                                                                              [ PUBLISH]

                  IN THE UNITED STATES COURT OF APPEALS

                            FOR THE ELEVENTH CIRCUIT                          FILED
                                                                     U.S. COURT OF APPEALS
                                                                       ELEVENTH CIRCUIT
                                                                           MAY 25 2000
                                       No. 99-11396                     THOMAS K. KAHN
                                                                             CLERK

                          D.C. Docket No. 96-02969-CIV-ASG


ARKWRIGHT MUTUAL INSURANCE CO.,

                                                                  Plaintiff-Appellant,

                                            versus

NATIONSBANK, N.A., (SOUTH),
f.k.a. NationsBank of Florida, N.A.,
NATIONSBANK, N.A. (SOUTH),

                                                                  Defendant-Appellee.



                      Appeal from the United States District Court
                          for the Southern District of Florida

                                      (May 25, 2000)


Before COX, Circuit Judge, GODBOLD and MESKILL*, Senior Circuit Judges.

_______________
*Honorable Thomas J. Meskill, Senior U.S. Circuit Judge for the Second Circuit, sitting by
designation.

PER CURIAM:
      This case arose from the forgery of 27 checks drawn on a Florida Power and

Light PMIS disbursement bank account at NationsBank. Between June and October

of 1993 forgers created 27 fake checks totaling $4,387,057.05 and paid by banks

across the United States. Arkwright Mutual Insurance Company is a commercial

crime insurer that reimbursed Florida Power and Light (FPL) for the forged check

losses. After FPL notified NationsBank of the forged checks, NationsBank

unsuccessfully attempted to recover the funds from the collecting banks that received

payment for the forged checks. Because it did not receive reimbursement from the

collecting banks NationsBank refused to credit FPL’s account.              NationsBank

contended that its banking contract with FPL shifted the risk for loss by forgery to

FPL because the bank allowed FPL to use a facsimile signature machine. Arkwright

filed this diversity suit in an attempt to recover the losses from the forgeries. The

district court granted NationsBank’s summary judgment motion after finding that the

parties contractually agreed to shift the risk of loss to FPL and that NationsBank’s

exercised ordinary care when it processed the forged checks. We must decide whether

this interpretation of the banking contract is correct and whether summary judgment

was properly granted. We agree with the district court that the contract shifted the risk

of loss to FPL and affirm that portion of the district court’s decision. However, the

record is not sufficiently developed to determine whether NationsBank acted with

ordinary care. Therefore we reverse and remand the case for further proceedings to

                                           2
determine if NationsBank acted with ordinary care when it processed the forged

checks.

          Arkwright sued Nationsbank to recover the amount debited from FPL’s

account for violations of Florida’s version of the U.C.C. and for breach of the banking

contract.1 Ordinarily, a drawee bank is absolutely liable to its customer for payment

of a forged check. Because a forged check is not a “properly payable item,” Fla. Stat.

§ 673.4031 (1993); see also Perini Corp. v. First Nat'l Bank, 553 F.2d 398, 403 (5th

Cir.1977), a forged maker's signature is wholly inoperative as the professed drawer's

signature. Perini, 553 F.2d at 403. Any payment on such an instrument is not to the

professed drawer's order and violates the drawee bank's strict duty to charge the

account of its customer only for properly payable items. Perini, 553 F.2d at 404.

Arkwright’s U.C.C. cause of action is based on Florida Uniform Commercial Code

Statute § 674.401 which provides that a bank may only charge against its customer’s

account an item that is properly payable from the account. Arkwright’s breach of

contract action alleges that the account agreement did not permit NationsBank to pay

and charge forged checks against the FPL account.




      1
         Arkwright is equitably surrogated to any claims FPL may have against the
person or persons liable for the loss and has obtained an assignment of FPL’s claims
against the person or persons liable for the loss.
                                          3
       NationsBank contends that it had no duty to reimburse FPL’s account because

the banking contract incorporated language in an FPL Corporate Resolution that

instructed the bank to accept, honor, and pay all checks “bearing or purporting to

bear” the facsimile signature of FPL’s authorized representative. Florida’s version of

the U.C.C. allows a bank and its customer to contract around the default rules set forth

in U.C.C. Fla. Stat. § 674.103(1);2 19B Fla. Stat. Ann., U.C.C. Comment to § 674.103

(1993) (indicating that § 674.103(1) “permits within wide limits variation of the

effects of provisions of the article by Agreement.”). Under Fla. Stat. § 674.401(1), a

check that would not otherwise be properly payable becomes properly payable if it is

authorized by the customer and is in accordance with the banking agreement. This

statute is consistent with Florida common law which recognizes that the relationship

between a bank and its customer is contractual in nature. See Federal Ins. Co. v.

NCNB Nat. Bank of N.C., 958 F.2d 1544, 1548 (11th Cir. 1992). However,

Arkwright contends that the checks at issue were not properly payable because no



      2
               The effect of the provisions of this chapter may be varied
              by agreement, but the parties to the agreement cannot
              disclaim a bank’s responsibility for lack of good faith or
              failure to exercise ordinary care or limit the measure of
              damages for the lack of failure. However, the parties may
              determine by agreement the standards by which the bank’s
              responsibility is to be measured if those standards are not
              manifestly unreasonable.
Fla. Stat. § 674.103(1).
                                           4
clause in its banking contract authorized NationsBank to pay checks with forged

facsimile signatures.

      The parties agreed that NationsBank would move for summary judgment to

determine whether the bank had a duty to reimburse FPL under the banking contract.

NationsBank filed its motion for summary judgment and included several affidavits

attesting that NationsBank acted with ordinary care. FPL objected to the inclusion of

any facts contained in NationsBank’s summary judgment motion relating to the

ordinary care issue because discovery had not yet been conducted. After the district

court asked the parties to clarify the facts necessary to resolve NationsBank’s

summary judgment motion, the parties submitted a joint stipulation setting forth the

relevant facts and clarifying the issue before the court. The issue before the district

court, as clarified by the stipulation, stated:

                         The Issue on Summary Judgment
      NationsBank’s Motion for Summary Judgment raises a specific, narrow
      issue: whether the FPL/NationsBank banking contract shifts the risk of
      loss due to forgery from NationsBank to FPL.

The parties stipulated that 1) NationsBank paid forged checks drawn against FPL’s

account, 2) the checks bore a forgery of FPL’s authorized facsimile signature,

although the checks appeared to be authentic,3 and 3) NationsBank paid the forged


      3
        Each check bore a different serial number corresponding to actual FPL checks
that FPL had internally voided or canceled through its check production process
without notice to Nationsbank.
                                            5
checks under the U.C.C. definition of “good faith.”4 The parties did not stipulate, nor

do they agree, that NationsBank exercised ordinary care when it paid the checks, and

both parties reserved the right to conduct further discovery pending the district court’s

interpretation of the banking contract.

      The banking contract between FPL and NationsBank consisted of 1) a

Corporate Resolution of FPL dated July 16, 1992; 2) a Corporate Resolution of FPL

dated September 9, 1993; 3) an unsigned and undated Deposit Agreement; 4) the FPL

signature cards; 5) Master Agreement for Treasury Management Accounts and

Services dated June 18, 1993; 6) the Controlled Disbursement Service Agreement

dated June 18, 1993, with Addendum dated July 21, 1993; and 7) an Account

Reconciliation Service Agreement dated June 18, 1993.

      Arkwright contends that two sections of the contract indicate that there was no

agreement shifting the risk of loss to FPL. First, a handwritten provision was included

in the Account Reconciliation Service Agreement:

      Except as specifically amended by this Agreement, nothing herein shall
      alter or affect Bank’s liabilities with respect to items improperly paid
      from Customer’s Account, under the Uniform Commercial Code
      applicable to such items.




      4
        This means that NationsBank acted honestly and not corruptly or in concert
with the forgers.
                                           6
Second, § 8 of the Deposit Agreement states that NationsBank remains liable for “any

amount improperly paid out of the account due to an unauthorized signature.”

      NationsBank contends that other provisions in the contract expressly modify

the bank’s liabilities. First, § 8 is qualified by two other sections in the Deposit

Agreement. Section 5(b) sets forth FPL’s responsibilities regarding the use of

facsimile signatures:

      Facsimile Signatures: If your items are signed using any facsimile
      signature or non-manual form of signature, you acknowledge that it is
      solely for your benefit and convenience. You accept sole responsibility
      for maintaining security over any device affixing the signature. Such
      signature will be effective as your signature regardless of whether the
      person affixing it was authorized to do so.

§ 5(b). (emphasis added). Second, § 1(c) of the Deposit Agreement allows

NationsBank to “recognize” resolutions adopted by FPL affecting the account. On

July 16, 1992 an FPL Corporate Resolution gave NationsBank authority to pay all

facsimile authorized checks up to $500,000 on the PMIS account.

            Resolved, [NationsBank] is hereby authorized and requested to
      accept, honor and pay, without further inquiry and until written notice of
      revocation of the authority, hereinafter provided for is received by it, all
      checks, drafts or other orders for the payment or withdrawal of the
      monies of the Company as follows:
      ...
      b.    With respect to the PMIS Disbursement Account,
            i.     For payments of $500,000 or less, when bearing or
                   purporting to bear the facsimile signature of the
                   Treasurer, Controller or an Assistant Treasurer.



                                           7
§ (b)(i)(emphasis added). A subsequent corporate resolution dated September 9, 1993

amended subsection (b)(i) of the July 16, 1992 Corporate Resolution. The September

9 Corporate Resolution authorized NationsBank to accept, honor, and pay all checks

drawn on the PMIS Disbursement Account:

             (b)(i) 1) when bearing or purporting to bear the facsimile or
                    actual signature of its Treasurer, Controller, or an Assistant
                    Treasurer; or 2) when bearing the actual signature of its
                    President, any Vice President (excluding the Vice President
                    of Accounting), its Secretary or an Assistant Secretary, or
                    any other person or persons designated from time to time in
                    writing to a bank or trust company by the Chairman of the
                    Board or the President . . .

§ (b)(i) (1-2) (emphasis added). Twenty-four of the twenty-seven checks were drawn

on the PMIS Disbursement Account before the September 9, 1993 FPL Corporate

Resolution. Two were drawn after this date and the date of one check is uncertain.

                      CONTRACTUAL INTERPRETATION

      We review the district court’s interpretation of a contract de novo. Because the

parties stipulated that the signatures on the checks were forgeries the outcome of this

issue depends on our interpretation of the phrase “when bearing or purporting to

bear.” Arkwright contends that this phrase is not a risk shifting clause and served only

to allow the bank to pay checks with facsimile signatures that have some technical

defect in the ink such as a smudge or a smear. We disagree.




                                           8
      The plain meaning of the phrase includes a much broader class of checks.

Blacks Law Dictionary defines “purport” as “The idea or meaning that is conveyed

or expressed, especially by a formal document; to profess or claim falsely; to seem to

be.” Blacks Law Dictionary 1250 (7th ed. 1999). A forgery by its very definition

“purports to bear.” Because the parties stipulated that the signatures on the checks

were exact duplicates of the facsimile signatures, the signature on these checks “seem

to be” the authentic signature of the authorized FPL representative. Therefore the

checks would be properly payable under the contract because they purport to bear an

authorized signature. Arkwright’s contention that the September 9, 1993 Corporate

Resolution removed this authority is incorrect because it also contains the phrase

“bearing or purporting to bear.”

      The Fifth Circuit reached the same conclusion on similar facts in Perini Corp.

v. First Nat’l Bank of Habersham County, 553 F.2d 398 (5th Cir. 1977). Perini is

binding on us. See Bonner v. City of Pritchard, 661 F.2d 1206, 1209 (11th Cir. 1981).

In Perini the bank and Perini entered into a banking contract that allowed the bank to

incorporate corporate resolutions into the contract.      Perini passed a corporate

resolution that authorized the bank

      to honor all checks, drafts, and other orders of payment of money drawn
      in the name of Perini Corporation on its Regular Accounts . . . when
      bearing or purporting to bear the single facsimile signature of R.A.
      Munroe . . . said banks shall be entitled to honor and charge Perini
      Corporation for all such checks, . . . regardless of by whom or by what

                                          9
      means the actual or purported facsimile signature thereon may have been
      affixed thereto, if such facsimile signature resembles the facsimile
      specimen from time to time filed with said banks.

Perini, 553 F.2d at 400. At a later date someone stole a number of pre-printed checks

and gained access to the signature machine or developed a perfect copy of the

facsimile signature it produced. Perini sought to be reimbursed after the bank paid on

the forged checks. Id. at 401. However, the Fifth Circuit stated that through the

language in this corporate resolution Perini contractually assumed the risk of loss for

the convenient use of the facsimile signature machine. Id. at 400. The first sentence

of the holding reiterated Perini’s assumption of the risk: “One answer is clear,

however. Perini has no recourse on the unauthorized signature of R. A. Munroe

against Morgan or Brown Brothers. Perini's resolution authorizing the drawees’

payment of checks bearing signatures resembling the machine-embossed facsimile

signature precludes that course of action.” Id. at 403. See also Jefferson Parish School

Bd. v. First Commerce Corp., 669 So. 2d 1298 (La. Ct. App. 1996) (same holding

with similar facts, citing to Perini).   Therefore Perini forfeited any claim he had

against the bank for good faith payments on forged instruments. Id.

      We do not find Perini distinguishable. Although the corporate resolution in

Perini did contain additional language in the clause with the phrase “bearing or

purporting to bear,” the additional language is not necessary to ascertain the plain

meaning of the phrase “purporting to bear.” This is especially true in the present case

                                          10
because the parties stipulated that the facsimile signatures are identical copies. The

plain meaning of the phrase “bearing or purporting to bear” necessarily includes all

signatures that are identical to the one produced by the facsimile signature machine.



      Arkwright contends that even if the contract shifted the risk of loss for forgery

to FPL, such a provision is void under Florida law because it is an exculpatory clause.

An exculpatory clause denies an injured party the right to recover damages from the

person who negligently caused his injury. See O’Connell v. Walt Disney World Co.,

413 So. 2d 444, 446 (Fla. 5th DCA 1982). Arkwright relies on Cumis Ins. Society,

Inc. v. Girard Bank, 522 F. Supp. 414 (E.D. Pa. 1981), in support of its contention.

Cumis also involved a customer who signed a corporate resolution authorizing the

bank to honor checks “bearing or purporting to bear” the facsimile signature of a

signature or signatures resembling the facsimile specimens. Id. at 416. The customer

sought reimbursement from the bank after the bank paid several checks with a forged

facsimile signature. The trial court found that the resolution was insufficient to relieve

the bank from liability under Pennsylvania law because the resolution was an

exculpatory clause that must be strictly construed against the bank. Id. at 421.

Although Cumis directly supports Arkwright’s contention, it is not controlling and is

distinguishable from the present case.



                                           11
          Cumis is distinguishable because exculpatory agreements must be strictly

construed against a bank under Pennsylvania law. Florida’s public policy against

exculpatory clauses indicates that, although viewed with disfavor, they will be

enforced if they are clear and unambiguous. See Theis v. J & J Racing Promotions,

571 So.2d 92, 94 (Fla. 2d DCA 1990), rev. denied, 581 So.2d 168 (Fla.1991). Cumis

is also inconsistent with the Perini decision that enforced a resolution with similar

language under Georgia law. See, e.g., Perini, 553 F.2d 398. See also Jefferson Parish

School Bd., 669 So. 2d 1298 (finding bank not liable because resolution contained

language authorizing bank to pay checks “bearing or purporting to bear the facsimile

signatures”); Wilmington Trust Co. v. Phoenix Steel Corp., 273 A.2d 266 (Del. 1971)

(same); Phoenix Die Casting Co. v. Manufacturers and Traders Trust Co., 289 N.Y.S.

2d 254 (N.Y. App. Div. 1968) (same).

      Moreover, this was not a true exculpatory clause because NationsBank and FPL

did not contract to avoid the bank’s duty to exercise ordinary care. Florida Stat. §

674.103(1) allows a customer who wishes to use a facsimile signature machine for his

own commercial purposes to enter into an agreement with a bank that shifts the risk

of forgery from the bank to the customer as long as the risk shifting agreement does

not attempt to disclaim the bank’s statutory duties of good faith and ordinary care.5


      5
        The comment to Fla. Stat. § 674.103(1) states:
      Section 1-102 states the general principles and rules for variation of the
                                         12
NationsBank does not contend nor was there any finding by the district court that the

resolution removed the bank’s duty of ordinary care. In fact, all parties are in

agreement that the bank retained its duty to exercise ordinary care. The district court

correctly found that the Corporate resolutions were limited in scope and provided only

that Nationsbank was authorized to pay certain checks “bearing or purporting to bear”

the facsimile machine signature.

      Whether it is wise to enter into an agreement that shifts the risk of loss to the

customer does not make such agreements against public policy as long as the

agreement does not abrogate the bank’s duty to exercise ordinary care. See FDIC v.

Carre, 436 So. 2d 227 (Fla. Dist. 2d 1983) (addressing whether a clause limiting the

bank’s liability toward a customer with a safety deposit box was exculpatory). FPL’s



      effect of this Act by agreement and the limitations to this power. Section
      4- 103 states the specific rules for variation of Article 4 by agreement
      and also certain standards of ordinary care. . . . it would be unwise to
      freeze present methods of operation by mandatory statutory rules. This
      section, therefore, permits within wide limits variation of the effect of
      provisions of the Article by agreement.
Official comment (2) reiterates the parties’ ability to vary the UCC:
      Subsection (a) confers blanket power to vary all provisions of the Article
      by agreements of the ordinary kind. The agreements may not disclaim a
      bank's responsibility for its own lack of good faith or failure to exercise
      ordinary care and may not limit the measure of damages for the lack or
      failure, but this subsection like Section 1-102(3) approves the practice
      of parties determining by agreement the standards by which the
      responsibility is to be measured. In the absence of a showing that the
      standards manifestly are unreasonable, the agreement controls.
                                          13
decision to enter into such an agreement for its own convenience shifted the risk of

loss for forged facsimile signatures to FPL but retained the bank’s duty to exercise

ordinary care and to act in good faith. See Orkin Exterminating Co., Inc. v.

Montagano, 359 So.2d 512 (Fla. 4th DCA 1978) (the principles that exculpatory

clauses relieving a party of his own negligence are not favored and are unenforceable

unless they are clear and unequivocal). The resolution shifting the risk of loss to FPL

is enforceable.

                                ORDINARY CARE

      There remains the issue whether NationsBank exercised ordinary care when

it processed the forged checks. The district court indicated that summary judgment

was proper because it is undisputed that the bank acted in good faith when it paid what

appeared to be authentic checks. However, these facts do not answer whether the bank

exercised ordinary care when it paid the checks. We conclude that there is insufficient

evidence on the record to determine if NationsBank acted with ordinary care.

      It is clear from the briefs, the record, and the district court’s order that the

narrow issue before the district court on summary judgment was whether the banking

contract between FPL and NationsBank shifted the risk of loss to FPL. The parties

stipulated to a narrow set of facts solely for the purpose of interpreting the bank’s

general liability under the banking contract. The only evidence on the record

addressing whether NationsBank acted with ordinary care consisted of affidavits

                                          14
included with NationsBank’s original motion for summary judgment. Arkwright

objected to the inclusion of these facts premised on its understanding of the limited

scope of NationsBank’s motion, and the stipulations make it clear that the parties did

not intend to address the ordinary care issue on summary judgment. The stipulations

do not support any finding that NationsBank exercised ordinary care, and the record

was not sufficiently developed to allow the district court to decide this issue.

      The district court’s dismissal of the ordinary care issue undermines its own

scheduling order in force at the time of this motion. After NationsBank filed for

summary judgment, the district court asked Arkwright if discovery was necessary to

decide the motion. Arkwright answered “no,” conditioned upon the limited scope of

the summary judgment motion.6 However, in both the Stipulation of Arkwright and

NationsBank and Arkwright’s response to the scheduling motion that the district court

issued after NationsBank filed its motion for summary judgment, Arkwright clearly

expressed the need for further discovery to determine whether NationsBank used

ordinary care when it processed the forged checks.7

      6
          Arkwright and NationsBank limited the issue on summary judgment in the
stipulation agreement to whether the FPL/NationsBank banking contract shifts the risk
of loss due to forgery from NationsBank to FPL. Arkwright reserved its right to
amend its complaint to include breach of ordinary care pending the resolution of the
risk shifting issue.
      7
        In footnote 3 of the stipulations Arkwright stated:
      Arkwright cannot at this time stipulate that NationsBank exercised
      ordinary care when paying the checks. Ordinary Care is a different
                                          15
      We do not find, nor do the parties contend, that the contract relieved

NationsBank of its duty to exercise ordinary care.8 A blanket holding stating that

liability shifts to the customer whenever the bank acts in good faith and the checks

appear to be authentic abrogates the restriction against contracting away the duty of

ordinary care. The district court’s analysis ignores the possibility that a bank may

breach its duty of ordinary care even when presented with an authentic looking

facsimile signature.9




       concept from good faith under the U.C.C. Ordinary care involves
       negligence concepts, and is pertinent to statutory defenses. Nationsbank
       agrees that the issues of contractual risk shifting can be addressed apart
       from issues of NationsBank’s ordinary care.
(internal quotation marks omitted).

      8
         On page 7 of NationBank’s reply brief in the lower court, it stated:
“NationsBank does not suggest an interpretation of the agreement that disavows its
duty to exercise ordinary care. In fact, the agreement implicitly, if not explicitly,
adopts the duty of ordinary care.”
      9
        The district court stated:
      The agreement in question is not exculpatory in nature because there is
      a complete absence of language indicating an intent to either release or
      indemnify the bank for its own negligence. Limited in scope, the
      agreement defines the permissible standards of care but does not attempt
      to disclaim the statutory duty of ordinary care. The resolution does not
      state that the bank can never be held liable for a forgery. It merely
      provides that under certain circumstances, such as where the bank is
      presented with items bearing or purporting to bear the facsimile machine
      signature, the bank is authorized to pay such items.
April 27, 1999 District Court Order, page 11.
                                          16
      Any findings regarding whether NationsBank used ordinary care or was

negligent when it paid the forged instruments would be premature. We remand the

case to allow the parties to present a more fully developed record to the district court

on this issue.

      AFFIRMED in part, REVERSED in part and REMANDED to the district court

to resolve whether the NationsBank acted with ordinary care when it processed the

forged checks.




                                          17
