1

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 ClaimantAppellant, 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
 

1The 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

4

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
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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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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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
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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.