Market St. Title & Trust Co. v. Chelten Trust Co.

• Decision Date: 18 March 1929
• Docket Number: 273
• Citation: 296 Pa. 230,145 A. 848
• Parties: Market St. Title & Trust Co. v. Chelten Trust Co., Appellant
• Court: Pennsylvania Supreme Court

145 A. 848

296 Pa. 230

Market St. Title & Trust Co. v. Chelten Trust Co., Appellant

No. 273

Supreme Court of Pennsylvania

March 18, 1929

Argued December 6, 1928

Appeal, No. 273, Jan. T., 1928, by defendant, from judgment of C.P. No. 4, Phila. Co., Sept. T., 1926, No. 12690, on verdict for plaintiff, in case of Market Street Title & Trust Co. v. Chelten Trust Co. Reversed.

Assumpsit on a forged endorsement of a check. Before FINLETTER, P.J.

The opinion of the Supreme Court states the facts.

Judgment on directed verdict for plaintiff for $5,113.60. Defendant appealed.

Error assigned, inter alia, was refusal of judgment for defendant n.o.v., quoting record.

The judgment of the court below is reversed and judgment is here entered for defendant non obstante veredicto.

Ralph B. Evans, of Evans, Bayard & Frick, for appellant. -- Plaintiff cannot recover if the loss was occasioned by its negligence: Iron City Bank v. Bank, 159 Pa. 46; Union Nat. Bank v. Bank, 271 Pa. 107.

Plaintiff cannot recover if under similar circumstances an ordinary depositor could not recover: Land Title & Trust Co. v Bank, 196 Pa. 230; Knights of Joseph v. T. & S.D Co., 69 Pa.Super. 89; Penna. M.L. Ins. Co. v. Bank, 70 Pa.Super. 34, 38.

An ordinary depositor could not recover from plaintiff: Myers v. Bank, 193 Pa. 1; McNeely v. Bank, 221 Pa. 588; United Security L. Ins. & Trust Co. v. Bank, 185 Pa. 586.

The judgment of the lower court is based on a disputed question of fact which should have been submitted to the jury.

Frederic L. Ballard, of Ballard, Spahr, Andrews & Ingersoll, with him John V. Lovitt, for appellee. -- The present case is not a "fictitious payee" case: Nat. F. Ins. Co. v. Bank, 276 Pa. 212.

The cases cited by appellant in support of its contention involve the alteration or forgery of either the drawer's signature or the amount of the check, whereas here the alteration and forgery were of the payee's name only.

The drawer or drawee is under no duty to examine returned checks for forged endorsements or alterations in the name of the payee: Nat. Fire Ins. Co. v. Bank, 276 Pa. 212; United States v. Bank, 135 A.D. 52; United States v. Bank, 214 U.S. 302.

Appellant's negligence caused the loss: Phila. Nat. Bank v. Bank, 25 F.2d 995.

Appellee can recover on the warranty of appellant's endorsement: Judge v. T. & T. Co., 68 Pa.Super. 310.

Appellant is liable to appellee for money paid on a forged endorsement.

There was no question of fact to go to the jury.

Before MOSCHZISKER, C.J., FRAZER, WALLING, SIMPSON, KEPHART, SADLER and SCHAFFER, JJ.

OPINION

MR. JUSTICE SIMPSON:

In the course of a real estate settlement, where plaintiff was insuring the title to the property and distributing the purchase price, it should have paid Albert W. Sanson, Esq., 1218 Chestnut Street, the sum of $4,591. Through some unexplained mistake of its officials, plaintiff's check for that sum, drawn by and upon itself, was made to the order of S.W. Samson, who, so far as appears, was a nonexistent person. Through another unexplained mistake of its officials, the check was mailed to Albert W. Sampson, 5842 Crittenden Street, Philadelphia, who had no interest in the settlement or right to the money; the letter, with which the check was enclosed, being also directed to him and stating, "We are enclosing herewith check to your order in the amount of $4,591," etc., etc. Before the check left plaintiff's bank, or shortly thereafter and before it was taken to defendant, the mistaken name of S.W. Samson was changed to the equally mistaken one of A. W. Sampson ^[*] (to whom, as already stated, the check was mailed), by writing the latter name over the former. No attempt was made to conceal the change; it was observable even on the most casual glance. It is difficult to believe plaintiff's contention that it was made after mailing, since, while fastened to the letter addressed to Albert W. Sampson, it passed under the scrutiny of five of plaintiff's officials or employees, one of whom signed it, another OK'd it, one or two others verified it and a fifth signed the letter to Sampson which said "We are enclosing herewith check to your order"; but, in the view we take of the matter, it is of no consequence when the change was made. Such alterations in the name of the payee are quite common in checks brought for deposit, the custom of banks, when they occur, being to refuse to receive the check in question except for collection, and to pay nothing on account of it until it has been honored by the drawee bank.

Albert W. Sampson, to whom, as stated, plaintiff sent the check, took it to defendant and sought to open an account with it. Because of the alteration in the name of the payee, defendant, following the custom of banks above referred to, refused to take the check except for collection, and this being assented to by Sampson, he endorsed it in the presence of defendant's officials, they stamped upon it their endorsement, which contained also the words "prior endorsements guaranteed," and, in due course, the check, palpably altered as stated, was presented to and paid by plaintiff. A few days later, Sampson called on defendant to see if the check had been honored, defendant called plaintiff up on the telephone, and one of the officials of the latter, after inquiry regarding or examination of the altered check, replied that it had been paid. Defendant then allowed Sampson to open a checking account with it, and the whole amount was paid to him, or on his order, before defendant received any notice that the check should not have been paid by plaintiff. Fifty-two days after plaintiff had paid the check, A. W. Sanson, Esq., to whom it should have been drawn, inquired of plaintiff why he had not received his money. This led to an investigation, the errors above set forth were discovered, and five days later plaintiff notified defendant thereof and demanded a refund of the amount of the check. This being refused, plaintiff sued defendant on its endorsement; the trial judge refused defendant's point for binding instructions, but gave such instructions for plaintiff; a verdict was rendered accordingly; the court in banc refused to enter judgment non obstante veredicto for defendant, but instead, entered judgment on the verdict, and defendant prosecuted this appeal. The judgment is erroneous for several reasons.

In the first place, it should have been entered for defendant, because of Land Title & Trust Co. v. Northwestern Nat. Bank, 196 Pa. 230, from which it cannot be distinguished in principle. There the check was drawn to the order of the proper person, but handed by plaintiff's employee to a third party, supposed to be the proper person, and was endorsed by that third party and deposited in the defendant bank, which also endorsed it and collected its amount from plaintiff. After the fund had been paid out by defendant, the mistake was discovered, plaintiff sued defendant on its endorsement, the trial court, as here, gave binding instructions in plaintiff's favor, but we reversed and entered judgment for defendant, because the money was in fact paid to the person to whom plaintiff, by its actions, showed it intended the money should be paid, though there, as here also, plaintiff thought it would be used by an entirely different person. There is, of course, no difference in principle between delivering a check to the wrong person by handing it to him, supposing him to be the right one, and delivering a check to the wrong person by mailing it to him, supposing him to be the right one. In that case, as in this, plaintiff caused a specified person to receive the check, expecting he would use it, defendant endorsed the check and collected it from plaintiff, and thereafter paid its amount to the person to whom plaintiff had delivered it. There an instructed verdict for the drawer was reversed, and here a like instructed verdict must receive the same treatment.

The only difference between the two cases is that here defendant's endorsement was accompanied by the words "prior endorsements guaranteed," while there it was not; but this is wholly immaterial, not only because it has always been the law that every unqualified endorsement is a guaranty of the validity of all previous endorsements, but also because the guaranty here, in the very nature of things, was that the prior endorsement, "A. W. Sampson," was the signature of the A. W. Sampson, to whom plaintiff sent the check, and not the signature of A. W. Sanson, Esq., to whom it was neither drawn nor sent, and of whom defendant had no knowledge. Neither defendant, nor any one else to whom the check was given, could know, nor were they required to know, that, in the minds of those acting for plaintiff, there was an undisclosed intention to have the money received by some one other than the person named on the face of the check. The liability is not to be determined by a consideration of plaintiff's undisclosed intent, but by determining whether or not it was negligent in delivering the check to the one who obtained the money on it (Houser v. Nat. Bank of Chambersburg, 27 Pa.Super. 613, per RICE, P.J.); that it was, is an admitted fact in the instant case. This is, indeed, the law respecting any written instrument, but it is especially so in regard to commercial paper, for, from the earliest days to the present, it has always been held to be a "courier without luggage."

It is of no moment that defendant did not see the letter with which the check was enclosed, for neither did defendant, in the Land Title & Trust Co. Case, know of the circumstances under which the check was given. Nor is it a matter of any consequence, in the consideration of the present point, even if the fact be so, that the name of the...