FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver for PARK NATIONAL BANK, Plaintiff Appellee,
RLI INSURANCE COMPANY, Defendant Appellant
Argued January 23, 2015
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 12 C 3790. Milton I. Shadur, Judge.
For FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver for PARK NATIONAL BANK, Plaintiff - Appellee: Joseph Brooks, Attorney, Federal Deposit Insurance Corporation, Legal Division, Appellate Litigation Unit, Arlington, VA; Debra Devassy Babu, Attorney, Askounis & Darcy, P.C., Chicago, IL.
For Rli Insurance Company, Defendant - Appellant: Scott L. Schmookler, Attorney, Gordon & Rees Llp, Chicago, IL.
Before WOOD, Chief Judge, and KANNE and TINDER, Circuit Judges.
Wood, Chief Judge
In 2001, representatives from the Moody Bible Institute of Chicago and a company called Sysix Financial signed a master lease agreement. The document laid the groundwork for future leases of equipment from Sysix to Moody. Seven years later, in 2008, two lease schedules for various computer items were executed; they appeared to have been signed by Moody's vice president and Sysix's president. Sysix assigned its end of both leases to another company, Rockwell Financial Group, which in turn acquired loans from Park National Bank (PNB) to finance the two individual leases between Sysix and Moody. PNB procured indemnification coverage for its loans to Rockwell from RLI Insurance Company in the form of a financial institution bond. There was, however, a problem at the heart of these transactions: Sysix's president had forged the signature of Moody's vice president on each of the two lease schedules. Moody never agreed to either schedule nor did it ever receive any of the promised equipment.
PNB notified RLI of its potential loss under the bond RLI had issued, but PNB itself soon went under. Acting as receiver for PNB, the Federal Deposit Insurance Corporation (FDIC) sued RLI in federal court, arguing that the language of the bond obligated RLI to indemnify PNB (and thus FDIC) for its losses related to the forgeries on the lease schedules. Eventually the district court granted summary judgment in FDIC's favor. Because we agree with the district court that the plain language of the bond covered FDIC's losses, we affirm.
This series of transactions began when Robert Gunter, vice president and general counsel of Moody, and John Sheaffer, president of Sysix, signed a document entitled " Master Equipment Lease Agreement" in December 2001. The master lease referred to future lease schedules that the parties would execute " from time to time," and stated that each lease schedule " shall constitute a separately enforceable lease ... for the Equipment therein."
In March 2008, Moody and Sysix purportedly executed a lease schedule (Lease Schedule S080), which bore the signatures of Sheaffer and Gunter. The minimum term of the lease was 48 months beginning April 1, 2008, with a monthly rent of $72,691.73 for hundreds of pieces of computer equipment listed in an attached exhibit. Schedule S080 stated that the total monthly rent was for equipment, the total purchase price of which was not to exceed $2,977,135.49. It also noted that it incorporated the terms and conditions of the 2001 master lease. The two men supposedly executed a similar lease schedule that same year, in December 2008, again for a large batch of computer equipment (Lease Schedule S084). The monthly rent for Schedule S084 was $32,410.51, with the purchase price of the described equipment not to exceed $1,111,024. Like Schedule S080, Schedule S084 incorporated the terms of the master lease between Moody and Sysix. But like Schedule S080, Schedule S084 was a forgery. Sheaffer signed Gunter's name to both schedules and created the terms of each out of whole cloth. Sheaffer admitted as much in a letter in
December 2008, where he wrote, " The Moody Bible Institute has no idea and never excueted [ sic ] schedule 80 0r [ sic ] 84 and for that matter Rockwell Financial is complete un asare [ sic ] that I compeltly [ sic ] fabricated these deals." It appears from the record that Rockwell and Moody discovered the forgeries around July 2009; Sheaffer committed suicide that month.
In 2008, before Sheaffer's forgeries were discovered, Sysix assigned all of its rights in both lease schedules to Rockwell. After each assignment, Rockwell sought loans from PNB to cover its end of the deal. A PNB loan presentation document, dated March 7, 2008, indicates that Rockwell initially sought $3.1 million from PNB; this sum was associated with Schedule S080, which was executed less than two weeks later. Another PNB loan presentation document dated December 10, 2008, shows Rockwell seeking $1.12 million, presumably associated with Schedule S084, which was executed just a few days after the presentation. A few weeks after each loan presentation, Rockwell and PNB signed a document called " Assignment and Security Agreement." This document specifically referred to both the lease schedule in question and a separate promissory note Rockwell had executed for a specific amount. These amounts were slightly different from those on the loan presentations. For Schedule S080, Rockwell's promissory note was for $2,978,334.28, with monthly installments of $72,691.73. (Recall that the maximum purchase amount for Schedule S080 was $2,977,135.49, with a monthly amount due of $72,691.73.) For Schedule S084, Rockwell's promissory note was for $1,131,989.75, with a $32,410.51 monthly payment (compared to $1,111,024 on Schedule S084, which had the same monthly amount of $32,410.51).
In May 2009, PNB acquired a bond from RLI to cover potential losses flowing from its loans to Rockwell during the period from May 1, 2009 to May 1, 2010. Of particular interest here, the bond's Insuring Agreement E stated that RLI agreed to indemnify PNB for
[l]oss resulting directly from the Insured having, in good faith, for its own account or for the account of others, ... acquired, sold or delivered or given value, extended credit or assumed liability, on the faith of, any Written, Original ... Security Agreement, which (i) bears a handwritten signature of any maker, drawer, issuer, endorser, assignor, lessee, transfer agent, registrar, acceptor, surety, guarantor, or of any other person whose signature is material to ...