In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 05-3703

WACHOVIA BANK, N.A.,

Plaintiff-Appellee

v.

FOSTER BANCSHARES, INC., and FOSTER BANK,

Defendants-Appellants.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 04 C 3914—James F. Holderman, Chief Judge.

____________

ARGUED MAY 11, 2006—DECIDED JULY 24, 2006

____________

Before POSNER, EASTERBROOK, and WOOD, Circuit Judges.

POSNER, Circuit Judge. This diversity suit pits two banks

(for unexplained reasons, the defendant bank’s parent

was also joined as a defendant) against each other in a

quarrel over liability for a forged or altered check.

A customer of Foster Bank named Choi deposited in her

account a check for $133,026 that listed her as the payee. The

check had been drawn on Wachovia Bank by a company

called MediaEdge that had an account with that bank.

Foster presented the check to Wachovia for payment.

Wachovia paid Foster and debited MediaEdge’s account.
2 No. 05-3703

Now as it happened the actual payee of the check as

originally issued had not been Choi; it had been a company called CMP Media. When CMP Media told MediaEdge

that it had not received the check, an investigation ensued

and revealed that Choi had somehow gotten her name

substituted for CMP Media on the check she’d deposited

with Foster. By the time this was discovered, Choi had

withdrawn the money from her account and vanished,

while Wachovia had destroyed the paper check that Foster

had presented to it for payment. It had done this pursuant

to its normal practice, the lawfulness of which is not

questioned. It had retained a computer image of the check,

but whether the image is of the original check drawn on

Wachovia, with an alteration, or a forged check, cannot be

determined.

MediaEdge sued Wachovia in New York for the amount

of the check. That suit has been stayed pending the outcome

of the present suit, in which Wachovia seeks a declaratory

judgment that Foster must indemnify it in the event that

MediaEdge obtains a favorable judgment in the New York

suit. Wachovia’s suit is based on the Uniform Commercial

Code’s “presentment warranty”: when a depositary bank,

Foster in this case, presents a check for payment by the bank

that issued the check, it warrants that the check “has not

been altered.” UCC §§ 3-417(a)1-2, 4-208(a)1-2; Clean World

Engineering, Ltd. v. MidAmerica Bank, FSB, 793 N.E.2d 110,

117-18 (Ill. App. 2003); Wachovia Bank, N.A. v. FRB, 338 F.3d

318, 321-22 (4th Cir. 2003). The district court granted

summary judgment for Wachovia. Foster had impleaded

Choi as a third-party defendant but could not serve her

because of her disappearance, so the district court dismissed

the third-party claim. Foster does not challenge that ruling.

There is a question of appellate jurisdiction, specifically

whether the district court’s judgment is final. The judg-
No. 05-3703 3

ment order states, so far as pertains to that question, merely

that Wachovia’s “motion for summary judgment . . . is

granted” and “judgment is entered in favor of plaintiff

against defendant Foster.” (Foster Bancshares, the parent, is

not mentioned, but the omission was inadvertent; there is

nothing pending against it in the district court.) Normally a

judgment that merely determines liability and does not

specify relief is not a final judgment and so is not appealable

under 28 U.S.C. § 1291, the final-decision rule that furnishes

the only ground for Foster’s appeal. The judgment order

that the district court issued does not specify any relief. Nor

can relief be calculated mechanically. (If it could be, the

judgment would be sufficiently final to be appealable.

Production & Maintenance Employees’ Local 504, Laborers’ Int’l

Union v. Roadmaster Corp., 954 F.2d 1397, 1401 (7th Cir.

1992); Vitale v. Latrobe Area Hospital, 420 F.3d 278, 281 (3d

Cir. 2005).) The district judge said in his opinion that

“Wachovia is entitled to the $133,026.00 it paid on the check

plus appropriate interest, less any reimbursement owed it

from MediaEdge.” But the judge did not define “appropriate interest”; and the “reimbursement owed [Wachovia]

from MediaEdge” cannot yet be calculated—the amount

depends on the outcome of the New York suit, which has

been stayed.

But we must remember that Wachovia was seeking a

declaratory judgment, which is deemed final although it

does not specify relief. 28 U.S.C. § 2201(a). The judge

mentioned on the first page of his opinion that the bank was

seeking such a judgment. He didn’t repeat this in the

judgment order, but the omission is not critical. Wilson v.

City of Chicago, 120 F.3d 681, 685 (7th Cir. 1997); see Chase

Manhattan Mortgage Corp. v. Moore, 446 F.3d 725, 728 (7th

Cir. 2006). That order is most sensibly interpreted as the

declaratory judgment that Wachovia sought. What else
4 No. 05-3703

could it be? It is clear on the one hand that the judge meant

to enter a final and therefore an appealable judgment, and

on the other hand that he was not intending to issue a

further order, specifying relief. A judgment that declares

rights but does not order relief is appealable under 28 U.S.C.

§ 1291 as, and only as, a declaratory judgment.

As we pointed out in the Chase Manhattan case, moreover, a judgment is final for purposes of appeal when the

district judge is through with the case whether or not he

should be, lest the case be left in limbo—no longer in the

district court, but barred from our court by the final-decision rule. 446 F.3d at 726-27; see also Moreau v. Harris

County, 158 F.3d 241, 244 (5th Cir. 1998). Not one but two

cases would be in limbo, because MediaEdge’s suit in

New York has been stayed pending the resolution of the

present case. The two suits would be Alphonse and Gaston.

Ordinarily if a district court mistakenly abandoned a

case after finding liability but before ordering relief, the

plaintiff would appeal. But in the present case the plaintiff,

Wachovia, got everything it asked for in the judgment that

the district court entered. The aggrieved party is Foster,

since the judgment declares its liability to Wachovia. If

it cannot appeal, the parties’ dispute cannot be resolved—

which provides the clinching argument for deeming the

judgment a declaratory judgment. Even if the judge didn’t

think he’d washed his hands of the case, he could not

proceed to award relief because the amount of reimbursement owed Wachovia by MediaEdge cannot be resolved

until the New York suit resumes.

So we have jurisdiction of Foster’s appeal and can turn

to the merits. The bank argues that Wachovia, because it

cannot produce the paper check, cannot prove that the check

was altered. For all we know, rather than the check being
No. 05-3703 5

“altered” in the usual sense, Choi used sophisticated

copying technology to produce a copy that was identical in

every respect to the original check (including the authorized

signature by MediaEdge’s chief financial officer) except for

an undetectable change of the payee’s name. Had the

original paper check not been destroyed, it could be examined and the examination might reveal whether the check

had been forged as just described or the payee’s name had

been changed by chemical washing of the check or by some

other method that utilized rather than replaced the original

check.

The bank on which a check is drawn (Wachovia in this

case) warrants to the presenting bank that the check is

genuine, UCC § 3-418(c); id., Official Comment 1; Henry J.

Bailey & Richard B. Hagedorn, Brady on Bank Checks

§ 28.11[1] (2006), hence not forged, while as we know the

presenting bank warrants that the check hasn’t been altered

since its issuance. When checks were inspected by hand,

when copying technology was primitive, and when

cancelled checks were stored rather than digitized copies

alone retained, this allocation of liability was consistent with

the sensible economic principle that the duty to avoid a loss

should be placed on the party that can prevent the loss at

lower cost. Holtz v. J.J.B. Hilliard W.L. Lyons, Inc., 185 F.3d

732, 743 (7th Cir. 1999); Edwards v. Honeywell, Inc., 50 F.3d

484, 490 (7th Cir. 1995); National Union Fire Ins. Co. v. Riggs

Nat’l Bank, 5 F.3d 554, 557 (D.C. Cir. 1993) (concurring

opinion). Having no dealings with MediaEdge, Foster could

not determine at reasonable cost whether, for example, the

drawer’s signature had been forged. Wachovia might be

able to determine this by comparing the signature on the

check presented to it for payment with the authorized

signature in its files. But Wachovia would have no idea who

the intended payee was, while Foster might have reason to
6 No. 05-3703

suspect that the person who deposited the check with it was

not the intended payee. And it would be in as good a

position as Wachovia to spot an alteration on the check.

But this last point assumes that a payee’s name would

be altered in the old-fashioned way, by whiting out or

otherwise physically effacing the name on the paper check.

If Choi created a new check, there would be no physical

alteration to alert Foster when she deposited the check

with the bank. That is why Foster complains that

Wachovia’s failure to retain the paper check prevents

determining how the “alteration” was effected—more

precisely, whether it is a case of alteration or of forgery. The

fact that MediaEdge acknowledges having issued a check to

CMP Media is not conclusive on the question because Choi

might have destroyed that check, rather than altering it, and

substituted a copy that seemed perfectly genuine, with her

name in place of CMP Media.

So the case comes down to whether, in cases of doubt,

forgery should be assumed or alteration should be assumed.

If the former, Foster wins, and if the latter, Wachovia. It

seems to us that the tie should go to the drawer bank,

Wachovia. Changing the payee’s name is the classic alteration. It can with modern technology be effected by forging

a check rather than by altering an original check, but since

this is a novel method, the presenting bank must do more

than merely assert the possibility of it. Granted, it is the

duty of the drawee bank to take reasonable measures to

prevent the forging of its checks, as by marking them in a

way that a forger could not discover and therefore duplicate. But Foster has made no effort to show that retention of

mountains of paper checks—which would be necessary to

determine whether the original check had such a marking—would be a reasonable method of determining whether
No. 05-3703 7

the drawee bank or the presenting bank should be liable for

the loss.

Nor did Foster make any effort to show—as it might have

been able to do, see Henry Bailey & Richard Hagedorn,

supra, § 28.3—that duplication of the entire check (that is,

forgery of the check deposited with the presenting bank),

rather than just physical alteration of the payee’s name

on the original check, has become a common method of

bank fraud. Nor did it try to show that banks have, as they

are allowed to do, been contracting around the provisions

of the UCC relating to the warranties of drawee and presenting banks in cases such as this. Nor did it try to show

what Choi’s modus operandi was, assuming that she had

stolen money in this way on other occasions, though such

evidence may of course have been unobtainable.

Even if Foster had shown that forgery of the entire

check has become a routine method of altering the payee’s

name, we would not adopt the rule for which it contends,

which is that the drawee bank cannot enforce the presentment warranty unless it retains the paper check. The

question of which bank was, in the language of economic

analysis of law, the “cheaper cost avoider” would still be

open. (Maybe neither bank is—which would hardly be a

persuasive ground for changing a long-settled rule of law.)

A depositary bank can sometimes discover an alteration of

the payee’s name even when there is no physical alteration

in the check presented to the bank for deposit. The size of

the check may be a warning flag that induces the bank to

delay making funds deposited by the check available for

withdrawal. E.g., Bank of America, “Frequently Asked

Questions,” http://www.bankofamerica.com/deposits/

checksave/index.cfm?template=lc_faq_acct_info (visited

July 5, 2006); Kennebunk Savings Bank, “Deposit Account
8 No. 05-3703

Agreement,” http://www.kennebunksavings.com/

depositagreement.html, (visited July 5, 2006). The check that

Choi deposited with Foster was for a hefty $133,000, and

there is no evidence that Choi had previously deposited

large checks. We do not suggest that Foster was careless in

deciding to make the money available for withdrawal when

it did. But the uncertainties that the bank has made no effort

to dispel counsel against adopting the legal change that it

urges. Reform if needed in the light of modern copying

technology should be left to the Uniform State Commissioners rather than engineered by a federal court in a diversity

case. The judgment for Wachovia is therefore

AFFIRMED.

A true Copy:

Teste:

 _____________________________

Clerk of the United States Court of 

Appeals for the Seventh Circuit 

USCA-02-C-0072—7-24-06