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TRAVELERS INDEM. CO. v. STEDMAN

August 16, 1995

THE TRAVELERS INDEMNITY COMPANY, Plaintiff,
v.
NANCY STEDMAN, et al., Defendants.



The opinion of the court was delivered by: LOWELL A. REED, JR.

 August 16, 1995

 MEMORANDUM

 Currently pending before this Court is the motion by defendant Main Line Federal Savings Bank ("Main Line") for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c) or for partial summary judgment pursuant to Fed. R. Civ. P. 56(b) on the crossclaim filed by codefendant Merrill, Lynch, Pierce, Fenner & Smith ("Merrill Lynch"). In dispute is the ultimate liability for pecuniary losses incurred by plaintiff The Travelers Indemnity Company ("Travelers") when defendants Main Line, as depositary and collecting bank, and Merrill Lynch, as drawee bank, honored seventeen checks unlawfully drawn on the account of the American Lung Association by codefendant Nancy Stedman. In their answers to Travelers' complaint, both Merrill Lynch and Main Line asserted crossclaims for contribution and/or indemnity against each other. In addition, Merrill Lynch advanced a claim for breach of presentment warranties against Main Line pursuant to 13 Pa. Cons. Stat. Ann. § 3417. The instant motion by Main Line seeks judgment in its favor with regard to twelve of the seventeen checks. Merrill Lynch concedes that Main Line is entitled to judgment on the pleadings with regard to the six checks that were neither deposited nor cashed at Main Line, but Merrill Lynch argues that Main Line is not entitled to judgment on the pleadings with regard to the other six checks at issue.

 This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332 as the parties are of diverse citizenship and the amount in controversy exceeds $ 50,000, exclusive of interest and costs. For the reasons set forth below, the motion of Main Line for judgment on the pleadings will be granted in part, and denied in part.

 I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

 In November 1988, plaintiff Travelers issued a comprehensive crime insurance policy to the American Lung Association (the "ALA"), thereby insuring the ALA against financial losses due to employee fraud or dishonesty. Shortly thereafter, in October of 1989, the ALA hired defendant Nancy Stedman as the Director of Bureau Affairs. In her capacity as Director of Bureau Affairs, Stedman possessed the authority to draw checks on a Working Capital Management Account (the "WCMA"), an account established by the ALA with defendant Merrill Lynch for the sole purpose of paying the ALA's operating expenses. The parties dispute whether the ALA's contract of deposit with Merrill Lynch required that each check drawn on the WCMA have two authorized signatures, but this factual issue is not relevant to the instant motion.

 Merrill Lynch and Main Line agree that the seventeen checks misappropriated by Stedman can be divided into three groups based on the combination of forged or unauthorized maker and payee signatures. Group One is comprised of six checks totalling $ 5,343.00, each bearing a forged co-signatory's signature, or co-maker's signature, and forged indorsements. Main Line and Merrill Lynch agree that the Group One checks were neither deposited at nor cashed by defendant Main Line. See Main Line's memorandum in support of judgment on the pleadings at 2 ("Support memorandum"); Merrill Lynch's memorandum in opposition to judgment on the pleadings at 1-2 ("Opposition memorandum"). Group Two is comprised of six checks totalling $ 85,241.01, each payable to either "American Lung Association" or "American Lung Association/Stedman." Each Group Two check bore two forged maker's signatures and at least one forged indorsement. All Group Two checks were accepted for deposit into the personal checking account of Stedman by Main Line, and subsequently presented to and honored by Merrill Lynch. Finally, Group Three is comprised of five checks totalling $ 39,030.22, each payable to "American Lung Association" and bearing only a forged indorsement.

 On October 13, 1994, Travelers filed an amended complaint to which defendant Main Line responded with a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6). By an Order of this Court dated December 7, 1994, this motion was granted, and Main Line remained in this action only by virtue of the crossclaim for contribution and/or indemnity and breach of presentment warranties asserted by Merrill Lynch. Main Line has now filed the instant motion seeking either judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c), or partial summary judgment pursuant to Fed. R. Civ. P. 56(b) against Merrill Lynch on the latter's crossclaim in relation to the Group One and Group Two checks. Merrill Lynch concedes that Main Line is entitled to judgment on the pleadings with regard to the Group One checks because it is undisputed that Main Line neither cashed these checks nor accepted them for deposit. Opposition memorandum at 2. Merrill Lynch contends, however, that genuine issues of fact remain concerning the Group Two checks. Id. The Group Three checks are not the subject of the instant motion.

 II. DISCUSSION

 A. Standard For Judgment On The Pleadings

 Main Line has filed the instant motion for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c) or for partial summary judgment pursuant to Fed. R. Civ. P. 56(b). Rule 12(c) provides that "after the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). Rule 12(c) provides further that "if ... matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56." Id. The only matters outside the pleadings introduced by either party is the admission by Merrill Lynch that the Group One checks were neither cashed nor deposited at Main Line. As Merrill Lynch concedes that Main Line is entitled to judgment on the pleadings with regard to the Group One checks, it is unnecessary for the Court to consider this admission. Therefore, this Court will treat the instant motion solely as one for judgment on the pleadings pursuant to Rule 12(c).

 In deciding a Rule 12(c) motion, a district court must view the facts and inferences to be drawn from the pleadings in the light most favorable to the non-moving party. Janney Montgomery Scott, Inc. v. Shepard Niles, Inc., 11 F.3d 399, 406 (3d Cir. 1993). Judgment pursuant to Rule 12(c) will only be granted if it is clearly established that no material issue of fact remains to be resolved and that the movant is entitled to judgment as a matter of law. Jablonski v. Pan American World Airways, 863 F.2d 289, 290 (3d Cir. 1988). In essence, this Court may not grant Main Line's motion for judgment on the pleadings unless it appears beyond doubt that Merrill Lynch ...


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