Philadelphia Title Ins. Co. v. Fidelity-Philadelphia Trust Co.

• Decision Date: 29 September 1965
• Docket Number: FIDELITY-PHILADELPHIA
• Citation: 419 Pa. 78,212 A.2d 222
• Parties: , 23 A.L.R.3d 925, 2 UCC Rep.Serv. 1011 PHILADELPHIA TITLE INSURANCE COMPANY, Appellant, v.TRUST COMPANY, Defendant, and The Philadelphia National Bank, Additional Defendant, and The Penn's Grove National Bank & Trust Company, Second Additional Defendant.
• Court: Pennsylvania Supreme Court

Page 222

212 A.2d 222

419 Pa. 78, 23 A.L.R.3d 925, 2 UCC

Rep.Serv. 1011

PHILADELPHIA TITLE INSURANCE COMPANY, Appellant, v. FIDELITY-PHILADELPHIA TRUST COMPANY, Defendant and The Philadelphia National Bank, Additional Defendant and The Penn's Grove National Bank & Trust Company, Second Additional Defendant.

Supreme Court of Pennsylvania.

Sept. 29, 1965.

Howard Saul Marcu, Philadelphia, for appellant.

J. Grant McCabe, III, Philadelphia, for appellees.

Before BELL, C. J., and MUSMANNO, JONES, COHEN, EAGEN, O'BRIEN and ROBERTS, JJ. COHEN, Justice.

This is an appeal in an action in assumpsit brought by plaintiff-appellant, Philadelphia Title Insurance Company, against defendant-appellee, Fidelity-Philadelphia Trust Company, to recover the sum of $15,640.82 which was charged against the Title Company's account with Fidelity in payment of a check drawn by the Title Company on Fidelity. The complaint alleged that the endorsement of one of the payees had been forged and that, therefore, Fidelity should not have paid the check. Fidelity joined the Philadelphia National Bank as an additional defendant claiming that if Fidelity were liable to plaintiff, PNB was liable over to Fidelity for having guaranteed the endorsements. PNB joined the Penn's Grove National Bank and Trust Company as a second additional defendant claiming that if PNB were liable to Fidelity, Penn's Grove was liable to PNB for having cashed the check and guaranteed the endorsements. By way of defense all of the banks asserted that none of them were liable because the issuance of the check by the Title Company was induced by an impostor and delivered by the Title Company to a confederate of the impostor thereby making the forged endorsement effective.

The case was tried before the lower court sitting without a jury. The trial judge found in favor of the Title Company. Exceptions to said finding were sustained unanimously by the court en banc and judgment was entered against the Title Company and in favor of the banks. The judgment must be affirmed.

The pertinent facts are stated by the lower court:

'Edmund Jezemski and Paula Jezemski were husband and wife, estranged and living apart. Edmund Jezemski was administrator and sole heir of his deceased mother's estate, one of the assets of which was premises 1130 North Fortieth Street, Philadelphia. Mrs. Jezemski, without her husband's knowledge, arranged for a mortgage to be placed on this real estate. This mortgage was obtained for Mrs. Jezemski through John M. McAllister, a member of the Philadelphia Bar, and Anthony DiBenedetto, a real estate dealer, and was to be insured by Philadelphia Title Insurance Company, the plaintiff. Shortly before the date set for settlement at the office of the title company, Mrs. Jazemski represented to McAllister and DiBenedetto that her husband would be unable to attend the settlement. She came to McAllister's office in advance of the settlement date, accompanied by a man whom she introduced to McAllister and DiBenedetto as her husband. She and this man, in the presence of McAllister and DiBenedetto, executed a deed conveying the real estate from the estate to Edmund Jezemski and Paula Jezemski as tenants by the entireties and also executed the mortgage, bond and warrant which had been prepared. McAllister and DiBenedetto, accompanied by Mrs. Jezemski, met at the office of the title company on the date appointed for settlement, the signed deed and mortgage were produced, the mortgagee handed over the amount of the mortgage, and the title company delivered its check to Mrs. Jezemski for the net proceeds of $15,640.82, made payable, as we have already mentioned, to Mr. and Mrs. Jezemski individually and Mr. Jezemski as administrator of his mother's estate.'

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* * *

'[The Title Company's] settlement clerk, in the absence of Edmund Jezemski at the settlement, accepted the word of McAllister and DiBenedetto that the deed and mortgage had been signed by Jezemski; he himself, though he had not seen the signatures affixed, signed as a witness to the signatures on the mortgage; he also signed as a witness to the deed, and in his capacity as a notary public he acknowledged its execution.'

* * *

* * *

'* * * Paula Jezemski, one of the payees, * * * presented [the check], with purported endorsements of all the payees, at the Penns Grove National Bank and Trust Company in Penns Grove, New. Jersey, for cash. Edmund Jezemski received none of the proceeds, either individually or as administrator of the estate of Sofia Jezemski; and it is conceded that the endorsements purporting to be his were forged. The Penns Grove bank negotiated the check through the Philadelphia National Bank, and it was eventually paid by Fidelity-Philadelphia Trust Company, which charged the amount of the check against the deposit account of plaintiff.'

* * *

* * *

'There is no question that the man whom Mrs. Jezemski introduced to McAllister and DiBenedetto was not Edmund Jezemski, her husband. It was sometime later that Edmund Jezemski, when he tried to convey the real estate, discovered the existence of the mortgage. When he did so he instituted an action in equity which resulted in the setting aside of the deed and mortgage and the repayment of the fund advanced by the mortgagee.'

The parties do not dispute the proposition that as between the payor bank ¹ (Fidelity-Philadelphia) and its customer ² (Title Company), ordinarily, the former must bear the loss occasioned by the forgery of a payee's endorsement (Edmund Jezemski) upon a check drawn by its customer and payed by it. Provident Trust Company of Philadelphia v. Interboro Bank and Trust Company, 389 Pa. 548, 133 A.2d 515 (1957); Coffin v. Fidelity-Philadelphia Trust Company, 374 Pa. 378, 97 A.2d 857, 39 A.L.R.2d 625 (1953); Uniform Commercial Code--Commercial Paper, Act of April 6, 1953, P.L. 3, § 3-404, as amended, 12A P.S. § 3-404. The latter provides, inter alia, that '(1) Any unauthorized signature [Edmund Jezemski's] is wholly inoperative as that of the person whose name is signed unless he ratifies it or is precluded from denying * * *.'

However, the banks argue that this case falls within an exception to the above rule, making the forged indorsement of Edmund Jezemski's name effective so that Fidelity-Philadelphia was entitled to charge the account of its customer, the Title Company, who was the drawer of the check. The exception asserted by the banks is found in § 3-405(1)(a) of the Uniform Commercial Code--Commercial Paper which provides:

'An indorsement by any person in the name of a named payee is effective if (a) an impostor by use of the mails or otherwise has induced the maker or drawer to issue the instrument to him or his confederate in the name of the payee; * * *.'

The lower court found and the Title Company does not dispute that an impostor appeared before McAllister and DiBenedetto, impersonated Mr. Jezemski, and, in their presence, signed Mr. Jezemski's name to the deed, bond and mortgage; that Mrs. Jezemski was a confederate of the impostor; that the drawer, Title Company, issued the check to Mrs. Jezemski naming her and Mr. Jezemski as payees; and that some person other than Mr. Jezemski indorsed his name on the check. In effect, the only argument made by the Title Company to prevent the applicability of Section 3-405(1)(a) is that the impostor, who admittedly played a part in the swindle, did not 'by the mails or otherwise' induce the Title Company to issue the check within the meaning of Section 3-405(1)(a). The argument must fail.

Outside the Uniform Commercial Code, the impostor doctrine has taken many forms and been based...