Ingersoll-Rand Financial Corp. v. Anderson

• Decision Date: 17 December 1990
• Docket Number: INGERSOLL-RAND,No. 90-5302,90-5302
• Citation: 921 F.2d 497
• Court: U.S. Court of Appeals — Third Circuit
• Parties: 13 UCC Rep.Serv.2d 799 FINANCIAL CORPORATION, a Delaware Corporation v. Larry R. ANDERSON et als.; Deborah S. Anderson; Beacon Management, Inc.; Donald L. Brown, M.D.; Nikolas M. Brush; Leroy Burch; Carl R. Burgreen; Timothy J. Fallon; Invesco; John C. Lude; Otis R. Mann, Jr.; Eugene L. Matan; Patrick J. McGrath; Gerald M. Penn, M.D.; Raab & Reger Assoc.; John B. Ruhlin; Peggy M. Ruhlin, and R. Dale Smith; George Matheson; Elrod & Thompson, P.C. ELROD & THOMPSON, P.C., Third Party Plaintiff, v. Richard J. WHALEY, Third Party Defendant. Appeal of Leroy BURCH.

Page 497

921 F.2d 497

13 UCC Rep.Serv.2d 799

INGERSOLL-RAND FINANCIAL CORPORATION, a Delaware Corporation v. Larry R. ANDERSON et als.; Deborah S. Anderson; Beacon

Management, Inc.; Donald L. Brown, M.D.; Nikolas M. Brush;

Leroy Burch; Carl R. Burgreen; Timothy J. Fallon;

Invesco; John C. Lude; Otis R. Mann, Jr.; Eugene L.

Matan; Patrick J. McGrath; Gerald M. Penn, M.D.; Raab &

Reger Assoc.; John B. Ruhlin; Peggy M. Ruhlin, and R. Dale

Smith; George Matheson; Elrod & Thompson, P.C.

ELROD & THOMPSON, P.C., Third Party Plaintiff, v. Richard J. WHALEY, Third Party Defendant.

Appeal of Leroy BURCH.

No. 90-5302.

United States Court of Appeals, Third Circuit.

Argued Oct. 10, 1990.

Decided Dec. 17, 1990.

Gary L. Herfel (argued), Dinsmore & Shohl, Florence, Ky., Dennis F. Gleason, Lowenstein, Sandler, Kohl, Fisher & Boylan, Roseland, N.J., for Leroy Burch, appellant.

Joseph L. Cook (argued), Mitchell B. Seidman, Ravin, Sarasohn, Cook, Baumgarten, Fisch & Baime, Roseland, N.J., for Ingersoll-Rand Financial Corp., appellee.

Before MANSMANN, ALITO and GARTH, Circuit Judges.

OPINION OF THE COURT

GARTH, Circuit Judge:

This appeal arises from the grant of summary judgment in favor of plaintiff-appellee Ingersoll-Rand Financial Corporation ("IRFC"), which sought payment on a promissory note allegedly signed by defendant-appellant Leroy Burch in connection with an investment in a limited partnership known as Beacon Properties Ltd. IV-85 ("Beacon IV"). ¹ IRFC claims it is a holder in due course of the note and is therefore entitled to payment from Burch.

I

The district court's subject matter jurisdiction was based on diversity of citizenship, pursuant to 28 U.S.C. Sec. 1332. Under 28 U.S.C. Sec. 1291, we have appellate jurisdiction to review the district court's final order.

Our review of the district court's grant of summary judgment for IRFC is plenary. Pennsylvania Power Co. v. Local Union No. 272, 886 F.2d 46 (3rd Cir.1989). "On review, the appellate court is required to apply the same test the district court should have utilized initially." Goodman v. Mead Johnson & Co., 534 F.2d 566, 573 (3rd Cir.1976), cert. denied, 429 U.S. 1038, 97 S.Ct. 732, 50 L.Ed.2d 748 (1977).

Among other questions which we must answer is whether the district court has complied fully with summary judgment procedure as prescribed by Fed.R.Civ.P. 56(c). The underlying complex of facts casts Burch's denial of liability in an unsympathetic light. Our standard of review, as just stated, however, is plenary, and although we can fully appreciate the reasons why the district court granted summary judgment to IRFC, we must nonetheless reverse and remand this proceeding to the district court because the record at this stage, due to a dispute of material fact, cannot be the basis for an order of summary judgment in favor of IRFC.

II

This diversity action was brought in the U.S. District Court for the District of New Jersey, and the parties do not dispute that New Jersey law applies. Uniform Commercial Code Sec. 3-307, as enacted in New Jersey at N.J.Stat.Ann. Sec. 12A:3-307, provides: "Unless specifically denied in the pleadings each signature on an instrument is admitted." U.C.C. Comment 1 adds: "In the absence of such specific denial the signature stands admitted, and is not in issue." Relying on this statute, the district court held that Burch could not challenge the authenticity of his signature because he had not put his signature in issue at the time he filed his answer. The district court granted IRFC's motion for summary judgment and awarded IRFC $81,003.42 plus interest and costs. Burch's cross-motion for summary judgment was denied.

In its opinion, the district court found that "Burch has not presented any evidence, other than conclusory assertions of forgery, concerning the validity of [his] signature. Most importantly, he specifically admitted executing the note in his answer and in his response to various interrogatories." District Court Opinion at 20. The district court concluded that Burch's arguments were "legally unpersuasive and, at best, factually suspect." Id. at 19.

The district court's determination that Burch did not put his signature in issue in his pleadings involved an interpretation or application of the legal precept embodied in N.J.Stat.Ann. Sec. 12A:3-307. It is not an evidentiary, or "basic," fact, see Universal Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98, 102 (3rd Cir.1981), since it does not involve an issue such as historical fact or credibility of witnesses on which we defer, absent clear error, to the findings of the district court. Rather, the issue is what legal significance derives from the wording of the pleadings. We have held that "interpretation of a writing is generally a question of law for the court." Barco Urban Renewal Corp. v. Housing Authority, 674 F.2d 1001, 1008 (3rd Cir.1982). ² Hence, we must review de novo the question as to whether Burch put his signature in issue.

III

In a one-time meeting with his old college friend Patrick McGrath, Leroy Burch agreed to invest in a limited partnership, Beacon Properties Ltd. IV-85. McGrath then presented Burch with one or more documents for Burch's signature. Burch retained no copies of the papers he signed. One of the documents Burch admits signing was a promissory note. IRFC claims that Beacon IV endorsed this note to IRFC, and that IRFC is now a holder in due course of the note.

Burch was one of several investors in Beacon IV from whom IRFC sought to collect in this action. IRFC's complaint, filed February 10, 1987, alleged that Burch was the maker of a note to Beacon IV, which note had been endorsed to IRFC. Burch answered on June 30, 1987 admitting that he had signed a note, but later disputed that the note attached to IRFC's complaint was the note he signed.

On September 15, 1989, IRFC filed a motion for summary judgment against all the investor-defendants, including Burch. To this motion IRFC appended copies of a "Negotiable Promissory Note," an "Assumption Agreement" and an "Acknowledgment and Agreement" purportedly signed by Burch. Burch opposed the summary judgment motion by affidavit swearing that he did not in fact sign any of the documents produced by IRFC.

Burch claims that while he did sign a promissory note in connection with Beacon IV, the note produced by IRFC in this action is not the note he signed, nor did he authorize anyone to sign it for him. Burch concedes that he made three payments under a promissory note directly to IRFC, and that he took a tax deduction for the loss on his Beacon IV investment. He claims, however, that the signature on the note produced by IRFC in its summary judgment motion is a forgery. Burch further claims that each of the other documents that IRFC presented to the district court in connection with the alleged Burch note, and which IRFC claimed was enforceable against him, was an unauthorized forgery of his signature.

Burch draws our attention to the apparent differences in appearance between the signatures on the documents presented by IRFC and Burch's signature on his own two sworn affidavits. IRFC has not commented on this apparent difference, except to suggest in its brief that the documents may have been executed by another acting on Burch's behalf and with Burch's consent. Yet IRFC offers no sworn testimony or affidavit sufficient to support such a suggestion--a suggestion which Burch in his affidavits flatly denies. IRFC never asked Burch to authenticate any documents or to admit to his signature. Nor did IRFC ever depose McGrath. ³ Burch also points out that none of his purported signatures subject to dispute bears any notation or qualification that the signing was done by another on Burch's behalf. He emphasizes that IRFC has never produced any sworn evidence, by affidavit or otherwise, controverting his claim of forgery.

IV

A.

As noted, the parties do not dispute that New Jersey law applies to this case. Under N.J.Stat.Ann. Sec. 12A:3-307, the burden of establishing signatures has been allocated as follows:

(1) Unless specifically denied in the pleadings each signature on an instrument is admitted. When the effectiveness of a signature is put in issue

(a) the burden of establishing it is on the party claiming under the signature; but

(b) the signature is presumed to be genuine or authorized....

The first question, then, is whether Burch specifically denied in the pleadings his signature on the Beacon IV note. Unless he did so, he cannot shift the burden onto IRFC to establish that his signature is genuine.

Burch's pleadings (i.e. his answer to IRFC's complaint, to which IRFC had attached a form note), when read literally, cannot be taken as an admission of his signature on the particular note presented by IRFC. Moreover, when Burch was presented with the note attached to IRFC's summary judgment motion and purportedly bearing his signature, Burch unequivocally stated that the signature on the note was a forgery. His answer and affidavits, therefore, have the effect of shifting onto IRFC the burden of proving his signature genuine. Burch's pleadings, to be sure, could well have given the impression that Burch was admitting the note. A close examination, however, bears out Burch's contention that all he admitted was signing some promissory note, but not the note attached to IRFC's complaint.

IRFC's Complaint, at p 5, alleges that:

Prior to February 25, 1985 each of the defendants separately made promissory notes in the form indicated on Exhibit "B". Each of the aforesaid notes was payable to Beacon Properties IV-85, Ltd.

Burch's Answer, at p 5, states:

In response to the allegations in paragraph 5, Defendant Burch admits that he made a promissory note payable to Beacon Properties IV-85 Ltd. With respect to the remainder of the allegations in paragraph 5, Defendant Burch alleges that he is without knowledge or information sufficient to form a belief as to the truth of the...