FI LED U.S. COURT OF APPEALS ELEV ENT H CI RCUI T SEPT EMBER 23, 2 010 J OHN LEY CLERK [DO N OT PUBLISH] IN THE UN ITED STATES COURT OF APPEALS FOR THE ELE VENTH CIRCUIT

__ __ __ __ __ __ __ __ __ __ __ __ No. 0 9- 15 37 3

__ __ __ __ __ __ __ __ __ __ __ __ D. C. Dock etNo. 0 8- 00 05 5- CV-HL-7 SOUTHW EST GEORGIA FINANCIAL CORPORATION, Pl ai nt iff -Co un te rDefen da nt -Ap pe ll an t, EMPIR E FINANCIAL SERVICES INC ., Pl ai nt iff -Ap pe ll an t, ve rs us COLONIAL AMERICAN CASUALTY AND SURETY COMP ANY, Defen da nt -Co un te rCl ai m an t-Ap pe ll ee.

__ __ __ __ __ __ __ __ __ __ __ __ App eal fro m

th e Uni te d S ta te s Di st ric t Co urt fo r th e Mi dd le Dis tri ctof Ge or gi a

__ __ __ __ __ __ __ __ __ __ __ __ _ (Sep te m be r 23 , 20 10 ) Befo re HULL, MARTIN, andFAY, Circ ui t J ud ge s.PER CURI AM:

So ut hwe stGeor gi a Fi na nc ia l Co rp or at io n a ndEm pi re Fi na nc ia l Se rv ic es , In c. ap pe al th e d is tri ctco urt’s g ran t o f su m m ary jud gm en t i n favo r of Co lo ni al Am eri canCas ua lty

an d S ur ety

Co m pa ny. I. Thi s i s anin su ran ce co ve rag e d is pu te . Plai nt iff -Ap pe ll an t So uthwe st Geo rg iaFin an ci al Co rp or at io n i s a b an k h ol di ng co m pa ny. Pl ai nt iff

-Ap pe ll an t Em pi re Fi na nc ia l Se rv ic es , Inc . is a who ll y -o wne d s ub si di ary of So ut hwe st Geo rg iaFin an ci al th atori gi na te s, s el ls , andservi ces co m m erci al real est at e lo an s. 1 Defen da nt -Ap pe ll ee Co lo ni al Am eri canCas ua lty an d S ur ety

Co m pa ny iss ue d a

“ D&O Sel ectpl us Ins ur an ce Po li cy ” to So ut hwe stGeor gi a Fi na nc ia l. Em pi re i s an in su redun de r th e p ol ic y . In M arch 20 06 Em pi re l oa ne d $ 21 ,73 5,0 00 .00 to Zoh ouri De ve lo pm en t As bu ry Co m m on s, LLC an d $ 15 ,90 0,0 00 .00 to Hend ers on Mi ll , LLC. T he lo anpro ceed s wer e to be us edby Farbo d Zo ho ur i, a re al est at e de ve lo pe r, to pu rch as e two ap art m en t co m pl ex es inAtl an ta , Geor gi a an d c on ve rt th em in to co nd om in iu m s. Em pi re s ol d und iv id edown ers hi p i nt eres ts inth e Asb ury Co m m on s an d Hen de rs on Mi ll lo an s t o “pa rti ci pa ti ng ba nk s” un de r an We will refer

to the plaintiffs-appe llants collectively as Empire e x cept whe n context requires the 1 companies to be ref

err ed to in their individual capa cities. 2Adju st ab le LoanPart ic ip at io n S al e an d S erv ic in g Ag reem en t (“ pa rti ci pa ti on

ag reem en t” ). The p art ic ip at in g b an ks pro vi de d Em pi re wi th m on ey

th atth e co m pa ny use d t o fu ndth e lo an s. Inex ch an ge , each pa rti ci pa ti ng ba nkwas e nt it le d to rece iv e “ it s p ro -rat a am ou ntof a ll m on th ly paym en ts rece iv edby [Em pi re] on th e [As bu ry

Co m m on s o r Hen de rs on Mi ll lo an ], les s tha t am ountpro du cedby th ree- ei gh th s o f on e p erce ntof t he th enap pl ic ab le in te res t ra te on th e [l ]oan .” The pa rti ci pa ti on ag reem en t p ro vi de d tha t i f Asb ury Co m m on s, LLC o r Hen de rs on Mi ll , LLC defaul te d o n the lo an s, Em pi re wo ul d fo recl os e o n the ap art m en t co m

pl ex es sec ur in g the m . After t he pro pe rti es were s ol d at a fo recl os ur e sa le , Em

pi re wo ul d d is tri bu te to each of t he pa rti ci pa ti ng bank s i ts pro rat a sh are o f th e sa le s p ro ceed s. As p artof i ts sal es effo rt, Em pi re p ro vi de d the parti ci pa ti ng bank s wi th cred itoff eri ng rep orts . The rep orts st at edth atclo si ng wou ldno t o ccur on th e Asb ury Co m m on s an d Hen de rs on Mi ll lo an s u nt il pre -s al e co nt ract s h adbe en ob ta in edfor30 % of t he un it s. Des pi te th atrep res en ta ti on , bo th lo an s wer e cl os ed be fo re 3 0% o f th e uni ts were p re-s ol d. Em pi re’s Exe cu ti ve Vice Pres id en t, Bi ll

3Osb orne , om it te d the pre -s al e requi rem en t fr om th e lo anco m

m it m en t l et te rs si gn edby Z oh ouri a ndth e cl os in g i ns tru ct io ns pro vi de d t o Em pi re’s at to rn ey . 2 Fro m a Sep te m be r 20 06 ne ws re po rt o n alo cal tel ev is io n s ta ti on , Em pi re le arn edth atth e FBI was i nv es ti ga ti ng Zoh ou ri f orm ortg ag e fraud . Em

pi re au di te d the Asb ury

Co m m on s an d Hen de rs on Mi ll lo an s an d d is co ve redth atbo th lo an s wer e cl os edwitho utth e p re-s al e co ntract s. OnOcto be r 5 S ou th wes t Geo rg iaFin an ci al in fo rm edCo lo ni al ab ou t the m at te r bu t d idno t m ak e a cl ai m . On Oct ob er 1 6 Em

pi re p la cedbo th lo an s i n ast at e o f de fau ltaft er Zo ho ur i fa il ed to m ak e h is Octo be r lo anpa ym en t. Em pi re ev en tu al ly forec lo se d o n As bu ry Co m m on s an d Hen de rs on Mi ll an d p ur ch as edbo th pro pe rti es at afor ecl os ur e sa le in Ju ly 200 7. A. Sett le m en t Paym en ts to Asb ury Co m m on s Parti ci pa ti ng Ban ks InAug us t 2 00 7 S ou th wes t Geo rg iaFin an ci al rep orte d the Asb ury Co m m on s lo anas apo te nt ia l cl ai m

to Co lo ni al . In m id -Oct ob er Co lo ni al in fo rm ed So ut hwe stGeor gi a Fi na nc ia l tha t i t co ul d n otde te rm in e whe th er the re was co ve rag e und er the po li cy be cau se no “ cl ai m ” h adbe enm ad e b y any of the
Empire neve r re ceive d any pre- sale c ontrac ts for Asbury Commons. It rec eived pr e-sa le 2 contra cts for H ender son Mill after closingthe loan, but those contra cts wer e later deter mined to be unenf orce able. 4pa rti ci pa ti ng ba nk s. Th e co m pa ny als o re se rv edall it s ri gh ts an d d efen se s u nd er th e p ol ic y . Inearl y Decem be r 20 07 eachof t he Asb ury Co m m on s p art ic ip at in g b an ks se nta le tt er t o Em

pi re “ de m an d[ in g] th e imm ed ia te return o f it s p rin ci pa l.” On Decem be r 11 Em

pi re s ol d the Asb ury

Co m m on s p ro pe rty for $ 14 ,75 0,0 00 .00 . The ne xtday , Em

pi re wi redeach of t he pa rti ci pa ti ng bank s the ir p ro rat a sh are o f th e sa le s p ro ceed s as requi redby the pa rti ci pa ti on ag reem en t. Two d ay s l at er, So ut hwe stGeor gi a Fi na nc ia l fo rward edth e p art ic ip at in g b an ks ’ de m an d l et te rs an d asp read sh eetto Co lo ni al . The s pr ead sh eetsh owe d e ach pa rti ci pa ti ng bank ’s (1 ) pe rcen ta ge own ers hi p i nt eres t i n the Asb ury Co m m on s l oa n; (2) pri nc ip al in ve st m en t; an d (3 ) pr o- rat a sh are o f th e sa le s p ro ceed s. So ut hwe stGeor gi a Fi na nc ia l i nf

orm edCo lo ni al th atEm

pi re i nt en de d t o e nt er i nt o s et tl em en t ag reem en ts with the pa rti ci pa ti ng ba nk s. Un de r th e se tt le m en t ag reem en ts , Em pi re wou ldpa y

each pa rti ci pa ti ng ba nkth e d iff eren ce b etweenit s p rin ci pa l i nv es tm en t an d p ro rat a sh are o f th e sa le s p ro ceed s. So uthwe stGeor gi a Fi nanc ia l re qu es te d Co lo ni al ’s con se ntto th e se tt le m en t ag reem en ts . Befo re re cei vi ng a res po ns e fro m Co lo ni al , Em

pi re p ai d e ach of the pa rti ci pa ti ng ba nk s the set tl em en t am ou nt . Em pi re p ai d ato ta l o f $1 ,36 8,1 71 .18 to th e Asb ury Co m m on s p art ic ip at in g b an ks .

5Inex ch an ge forth e p aym en ts , each of t he pa rti ci pa ti ng ba nk s s ig ne d a

se tt le m en t ag reem en t. The pa rti ci pa ti ng ba nk s ag reedto rel eas e “ Em pi re, Em pi re’s s ub si di ari es , off

ic ers , di rect or s, l awy ers , affi li at es , age nt s, i ns ur ers , co nt ract or s, em

pl oyees (e xc ep t Bi ll Osb orne ), se rv an ts , andothe r rep res en ta ti ve s fro m an y an d a ll cla im s . . . ari si ng ou t o f orrel at edto th e act s, o m is si on s, tra ns act io ns , trans fers , hap pe ni ng s, v io lati on s, p ro m is es , con tra ct s, ag reem en ts , fact or s o r si tu at io ns fro m th e b eg in ni ng of t im e . . . in c on ne ct io n wi th th e Part ic ip at io n Ag reem en t. . . .” On Dec em

be r 21 , Col on ia l n ot ifi edSo ut hwe stGeor gi a Fi na nc ia l tha t i t wou ldno t ra is e la ckof c on se ntas ade fen se to co ve rag e fo r th e Asb ury Co m m on s cl ai m s. Ho wev er, i t re se rv edall it s o th er ri gh ts an d d efen se s t o c ov erag e. Inearl y Ja nu ary 20 08 So ut hwe stGeor gi a Fi na nc ia l s en t the Asb ury Co m m on s pa rti ci pa ti ng ba nk s’ set tl em en t ag reem en ts to Co lo ni al an d re qu es te d tha t Co lo ni al pa y th e se tt le m en t am ou nt s. OnJan ua ry 31 , Col on ia l d en ie d c ov erag e co nc lu di ng th atth e se tt le m en t p aym en ts were n ota “ lo ss ” wit hi n the m ean in g o f th e p ol ic y . The po li cy

ex cep ts fro m

th e d efi ni ti on of l os s “ an y pri nc ip al , in te res t o r othe r m on ie s p ai d, ac cru edor due as t he res ul t o f an y lo an , lea se or e xt en si on of c red it .”

6Co lo ni al de te rm in edth atth e p aym en ts to th e p art ic ip at in g b an ks were the ir u np ai d

lo anba lanc es an d d en ie d c ov erag e. B. Set tl em en t Pa ym en ts to Hend ers on Mi ll s Pa rti ci pa ti ng Ban ks InJu ne 20 08 Ban k In de pe nd en t, o ne of t he Hend ers on Mi ll pa rti ci pa ti ng ba nk s, fi le d aco m

pl ai ntag ai ns t Em

pi re i n the Nort he rnDis tri ctof Al ab am a. The co m pl ai ntall eg edth at“ Em

pi re Fi na nc ia l ex pr es sl y

an d a dm it te dl y

bre ach edit s pr om is e to [Ban k In de pe nd en t] th at49 un it s (o r 30 %) inth e co nd om in iu m co nv ers io n p ro

ject wo ul d b e p re-s ol d p rio r to lo an in g m on ey to th e b orro wer.” Ban k In de pe nd en t as se rte d c la im s fo r br each of c on tra ct , m is rep res en tati on , supp res si on , neg li ge nc e, an d b reac h o f fi du ci ary du ty. The fo ll owi ng m on th , Co lo ni al ag reedto de fen d Em pi re s ub ject t o ares erv at io n o f ri gh ts . On Au gu st15 , Em

pi re s ol d the Hend ers on Mi ll pro pe rty for $ 11 ,00 0,0 00 . Em pi re p ai d ato ta l o f $8 47 ,24 1.1 4 i n s et tl em en t p aym en ts to th e Hen de rs on Mi ll pa rti ci pa ti ng ba nk s o th er tha n B an k In de pe nd en t. Als o, wi th th e ex cep ti on of Ban k In de pe nd en t, the pa rti ci pa ti ng ba nk s re le as edall cla im s the y ha d a ga in st Em pi re. InOcto be r, Em

pi re i nf orm edCo lo ni al ab ou t i ts set tl em en t ag reem en ts with the Hend ers onMi ll pa rti ci pa ti ng ba nk s.

7InDecem be r, Em pi re en te redin to a se tt le m en t ag reem en t wi th Ban k In de pe nd en t. Un de r th atag reem en t, Em pi re p ro m is edto pa y

th e b an k $2 07 ,00 0.0 0. InMarc h 2 00 9, Co lo ni al ag reedto pa y $7 1,9 35 .41 of t he set tl em en t am ount . Col on ia l d en ie d c ov erag e fo r th e res t o f th e Hen de rs on Mi ll

3 pa rti ci pa ti ng ba nkset tl em en ts . II. InApri l 2 00 8 S ou th wes t Geo rg iaFin an ci al an d Em pi re fi le d s ui t ag ai ns t Co lo ni al inth e Mi dd le Dis tri ctof Ge or gi a se ek in g d am ag es forbre ach of c on tra ct an d b adfai th de ni al of c ov erag e. InApri l 2 00 9 the pa rti es fil edcro ss m ot io ns for su m m ary jud gm en t. OnSep te m be r 21 , 20 09 , th e d is tri ctco urt g ran te d C ol on ia l’s su m m ary jud gm en t m ot io n a ndde ni edSo ut hwe stGeor gi a Fi na nc ia l an d Em pi re’s. The di st ric t co urt co nc lu de d tha t Em pi re’s p aym en ts to th e p art ic ip at in g b an ks were n ota co ve red“ lo ss ” b ecau se th e p art ic ip at in g b an ks ’ lo ss es res ul te d fr om Zoh ouri’s l ackof l iqui di ty andde fau lton th e lo an s—no t the fai lu re t o c om pl y with the pre -s al e requi rem en ts . III.

Colonial agree d to pay

the settlement amount, less the ba nk’s re maining loa

n principal of 3 $154,330.11, and all attorne y ’s fe es over Empire’s de ductible. 8W e rev ie w de no vo a d is tri ctco urt’s g ran t o f su m m ary jud gm en t an d, “ [i]n so do in g, we m

us t v ie w all ev id en ce an d draw al l re as on ab le in fere nc es infav orof th e n on -m ov in g p arty .” Harri so n v . Ben ch m arkElec s. Hu nt sv il le , Inc ., 59 3 F .3d 12 06 , 12 11 (11 th Cir . 20 10 ). A di st ric t co urt s ho ul d g ran t s umm ary jud gm en t i f

“ th e p le ad in gs , th e d is co ve ry an d the di sc lo su re m at eri al s o n fi le , andan y affi da vi ts sh ow tha t the re i s n o g enui ne is su e as to an y m at eri al factan d tha t the m ov an t i s en ti tl edto jud gm en t as a m at te r of law.” Fe d. R. C iv . P. 56 (c)( 2) . “ W e canaffi rm

[su m m ary] jud gm en t o n a ny leg al gro un d, re ga rd le ss of t he gro un ds ad dr es se d a ndrel ie d upo n b y th e d is tri ctco urt.” Cu dd eb ackv. Fl a. Bd . Of Edu c., 38 1 F .3d12 30 , 12 35 (11 th Cir . 20 04 ). IV. To re so lv e th is di sp ut e, we m us t i nt erp retth e te rm s o f th e D & O Sel ectpl us In su ran ce Po li cy . The p ol ic y ’s th ree i ns ur in g c laus es pro vi de co ve rag e fo r “ lo ss ” res ul ti ng fro m

“ cl ai m s” m ad e dur in g the po li cy pe rio d fo r co ve red“wro ng fu l act [s ]. ” The term s “ lo ss ,” “ cl ai m ,” an d “ wro ng fu l ac t” are d efi ne d i n the po li cy . Sect io n 3 (L) d efi ne s “ lo ss ” as “ an y am ou ntwhi chan y

Ins ur edis leg al ly obl ig at ed to pa y as ares ul t o f a cl ai m , in cl ud in g d am ag es , jud gm en ts , set tl em en ts an d

9de fen se ex pe ns es . . . . ” Thu s, l os s m ean s (1 ) an y am ountwhi chan y

in su redis le ga ll y ob li ga te d t o p ay ; (2 ) as a res ul t o f a cl ai m . The in te rp ret at io n o f th e D & O po li cy pre se nt s a que st io n o f Geo rg ialaw. Und er Geo rg ialaw, “ [a]n i ns ur an ce p ol ic y is go ve rn edby the ord in ary ru le s o f co nt ractco ns tru ct io n.” Ban ks v. Bh d. M ut . Ins . Co., 6 86 S.E.2d87 2, 8 74 (Ga. Ct . App . 20 09 ). Mo reo ve r, “ [t]he word s u se d i n p ol ic ie s o f in su ran ce, as inall othe r co nt ract s, b ear t he ir u su al an d c omm on si gn ifi can ce, an d p ol ic ie s o f in su ran ce ar e, as inall othe r co nt ract s, t o b e co ns tru edinth ei r or di nary m ean in g.” Lawy ers Tit le In s. Co rp . v. Gri ffi n, 6 91 S.E.2d63 3, 6 36 (Ga. Ct . App . 20 10 ) (quo tati on m ark s om itte d) . Eve n i f we as su m e th atEm pi re m ad e a “ cl ai m ” fo r a “ wro ng fu l ac t,” Em pi re ha s fa il edto est ab li sh a “ lo ss ” an d i s n oten ti tl edto co ve rag e und er the po li cy . As we ha ve alr eady

di sc us se d, the po li cy

ex cep ts fro m

th e d efi ni ti on of “ lo ss ” (7 ) an y pr in ci pa l, i nt eres t o r ot he r m on ie s p ai d, ac cru edor due as t he res ul t o f an y lo an , le as e o r ex te ns io n o f cre di t. . . .” Em pi re co nt en ds th atth e lo ss ex cep ti on do es no t ap pl y be cau se itdi d n otm ak e lo an s o r ex te ndcred itto th e p art ic ip at in g b an ks . Mo reo ve r, itarg ue s tha t the set tl em en t p aym en ts were n ot“pr in ci pa l, i nt eres t o r ot he r m on ie s p ai d . . . as t he res ul t o f” the Asb ury Co m m on s an d Hen de rs on Mi ll

10lo an s b ecau se th e se tt le m en t p aym en ts were n otm ad e unt il aft er the pro pe rti es

were fo recl os edup on an d tho se lo an s wer e ex ti ng ui sh ed . Co nt rary to Em

pi re’s arg um en t, i ts pa ym en ts to th e p art ic ip at in g b an ks fal l withi n the lo ss ex cep ti on . The p art ic ip at in g b an ks pu rch as edanun di vi de d own ers hi p i nt eres t i n the Asb ury Co m m on s o r Hen de rs on Mi ll lo an s. Th e pa rti ci pa ti ng ba nk s’ fun ds supp li edth e p rin ci pa l o n the lo an s. Fo r it s o wne rs hi p in te res t, ea chpa rti ci pa ti ng ba nkwas e nt it le d t o re cei ve it s p ro rat a sh are o f th e m on th ly loan p aym en ts , les s thr ee-e ig ht hs of o ne pe rcen t o f th e th en -ap pl ic ab le in te res t ra te on th e lo an s. Inset tl em en t, Em pi re p ai d e ach of t he pa rti ci pa ti ng ba nk s the di ffer en ce b etweenit s i nv es tm en t an d i ts pro rat a sh are o f th e p ro ceed s fro m sel li ng th e Asb ury

Co m m on s an d Hen de rs on Mi ll pro pe rti es . Tho se fun ds rep res en te d m on ey

to whi chth e p art ic ip at in g b an ks were en ti tl ed“ as th e res ul t o f” th e Asb ury

Co m m on s o r Hen de rs on Mi ll lo an s. Hadno de fau ltoc cu rred , th e pa rti ci pa ti ng ba nk s wo ul d h av e rec ei ve d tho se fun ds fro m th ei r sh are o f th e m on th ly loan p aym en ts . Bas edup onth is , we con cl ud e th atth e p aym en ts for whi chEm

pi re i s s eek in g i nd em

ni fic at io n a re “pr in ci pa l, i nt eres t, o r ot he r m on ie s pa id , accru edor due as the res ul t o f an y lo an ” an d thu s ex cep te d fr om th e de fin it io n o f lo ss .

11W e rejectEm pi re’s as se rti on th atth e ex cep ti ondo es no t ap pl y be cau se Em pi re d idno t p ro vi de a lo anto th e p art ic ip at in g b an ks . The ex cep ti on rem ov es fro m th e d efi ni ti on of l os s “ an y pri nc ip al , in te res t o r ot he r m on ie s p ai d, ac cru edor du e as th e res ul t o f an

y lo an , lea se or e xt en si onof c red it .” See Pr ic e v . Tim e, In c., 41 6 F .3d13 27 , 13 36 (11 th Cir . 20 05 ) (“ The Uni te d S ta te s Supr em e Co urt an d thi s Co urt h av e rec og ni zedon m an y oc cas io ns th atth e wor d ‘an y ’ is a po werfu l an d br oa d wo rd , andth atitdo es no t m ean‘ so m e’ or ‘all bu t a f ew,’ bu t i ns te adm ean s ‘all.’ ”). To acc ep t Em

pi re’s co ns tru ct io n, we wo ul d h av e to re-wri te th e p ol ic y to in cl ud e th e p hr as e “by the Co m pa ny” at the en d o f th e ex cep ti on . Thatwe can no t do . See Ga. Farm

BureauMu t. In s. Co . v. Co le m an , 17 4 S .E.2d35 1, 3 52 (Ga. Ct . App . 19 70 ) (n ot in g tha t a c ou rt c an no t re -wri te anin suran ce p ol ic y an d m ak e a ne w con tra ctfor

th e p art ie s) . Our co nc lu si on th atth e ex cep ti on is no t l im it edto lo an s o r ex te ns io ns of c red itm ad e b y th e in su redis rei nf

or cedby the de fin it io n o f le nd ers ’ li ab il ity

cla im , whi chis de fin edas “ a d em an d o r pr oc eed in g . . . fora wro ng fu l ac t co nc ern in g an e xt en si on byth e Co mpa ny of cred it , an a ctua l o r al le ge d fa il ur e o r refu sa l byth e Co mpa nyto ex te ndcred it ; o r anactua l o r al le ge d ag reem en t byth e Co mpa nyto ex te ndcred it .” (em ph as is ad de d) . If th e lo ss ex cep ti on were i nt en de d t o b e si m il arl y na rro w, itwou ldsay so . W e al so reject

12Em

pi re’s as se rti on th atth e ex cl us io n d oe s n otap pl y be cau se th e p aym en ts were m ad e aft er the Asb ury

Co m m on s an d Hen de rs on Mi ll lo an s wer e ex ti ng ui sh ed . The ex cep ti on pro vi de s s im pl y “ as a res ul t o f an y

lo an .” Bec au se th e D & O po li cy ’s in su rin g c laus es on ly pro vi de co ve rag e fo r

“ lo ss ” an d we c on cl ud e th atno ne oc cu rred , we affi rm th e d is tri ctco urt’s g ran t o f su m m ary jud gm en t i n favo r of Co lo ni al . AFFIRMED.

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