Mellon Bank v. National Union Ins. Co.

• Decision Date: 31 January 2001
• Citation: 768 A.2d 865
• Parties: MELLON BANK, N.A., Appellant, v. NATIONAL UNION INSURANCE COMPANY OF PITTSBURGH, PA and Kaiser Aluminum and Chemical Corporation, Appellees.
• Court: Pennsylvania Superior Court

768 A.2d 865

MELLON BANK, N.A., Appellant, v. NATIONAL UNION INSURANCE COMPANY OF PITTSBURGH, PA and Kaiser Aluminum and Chemical Corporation, Appellees.

Superior Court of Pennsylvania.

Argued October 18, 2000.

Filed January 31, 2001.

Reargument Denied April 4, 2001.

Frank G. Salpietro, Pittsburgh, for appellant.

Richard K. Dandrea, Pittsburgh, for Kaiser Aluminum, appellee.

Larry A. Silverman, Pittsburgh, for National Union, appellee.

Before CAVANAUGH, EAKIN and TAMILIA, JJ.

EAKIN, J.:

¶ 1 Mellon Bank, N.A., appeals from the order granting judgment on the pleadings in favor of appellees, and dismissing with prejudice the claims Mellon asserted in its amended complaint. We affirm in part, reverse in part, and remand for further proceedings. ¶ 2 The trial court has concisely summarized the matter:

Kaiser is the First Named Insured under a commercial crime insurance policy (hereinafter "The Policy") issued by National Union. In March 1996, Kaiser instituted an action against Mellon in the United States District Court for the Western District of Pennsylvania at Civil Action 96-399 alleging that an unknown third party had forged two checks drawn on one of its accounts at Mellon and that Mellon was liable for the payment of these two checks.

During discovery in this Federal Action, a Kaiser representative, Thomas Edwards, testified during a deposition on July 10, 1996 as follows:

MR. HAGUE (Counsel for Mellon): Have you checked with your insurance people to see if you have insurance for this loss, for these losses?

MR. EDWARDS: I believe I've had a conversation with our director of risk management.

MR. HAGUE: And what have you been informed?

MR. EDWARDS: The amount of these checks would not be eligible for recovery.

MR. HAGUE: Why? Is it below your deductible or your SIR (?) or whatever?

MR. EDWARDS: I believe that's—

MR. HAGUE: Is that the case?

MR. EDWARDS: I believe that's along the general lines, yes ...

Kaiser, contrary to Mr. Edwards' testimony, did have coverage for this particular loss, and on November 20, 1996, received a payment in the amount of $259,290.50 from National Union pursuant to the Policy. Under an Assignment and Release Agreement dated January 10, 1997, Kaiser partially assigned its rights against Mellon to National Union. Pursuant to this agreement, Kaiser would receive the first $58,876.17 of any recovery from Mellon, and National Union, as subrogee, would receive the balance of any such recovery.

On July 24, 1997, following a trial, Mellon was found liable to Kaiser for the forgery losses and a judgment was entered against Mellon. Mellon appealed this judgment to the Court of Appeals for the Third Circuit, during the pendency of this appeal, Mellon learned that Kaiser did indeed have insurance coverage for this loss and that Kaiser did receive a payment from National Union.

In March, 1999, Mellon instituted a civil action in this Court by Complaint. Both Defendants filed Preliminary Objections which were argued before the Honorable Alan S. Penkower of this Court. On October 21, 1999, Judge Penkower overruled National Union's Preliminary Objections and similarly overruled Kaiser's Preliminary Objections except for Kaiser's demurrer to Count V which was sustained.

Mellon filed an Amended Complaint on November 5, 1999. Both Defendants filed Answers and New Matter to which Mellon filed Replies. Defendants then filed the instant Motions for Judgment on the Pleadings. After review of all the pleadings, the briefs and argument, this Court granted Defendants' Motions and dismissed the Amended Complaint. This Appeal followed.

Trial Court Opinion, 3/29/00, at 1-2.

¶ 3 Mellon raises three issues for our review:

1. Whether the lower court erred in dismissing the Amended Complaint and ruling that Appellant was not an insured under an insurance policy, where Appellees admitted for purposes of their Motions for Judgment on the Pleadings that Appellant was an insured, where the issue of Appellant's insured status was not raised in Appellees' Motions, and where it appears that the lower court ignored or failed to review material documents and evidence. 2. Whether the lower court erred in dismissing the Amended Complaint and ruling that the "compensated surety rule" is dependent upon Appellant's status as an insured, where the application of the rule is completely independent of that status.

3. Whether the lower court erred in dismissing the Amended Complaint and ruling that Federal Rule of Civil Procedure 60 barred Appellant's claims, where Appellant was not seeking relief from a federal court judgment.

Appellant's Brief, at 4 (emphasis in original).

¶ 4 Pennsylvania Rule of Civil Procedure 1034 authorizes entry of judgment on the pleadings after the pleadings are closed, but within such time as not to delay trial. "A motion for judgment on the pleadings is similar to a demurrer. It may be entered when there are no disputed issues of fact and the moving party is entitled to judgment as a matter of law." Citicorp North America, Inc. v. Thornton, 707 A.2d 536, 538 (Pa.Super.1998). On appeal from a grant of judgment on the pleadings, our scope of review is plenary. Kelly v. Nationwide Insurance Company, 414 Pa.Super. 6, 606 A.2d 470, 471 (1992). We must determine whether the trial court's ruling was based on a clear error of law or whether the pleadings disclosed facts which properly should go to the jury. Id. Further, we must accept as true all well-pleaded facts of the non-moving party, while considering against it only those facts it specifically admits. Id.

¶ 5 Mellon alleges it is an insured under the Depositors Forgery Coverage provisions of the Policy. For purposes of its motion for judgment on the pleadings only, National Union admitted Mellon is an insured under the Policy in its supporting brief. Although Mellon relies heavily on this "admission," the trial court specifically found National Union's statement was not a binding admission, and concluded Mellon is not an insured under the Policy as a matter of law.

¶ 6 The trial court did not err in rejecting the contention that National Union made a binding admission; National Union consistently and repeatedly denied Mellon is an insured, admitting such status only for the purposes of its argument that Mellon's claim is barred by the "Joint Insured" clause in the Policy. In other words, National Union contended that assuming arguendo Mellon is an insured under the Policy, Mellon would not be entitled to relief because its payment to Kaiser as First Named Insured fully released National Union from further liability for the forgery. National Union was clear its "admission" was made consonant with the prescribed standard for judgment on the pleadings, as stated above. Perhaps this "admission" was not limited as artfully as it might have been, but, taken in context, we find no error in declining to hold it to be a binding admission for purposes other than the "Joint Insured" argument.

¶ 7 We are also mindful of the well-settled principle applied to a motion for judgment on the pleadings: neither party will be deemed to have admitted conclusions of law. Hammerstein v. Lindsay, 440 Pa.Super. 350, 655 A.2d 597, 601 (1995); Kelly, at 471. Mellon's allegation that it is an insured under the Policy is a conclusion of law based on the terms of the contract; we do not accept it as fact. Keystone Automated Equipment Co., Inc. v. Reliance Insurance Co., 369 Pa.Super. 472, 535 A.2d 648, 650 (1988),appeal denied, 519 Pa. 654, 546 A.2d 59 (1988). The interpretation of that contract, including Mellon's status as an insured, is a question of law for the court's determination.¹Madison Construction Co. v. Harleysville Mutual Insurance Co., 557 Pa. 595, 735 A.2d 100, 106 (1999). As stated above, the trial court examined the terms of the Policy and concluded Mellon is not an insured as a matter of law.

¶ 8 We begin with the policy language; our goal is to ascertain the intent of the parties, as reflected in that language. Madison, at 106. As with any contract, we read an insurance policy in its entirety to determine intent, Riccio v. American Republic Insurance Co., 550 Pa. 254, 705 A.2d 422, 426 (1997), and must construe words "in their natural, plain and ordinary sense." Id. We give effect to language which is clear and unambiguous. Madison, at 106. Contractual terms are deemed ambiguous if they are susceptible of more than one reasonable interpretation when applied to a particular set of facts. Id. We will not "distort the meaning of the language or resort to a strained contrivance in order to find an ambiguity." Id.

¶ 9 The provision entitled "Depositors Forgery Coverage" states, in pertinent part:

V. Loss which the Insured or any bank which is included in the Insured's proof of loss and in which the Insured carries a checking or savings account, as their respective interests may appear, shall sustain through forgery or alteration of, on or in any check, draft, promissory note, bill of exchange, or similar written promise, order or direction to pay a sum certain in money, made or drawn by or drawn upon the Insured, or made or drawn by one acting as agent of the Insured, or purporting to have been made or drawn as hereinbefore set forth, including

(a) any check or draft made or drawn in the name of the Insured, payable to a fictitious payee and endorsed in the name of such fictitious payee.

(b) any check or draft procured in a face to face transaction with the Insured, or with one acting as agent of the Insured, by anyone impersonating another and made or drawn payable to the one so impersonated and endorsed by anyone other than the one so impersonated; and

(c) any payroll check, payroll draft or payroll order made or drawn by the Insured, payable to the bearer as well as to a named payee and endorsed by anyone other than the named payee without authority from such payee;

whether or not any endorsement mentioned in (a), (b) or (c) be a

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