Court Opinion

ID: 9466062
Source: CourtListenerOpinion
Date Created: 2023-08-05 01:04:35.966192+00
Date Added: 2024-06-11T17:39:31.677630
License: Public Domain

LUMBARD, Circuit Judge
(concurring):
Decision in this appeal turns upon whether unauthorized but otherwise genuine signatures are “forgeries” under New York law. In this diversity action, the brokerage firm of Filor, Bullard & Smyth [Filor] seeks to recover from its insurer, Insurance Company of North America [INA], losses Filor suffered when Douglas Schotte, formerly President of Eatontown National Bank, wrote fourteen unauthorized cashier’s checks to the order of Filor. Using the funds so obtained, Schotte began trading in securities for his own personal benefit, falsely representing to Filor that he was trading on behalf of unidentified customers of the bank. The parties agree that New York law governs this case. Appellant Filor claims that Schotte “forged” the checks within the present meaning of New York law, and that INA must therefore recompense Filor for the losses incurred, inasmuch as Filor’s contract with INA protects against “loss through forgery.” Alternatively, Filor seeks to show that the meaning of the word “forgery” as used in its insurance bond is ambiguous and must therefore be construed against the insurer. Since we all agree that recent developments in New York law have rendered the scope of the term “forgery” ambiguous with respect to Schotte’s defalcations, and that appellant Filor is therefore entitled to recover on its insurance bond, we need not anticipate the New York courts on an unsettled question of New York law.
To be sure, at one time New York law seemed relatively clear on this point. In Fitzgibbons Boiler Co. v. Employers’ Liability Assurance Co., 105 F.2d 893 (2d Cir. 1939), this court held that unauthorized action by a corporate officer in signing a corporate check was not forgery, so long as the officer’s signature was genuine. In so holding, this court attempted to state New York law as it then existed. But New York law on this point has since changed.
In 1967 New York revised its statutory definition of forgery to include writings unauthentic because not authorized. New York Penal Law § 170.00(4]. In framing this revision, the New York legislature followed the approach adopted by the Model Penal Code. Compare ALI, Model Penal Code § 224.1 (Proposed Official Draft 1962). The commentary to the Model Penal Code makes explicit the drafters’ determination to overrule Fitzgibbons. ALI, Model Penal Code, Commentary to § 223.1, 83 n. 18 (Tent. Draft No. 11, 1960). Thus Fitzgibbons is no longer consistent with New York statutory law.
New York case law has also departed from the view articulated in Fitzgibbons. Although New York case law is by no means conclusive on the question whether unauthorized but otherwise genuine signatures are forgeries, dictum in People v. Dairylea (Sup.Ct. Albany Co., 1975), aff’d, 52 App.Div.2d 1004, 383 N.Y.S.2d 877 (3d Dept. 1976), follows the Model Penal Code view. Courts in California, Michigan, and Illinois, furthermore, favor including malefactions such as Schotte’s within the scope of forgery. See, e. g., People v. Young, 19 Ill. App.3d 455, 311 N.E.2d 609 (1974).
That these developments in statutory and case law have rendered the term “forgery” ambiguous as used in Filor’s insurance bond is by itself sufficient to require reversal of the court below and judgment for appellant *605Filor. As with the drafter of any contract, the insurer pays the price of ambiguity. See Pan American World Airways, Inc. v. Aetna Casualty & Surety Co., 505 F.2d 989, 999-1000 (2d Cir. 1974); Lachs v. Fidelity & Casualty Co. of New York, 306 N.Y. 357, 365-66, 118 N.E.2d 555, 559 (1954). Under New York law, the term “forgery” is at least ambiguous enough to encompass genuine but unauthorized signatures. INA, moreover, was undoubtedly aware of the ambiguity in its agreement with Filor, see, e.g., Maurice, Recent Developments in Claims Under Blanket Bonds, 1965 Proc. ABA Ins. Section, at 27, and could easily have avoided any uncertainty by inserting clarifying language in the bond which it drafted.
Having found the meaning of the term “forgery” ambiguous under New York law, we need not — and should not — hazard a prediction of what the New York courts will do when and if they reach this issue. When a case may be decided on other grounds, federal-state comity requires that federal courts refrain from unnecessarily anticipating state court decisions.