signed the bills of lading in issue. Indeed, neither FABC nor
Fireman's knows who signed the bills, or whether or not the
signer signed his or her name, either with or without
authority. Nor is there affirmative evidence that the signer
signed the bills of lading with the intent to deceive, although
that may be inferred from the circumstances. Indeed, FABC has
not proved that the illegible scribble on the bills of lading
in issue is someone's signature.
It appears that the handwriting on all the fictitious bills
were made by the same person and represent the same, albeit
illegible, name. Plaintiff's Trial Exh. 195, Osborn Affid. of
January 1988 ¶ 17. If the person who affixed the handwriting to
the bills of lading in this case attempted to simulate the
signature of a known signatory it could constitute a forgery.
However, FABC and its expert agree that the handwriting does
not appear to be, or appear to purport to be, that of any
person authorized by Flota as signatories, nor that of any
known person. Agreed Fact ¶ 4; Osborn Affid. of June 1987 ¶¶
FABC argues that since the handwriting is unidentifiable as
that of someone known to either FABC or Fireman's, it is
reasonable to assume that the name is that of a fictitious
person. However, it is equally plausible that the signer signed
his own name or did not sign a name at all, but merely made an
illegible scribble. See Loeb Partners v. Hartford Acc. & Indem.
Co., N.Y.L.J., Aug. 2, 1984, p. 4, Col. 1 (Sup.Ct., N.Y.Co.
1984) (the illegibility of a purported signature and the
absence of any evidence as to who affixed it or what it was
supposed to represent raised "serious issues of fact" as to a
claim of forgery). It is also possible that the scribble is the
actual signature of an unauthorized person, or a disguised
signature adopted by an authorized person. FABC has thus not
sustained its burden of proving a "forgery" under the Bond. Cf.
William Iselin & Co. v. Fireman's Fund Ins. Co., 117 A.D.2d 86,
501 N.Y.S.2d 846 (1st Dep't 1986), ctfd. ques. ans., 69 N.Y.2d
908, 516 N.Y.S.2d 198, 508 N.E.2d 932 (1987) (stamped printed
signatures on bills of lading of "Lawson Trucking Co., Inc., J.
Lawson, President" were "forged as to signature" where it was
shown that the stamp was being utilized without the knowledge
or consent of J. Lawson).
FABC's reliance on New York criminal law to establish that
the "signatures" on the bills of lading are forgeries is
misplaced. See Allied Bank Int'l v. Fireman's Fund Ins. Co.,
NYLJ, Aug. 11, 1988, p. 18, col. 2 (Sup.Ct.N.Y.Co. Aug. 3,
1988), aff'd without op., 151 A.D.2d 1056, 544 N.Y.S.2d 264
(1st Dep't 1989).*fn6 Because of the plain meaning of the Bond
language defining forgery, the only relevant definition of
forgery is that contained in the Bond and cases construing that
definition. Id. Under the Bond, coverage is limited to
documents that are forged as to signature.*fn7 Even under the
of New York,*fn8 the signing of a fictitious or assumed name
alone does not constitute a forgery. People v. Johnson,
96 A.D.2d 1083, 466 N.Y.S.2d 969 (2d Dep't 1983), aff'd mem., 63
N Y2d 888, 472 N.E.2d 1029, 483 N.Y.S.2d 201 (1984). It must
be shown that the name was used for the purpose of falsely
representing that the person who signed the document was a
"person wholly separate and apart from himself." Id., 466
N YS.2d at 970. "[T]he courts have distinguished forgery from
mere fraud involving the use of an instrument requiring that
the victims have intended to extend credit in reliance upon the
maker's signature, i.e., upon the existence of the ostensible
rather than the actual author." Id. at 972 (O'Connor, J.,
dissenting in part and concurring in part). Although it is
undisputed that FABC believed the bills of lading to be valid,
and it is reasonable to infer that the bills were signed for
the purpose of deception or fraud, fraud alone does not
necessarily constitute forgery under the Bond or even under the
penal law of New York.
Nor is FABC's reliance, by analogy, on the Uniform Commercial
Code ("UCC") persuasive. FABC argues that the UCC treats the
signature of a fictitious person as a forgery. Aside from the
fact that FABC has not provided any proof that the "signature"
on the bills of lading is that of a fictitious person, under
UCC § 3-405, an endorsement in the name of a fictitious payee
is not a forgery; it is an ineffective indorsement. Moreover, a
signature under the UCC may be in an assumed name, "since the
existence or nonexistence of the named payee is not decisive."
§ 3-405, Comment 1. Because the fictitious payee rule is not
applicable unless the check is endorsed in the name of the
named payee, when the check is endorsed, the handwriting is
meant to be the name of the person known to be fictitious. §
3-405(1) and Official Comment 1. An "unauthorized' signature or
indorsement under the UCC "means one made without actual,
implied or apparent authority and includes a forgery." § 1-201.
Thus this definition recognizes that "forged" is a narrower
concept than "unauthorized." The terms are not functional
equivalents; "unauthorized" signatures includes those that have
been "forged," while "forged" does not include all
FABC also points to a companion case growing out of the CCC
fraud, to support its claim that the bills were forged or
counterfeited. In Societe Generale v. Federal Insurance Co.,
856 F.2d 461 (2d Cir. 1988), involving a bank's identical
claims of forgery and counterfeit on a Bankers Blanket Bond,
the jury found, via special verdict form, that the bills had
been "forged" or "counterfeited." However, Judge Sand had
specifically instructed the jurors that they could reach that
conclusion only if they determined that the bills had been
"signed by a person who signed a name other than his own and .
. . who was not an employee of Flota or an authorized
representative of Flota." Defendant's Trial Memo. of Law, Exh.
C. Here there is no basis upon which I could find that the
instant bills were "signed by a person who signed a name other
than his own."
Moreover, I find that FABC's losses are not covered under the
forgery provision of Insuring Agreement (E) of the Bond because
the losses did not directly result from the purported forgery.
The language of the Bond is clear that in order for FABC to
recover, the claimed loss must have resulted
directly from FABC, in good faith, having given value against
bills of lading which "bears a signature which is a Forgery."
JTE 68. In a similar action in which a bank sought to recover
under a bankers blanket bond for losses from loans secured by
worthless certificates of deposit ("CD's"), the court held that
even if the CD's were counterfeits and forgeries, the bank's
loss was not caused by the lack of authenticity or genuineness
of the documents, but by the fact that the statements contained
in the documents were not true. Liberty Nat'l Bank v. Aetna
Life & Cas. Co., 568 F. Supp. 860, 863 (D.N.J. 1983). The court
noted that "[i]f the documents were authentic and their
signatures genuine and authorized, the loss nonetheless would
have occurred." Id. The court concluded that, by the terms and
intent of the Bond, the loss fell upon the bank because the
"failure of the security was not because they were counterfeit
or forged, but solely because the assets purportedly
represented thereby were nonexistent." Id.
Here, FABC's losses resulted not from the purported forgeries
but from the Duque's fraudulent scheme. FABC did not know who
the authorized signatories of Flota were; FABC could not read
the scribble on the bill of lading and had no idea whose name
was purported to be represented thereby. Even if the signatures
had been identifiable and genuine, the bills still represented
non-existent or previously completed transactions and FABC
would have still suffered losses identical to those they now
face. See Reliance Insurance Co. v. Capital Bancshares,
Inc./Capital Bank, 685 F. Supp. 148 (N.D.Tex. 1988) (where bank
would have suffered same loss even if forged signature on bogus
stock certificates had been genuine, loss not covered by
bankers' blanket bond). Because the losses are not the direct
result of FABC having "extended credit" or "otherwise acted" on
the faith of the "signatures" on the bills of lading, those
losses are not within the scope of Insuring Agreement (E) of
Section 1(d) of the Bond defines "Counterfeit" as follows:
Counterfeit means an imitation which is intended
to deceive and to be taken as an original.
The close similarity between the fake bills and authentic
Flota bills of lading is undisputed. The fake bills were
created on actual Flota forms, employed actual Flota stamps,
and appeared to FABC to be valid Flota bills. Fireman's
contends, however, that because each of the bills of lading is
itself an original document, and is neither an imitation of an
original document or an imitation intended to be taken as an
original, they are not "counterfeit" as defined under the Bond.
Both FABC and Fireman's agree that Exchange National Bank v.
Ins. Co. of North America, 341 F.2d 673 (2d Cir. 1965), cert.
denied, 382 U.S. 816, 86 S.Ct. 37, 15 L.Ed.2d 63 (1965), is the
leading case in this circuit on the issue of "counterfeit"
under the Bond. That case involved determination of whether
genuinely issued but false invoices were counterfeits under
Insuring Agreement (E) of the Bankers Blanket Bond. The
borrower had assigned accounts receivable as collateral and, as
evidence of the accounts, had submitted false but genuinely
signed invoices showing shipments not yet completed at the time
the loan were made. The Second Circuit held the invoices were
not "counterfeit," stating:
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.
341 F.2d at 676.