Opinions of the United
2005 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


7-5-2005

Lusitania Sav Bank v. Progressive Cslty
Precedential or Non-Precedential: Non-Precedential

Docket No. 04-3503




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                                                         NOT PRECEDENTIAL

                  IN THE UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT
                              _______________

                                     No. 04-3503
                                  ________________

                         LUSITANIA SAVINGS BANK, FSB,
                                         Appellant
                                      v.


               PROGRESSIVE CASUALTY INSURANCE COMPANY

                      ____________________________________

                    On Appeal From the United States District Court
                             For the District of New Jersey
                                (D.C. No. 03-cv-02902)
                    Magistrate Judge: Honorable Susan D. Wigenton
                    _______________________________________

                      Submitted Under Third Circuit LAR 34.1(a)
                                June 30, 2005
              Before: RENDELL, BARRY and BECKER, Circuit Judges


                                  (Filed July 5, 2005)


                              _______________________

                                     OPINION
                              _______________________

BECKER, Circuit Judge.

      This is an insurance coverage dispute over a false endorsement on a check. It is a

rather bizarre case. A non-party malefactor acquired a check made out to a company, set
up her own company with the same name, endorsed the check with her company’s name

and her own signature, and deposited the check. Lusitania, the bank in which she

deposited the check, tried to recover the check’s amount from Progressive, which insures

it against, among other things, forgery. Progressive defended on the grounds that this case

does not involve “forgery” as that term is defined in the policy, because the thief endorsed

the check with her real name and the real name of her own company. The District Court

granted summary judgment for Progressive. We affirm.

                            I. Facts and Procedural History

                                       A. The Check

       One Theresa Leuzzi somehow obtained a check from Nike, Inc., in the amount of

$198,124.00, payable to “TCS America, 101 Park Avenue, 26th Floor, New York, NY

10178.” TCS is a corporation that did some consulting work for Nike; Leuzzi had no

connection with TCS. The check was drawn on Wachovia Bank. Leuzzi decided to cash

the check. To do so, she filed a Business Name Certificate with the clerk of Hudson

County, NJ, stating that she conducting a “sport clothing” business under the name

“T.C.S. America.” The certificate listed T.C.S.’s address as “231 Kearny Av., Kearny, NJ

07071.”

       Leuzzi then went to the Newark branch of the Lusitania Savings Bank and opened

an account in the name of T.C.S. America. As required under Lusitania policies, she

presented the Business Name Certificate, as well as her own personal identification



                                             2
documents (passport and naturalization certificate). She successfully opened an account

and, several days later, returned to the branch to deposit the check. To do so, she endorsed

it as follows:

       Deposit only: TCS
       [Leuzzi’s signature]1
       010015743
       014015744

The numbers in the endorsement are “T.C.S. America”’s (Leuzzi’s company) checking

account numbers. On subsequent visits to the Lusitania branch, she issued $59,801 in

checks on the account; she also issued checks for the remaining value of the account

while not present at the branch.

       The real TCS America eventually realized that it had not been paid, and inquired

of Nike, which inquired of Wachovia. Wachovia reimbursed Nike and brought suit,

which led to a settlement between Wachovia and Lusitania under which Lusitania paid

Wachovia $198,124, the face value of the check, without interest or attorneys’ fees. No

money seems to have been recovered from Leuzzi.

                                   B. The Bond Agreement

       Lusitania maintained an insurance agreement with Progressive. This agreement is

known as a “financial institution bond,” “bankers’ blanket bond,” or “fidelity bond,”

which insures a bank against losses caused by embezzlement, forgery, and similar acts.



  1
   While Leuzzi’s signature is not especially legible, it is concededly the same as the
signature on the “T.C.S. America” account’s signature card.

                                             3
Insuring Agreement (D) of the fidelity bond, titled “Forgery or Alteration,” covers

Lusitania for “Loss resulting directly from (1) Forgery or alteration of, on or in any

Negotiable Instrument (except an Evidence of Debt), Acceptance, Withdrawal Order,

receipt for the withdrawal of Property, Certificate of Deposit or Letter of Credit.”

       Section 1(i) of the Definitions part of the fidelity bond, in turn, defines forgery as

follows:

       Forgery means the signing of the name of another person or organization
       with intent to deceive; it does not mean a signature which consists in whole
       or in part of one’s own name signed with or without authority, in any
       capacity, for any purpose.

A rider provides coverage for court costs and attorneys’ fees incurred by Lusitania in

defending any claim “which, if established against [Lusitania], would constitute a valid

and collectible loss under this bond.”

                                         C. This Suit

       Lusitania claimed coverage for the Nike/TCS check under Insuring Agreement

(D), arguing that the endorsement in the name of TCS constituted forgery. Progressive

agreed to provide coverage for the $59,801 in checks on the T.C.S. America account that

Leuzzi issued at the bank. This loss fell under Insuring Agreement (B), under which

Progressive indemnified Lusitania for larceny committed on the bank’s premises.

Progressive therefore paid $34,801, the covered amount minus a $25,000 deductible. But

Progressive refused to pay for the approximately $138,000 that Lusitania lost to checks

issued by Leuzzi while not physically present at the branch. It also refused to pay

                                              4
Lusitania’s costs of litigating against Wachovia.

       Lusitania then brought suit in a New Jersey court, and Progressive removed to the

District of New Jersey. The parties filed cross-briefs for summary judgment, and

Magistrate Judge Wigenton granted summary judgment to Progressive on July 30, 2004.

She found that, because Leuzzi had signed her own name on the check, her endorsement

did not constitute a forgery under the bond agreement’s definition of the term, and

therefore that there was no coverage. Lusitania timely appealed to this Court.2

                                        II. Analysis

       The only question in this appeal is whether Leuzzi’s endorsement of the Nike

check constituted “forgery” within the meaning of the fidelity bond agreement. If it was

forgery, then Progressive must indemnify Lusitania for the entire amount of the loss

stemming from that check, including attorneys’ fees. If it was not forgery, then

Progressive is not liable to Lusitania under Insuring Agreement (D), and does not owe

any additional money.

                                A. Leuzzi’s Own Signature

       Magistrate Judge Wigenton found that Leuzzi’s endorsement did not constitute

forgery because it included her own signature. Leuzzi signed the check with her own



 2
   The District Court had diversity jurisdiction under 28 U.S.C. § 1332(a). New Jersey
law applies. We have appellate jurisdiction under 28 U.S.C. § 1291. In reviewing a
District Court’s (or Magistrate Judge’s) grant of summary judgment, this Court exercises
plenary review over rulings of law, and may reject factual findings only if they are clearly
erroneous.

                                             5
name, and the policy defines forgery to mean “the signing of the name of another person

or organization with intent to deceive,” but not “a signature which consists in whole or in

part of one’s own name signed with or without authority, in any capacity, for any

purpose.” As the endorsement here consists in part of Leuzzi’s own name, it was not a

forgery.

       Lusitania argues, however, that the endorsement on the check read only “Deposit

only TCS.” Leuzzi’s own signature was not part of the endorsement; rather, it was

required only as part of the bank’s operating procedures, which mandate that a person

affixing a corporate endorsement sign her own name in order to identify herself. We

recognize the appeal of this argument: Progressive is responsible for losses “resulting

directly from” forgery; if Leuzzi’s signature did not cause the loss, then the fact that it is

her real signature would not excuse Progressive from paying.

       But we think that Leuzzi’s signature was part of the endorsement of the check. The

New Jersey Uniform Commercial Code (UCC) defines endorsement as follows:

       “Indorsement” means a signature . . . that alone or accompanied by other
       words is made on an instrument for the purpose of negotiating the
       instrument, restricting payment of the instrument, or incurring endorser’s
       liability on the instrument, but regardless of the intent of the signer, a
       signature and its accompanying words is an endorsement unless the
       accompanying words, terms of the instrument, place of the signature, or
       other circumstances unambiguously indicate that the signature was made for
       a purpose other than endorsement.

N.J. Stat. Ann. § 12A:3-204(a) (emphasis added). The emphasized language suggests that

all accompanying words constitute part of the endorsement—including Leuzzi’s

                                               6
signature, which certainly accompanied her endorsement as TCS, and which she and

Lusitania both viewed as essential to negotiating the check.3

       Because the policy defines forgery to exclude “a signature which consists in whole

or in part of one’s own name signed with or without authority, in any capacity, for any

purpose,” and because the endorsement on this check consisted in part of Leuzzi’s own

name, Lusitania’s losses did not result from “forgery,” and so are not covered.

                              B. The Signature for “T.C.S.”

       Progressive also argues that Leuzzi’s endorsement as “TCS” was not a forgery,

because it was the name of her own business. Although the Magistrate Judge did not

address this argument, we agree that it provides an alternative reason to affirm.

       While “T.C.S. America,” Leuzzi’s company, had no actual operations, it does

seem to have had a real legal existence. Leuzzi filled out a Business Name Certificate for

T.C.S., with her true name and address listed as the proprietor; the Certificate was

properly signed, notarized, and filed with the Hudson County Clerk. See N.J. Stat. Ann.

§ 56:1-1. The business certainly had a real bank account at Lusitania, with a properly

completed account opening and with Leuzzi as an authorized signer. Thus, because

Leuzzi signed T.C.S.’s real name and deposited the money to T.C.S.’s own bank account,

the signature was not a forgery. See Alpine State Bank v. Ohio Cas. Ins. Co., 

(7th Cir. 1991).

 3
  Lusitania admits that its policies require agents to sign their own names when
endorsing checks on behalf of business accounts. (See Br. of Appellants 13.)

                                             7
       We concede that Leuzzi did not exactly endorse the check as “T.C.S.

America”—she endorsed it as “TCS,” which is closer to the name of the defrauded

company (in that it omitted the periods in the name). The UCC, however, considers a

signature to be an endorsement if it is in a name “substantially similar to that of the

payee.” N.J. Stat. Ann. § 12A:3-404(c). And Lusitania clearly took the “TCS”

endorsement to refer to “T.C.S. America” (Leuzzi’s company), since it deposited the

check into that company’s account. Indeed, Leuzzi wrote “T.C.S. America”’s account

numbers under the endorsement, thus making it very clear on whose behalf she endorsed

the check.4

                                      III. Conclusion

       Leuzzi endorsed the check with the true name of her own business, her own true

signature, and her own true account numbers. Under the definition in Lusitania’s fidelity

bond, this endorsement was not a forgery, and Lusitania is not entitled to coverage. We

will therefore affirm the judgment of the District Court.




 4
   Lusitania could have avoided the fraud perpetrated by Leuzzi if it had noticed that the
address given on “T.C.S. America’s” account documents and Business Name Certificate
did not match that printed on the front of Nike’s check to the real TCS America.

                                              8