Wachovia Bank, N.A. v. Foster Bancshares, Inc.

• Decision Date: 24 July 2006
• Docket Number: No. 05-3703.,05-3703.
• Citation: 457 F.3d 619
• Parties: WACHOVIA BANK, N.A., Plaintiff-Appellee v. FOSTER BANCSHARES, INC., and Foster Bank, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

457 F.3d 619

WACHOVIA BANK, N.A., Plaintiff-Appellee v. FOSTER BANCSHARES, INC., and Foster Bank, Defendants-Appellants.

No. 05-3703.

United States Court of Appeals, Seventh Circuit.

Argued May 11, 2006.

Decided July 24, 2006.

Rehearing Denied August 16, 2006.

Roger A. Lewis (argued), Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Chicago, IL, for Plaintiff-Appellee.

Stanley R. Parker (argued), Parker & Hay, Topeka, KS, for Defendants-Appellants.

Before POSNER, EASTERBROOK, and WOOD, Circuit Judges.

POSNER, Circuit Judge.

This diversity suit pits two banks (for unexplained reasons, the defendant bank's parent was also joined as a defendant) against each other in a quarrel over liability for a forged or altered check.

A customer of Foster Bank named Choi deposited in her account a check for $133,026 that listed her as the payee. The check had been drawn on Wachovia Bank by a company called MediaEdge that had an account with that bank. Foster presented the check to Wachovia for payment. Wachovia paid Foster and debited MediaEdge's account. Now as it happened the actual payee of the check as originally issued had not been Choi; it had been a company called CMP Media. When CMP Media told MediaEdge that it had not received the check, an investigation ensued and revealed that Choi had somehow gotten her name substituted for CMP Media on the check she'd deposited with Foster. By the time this was discovered, Choi had withdrawn the money from her account and vanished, while Wachovia had destroyed the paper check that Foster had presented to it for payment. It had done this pursuant to its normal practice, the lawfulness of which is not questioned. It had retained a computer image of the check, but whether the image is of the original check drawn on Wachovia, with an alteration, or a forged check, cannot be determined.

MediaEdge sued Wachovia in New York for the amount of the check. That suit has been stayed pending the outcome of the present suit, in which Wachovia seeks a declaratory judgment that Foster must indemnify it in the event that MediaEdge obtains a favorable judgment in the New York suit. Wachovia's suit is based on the Uniform Commercial Code's "presentment warranty": when a depositary bank, Foster in this case, presents a check for payment by the bank that issued the check, it warrants that the check "has not been altered." UCC §§ 3-417(a)1-2, 4-208(a)1-2; Clean World Engineering, Ltd. v. MidAmerica Bank, FSB, 341 Ill.App.3d 992, 275 Ill.Dec. 630, 793 N.E.2d 110, 117-18 (2003); Wachovia Bank, N.A. v. FRB, 338 F.3d 318, 321-22 (4th Cir.2003). The district court granted summary judgment for Wachovia. Foster had impleaded Choi as a third-party defendant but could not serve her because of her disappearance, so the district court dismissed the third-party claim. Foster does not challenge that ruling.

There is a question of appellate jurisdiction, specifically whether the district court's judgment is final. The judgment order states, so far as pertains to that question, merely that Wachovia's "motion for summary judgment . . . is granted" and "judgment is entered in favor of plaintiff against defendant Foster." (Foster Bancshares, the parent, is not mentioned, but the omission was inadvertent; there is nothing pending against it in the district court.) Normally a judgment that merely determines liability and does not specify relief is not a final judgment and so is not appealable under 28 U.S.C. § 1291, the final-decision rule that furnishes the only ground for Foster's appeal. The judgment order that the district court issued does not specify any relief. Nor can relief be calculated mechanically. (If it could be, the judgment would be sufficiently final to be appealable. Production & Maintenance Employees' Local 504, Laborers' Int'l Union v. Roadmaster Corp., 954 F.2d 1397, 1401 (7th Cir.1992); Vitale v. Latrobe Area Hospital, 420 F.3d 278, 281 (3d Cir.2005).) The district judge said in his opinion that "Wachovia is entitled to the $133,026.00 it paid on the check plus appropriate interest, less any reimbursement owed it from MediaEdge." But the judge did not define "appropriate interest"; and the "reimbursement owed [Wachovia] from MediaEdge" cannot yet be calculated—the amount depends on the outcome of the New York suit, which has been stayed.

But we must remember that Wachovia was seeking a declaratory judgment, which is deemed final although it does not specify relief. 28 U.S.C. § 2201(a). The judge mentioned on the first page of his opinion that the bank was seeking such a judgment. He didn't repeat this in the judgment order, but the omission is not critical. Wilson v. City of Chicago, 120 F.3d 681, 685 (7th Cir.1997); see Chase Manhattan Mortgage Corp. v. Moore, 446 F.3d 725, 728 (7th Cir.2006). That order is most sensibly interpreted as the declaratory judgment that Wachovia sought. What else could it be? It is clear on the one hand that the judge meant to enter a final and therefore an appealable judgment, and on the other hand that he was not intending to issue a further order, specifying relief. A judgment that declares rights but does not order relief is appealable under 28 U.S.C. § 1291 as, and only as, a declaratory judgment.

As we pointed out in the Chase Manhattan case, moreover, a judgment is final for purposes of appeal when the district judge is through with the case whether or not he should be, lest the case be left in limbo—no longer in the district court, but barred from our court by the final-decision rule. 446 F.3d at 726-27; see also Moreau v. Harris County, 158 F.3d 241, 244 (5th Cir.1998). Not one but two cases would be in limbo, because MediaEdge's suit in New York has been stayed pending the resolution of the present case. The two suits would be Alphonse and Gaston.

Ordinarily if a district court mistakenly abandoned a case after finding liability but before ordering relief, the plaintiff would appeal. But in the present case the plaintiff, Wachovia, got everything it asked for in the judgment that the district court entered. The aggrieved party is Foster, since the judgment declares its liability to Wachovia. If it cannot appeal, the parties' dispute cannot be resolved—which provides the clinching argument for deeming the judgment a declaratory judgment. Even if the judge didn't think he'd washed his hands of the case, he could not proceed to award relief because the amount of reimbursement owed Wachovia by MediaEdge cannot be resolved until the New York suit resumes.

So we have jurisdiction of Foster's appeal and can turn to the merits. The bank argues that Wachovia, because it cannot produce the paper check, cannot prove that the check was altered. For all we know, rather than the check being "a...