Land Title Bank & Trust Co. v. Cheltenham National Bank

• Decision Date: 23 May 1949
• Docket Number: 1392
• Citation: 362 Pa. 30,66 A.2d 768
• Parties: Land Title Bank & Trust Company v. Cheltenham National Bank, Appellant, et al
• Court: Pennsylvania Supreme Court

66 A.2d 768

362 Pa. 30

Land Title Bank & Trust Company v. Cheltenham National Bank, Appellant, et al

No. 1392

Supreme Court of Pennsylvania

May 23, 1949

Argued April 19, 1949

Appeal, No. 110, Jan. T., 1949, from judgment of Common Pleas No. 1, Philadelphia Co., June T., 1948, No. 3330, in case of Land Title Bank and Trust Company v. Cheltenham National Bank et al. Judgment affirmed.

Assumpsit.

Plaintiff's motion for judgment on the pleadings granted and additional defendant's preliminary objections sustained, opinion by KUN, J. Original defendant appealed.

Judgment affirmed.

Frederick H. Spotts , with him William B. Farran, Philips Farran & McKeag and Pepper, Bodine, Stokes &amp Hamilton, for appellant.

Herbert A. Barton , with him Swartz, Campbell & Henry , for Land Title Bank and Trust Company et al., appellees.

Edward H. Cushman , with him Richard A. Smith , for Maryland Casualty Company, appellee.

John C. Phillips , for Edward W. Sliker, appellee.

Before MAXEY, C.J., DREW, LINN, STERN, PATTERSON, STEARNE and JONES, JJ.

OPINION

MR. JUSTICE HORACE STERN

One Vera Keller was the owner of a property on Shawnee Street in Philadelphia. Without her knowledge or authority one Bennewitt, who was a real estate broker, applied to Willow Highlands Company for a loan of $ 8,000 on that property. The loan was approved and application made by the lending company to plaintiff, the Land Title Bank & Trust Company, for title insurance guaranteeing the lien of the mortgage. At the settlement in plaintiff's office Vera Keller did not appear. Bennewitt, representing that she was merely his "strawman", produced a bond and mortgage purporting to be signed by her and the mortgage acknowledged before one Sliker, a notary public; her signatures to the bond and mortgage were forged and she had not in fact acknowledged the mortgage. The mortgagee deposited the sum of $ 8,000 with plaintiff, which issued its title policy insuring the lien of the mortgage. Plaintiff drew a check on itself in the sum of $ 7,904.50 payable to the order of Vera Keller and delivered it to Bennewitt, who indorsed the name of Vera Keller thereon and cashed it at the Cheltenham National Bank, the defendant in the present action. Defendant delivered the check to the Federal Reserve Bank of Philadelphia and received from it the amount thereof which in turn was paid by plaintiff to the Federal Reserve Bank. Upon discovery that the indorsement of Vera Keller's name was a forgery plaintiff promptly gave notice to that effect and made demand upon defendant for reimbursement.

Substantially the same transaction occurred with reference to another property owned by Vera Keller on Marshall Street in Philadelphia. Without her knowledge or authority Bennewitt applied to the Cayuga Federal Savings & Loan Association of Philadelphia for a loan on that property of $ 5,500. The loan was approved and application made by the Association to plaintiff for title insurance. Settlement was made in plaintiff's office; Vera Keller, of course, did not appear and Bennewitt again produced a bond and mortgage with forged signatures, the mortgage falsely purporting to have been acknowledged before himself, he being a notary public. The Association deposited the sum of $ 5,500 with plaintiff, which issued its policy insuring the mortgage lien, drew a check on itself in the sum of $ 5,336.38 payable to the order of Vera Keller, and delivered it to Bennewitt. Bennewitt forged her name as indorser and cashed the check at defendant bank. This check then took the same course as the other one, and, having been paid by plaintiff, the latter, upon discovery of the forgery, made demand upon defendant for repayment. As both such demands were disregarded plaintiff brought the present action and obtained judgment on the pleadings for the respective amounts of $ 7,904.50 and $ 5,336.38, or a total, with interest, of $ 14,319.72. From that judgment defendant appeals.

The applicable rule of law is so firmly settled that it needs no elaborate citation of authorities to support it. If a check is made payable to the order of a person named therein the absolute duty of a bank honoring the check is to pay only to that payee or according to his order, and no amount of care to avoid error will protect it from liability if it pays to a wrong person; it must ascertain and act upon the genuineness of the indorsement at its peril. Section 23 of the Negotiable Instruments Law of 1901, P.L. 194, provides that "When a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority." And the Act of April 5, 1849, P.L. 424, section 10, which Act was not repealed by the Negotiable Instruments Law (Union National Bank v. Franklin National Bank , 249 Pa. 375, 94 A. 1085; Market Street Title & Trust Co. v. Chelten Trust Co ., 296 Pa. 230, 145 A. 848), provides that, where the signature of an indorser on a check is forged and the amount by reason thereof is erroneously paid, the payer shall be legally entitled to recover from the person previously holding or negotiating the same the amount so paid, together with interest thereon from the time that demand shall have been made for repayment.

Defendant attempts to assimilate the present situation to the so-called "impostor" cases ^[1] which hold that a bank is not liable for the payment of a check on a forged indorsement where the person who committed the forgery and received the money was in fact the person to whom the drawer delivered the check and whom he believed to be the payee named . Here, however, plaintiff did not intend or believe Bennewitt to be the payee; on the contrary, it believed that it was dealing with Vera Keller; the checks were made payable to her order and entrusted to Bennewitt merely for the purpose of delivery to her. Defendant, having made payment to the wrong person on a forged indorsement, obtained no title to the checks and consequently no right to collect thereon from the plaintiff drawee, and, such collection having nevertheless been effected, plaintiff is entitled to recover the amount thus erroneously paid: National Union Fire Insurance Co. v. Mellon National Bank , 276 Pa. 212, 119 A. 910; Real Estate Land Title & Trust Co. v. United Security Trust Co ., 303 Pa. 273, 154 A. 593. The latter case is particularly apposite; in fact it is controlling, the facts being strikingly similar to those here involved. There, as here, a person applied for and obtained a mortgage loan from a company without the knowledge or consent of the owners of the property; there, as here, the mortgagee deposited the amount of the loan with the plaintiff company where settlement was to be made; there, as here, the alleged "agent" produced a bond and mortgage with forged signatures of the owners and false acknowledgments; there, as here, the plaintiff company issued its policy of title insurance to the mortgagee, drew its check for the amount of the mortgage to the order of the owners, and entrusted it to the "agent" for delivery to her; there, as here, the "agent" forged the payee's name and collected on the check at the defendant's bank; there, as here, when the forgery was discovered the plaintiff company notified the defendant bank thereof and demanded repayment of the amount of the check. On the pleadings setting forth these facts the court below rendered judgment for the plaintiff which this court affirmed.

Defendant's attempt to escape liability is based principally upon the concluding clause in section 23 of the Negotiable Instruments Law above quoted: "unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority". It is contended that plaintiff is so precluded because of alleged negligence on its part in two respects: (1) in not requiring the personal appearance of Vera Keller at the mortgage settlement, and (2) in delivering the check to Bennewitt for transmission to Vera Keller instead of sending it to her through the mail. There are several reasons why the argument thus advanced by defendant is untenable. In the first place, the facts do not disclose anything that could fairly be characterized as negligence on the part of plaintiff. It was said by RICE P.J., in Houser v. National Bank of Chambersburg , 27 Pa.Super. 613, 618: "We cannot give our assent to the extreme proposition urged by the appellant's counsel, that the mere fact that a man has allowed himself to be duped implies some degree of negligence on his part." Plaintiff had no reason to suspect that each of two notaries public would, and in this case did, falsely certify that the mortgagor had personally appeared before him and acknowledged the mortgage; it had no reason to doubt the genuineness and validity of the documents, and to have required the actual appearance of the mortgagor at the settlements would have availed nothing by way of protection because, as has sometimes happened, the person thus appearing might, and here undoubtedly would, have been herself an impostor so that even then there would have been required further outside investigation to determine her identity, or lack of identity, with the owner of the properties. As to turning the check over to Bennewitt for delivery to the payee, since no reason then existed to give rise to a suspicion that he was dishonest, there was no apparent need for plaintiff to mail the check to the mortgagor rather than...