Provident Trust Co. of Philadelphia v. Interboro Bank & Trust Co.

• Decision Date: 28 June 1957
• Citation: 133 A.2d 515,389 Pa. 548
• Parties: PROVIDENT TRUST COMPANY OF PHILADELPHIA v. INTERBORO BANK AND TRUST COMPANY, Appellant.
• Court: Pennsylvania Supreme Court

Page 515

133 A.2d 515

389 Pa. 548

PROVIDENT TRUST COMPANY OF PHILADELPHIA v. INTERBORO BANK AND TRUST COMPANY, Appellant.

Supreme Court of Pennsylvania.

June 28, 1957.

Sidney L. Wickenhaver, Montgomery, McCracken, Walker & Rhoads, Philadelphia, for appellant.

Herbert A. Barton, Philadelphia, Robert W. Beatty, Media, and Swartz, Campbell & Henry, Philadelphia, for appellee.

Before CHARLES ALVIN JONES, C. J., and BELL, CHIDSEY, MUSMANNO, ARNOLD, BENJAMIN R. JONES and COHEN, JJ.

MUSMANNO, Justice.

On June 28, 1951, Arthur Benson obtained from Mrs. Cora V. Savidge, whom he had known for 25 years, a power of attorney to sell her Lansdowne property, manage the business of her deceased husband, invest funds, negotiate loans and accomplish other business matters not necessary to relate here. On July 6, 1951, he endorsed Mrs. Savidge's name without her knowledge to a judgment note and borrowed $6,000 on it from the Interboro Bank & Trust Company. With this money he opened an account in that bank in her name. He then withdrew from the account $5,049.63.

A week later he attended the settlement closing of the sale of Mrs. Savidge's Lansdowne property at the office of the Commonwealth Title Company, which turned over to him its check payable to Mrs. Savidge in the amount of $9,300.32 due her as grantor. The check was drawn on the Provident Trust Company of Philadelphia, the plaintiff in this lawsuit. Benson endorsed (again without her knowledge) the name of Mrs. Savidge to this check and deposited it in the account he had opened in her name in the Interboro Bank. The Interboro Bank negotiated, transferred, and delivered the check to the Federal Reserve Bank of Philadelphia which delivered it to the Provident Trust Company and received from the Provident Trust the amount of the check which the Reserve Bank then turned over to Interboro. Provident then charged the account of Commonwealth Title with the amount of the check.

When Benson deposited the $9,300 check in the Interboro Bank on August 1, 1951, Mrs. Savidge's account at that time was already overdrawn in the amount of $35.12. With the depositing of the $9,300, Interboro collected the $6,000 it had loaned to Benson on the assumption it was going to Mrs. Savidge. By the end of August, 1951, the entire amount deposited by Benson had been withdrawn, save $33. 17.

It was not until April, 1952, that Mrs. Savidge became aware of Benson's duplicities and illegal transactions. In that month Benson began serving a prison sentence for an unrelated Federal offense. Mrs. Savidge now employed counsel to represent her and she learned, inter alia, of the existence of the account in her name in Interboro, of the $6,000 and $9,300 deposits made in her name, and the ensuing withdrawals. She brought suit against the Commonwealth Title Company for the proceeds from the sale of her property, asserting that the Title Company had no authority to pay to Benson the money due her. The Title Company settled this lawsuit upon payment of $7,500 to Mrs. Savidge who then assigned to the Title Company all her rights to proceeds in the Lansdowne property transaction as well as her rights to the $9,300 check issued by the Title Company. The Title Company reassigned these rights to the Provident Trust Company which, in its dual position as assignee of Mrs. Savidge's rights, and as drawee bank, brought suit against the Interboro Bank for the amount it had paid to the Federal Reserve Bank, it having reimbursed its depositor's (Title Company) account for the amount charged against it.

Upon filing of Answer, the case was heard by the Court of Common Pleas of Delaware County without jury and verdict was rendered in favor of the plaintiff in the sum of $11,981.82. The defendant appealed.

It is the position of the plaintiff, Provident Trust, that the Interboro Bank, as the collecting bank, which, by its endorsement guaranteed all prior endorsements, was liable to Provident for the $9,300 paid by Provident. This position is a sound one. We said in the case of Land Title Bank & Trust Co. v. Cheltenham National Bank, 362 Pa. 30, 66 A.2d 768, 770:

'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, 56 P.S. § 28, 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, 56 P.S. § 29, 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.'

On the other hand, it is the position of Interboro that it has no liability in the matter because (1) Mrs. Savidge's signature on the check was not a forgery; (2) that, under the authority of the power of attorney which she gave to Benson he had the right to sign her name; and that (3) she subsequently ratified his actions. We affirm what the lower Court said with regard to these first two propositions:

'We feel that Benson was not 'in fact' authorized to indorse this check. The Power of Attorney authorized Benson 'to deposit such funds in my account at the Bryn Mawr...