Court Opinion

ID: 5883692
Source: CourtListenerOpinion
Date Created: 2022-01-13 02:25:03.337182+00
Date Added: 2024-06-11T08:45:05.989705
License: Public Domain

Sandler, J. (dissenting in part).
I agree with that part of the court’s opinion, and for the reasons stated, that finds those documents on which an unauthorized stamped signature appeared to be "forged as to signature”, and also "counterfeited”, within the meaning of the relevant language in insuring agreement (E) of the bankers blanket bond. I do not agree with that part of the court’s opinion which concludes that, wholly without regard to the stamped signatures, the docu*94ments were "counterfeited” within the meaning of paragraph (E) of the insuring agreement, a conclusion that inexplicably departs from what may fairly be considered the well-established judicial construction. Since there may be transactions involving documents on which the stamped signatures did not appear, the issue has legal significance with regard to the determination of the motion to strike the fourth, fifth and sixth affirmative defenses, and therefore, requires discussion.
Disagreeing with what is indisputably the overwhelming weight of authority, the court majority now holds that the word "counterfeited” as used in the insuring agreement in fact means fraudulent or fictitious and embraces any apparently authentic instrument which purports to describe a transaction that did not in fact take place. Even if viewed as a matter of first impression, this construction would seem untenable, since the usual accepted meaning of the term "counterfeited” simply does not mean fraudulent or fictitious, and it is difficult to believe that experienced business people would have understood from the word "counterfeited” that they had secured insurance protection with regard to every transaction in which money was paid out on the basis of a document that purported to describe a transaction that never occurred. Considered in light of the well-established judicial interpretation in effect at the time the blanket bond here was entered into, the court’s conclusion is not easy to understand.
In Exchange Natl. Bank of Olean v Insurance Co. of N. Am. (341 F2d 673, cert denied 382 US 816) the Second Circuit (per Marshall, J.) set forth, in 1965, what has become uniformly accepted as the correct construction of the term "counterfeited” as used in the instrument with which we are concerned. The court said (at p 676): "A document or writing is counterfeit if it is an imitation, if it attempts to simulate another document or writing which is authentic. The deceptive and fraudulent quality of these invoices, however, arose, not from the effort to imitate or simulate authentic invoices, but from falsity of the implicit and explicit representations of fact, to wit, that certain goods had already been shipped to a customer. To hold that these invoices are counterfeit would obliterate elementary distinctions among the techniques of deception. These distinctions are recognized in ordinary and commercial usage and they are preserved in the bond.”
In the 21 years that have passed since the Olean decision (supra), every court to address the issue, including the Fourth Department in this State, has adopted the Olean construction. *95(See, e.g., State Bank v Hanover Ins. Co., 49 Misc 2d 341, affd 25 AD2d 618; Richland Trust Co. v Federal Ins. Co., 494 F2d 641; Whitney Natl. Bank v Transamerica Ins. Co., 476 F2d 632; Capitol Bank v Fidelity & Cas. Co., 414 F2d 986; Liberty Natl. Bank v Aetna Life & Cas. Co., 568 F Supp 860, 864; Hinkson v Fireman’s Fund Ins. Co., 84 Cal App 3d 232, 146 Cal Rptr 669.)
It is misleading to suggest that this court is confronted with a division of judicial authority between one group of cases taking the "restrictive” view (presumably bad) and another group following the more "expansive” interpretation (presumably good). The three decisions referred to in the court’s opinion as supporting the "expansive” view were decided before (then) Judge Thurgood Marshall’s decision in Olean (supra). The court’s opinion fails to cite a single decision since Olean that interprets the word "counterfeited” in the standard bond in accordance with the interpretation here advanced.
The court’s opinion relies in large part on this court’s earlier decision in Prudential Capital Corp. v Royal Indem. Co. (21 AD2d 664) a case decided prior to the Olean decision and the judicial consensus on the issue that thereafter developed. Notably, this court’s memorandum opinion in Prudential Capital Corp. (supra), relied in turn on Fidelity Trust Co. v American Sur. Co. (268 F2d 805), a Third Circuit decision that was explicitly overruled by that court in Whitney Natl. Bank v Transamerica Ins. Co. (476 F2d 632, supra). Reviewing the overwhelming authority that had developed subsequent to its prior decision, the Third Circuit concluded (at p 635): "The cited cases constitute impressive authority contrary to our earlier decision. We are persuaded that they are soundly reasoned. Accordingly, we no longer will follow Fidelity Trust Co. v. American Surety Co.”
I would have thought that the definition of the word "counterfeited” introduced in the revision of the blanket bond in 1969 eliminated any possible doubt as to the construction of that term. When that definition is read in light of the body of judicial authority at the time the definition was introduced, it seems to me clear beyond any possible doubt that its intent was to incorporate explicitly the interpretation that had been adopted by the Second Circuit in Olean (supra). (See, Hinkson v Fireman’s Fund Ins. Co., supra, at pp 671-672; Liberty Natl. Bank v Aetna Life & Cas. Co., supra, at p 864, n 3.) I think it untenable to suppose that the insurance industry added the *96definition of the word "counterfeited” in the revision of the standard bond in 1969 in order to overthrow the interpretation of that word established in Olean and the later decisions, and in a curious effort to expand substantially its liability under the bond.
In light of the foregoing analysis, and the fact that there may be some transactions involving documents that were not forged, it would be erroneous at this time to strike the fourth, fifth and sixth affirmative defenses.
Accordingly, the order of the Supreme Court, New York County (Alvin F. Klein, J.), entered on May 6, 1985, which denied defendant’s motion for summary judgment, denied plaintiff’s cross motion to dismiss the fourth, fifth and sixth affirmative defenses, and granted plaintiff’s cross motion to dismiss the seventh affirmative defense, should be affirmed.
Kupferman, J. P., and Ross, J., concur with Milonas, J.; Sandler and Asch, JJ., dissent in part in an opinion by Sandler, J.
Order, Supreme Court, New York County, entered on May 6, 1985, modified, on the law, to the extent of granting plaintiff’s cross motion to dismiss the fourth, fifth and sixth affirmative defenses, and otherwise affirmed, without costs and without disbursements.