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BancInsure, Inc. v. Highland Bank

United States Court of Appeals, Eighth Circuit

March 3, 2015

BancInsure, Inc., Plaintiff - Appellee
v.
Highland Bank, Defendant - Appellant

Submitted June 10, 2014

Appeal from United States District Court for the District of Minnesota - Minneapolis.

For BancInsure, Inc., an Oklahoma corporation, Plaintiff - Appellee: Daniel Ellerbrock, Mark J. Johnson, Joseph Arthur Nilan, Gregerson & Rosow, Minneapolis, MN.

For Highland Bank, a Minnesota banking corporation, Defendant - Appellant: John M. Bjorkman, Patrick H. O'Neill Jr., Paula Duggan Vraa, Larson & King, Saint Paul, MN.

For Minnesota Bankers Association, Amicus Curiae: Julia O'Brien, Rodney J. Mason, Ltd.., Saint Paul, MN; Joseph Witt, Minnesota Bankers Association, Eden Prairie, MN.

Before LOKEN, BEAM, and GRUENDER, Circuit Judges.

OPINION

Page 566

LOKEN, Circuit Judge.

BancInsure, a licensed Oklahoma insurance company, denied a claim by Highland Bank, a Minnesota corporation, under a Financial Institution Bond issued by BancInsure to Highland Bank. In this diversity action, BancInsure seeks a declaratory judgment that Highland Bank's claim did not fall within the coverage terms of the Bond. Ruling on cross motions for summary judgment, the district court[1] granted summary judgment to BancInsure. Applying Minnesota law, the court ruled that Highland Bank's claim was not covered by the Bond's " Insuring Agreement E" which, as relevant here, provided coverage for " Loss resulting directly from the Insured having . . . acquired, sold or delivered, given value, extended credit or assumed liability on the faith of any original . . . personal Guarantee . . . which bears a signature of any . . . guarantor . . . which is a Forgery." Here, the court concluded, the loss did not " result directly from" a forged personal guaranty because the guaranty was worthless to the bank when it entered into the transactions in question. See BancInsure, Inc. v. Highland Bank, No. 11-cv-2497, 2013 WL 5340887, at *6-8 (D. Minn. Sept. 23, 2013). Highland Bank appealed.

While the appeal was pending, BancInsure (now known as Red Rock Insurance Company) was placed into receivership by an Oklahoma state court, and the court appointed the Oklahoma Insurance Commissioner as Receiver under a final order of liquidation. After staying the appeal " to permit proper legal action by the Receiver," we directed the parties " to advise the court . . . how they believe the court should proceed," with notice to the Insurance Commissioner as Receiver because no motion for substitution had been filed. The parties promptly filed a joint request " that the Court complete the appeal." We have done so and now affirm.

I. Background

A. The Underlying Transactions.

In May 2005, First Premier Capital (" FPC" ), an equipment lease finance company located in Minnesota, entered into a Master Lease Agreement with Equipment Acquisition Resources (" EAR" ), a Chicago-based enterprise engaged in the business of refurbishing and selling or leasing high-tech machinery used in the semiconductor industry. Sheldon Player and Donna Malone, who were married, each owned 50% of EAR. The Master Lease Agreement provided that FPC would lease to EAR equipment described in one or more Lease Schedules. Each Lease Schedule " would constitute a separate, distinct, and independent lease." Player signed the Master Lease on behalf of EAR. FPC received separate Absolute, Unconditional and Continuing Guaranty Agreements signed by Player and by Malone guaranteeing payment " of all of the obligations and liabilities of [EAR] under the Lease, both present and future," and explicitly made enforceable by FPC's " successors and assigns."

FPC and EAR executed some twenty Lease Schedules pursuant to the Master Lease Agreement, leasing specific equipment to EAR at specified terms and monthly lease charges. To finance its equipment purchases, FPC assigned its right to payments under each Lease Schedule to one of eight or ten " bank ...


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