The H onor abl e D avi d W

. M cK eague , U ni t ed St at es D i st r i ct Judge f or t he W es t er n D i st r i ct of M i chi gan, s i t t i ng * by des i gnat i on. RE CO MMENDE D FOR FU LL -TE XT P UB LI CA TIO N Pursuant to Six th Circu it Rul e 20 6 File Na me: 0 5a007 7p.06 

### UNITED STATES COURT OF APPEALS

FO R T HE SI XT H C IR CU IT

_________________
In r e: C ALUM ET F ARM , I NC ., De bto r.

______________________________ F I RST N ATI ONA L B ANK & T RUST C O ., Ap pe lla nt,

v. P ETE R M. B RANT and W HI TE B I RC H F ARM , I NC ., Ap pe lle es. X

- - - -> , - - - - - - N No. 03-5533

Ap pe al f rom the Un ite d S tat es D istric t C ourt for the Eastern Dis trictof Kentucky at Lexington. No . 0 2-0 03 10 —K arl S. Fo res ter , D ist ric t Ju dg e. Argued: December 2, 2004 Decided and Filed: February 17, 2005 Be fo re: GI LM ANan d S UT TO N, Ci rcu it Jud ge s; M cKEA GU E, Di str ict Ju dg e. *

_________________ COUNSEL AR GUED: W illia m L . Montague, STOLL, KEENO N & PARK, Lexington, Kentucky, for App ell an t. W ill iam

W

. Al len , GE SS , MA TT IN GL Y & A TC HI SO N, L ex ing ton , Ke ntu cky, for Appellee. ON BRIEF: W illia m L . Montague, STOLL, KEENO N & PARK, Lexington, Kentucky, for Appellant. William W

. Allen, C. Timothy Cone, GES S, MATTINGLY& ATCHISON, Le xin gto n, Ke ntu ck

y, fo r App ell ee.

_________________

OP IN ION

_________________ RO NA LD LE E G IL MA

N, Ci rcu it Jud ge . T his cas e ar ise s o ut o f a bo tch ed ele ctr on ic w ire trans fe r f rom Ca lum et Farm , Inc

. to Pe ter M. Br an t an d Whit e B irc h F arm , In c. (co lle cti ve ly, Whit e Birch). On Friday, Ma rch 8, 1991, Calumet initiat ed the wire transfer of $77,301.58 by a payment ord er t o its bank , F irs t N ati on al B ank & T rus t C om pany . T his am ount w as c alc ulated byCa lum et

1No. 03-5533 In re C alu me t F ar m, Inc

. Pa ge 2

as a paym en t of

int ere st o n it s o utst an din g d eb t of ov er $ 1 m ill ion

du e to Whit e B irc h. Whe n Calumet received writt en confirmation of the wire trans fer from First N at ional on the foll owing Mo nd ay , M arc h 11 , 19 91 , it learne d that $ 77 0, 30 1. 58 , rathe r t han $ 77 ,3 01 .5 8, ha d m ist ak en ly b een trans fe rre d. Whit e B irc h re fu sed to r eturn t

he ad dit ion al $ 69 3, 00 0, and C alum et s ub seq ue ntl y declared ba nkruptcy. First Nati onal is now seeki ng restit ution from White Birc h for the excess pa yment. Both the bank rup tcy co urt an d d istric t co urt

rul ed in f av or of White B irc h. Th e k eyiss ue on ap pe al i s wh eth er W

hit e B irc h e sta

bli sh ed the ele m en ts o f t

he “d isc harge -f

or- va lue ” d efense to F irs t Natio na l’s res tit

uti on cla im . F or t

he rea so ns set

fo rthbe low , w e RE VE RS E the judgment of the distri ct court a nd REMAND the cas e f or t he entr y o f j ud gm en t in

favo r of Fi rst Natio na l. I. BACKGROUND Most of the facts of this case were previously set forth by this cour t in In re Calumet Farm, Inc

. , N o. 95 -59 53 , 1 99 7 W L 2 53 27 8, at * *1 -2 ( 6th Ci r. M ay14 , 1 99 7) ( un

pu bli sh ed ), a s f

oll ow s: Whit e B irc h is a th oro ughbred ho rse farm

in C onne cti cut owne d b y P ete r Brant. In 1986, Calumet purchased a one-half interest in the thoroughbred s talli on Mogambo f

rom W hite Birch a nd executed a $6,500 ,0 00 promissory note (“the Mo gam bo n ote ”) ev ide nc ing th e ob lig ati on
. O n Oc tob er 31 , 19 90, Cal um et defaulted in making i ts a nnual pr incipal payment of [$1,300,000] on t he debt . Brant an d J .T . L un dy , p resident of Calum et, reache d an agreement whereby Ca lum et w ou ld make the payment on orbefore Mar ch 15, 1991. Calumet also defaulted in making sev era l inter

ve nin g inter est

paym en ts an d, as o f M arc h 7 , 1 99 1, ow ed Whit e B irc h ap pro xim ate ly $ 10 3, 05 7. 50 in i nte res t an d p en alt ies

. On M arc h8 , 1 9 9 1 , L un d

yin s tr u c te d C a lu m e t’ s b oo kk eep er, An ge la H oll eran [properly, “Hollea rn”], to pay the interes t due to White Bir ch as of January 31, 1991, amounting to $77,301.58. Hollera n thereupon cal led FirstNational to a rrange paym en t by

wire tran sf

er, and also call ed

W hit e B irc h to inf

orm it that a w ire trans fe r paym en t w as f

ort hc om ing ; ho we ve r, t

he sub stanc e o f t

he se c onve rsatio ns is d isp ute d as t o th e am ount t

hat Whit e B irc h w as t o re cei ve
. Th e wi re trans fe r, r ef ere nc ed as “MO GA MB O INT ,” wa s m ad e to Whit e B irc h' s ac co unt at Ci tib ank in Ne w Y ork on March 8, 1991. On Mar ch11 , 1 99 1, Ho lle ran rec eiv ed wr itten conf

irm ati on of the wi re transfer from First National and realiz ed tha t $770,301.58, rather t han $77,301.58, ha d b een trans fe rre d. Ho lle ran

no tif ied Fi rst Natio nal of the m ist ak e an d F irs t National cont acted Citi bank to requestreversal of the wi re t rans fer. Because the m on eyalr ead

y h ad be encre dit ed

to White Birch ’s a cco unt, C iti bank ref us ed to reverse t he wire tra nsfer. Thereafter, Fir st National requested t hat Brant re turn the additional $693,000 erroneously transferred t o him, but Brant refused to retur n the m on eyun les s F irs t N ati on al a ck nowledged

in writ ing that it

ha d m ad e th e er

ror in trans fe rri ng the fu

nd s. On Mar ch27 , 1 99 1, C alum et fi led s uit a ga ins t F irs t N ati on al i n S co tt C ounty Ci rcu it C ourt a lle gin g ne gli ge nc e and brea chof co ntr act

with resp ect to t he m ist ak en wire trans fer. Because of Calumet ’s p rec arious financi al conditi on, Calumet and First Nati onal reache d a partia l settl ement whereby First National a gr ee d to lend Ca lum e t $ 5 0 0 , 0 0 0 , s e c ure d b yC a lum e t’ s i n te re s t in

th e M o g a m

b o n o te

. C alum et als o a ssi gn ed

to F irs t N ati on al anyrig ht o f r eco ve ry that i t mig ht p os ses s ag ain st White Birch a nd agreed to r elease First National from any liabilit y arising from theNo. 03-5533 In re C alu me t F ar m, Inc

. Pa ge 3

wi re tran sf

er. Al tho ug h F irs t N ati on al and Ca lum et had partially s ett led the state co urt acti on , Fi rst

Nat ion al f

ile d anansw er and

co unter cla im

[a ctu all y, a th ird -party co m pla int ] o n Apri l 4, 1 99 1, a sse rti ng c lai m s ag ain st Whit e B irc h. In t he m eantim e, White Birch fil ed a complaint againstCalumet in the United States District Court for the Eastern Districtof Kentucky, seeking the pr incipal a nd interes t due on the Mo gam bo no te. On June 11 , 1 99 1, Ca lum et f iled a bank

rup tcy pe tit ion in t he Un ite d S tat es Bank rup tcy Co urt for the Ea ste rn D ist

ric t of Kentuc ky . In Oc tob er 19 91 , th e st ate court act ions were removed to t he Bankrupt cy Court as adversar y proceedings, a nd on De cem be r 12 , 1 99 1, the dis tri ct c ourt a cti on w as ref err ed to the bank

rup tcy co urt

. Up on cro ss- m oti on s f

or s um m ary jud gm en t, t

he bank rup tcy court e nte red parti al s um

m ary jud gm en t in

favo r of Whit e Bi rch

o n De cem

be r 2 2, 1 99 3. Th e co urt he ld t hat F irs t N ati on al l ack ed

stand ing to a sse rt a res tit uti on cla im ag ain st W

hit e Bi rch , re aso nin g that th e am ount o f a wi re t ran sf er, on ce d eb ite d f

rom a d ep os ito r’s acc ount, be lon gs so lel y to that depos itor; a cco rdi ng ly, the co urt he ld t hat on ly Calumet possessed standing t o recover t he transferr ed funds from White Birch. However, b ec au se Calumet owed White Birch a sum well in excess of the amount of the w ire tran sf

er, the c ourt h eld

that Whit e B irc h h ad

no t be enun

jus tlyenric he d and was not obligat ed to make resti tution. The cour t then denie d First Nati onal leave to file a second a mended counterclaim to include cl ai ms f or conve rsion and int en tio na l inter fe ren ce w itha co ntr act , b ut a llo we d F irs t N ati on al t o a sse rt o the r state- lawcla im s. On Se pte m be r 6, 19 94 , th e b ankru

ptc y c ourt e nte red

summ ary jud gm en t in favor of White Bi rc h on a ll remaining claims and entered i ts final orderon Oc tob er 2 7, 19 94 . [ As part o f t he fi na l se ttl em en t, F irs t N ati on al a gre ed to pay Calumet $50,000 in addition to t he $500,000 loan, which Calume t never repai d.] First Nati onal appeale d the bankruptc y court's grant of summ ary judgment in favor of Whit e Bi rch

and the co urt ' s den ial of le av e to am en d its counte rcl aim . T he dis tri ct court affirmed the bankruptcy cour t's decision in i ts entir ety on June 13, 1995. In May of 1997, this court reverse d the grant of summ ary judgment in favor of White Birch, but al so af

fi rm ed the de nia l of

Fi rst Natio na l’s m oti on

fo r le av e to am en d its co unter cla im . T he cas e was rem anded to the district courtwith instructions to r eturn the matter t o the bankruptc y court for fu rth er p roc eed ing s. Th is c ourt h eld that “t he bank rup tcy co urt sh ou ld m ak e ad ditional f act ua l findings as to whetherWhite Birch ha d notice tha t the funds trans ferh adb ee n made in error and, thu s, de ter

m ine wh eth er Whit e Bi rch [co uld ] su cce ssf

ull y a sse rt [ the ‘di sch arg e-f or- va lue ’] de fe ns e to First Nat ional’s r estitut ion claim.” 1997 WL 253278, at *5. In r esol vin g c ros s-m oti on s f or s um m ary jud gm en t, t

he bank rup tcy co urt de ter m ine d on rem an d th at the re w as i ns uf fi cie nt e vid en ce i n th e re co rd t o s up po rt a fi nd ing that Whit e B irc h h ad notice of the error in the amount transferred before the f unds were credited to its account at Citibank. It therefore held that White Birch had satisfied the required elements of the di sc harge-for-val ue de fe ns e to Fi rst

Nat ion al’ s res tit

uti on clai m . Acc ord ing ly, the b ankru ptc y c ourt g ranted

summ ary judgment in favor of White Birch a nd denied the cross-m otion filed by First National. I n March of 2003, the distr ict court affirm ed both determ inations. First National now appeals , claiming that the low er c ourts fa ile d to pro pe rlyint erp ret an d a pp ly t he dis ch arg e-f

or- va lue de fe ns e as ser

ted byWhit e Birch.No. 03-5533 In re C alu me t F ar m, Inc

. Pa ge 4

II. AN AL YS IS A. St an da rd of r ev iew W e review a dis trictcourt’s g ra nt of summ ary judgment de novo. Th erm a-S ca n, Inc . v
. Th erm os ca n, Inc

. , 2 95 F. 3d 62 3, 62 9 (6 th C ir. 20 02 ). S um m ary jud gm en t is pro pe r w he re the re exists no genui ne issue of material fact and the m oving party is entitled to judgm ent as a m atter of law . F ed

. R. C iv. P

. 56 (c)

. In c on sid eri ng a

m oti on f or summ ary

ju dg m en t, the dis tri ct c ourt m us t construe all reasonabl e inferences in f avor of the nonm oving party. Mat su sh ita Elec. Ind

us . C o. v. Zenith Radio Corp. , 4 75 U. S. 57 4, 58 7 (1 98 6). Th e ce ntr al i ssu e is “ wh eth er the ev ide nc e p res en ts a su ff ici ent di sag ree m en t to req uir e su bm iss ion to a jur y o r w he the r i t is so on e-s ide d th at o ne party m us t pr ev ail as a

m att er o f l aw .” An de rso n v . L ibe rty Lo bb y, Inc

. , 4 77 U. S. 24 2, 25 1-5 2 (1 98 6). B. Th e d isc ha rg e-f

or -va lu e d efe ns e In its ea rlieropinion, this court held t hat FirstNational had st anding to as sert a cl aim for res tit uti on un de r U .C .C

. § 4A -30 3(a ) ( en act ed as § 35 5. 4A -30 3(1 ) of

the Ke ntu ck

y R ev ise d S tat

ute s and incorpora ted into Feder al Reserve Regula tion J, 12 C.F.R. §§ 210.25-31, which governs funds trans fe rs) . S ect ion

§ 4 A- 30 3(a ) pr ov ide s as fo llo ws : A receiving b an k th at ( i) execut es the payment order of the sende r by issuing a paym en t or de r in

anam ount g reater

than th e am ount o f t

he sen de r’s order .

. . is en tit led to p ay m en t o f the am ount of th e sen de r’s o rde r u

nd er S ect ion

4A -40 2(c ) if that subsec tion is ot herwise sat isfied. The bank is ent it le d to rec over from the be ne fi ciary o f t

he e rro ne ou s ord er the e xc ess p ay m en t re cei ve d to the ex tent al low ed by the law governi ng mistake and restit ution. Th is p ro v is io nau th o ri z e s ab an k to s e e k re s ti tuti o nf

ro m th e b e n e f ic iary o f th e e x c e s s p ay m e n t i f the bank co mm itt ed

an err or i n e xe cutin g th e p ay m en t or de r. In t he pri or o pin ion , th is c ourt n ote d that § 4A -30 3(a ) i nc orp orates th e dis ch arg e-f or- va lue d ef

en se. 1 99 7 W L 25 32 78 , at *4 . The Re statem en t of

Re sti tut ion

de fi ne s th e d isc harge -f

or- va lue de fe ns e as fo llo ws : A c red ito r of

an oth er o r on e h av ing a li enon an oth er’ s p rop erty who h as r ece ive d fr om a th ird pe rso n anybe ne fi t in

dis ch arg e o f t

he de bt o r li en , is un de r n o d uty to make restitution t herefor, although t he discharge was g iv en b y mistake of the transferor a s to his int erests orduti es, if t he tra ns feree made no m isrepre sentati on and did no t ha ve n oti ce o

f th e tran sfe ro r's mi

sta ke

. Re statem en t of

Re sti tut ion

§ 1 4(1 ) (e m

ph asi s ad de d). Thus , wh ena c red ito r re cei ve s what ap pe ars to be a payment on a debt from som eone other t han the debtor , the credi tor becomes a bona fide purchaser a nd may keep the m istaken payment if the creditor di scharges t he obligati on of its debtor prior to be coming aware of the m istake. Se cti on1 4 (1 ) o f

th e R e s tate m e n t, h o w e v e r, d o e s n o t s p e c if yth e p o int i nti m e b yw h ic h no tic e o f t he m ist ak e m

us t be rec eiv ed

. No r di d th is c ourt’ s p rio r op ini on in t he pre sent ca se a dd

res s the iss ue . A nd

the tw o o the r ap pe llate c ourts that have co nc lud ed that th e d isc harge -f

or- va lue rul e applies to wire transfers also failed to f ocus on the ti ming question. See Gen. Elec. Capital Corp. v. Cent. Bank , 4 9 F. 3d

28 0, 28 4 (7 th C ir. 19 95 ) ( GECC ); Ba nq ue Wor

ms v. Ba nk

Am eri ca Int ’l , 570 N. E. 2d 18 9, 19 6 (N .Y . 1 99 1). Isolate d language in bot h of t he above c ases, however, indi cates tha t the noti ce must occur before the funds arri ve. See GECC , 49 F .3 d at 28 4 (ho ldi ng th at “a cre dit or s ho uld be ab le t o tr eat fu nd s cre dit ed

in app are nt paym en t of

a debt as irre vo cab ly hi s, unle ss ne ws of th e er ror pre ced es arr iva l of the fu nd s”) ; Banque Worms , 5 70 N. E. 2d at 1 96 (expla ini ng that “[ w] he n a be ne fi ciaryNo. 03-5533 In re C alu me t F ar m, Inc

. Pa ge 5

receives money to which it is e ntitle d and has no knowledge t hat t he money was err oneously wired, the be ne fi ciary s ho uld

no t have to w on de r whe the r i t m ayre tai n the fu nd s; r ath er, su cha b en ef

ici ary sh o u ld b e ab le to c o n s id e r t

h e tr an s f e r o f f un d s a s af

in a l an d c o m p le te tr an s a c ti o n , n o t s u

b je c t t o rev oc ati on ”). But th e q

ue sti on in e ach cas e (a s in

thi s co urt ’s p rio r de cis ion ) w as wh eth er the dis ch arg e-f

or- va lue rule ap pli es i n th is s ett ing , n ot how it a pp lie s. No r, at any rate, do es t he qu ote d language squar ely address the point. I n a wire tra nsfer sett in g, i s the relevantevent when the be ne fi ciary’ s b ank re cei ve s th e m on ey , o r w he n th e b en ef ici ary lear ns that th e m on eyis i n it s acc ount, or whe n th e b en ef iciary credits the m on eyto t he de bto r’s acc ount? N eithe r th is c ourt’ s prior deci sion, GECC , n or Ba nq ue Wor ms purpo rts to c on sid er the qu est ion , m uc h le ss ans we r it

. Tr ad iti on all y, the U. C. C. prov ide s that paym en t in di sch arg e of an ob lig ati on

oc curs und er the first option—“at the time a paym ent order for the benefit of the be neficiary is accepted by t he be ne fi ciary’ s b ank in

th e fu nd s tr an sf er. ” U .C .C . § 4A -40 6(a ). B ut t his ap pro ach

do es n ot s qu are with the notice exception to the discharge-for-value rule. Application of this U.C.C. definition of dis ch arg e w ou ld m ean

that th e entity th at m

us t re cei ve no tic e (h ere Whit e B irc h) i s an e nti ty o the r than the e nti ty to wh om

th e fu nd s we re wi red

(h ere C iti bank ). T o div ide th e “re cei pt of paym en t” and “notice of err or” elements between different e ntitie s makes little se nse and at any rate is a recipe fo r re ad ing the no tic e ex cep tio n o ut o f t he rul e. Eq ua llyun pe rsu asi ve is the arg um en t t hat t he d isc harge -tr igg eri ng ev en t ne ces sar ilyoc curs on ly whe n the be ne fi ciary h as a ctu al n oti ce t hat f un ds have be enpla ced

in i ts a cco unt. S uc h n oti ce may not connect the funds to a given debt or or to the size of the d eb to r’ s outstandi ng obligati on. Furthermore, while actua l notice of a mistake may of course be independe ntl y disclosed by t he originat or to the benef

iciary, constructive notice of a mistake m ay also occur sim ply as a result of the siz e o f the tr an sf

er wh enc on sid ere d in co nn ect ion w ithth e nam e o f t

he ori gin ato r. I n th is c ase , fo r ex am ple , Whit e Bi rch

a ssu red ly wo uld

h av e ha d co ns tru cti ve n oti ce of th e m ist ak e if

the trans fe r ha d b een , s ay , fo r $7 .7 m ill ion —if , in oth er w ord s, Fi rst

Natio na l ha d m ad e a t

wo -di git err or r ath er than a one-di git err or in tra nsmitting Calumet’s payment or de r. Any sensi ble applic ation of the dis ch arg e-f

or- va lue rul e in

thi s uniq ue settin g m

us t ac co unt fo r con str

uc tiv e as w ell as a ctu al n oti ce of a m ist ak e. That leaves whatseem s to us to be the m ost desir able option—t hat the dis charge-for-va lue defense will apply unless the be neficiary re ceives noti ce of a mistake before the beneficiar y of the transfer cr edits the debtor’s a ccount. In addi tion to al igning the ent ity thatreceives not ic e of any mistake with the entity that receive s the paym ent, and perm itting constructive noti ce to tri gger the rul e, thi s ap pro ach

is c on sis tent w ithon e o f t

he un de rly ing pri nc ipl es o f t he dis ch arg e-f

or- v a lu e ru le; nam ely, that th e cr ed ito r ha s g ive n v alu e f or t he m ist ak enpaym en t. N or, de sp ite Whit e B irc h’s su gg est ion

to t he co ntr ary , wi ll th is ap pro ach und erm ine the dis ch arg e-f or- va lue rul e o n th e th eo ry that the rule will kick in only after the beneficiary on its own terms m akes an account ing of how the trans fe r sh ou ld b e cr ed ite d. Th e ti m e v alu e o f m on eybe ing wh at i t i s, m os t co mm erc ial rec ipi en ts of s uc h trans fe rs can

b e co unted

o n to pro m

ptl y cre dit

th e de bto r’s acc ount. As in m os t se tti ng s, at any rate, the rul e ap pli es o nly to c om m erc ial ly r eas on ab le a cco untin gs
. W e note that a distri ct court decision directl y on point followed a similar ana lysis. In NB as e Co mm un ica tio ns v. Am eri ca n N ati on al B an k & T

ru st, 8 F . S up p. 2d

10 71 (N .D . Il l. 1 99 8), the co urt held that not ice was sufficie nt so long a s the beneficia ry of the payment learned of the mistake before re covering the c heck from a lock box. In r eaching thatconclusion, t he court note d that the cr e d it o r m

u s t g iv e v a lu e f

o r t h e m is tak e np ay m e n t—

b yc re d it in g th e d e b to r’ s a c c o un t— b e f o re receivi ng notice of the mistake in order to invoke the discharge-for- value defense. Id. at 1076-77. Ch eck s an d w ire trans fe rs, we ack no wl ed ge , d o n ot o ff

er a pe rf ect an alo gy . T he fo rm er are governed by stat e law, the lat ter by federal law, and the t wo are governed by different s ections of the U. C. C. But in

the un iqu e se tti ng of

ap ply ing the no tic e ex cep tio n to the dis ch arg e-f or- va lue rul e, the reasoni ng of N

Ba se aptly res pe cts the pri nc ipl es o f t he rul e an d th e re ali tie s o f a pp lyi ng it t oNo. 03-5533 In re C alu me t F ar m, Inc

. Pa ge 6

ch ecks a nd wire tran sf

ers : “[ I] t is dif

fi cu lt t o s ee what is un fa ir a bo ut r eq uir ing a b ank to ret

urn m on eyif it w as n oti fi ed

of the m ist ak enpaym en t be fo re i t gave va lue fo r th e p ay m en t. F or e xam ple , only after the cre dit ing wo uld it b e unf air to re qu ire the inno cent cre dit or to m ak e re sti tut ion .” Id. at 1 07 7 (e m

ph asi s in ori gin al) . S o it

is h ere
. Bo th t he bank rup tcy co urt an d th e d ist

ric t co urt , in

tak ing up the case on

rem an d, err ed

in focusing on when White Birch received t he funds r ather tha n on when White Birch cre dited Calumet’s account . In doing so, both cour ts e ffectively wrot e out the e lement of “discharge ” from the dischar ge-for-value defense. The undisputed re cord shows that White Birch di d not creditthe funds to Calumet’s account un ti l th e aft ernoon of March 11, 1991. Firs t National offered the tes tim ony o f C alum et e m plo ye e An ge la H oll ear

n to pr ov e that Whit e B irc h w as aware w ell be fo re the n th at C alum et h ad

int en de d to wi re o nly

$7 7, 30 1. 58 to W

hit e B irc h f

or the p ay m en t of

acc rue d interes t. The bankruptcy court ruled againstFirst Nati onal on the basi s that Holle arn’s te stimony was equivocal o n th e is su e of to whom she spoke and what was sai d on March 8, 1991 when she allegedly co nv ey ed

to W hit e B irc h th e f

act that a w ire trans fe r ha d b een sent, t he am ount o f t

he transfer, and how thatamount had been calculate d. Th e d istric t court lik ew ise dism iss ed Hol learn’ s te sti m ony o n th is p oint as too sp ecu lat ive

. It ther efore determined that Fir st National had not establ ishe d th at White Birc h had notice of the error before r eceiving t he funds. W ithout deci ding whether the lower courts erred in e xcluding the disputed te stimony as a matter of law, s ee M.B .A .F .B

. Fe de ra l C

red it Un ion v
. Cu mi

s Ins . Soc ’y, Inc

. , 6 81 F. 2d

93 0, 93 2 (4 th C ir. 19 82 ) (h old ing that a w itn ess ’s t est im ony w as a dm iss ibl e ev en tho ug h th e w itn ess adm itt ed that it wa s o nly “p os sib le” that he or h is atto rne y h ad m ad e ce rta in statements), we note that there is no dispute that Hollearn notified White Birch of the err or on the morning of March 11, 1991. Furth erm ore , Whit e B irc h’s be havio r es tab lis he s th at i t w as aware o f t he err or a s so on

as i t was informed of the wire transfer by it s own bank. When White Birch discovered on t he morning of Mar ch11 , 1 99 1 th at Ci tib ank ha d c red ite d it s ac co unt f or $ 77 0, 30 1. 58 , it

imm ed iat ely

trans fe rre d the additional $693,000 t o Brant’s per sonal accountat Citibank, os tensibly s o that “ever ything could be sort ed out. ” It did no t app ly th at am ount to red uc e C alum et’ s d eb t on

the Mo gam

bo no te unti l later t hat day. If W

hite Birch did not know

or at least suspect that i t had errone ously recei ved the ad dit ion al f

un ds , it wou ld h av e h ad

no rea so n to seg reg ate the m int o it s o wn er’ s p ers on al a cco unt. Th e f act that it seg reg ate d th e p rec ise am ount o f t he ov era ge , m ore ov er, is stron g e vid en ce t hat Wh it e B ir c hk

n e we x a c tl yh o wm

u c hi t w a s s u

p p o s e d t o r e c e iv e f

ro m C a lum e t. Ev enthe wi re transfer it self, after all , was referenced as “ MOGAMBO INT .” (E m ph asi s ad de d. ) Thus , ev enif

th e bank rup tcy c ourt an d dis tri ct co urt

c orr ect ly de ter

m ine d that W

hit e B irc h did no t have n oti ce of

th e err or be fo re rec eiv ing the fu nd s, Whit e B irc h c ert ain ly h ad no tic e b ef

ore cre dit ing Ca lum et’ s ac co unt. W e th ere fo re h old as a m att er o f l awthat Whit e B irc h h ad pri or n oti ce of the m ist ak e in

the fu nd s tr an sf er f or p urp os es o f t

he dis ch arge-for -va lue rul e an d c anno t av ail itself of that defense. Fi rst Nationa l is ther efore entitl ed to rest itution from White Birch. Un de r no rm al c irc um stanc es, the am ount of rest itutio n wo uld

be the $69 3, 00 0 o ve rpaym en t. But he re F ir s t N ati o n a l w a s ab le to s e tt le C a lum e t’ s c la im a g a in s t i t f

o r a to ta l o f $ 5 5 0 , 0 0 0

. F ir st National conce ded at oral argument that this i s the true extent of its l oss, and thus the measure by wh ich Whit e B irc h h as been unjustly e nri ch ed at the bank ’s e xp en se. Al tho ug h W hit e B irc h h as arg ue d th at $ 50 0, 00 0 o f t he bank ’s c lai m

wa s in the form of a loan to Ca lum et, the rec ord m ak es cle ar that F irs t N ati on al c red ite d th is am ount to Cal um et’ s acc ount so lel y to s ett le the law su it f ile d ag ainst it a s a r esu lt o f t

he m ist ak enwi re tran sf

er. If the bank ha s in fa ct r eco ve red

any o f t his “lo an ” in the Ca lum et b ankru

ptc y p roc eed ing s, the dis tri ct c ourt o n rem an d c antak e th is i nto acc ount i n re nd eri ng the fi na l ju dg m en t ag ainst White Bir ch . T he dis tri ct c ourt i s al so fr ee t o consider whethe r First Nat ional is e ntitle d to prejudgment inter est on its restit ution clai m.No. 03-5533 In re C alu me t F ar m, Inc

. Pa ge 7
As a final point, we note t hat allowing White Birch t o keep funds that no one intended for it t o h av e whe n it

rec eiv ed the m w ou ld co ns tit

ute a w ind fa ll to Whit e Bi rch

at t he expe ns e o f F irs t National. Retur ning the $550,000 paid out by First Nati onal to extr icate i tself from its transmission error will, however, putthe parties in t he same position that t hey would have been in had t he error in transferr ing th e funds not occurred. Alt hough these equit able conside rations do nottrump the dis ch arg e-f

or- va lue de fe ns e in

situations wh ere the de fe ns e is ap pli cab le, the y are p ert ine nt h ere
. White Birch s hould, in fact, consi der itse lf f ortunate t hat it i s having to re turn only $550,000 of the $693,000 excess itrec eived because First National was able to settl e with Calumet for less than the amount of the m istaken t ransfer. III . C ON CL US ION Fo r all o f t

he rea so ns set

fo rthab ov e, we REVER SE the judgment of the district cour t and REMAND the case for the entry of judgment in favor of First National

.