United States Court of Appeals,
Fifth Circuit.
No. 95-60171.
UNITED STATES FIDELITY AND GUARANTY COMPANY, Plaintiff-Counter
Defendant-Appellee, Cross-Appellant,
v.
PLANTERS BANK & TRUST COMPANY, Defendant-Counter Claimant-
Appellant, Cross-Appellee.
March 18, 1996.
Appeals from the United States District Court for the Northern
District of Mississippi.
Before KING, STEWART and PARKER, Circuit Judges.
STEWART, Circuit Judge:
United States Fidelity and Guaranty Company, Inc., (USF & G)
executed and delivered a Financial Institution Bond to Planters
Bank & Trust Company. This dispute arises out of a claim by
Planters on the Bond to recover for losses incurred as a result of
a forgery/kiting scheme. USF & G denied the claim and immediately
filed a declaratory judgment action against Planters. Planters
answered and counterclaimed for the amount of its losses,
$637,600.73, and for punitive damages based on USF & G's bad faith
denial of the claim in the amount of $3,000,000.00. In a nonjury
case, the district court granted partial summary judgment in USF &
G's favor. For the reasons set forth below, we affirm.
FACTS
In the spring of 1992, William C. Maloney, Jr., stole trust
account checks from the law firm of Townsend, McWilliams & Holladay
in Indianola, Mississippi. The firm maintained its account in
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Planters Bank. Maloney forged deposits and negotiated forged trust
account checks, carrying out a check-kiting scheme between the
trust account in Planters and accounts he maintained himself,
through his corporations, or through his sons in two other banks:
Bank of Ruleville and Sunburst Bank. Planters gave credit
immediately to the trust account upon deposit. During the several
day period that the check on either the Bank of Ruleville or the
Sunburst Bank was being processed for collection, Maloney would
write other checks on the trust account payable to himself or
others and negotiate the same. He then would deposit most of the
trust account checks in Bank of Ruleville or Sunburst Bank. By
repeating this scheme, Maloney took advantage of the lag time
required for transmittal, processing, and payment of checks from
accounts in the different banks.
The loss Planters suffered included checks returned to
Planters by Sunburst Bank, two checks refused by Bank of Ruleville,
and $58,000 which Planters paid out in official checks to Maloney.
Sunburst Bank returned three checks for $94,500, $89,500, and
$74,000 as drawn on uncollected funds. Bank of Ruleville refused
two checks drawn on the law firm's account. Planters found one of
these checks, for $128,000, to be a forgery and delivered it as a
timely return item. However, Bank of Ruleville refused to accept
it. The second check was for $148,500; and Bank of Ruleville
refused to accept it as well. The $58,500 in forged checks were
negotiated personally by Maloney in the bank in exchange for
Planters' official checks and cash.
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Planters sued Bank of Ruleville to recover that portion of its
loss but settled the claim for $189,250. In its lawsuit against
USF & G, Planters contended that its claim for actual damages
against USF & G had been reduced by that settlement figure. USF &
G, however, took the position that the claim had been reduced by
the amount of the loss initially attributed to Bank of Ruleville
checks, $276,500.
USF & G filed a motion for summary judgment, or, in the
alternative, partial summary judgment. The district court granted
partial summary judgment for USF & G and, at the same time,
disposed of the claim for punitive damages. It found that the
$58,500 in trust account checks which were either cashed or used to
buy cashier's checks in Planters did not fall within the exclusion.
On cross appeal, USF & G argues that this portion of the claim is
all part of the kite and that Planters did not sustain a loss until
the kite crashed and the other banks started returning checks which
had been deposited in the trust account.
DISCUSSION
Summary Judgment
The first point of contention is the appropriate standard of
review of summary judgment given that this was a nonjury case.
According to Federal Rule of Civil Procedure 56(c), summary
judgment is proper if there is no genuine issue of material fact
and the moving party is entitled to judgment as a matter of law.
Typically, we review summary judgment evidence de novo. Matter of
Placid Oil Co., 932 F.2d 394, 396 (5th Cir.1991). However, there
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is some hint of a distinction in the standard as between jury and
nonjury trials.
In Phillips Oil Co. v. OKC Corp., 812 F.2d 265, 273 n. 15 (5th
Cir.), cert. denied, 484 U.S. 851, 108 S.Ct. 152, 98 L.Ed.2d 107
(1987), a panel of this court remarked that "this circuit has
arguably articulated an even more lenient standard for summary
judgment in certain nonjury cases" as opposed to jury trials.1 The
1
The full text of footnote 15 reads as follows:
It should be recognized that there was no request for a jury
trial in this case. In this regard we note that this
circuit has arguably articulated an even more lenient
standard for summary judgment in certain nonjury cases. A
panel of this court, in Professional Managers, Inc. v.
Fawer, Brian, Hardy & Zatzkis, 799 F.2d 218 (5th Cir.1986),
after noting that the Supreme Court has said that the
standard for summary judgment mirrors the standard for
directed verdict under Fed.R.Civ.P. 50(a) (citing Liberty
Lobby, 477 U.S. at 249, 106 S.Ct. at 2511, and Celotex Corp.
v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265
(1986)) commented that, "in the same fashion, in nonjury
cases it mirrors the standards for dismissals provided by
Rule 41(b)." Professional Managers, 799 F.2d at 223.
Rule 41(b) of the Federal Rules of Civil Procedure
provides, in relevant part, that:
After the plaintiff, in an action tried by the court
without a jury, has completed the presentation of his
evidence, the defendant, without waiving his right to
offer evidence in the event the motion is not granted,
may move for a dismissal on the ground that upon the
facts and the law the plaintiff has shown no right to
relief. The court as trier of the facts may then
determine them and render judgment against the
plaintiff or may decline to render any judgment until
the close of all the evidence.
Fed.R.Civ.P. 41(b). "A dismissal under Rule 41(b) differs
from a directed verdict in a jury trial in that the court
need not determine that the defendant is entitled to
judgment as a matter of law." DuPont v. Southern Nat. Bank,
771 F.2d 874, 879 (5th Cir.1985), cert. denied, 475 U.S.
1085, 106 S.Ct. 1467, 89 L.Ed.2d 723 (1986) (citation
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omitted). "Instead, as the finder of fact, the court may
resolve disputed issues of fact. A Rule 41(b) dismissal is
warranted when the district court, even before hearing the
defendant's evidence, determines that the plaintiff has
failed persuasive evidence regarding the necessary elements
of his case." Id. Under Rule 41(b), the district court is
"entitled to weigh evidence, make credibility judgments, and
draw inferences unfavorable to the plaintiffs." North
Mississippi Communications, Inc. v. Jones, 792 F.2d 1330,
1333 (5th Cir.1986) (footnote omitted); see also Weissinger
v. United States, 423 F.2d 795, 798 (5th Cir.1970) (en
banc).
In a line of cases dealing with summary judgment in the
nonjury context, panels of this court have discussed
the inquiry to be performed when summary judgment is
sought. In a case wherein the court found that the
parties did not request a jury trial, the panel stated
that while a certain question is considered one of
"fact" under state law, "to be judged in light of all
the circumstances surrounding a given transaction,' ...
a federal district court may nevertheless grant summary
judgment on such an issue, in a non-jury case, if the
"evidentiary facts are not disputed ... [and] trial
would not enhance [the court's] ability to draw
inferences and conclusions,' Nunez v. Superior Oil Co.,
572 F.2d 1119, 1124 (5th Cir.1978) (emphasis added).
Houston North Hosp. Properties v. Telco Leasing, Inc.,
680 F.2d 19, 22 (5th Cir.) (footnote and citations
omitted), reh'g. denied in part, granted in part, 688
F.2d 408 (1982). The court has also stated that:
Summary judgment may be improper, even though the
basic facts are undisputed, if the ultimate facts
in question are to be inferred from them, and the
parties disagree regarding the permissible
inferences that can be drawn from the basic facts.
Winter v. Highlands, 5 Cir.1978, 569 F.2d 297,
299. " "[T]he choice between permissible
inferences is for the trier of facts.' " Nunez v.
Superior Oil Co., 5 Cir.1978, 572 F.2d 1119, 1124,
quoting, Walker v. U.S. Gypsum Co., 5 Cir.1959,
270 F.2d 857, 862, cert. denied, 1960, 363 U.S.
805, 80 S.Ct., 1240, 4 L.Ed.2d 1148. Where a jury
is called for, the litigants are entitled to have
the jury choose between conflicting inferences
from basic facts. Nunez, supra, 572 F.2d at 1124.
However, where the judge is the trier of fact, as
was the case here, he may be in a position to draw
inferences without resort to the expense of trial,
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opinion cited Professional Managers, Inc. v. Fawer, Brian, Hardy &
Zatzkis, 799 F.2d 218, 223 (5th Cir.1986), where we recognized that
while the standard for summary judgment "mirrors the standard for
directed verdict under Federal Rule of Civil Procedure 50(a), [in]
the same fashion in nonjury cases it mirrors the standards for
dismissals provided by Rule 41(b)."
According to Rule 41(b)
After the plaintiff in an action tried by the court without a
jury, has completed the presentation of his evidence, the
defendant, without waiving his right to offer evidence in the
event the motion is not granted, may move for a dismissal on
the ground that upon the facts and the law the plaintiff has
shown no right to relief. The court as trier of the facts may
then determine them and render judgment against the plaintiff
or may decline to render any judgment until the close of all
the evidence.
Nunez v. Superior Oil Co., 572 F.2d 1119, 1124 (5th
Cir.1978), held that "[i]f a decision is to be reached by the
court, and there are no issues of witness credibility, the court
unless there is an issue of witness credibility.
See id. at 1124-25.
Alabama Farm Bur. Mut. Cas. Co. v. American Fid. Life
Ins. Co., 606 F.2d 602, 609-10 (5th Cir.1979), cert.
denied, 449 U.S. 820, 101 S.Ct. 77, 66 S.Ed.2d 22
(1980).
Whether or not these cases set forth a "nonjury
summary judgment standard" different from the
summary judgment standard applied in jury cases
and, if so, whether it has been universally and
consistently applied in nonjury summary judgment
cases are not questions we need decide here.
Since we can affirm the judgment of the district
court in this case on the basis of the general
summary judgment standard set forth in a long line
of cases in this circuit and in Liberty Lobby, we
merely note the question of whether a different
and arguably more lenient summary judgment
standard should apply in nonjury cases.
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may conclude on the basis of the affidavits, depositions, and
stipulations before it, that there are no genuine issues of
material fact, even though decision may depend on inferences to be
drawn from what has been incontrovertibly proved." Nunez
established that even at the summary judgment stage a judge in a
bench trial has the limited discretion to decide that the same
evidence, presented to him or her as trier of fact in a plenary
trial, could not possibly lead to a different result.
What these cases mean for the standard applicable here is
uncertain. While Phillips Oil suggests a distinction, it
nevertheless declined to mandate one. Footnote 15 is this
circuit's most extensive discussion of the issue. In the present
case, however, we need not answer the intriguing question posed by
the court in Phillips Oil regarding whether our circuit law has
recognized a "nonjury summary judgment standard" different from the
general summary judgment standard applied in jury cases. Standard
summary judgment analysis suffices to affirm the district court.
Financial Institution Bond
In its brief, Planters relates what it deems are the relevant
provisions of the bond. The bond defines "forgery" as
the signing of the name of another person or organization with
intent to deceive; it does not mean a signature which
consists in whole or in part of one's own name signed with or
without authority, in any capacity, for any purpose.
Insuring Agreement (D) provides
(D) Loss resulting directly from
(1) Forgery or alteration of, on or in any Negotiable
Instrument (except an Evidence of Debt), Acceptance,
Withdrawal Order, receipt for the withdrawal of Property,
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Certificate of Deposit or Letter of Credit.
(2) transferring, paying or delivering any funds or
Property or establishing any credit or giving any value on the
faith of any written instructions or advices directed to the
Insured and authorizing or acknowledging the transfer,
payment, delivery or receipt of funds or Property, which
instructions or advisers purport to have been signed or
endorsed by any customer of the Insured or by any banking
institution but which instructions or advices either bear a
signature which is a Forgery or have been altered without the
knowledge and consent of such customer or banking institution,
Telegraphic, cable or teletype instructions or advices, as
aforesaid, exclusive of transmissions of electronic funds
transfer systems, sent by a person other than the said
customer or banking institution purporting to send such
instructions or advices shall be deemed to bear a signature
which is a Forgery.
The uncollected funds exclusions provision of the bond, exclusion
(o), provides that the bond does not cover "loss resulting directly
or indirectly from payments made or withdrawals from a depositor's
account involving items of deposit which are not finally paid for
any reason, including but not limited to Forgery or any other
fraud, except when covered under Insuring Agreement (A) ..."
In its memorandum opinion granting partial summary judgment,
the district court separated the loss into two categories. First
it found that the Bank of Ruleville and Sunburst checks were part
of Maloney's check-kiting scheme and appropriately fell under
exclusion (o). Planters should have made sure that the Maloney's
deposits were drawn on sufficient funds or were not forgeries
rather than immediately crediting them.
Planters concedes that the checks at issue were forgeries but
argues that the express language of exclusion (o) required the
district court to make findings regarding whether Planters's loss
resulted from "items of deposit which are not finally paid" or
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whether Planters's loss resulted from "payments made or withdrawals
from a depositor's account." The memorandum opinion, Planters
complains, did not discuss the affidavit of Paul Carrubba,
Planters's expert, who maintained that the Sunburst checks were
finally paid and that the checks refused by Bank of Ruleville were
not payments made.
Planters contends that the Sunburst checks were "finally paid"
by Sunburst pursuant to Miss.Code Ann. § 75-4-213 (1972) with no
right of revocation. The section reads in pertinent part
(1) An item is finally paid by a payor bank when the bank has
done any of the following, whichever happens first:
(a) paid the item in cash; or
(b) settled for the item without reserving a right to revoke
the settlement and without having such right under statute,
clearinghouse rule or agreement; or
(c) completed the process of posting the item to the indicated
account of the drawer, maker or other person to be charged
therewith; or
(d) made a provisional settlement for the item and failed to
revoke the settlement in the time and manner permitted by
statute, clearinghouse rule or agreement.
Therefore Planters says that the losses resulting from the Sunburst
checks do not fall within the bond exclusion.
Planters also argues that the Bank of Ruleville checks were
also covered by the forgery provisions of the bond and not excluded
by exclusion (o) because there was no payment made on them pursuant
to Miss.Code.Ann. § 75-4-301 (1972). According to Planters, this
code section protected them since Planters made a timely return of
the checks within the "midnight of the banking day of receipt"
deadline.
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USF & G argues that, on the contrary, exclusion (o) did cover
the Sunburst Bank and Bank of Ruleville forgeries. It says that
the bond in question is a standard form bond commonly used in the
industry since 1941. The overwhelming case law applying exclusion
(o) to deny coverage obviated the district court from making a
specific finding on the affidavit of Paul Carrubba. Furthermore,
USF & G, claims Carrubba's affidavit is speculative and
conclusionary, with no basis in the facts of the scheme perpetrated
in this case.
As the plaintiff, USF & G bears the burden of proving that
exclusion (o) is applicable: "[W]here an exclusion is specifically
pleaded as an affirmative defense the burden of proving such
affirmative defense is upon the insurer ..." Lunday v. Lititz Mut.
Ins. Co., 276 So.2d 696, 698 (Miss.1973); see Sentry Ins. v. R.J.
Weber Co., 2 F.3d 554 (5th Cir.1993). In turn, USF & G simply
relies on the clear language of the exclusion.
Indeed, the clear language of the bond supports the district
court's decision to grant summary judgment with respect to the Bank
of Ruleville checks. These checks were part of a check-kiting
scheme and therefore the accompanying losses were excluded by
exclusion (o). Exclusion (o) is meant generally, though not
exclusively, to prohibit coverage for losses due to a check-kiting
scheme. Maloney fraudulently negotiated the Sunburst Bank checks
and Bank of Ruleville checks without sufficient funds to support
them. This is the very definition of a check-kite and, therefore,
exclusion (o) should have applied.
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Forged Checks
The second category of loss, separate from the check-kiting
scheme, consisted of the forged checks Maloney cashed or converted
to cashier's checks personally at the Planters Bank. The district
court decided that another provision of the bond covered them:
ON PREMISES
(B)(1) Loss of Property resulting directly from
(a) robbery, burglary, misplacement, mysterious
unexplainable disappearance and damage thereto or
destruction thereof, or
(b) theft, false pretense, common-law or statutory
larceny, committed by a person present in an office or on
the premises of the Insured.
while the Property is lodged or deposited within offices or
premises located anywhere.
We agree with the district court's determination that the
$58,500 loss was covered by the "ON PREMISES" clause and not
excluded by (o). The court rightly found that "[e]xclusion (o) is
dependent upon an account being improperly credited with deposits
that have not been collected from the payor bank." Here, however,
the trust account had sufficient funds on deposit when Maloney
cashed the forged checks. Therefore, exclusion (o) did not apply.
Furthermore, the checks were forgeries negotiated on the premises
of Planters, falling within the plain language of the bond.
Therefore, summary judgment was correctly entered.
AFFIRMED.
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