
10
because the parties stipulated that the facsimile signatures are identical copies. The
plain meaning of the phrase “bearing or purporting to bear” necessarily includes all
signatures that are identical to the one produced by the facsimile signature machine.
Arkwright contends that even if the contract shifted the risk of loss for forgery
to FPL, such a provision is void under Florida law because it is an exculpatory clause.
An exculpatory clause denies an injured party the right to recover damages from the
person who negligently caused his injury. See O’Connell v. Walt Disney World Co.,
413 So. 2d 444, 446 (Fla. 5th DCA 1982). Arkwright relies on Cumis Ins. Society,
Inc. v. Girard Bank, 522 F. Supp. 414 (E.D. Pa. 1981), in support of its contention.
Cumis also involved a customer who signed a corporate resolution authorizing the
bank to honor checks “bearing or purporting to bear” the facsimile signature of a
signature or signatures resembling the facsimile specimens. Id. at 416. The customer
sought reimbursement from the bank after the bank paid several checks with a forged
facsimile signature. The trial court found that the resolution was insufficient to relieve
the bank from liability under Pennsylvania law because the resolution was an
exculpatory clause that must be strictly construed against the bank. Id. at 421.
Although Cumis directly supports Arkwright’s contention, it is not controlling and is
distinguishable from the present case.
11
Cumis is distinguishable because exculpatory agreements must be strictly
construed against a bank under Pennsylvania law. Florida’s public policy against
exculpatory clauses indicates that, although viewed with disfavor, they will be
enforced if they are clear and unambiguous. See Theis v. J & J Racing Promotions,
571 So.2d 92, 94 (Fla. 2d DCA 1990), rev. denied, 581 So.2d 168 (Fla.1991). Cumis
is also inconsistent with the Perini decision that enforced a resolution with similar
language under Georgia law. See, e.g., Perini, 553 F.2d 398. See also Jefferson Parish
School Bd., 669 So. 2d 1298 (finding bank not liable because resolution contained
language authorizing bank to pay checks “bearing or purporting to bear the facsimile
signatures”); Wilmington Trust Co. v. Phoenix Steel Corp., 273 A.2d 266 (Del. 1971)
(same); Phoenix Die Casting Co. v. Manufacturers and Traders Trust Co., 289 N.Y.S.
2d 254 (N.Y. App. Div. 1968) (same).
Moreover, this was not a true exculpatory clause because NationsBank and FPL
did not contract to avoid the bank’s duty to exercise ordinary care. Florida Stat. §
674.103(1) allows a customer who wishes to use a facsimile signature machine for his
own commercial purposes to enter into an agreement with a bank that shifts the risk
of forgery from the bank to the customer as long as the risk shifting agreement does
not attempt to disclaim the bank’s statutory duties of good faith and ordinary care.5
5
The comment to Fla. Stat. § 674.103(1) states:
Section 1-102 states the general principles and rules for variation of the
12
NationsBank does not contend nor was there any finding by the district court that the
resolution removed the bank’s duty of ordinary care. In fact, all parties are in
agreement that the bank retained its duty to exercise ordinary care. The district court
correctly found that the Corporate resolutions were limited in scope and provided only
that Nationsbank was authorized to pay certain checks “bearing or purporting to bear”
the facsimile machine signature.
Whether it is wise to enter into an agreement that shifts the risk of loss to the
customer does not make such agreements against public policy as long as the
agreement does not abrogate the bank’s duty to exercise ordinary care. See FDIC v.
Carre, 436 So. 2d 227 (Fla. Dist. 2d 1983) (addressing whether a clause limiting the
bank’s liability toward a customer with a safety deposit box was exculpatory). FPL’s
effect of this Act by agreement and the limitations to this power. Section
4- 103 states the specific rules for variation of Article 4 by agreement
and also certain standards of ordinary care. . . . it would be unwise to
freeze present methods of operation by mandatory statutory rules. This
section, therefore, permits within wide limits variation of the effect of
provisions of the Article by agreement.
Official comment (2) reiterates the parties’ ability to vary the UCC:
Subsection (a) confers blanket power to vary all provisions of the Article
by agreements of the ordinary kind. The agreements may not disclaim a
bank's responsibility for its own lack of good faith or failure to exercise
ordinary care and may not limit the measure of damages for the lack or
failure, but this subsection like Section 1-102(3) approves the practice
of parties determining by agreement the standards by which the
responsibility is to be measured. In the absence of a showing that the
standards manifestly are unreasonable, the agreement controls.
13
decision to enter into such an agreement for its own convenience shifted the risk of
loss for forged facsimile signatures to FPL but retained the bank’s duty to exercise
ordinary care and to act in good faith. See Orkin Exterminating Co., Inc. v.
Montagano, 359 So.2d 512 (Fla. 4th DCA 1978) (the principles that exculpatory
clauses relieving a party of his own negligence are not favored and are unenforceable
unless they are clear and unequivocal). The resolution shifting the risk of loss to FPL
is enforceable.
ORDINARY CARE
There remains the issue whether NationsBank exercised ordinary care when
it processed the forged checks. The district court indicated that summary judgment
was proper because it is undisputed that the bank acted in good faith when it paid what
appeared to be authentic checks. However, these facts do not answer whether the bank
exercised ordinary care when it paid the checks. We conclude that there is insufficient
evidence on the record to determine if NationsBank acted with ordinary care.
It is clear from the briefs, the record, and the district court’s order that the
narrow issue before the district court on summary judgment was whether the banking
contract between FPL and NationsBank shifted the risk of loss to FPL. The parties
stipulated to a narrow set of facts solely for the purpose of interpreting the bank’s
general liability under the banking contract. The only evidence on the record
addressing whether NationsBank acted with ordinary care consisted of affidavits
14
included with NationsBank’s original motion for summary judgment. Arkwright
objected to the inclusion of these facts premised on its understanding of the limited
scope of NationsBank’s motion, and the stipulations make it clear that the parties did
not intend to address the ordinary care issue on summary judgment. The stipulations
do not support any finding that NationsBank exercised ordinary care, and the record
was not sufficiently developed to allow the district court to decide this issue.
The district court’s dismissal of the ordinary care issue undermines its own
scheduling order in force at the time of this motion. After NationsBank filed for
summary judgment, the district court asked Arkwright if discovery was necessary to
decide the motion. Arkwright answered “no,” conditioned upon the limited scope of
the summary judgment motion.6 However, in both the Stipulation of Arkwright and
NationsBank and Arkwright’s response to the scheduling motion that the district court
issued after NationsBank filed its motion for summary judgment, Arkwright clearly
expressed the need for further discovery to determine whether NationsBank used
ordinary care when it processed the forged checks.7
6
Arkwright and NationsBank limited the issue on summary judgment in the
stipulation agreement to whether the FPL/NationsBank banking contract shifts the risk
of loss due to forgery from NationsBank to FPL. Arkwright reserved its right to
amend its complaint to include breach of ordinary care pending the resolution of the
risk shifting issue.
7
In footnote 3 of the stipulations Arkwright stated:
Arkwright cannot at this time stipulate that NationsBank exercised
ordinary care when paying the checks. Ordinary Care is a different
15
We do not find, nor do the parties contend, that the contract relieved
NationsBank of its duty to exercise ordinary care.8 A blanket holding stating that
liability shifts to the customer whenever the bank acts in good faith and the checks
appear to be authentic abrogates the restriction against contracting away the duty of
ordinary care. The district court’s analysis ignores the possibility that a bank may
breach its duty of ordinary care even when presented with an authentic looking
facsimile signature.9
concept from good faith under the U.C.C. Ordinary care involves
negligence concepts, and is pertinent to statutory defenses. Nationsbank
agrees that the issues of contractual risk shifting can be addressed apart
from issues of NationsBank’s ordinary care.
(internal quotation marks omitted).
8
On page 7 of NationBank’s reply brief in the lower court, it stated:
“NationsBank does not suggest an interpretation of the agreement that disavows its
duty to exercise ordinary care. In fact, the agreement implicitly, if not explicitly,
adopts the duty of ordinary care.”
9
The district court stated:
The agreement in question is not exculpatory in nature because there is
a complete absence of language indicating an intent to either release or
indemnify the bank for its own negligence. Limited in scope, the
agreement defines the permissible standards of care but does not attempt
to disclaim the statutory duty of ordinary care. The resolution does not
state that the bank can never be held liable for a forgery. It merely
provides that under certain circumstances, such as where the bank is
presented with items bearing or purporting to bear the facsimile machine
signature, the bank is authorized to pay such items.
April 27, 1999 District Court Order, page 11.
16
Any findings regarding whether NationsBank used ordinary care or was
negligent when it paid the forged instruments would be premature. We remand the
case to allow the parties to present a more fully developed record to the district court
on this issue.
AFFIRMED in part, REVERSED in part and REMANDED to the district court
to resolve whether the NationsBank acted with ordinary care when it processed the
forged checks.
17