Court Opinion

ID: 8935349
Source: CourtListenerOpinion
Date Created: 2022-11-27 07:27:43.126235+00
Date Added: 2024-06-11T17:09:36.792640
License: Public Domain

BRIGHT, Senior Circuit Judge,
concurring in part and dissenting in part.
I concur in Judge Arnold’s excellent opinion sustaining the judgment in favor of Merrill Lynch against the FNB. I also agree that the judgment against FNB and Comex should be joint and several. I cannot agree, however, with the modification of the district court’s judgment to deny FNB complete indemnity from Comex, which authored this financial fiasco through its check-kiting scheme.
The Arkansas Supreme Court has stated that “ * * * the doctrine of indemnity is based upon the equitable principles of restitution which permit one who is compelled to pay money, which in justice ought to be paid by another, to recover sums so paid unless the payor is barred by the wrongful nature of his own conduct.” Coleman v. Texaco, Inc., 286 Ark. 14, 16, 688 S.W.2d 741, 743 (1985) (quoting Larson Machine, Inc. v. Wallace, 268 Ark. 192, 600 S.W.2d 1 (1980)). The majority concludes that FNB cannot seek indemnity from Comex because FNB was an intentional tortfeasor as against Merrill Lynch, and therefore, is “barred by the wrongful nature of [its] own conduct.” This conclusion misconstrues the equitable principles underlying the doctrine of indemnity as applied by Arkansas courts.
As observed by the Arkansas Supreme Court, the doctrine of indemnity rests on the concept of restitution, which regards a tort-feasor as unjustly enriched when another discharges liability that, in all justice, it should bear complete responsibility for paying. See Restatement (Second) of Torts § 886B(1) and comment c (1977). Analysis of indemnity cases from Arkansas and other jurisdictions reveal that courts grant or deny indemnity based on the equities of each case.
*920The unexpressed premise [of these cases] has been that indemnity should be granted in any factual situation in which, as between the parties themselves, it is just and fair that the indemnitor should bear the total responsibility, rather than to leave it on the indemnitee or to divide it proportionately between the parties by contribution.
Restatement (Second) of Torts § 886B comment c (1977); see also W. Prosser, Law of Torts 313 (4th ed. 1971).
The district court held that, as between FNB and Comex, it was fair and just for Comex to bear the burden of indemnifying FNB for all sums paid to Merrill Lynch. The facts more than amply support the district court’s conclusion. By the time it detected Comex’s kite, the FNB held an uncollected balance in its Comex account of over $1,000,000. By delaying notification to Merrill Lynch of the suspected kite, FNB allowed Comex to cover that amount with funds drawn on Merrill Lynch. The delay thus shifted the loss from FNB to Merrill Lynch, with this lawsuit shifting it back to FNB. At all times, however, Co-mex was obligated to make good the fraudulently issued (kited) checks that form the basis of this loss. For example, that the FNB incurred liability to Merrill Lynch does not change the obligation of Comex as the drawer of checks on a NSF (non-sufficient funds) account in the Worthen Bank. If FNB is not permitted complete indemnity from Comex, Comex will be unjustly enriched by being able to forever avoid paying in full for the benefits it received in perpetuating its fraud, and as. so succinctly put by the district court, FNB “once again becomes the ‘victim’ of [Comex’s] tortious conduct.”
Therefore, the equitable principles of restitution that underlie the doctrine of indemnity in Arkansas demand that Comex indemnify FNB for all sums paid to Merrill Lynch. I would thus affirm the district court’s decision granting indemnity in light of the clear absence of any abuse of discretion. Cf. Kapp v. Bob Sullivan Chevrolet Co., 234 Ark. 395, 353 S.W.2d 5, 9 (1962) (trial court’s decision to grant contribution cannot be reversed absent an abuse of discretion).