Appeals, Nos. 3 and 4, March T., 1951, from judgment of Court of Common Pleas of Beaver County, Sept. T., 1949, No. 239, in case of A. A. Johnson et ux. v. First National Bank of Beaver Falls. Judgment reversed.
Joseph A. Rieser, for appellants.
Leonard L. Ewing, with him Reed, Ewing & Ray, for appellee.
Before Drew, C.j., Stern, Stearne, Jones, Bell, Ladner and Chidsey, JJ.
OPINION BY MR. JUSTICE JONES
The plaintiffs, husband and wife, sued to recover a sum allegedly standing to their credit, as joint depositors,
in a checking account in the defendant bank. The complaint averred that, after various deposits made by the plaintiffs to the credit of the account and withdrawals therefrom from time to time, there should have been a net balance in the account to the plaintiffs' credit in the month of October 1948 of $3153; that the plaintiffs made demand therefor; and that the defendant refused to pay the plaintiffs that sum or any portion thereof. The defendant answered, denying that anything was due the plaintiffs, and averred, under new matter, that the plaintiffs had received payment in full as shown by the bank's ledger sheet of the account which began with an entry of October 23, 1947, crediting the plaintiffs with a balance brought forward of $3278. Subsequent entries of deposits and withdrawals appear on the ledger sheet until October 4, 1948, at which time the withdrawal shown reduced the balance in the account to $.00 There were, all told, in the period of time covered by the ledger sheet twenty-three withdrawals by checks purportedly drawn by one or the other or both of the plaintiffs. In their reply to the new matter, the plaintiffs averred that only six of the withdrawals had actually been made by them and that seventeen of the checks charged to their account, for an aggregate sum of $3153, were forgeries.
At trial, the plaintiffs proved that all seventeen of the contested checks were forgeries, and the jury expressly so found in a special verdict. The defendant offered no proof of the genuineness of the signatures to the checks involved and no longer questions that they were forgeries. It so happened, however, that the last two of such checks were cashed by the bank after the plaintiffs had knowledge of the "irregularity" in their account and, because they did not notify the bank accordingly when they first obtained such knowledge, the jury relieved the bank of liability for the payment of those checks and returned a verdict for the plaintiffs
in the sum of $2770. The verdict represented the amount paid out by the bank on the other fifteen forged checks all of which had been cashed by the bank before the plaintiffs knew, or had reason to know, that such checks had been charged to their account. The defendant moved for judgment n.o.v. on the ground that the plaintiffs had failed to give the defendant prompt notice of the forgeries and were thereby precluded from setting them up. The court below granted the motion and entered judgment for the defendant from which the plaintiffs brought these separate appeals.
Section 23 of the Negotiable Instruments Law of May 16, 1901, P.L. 194 (56 PS § 28), provides that "When a signature is forged... it is wholly inoperative, and no right... 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..." (Emphasis supplied). The word "precluded", as used in Section 23 of the N.I.L., has been construed in this State, as well as elsewhere, to mean "estopped" which necessarily connotes harm or at least unfairness, otherwise, to the one asserting the estoppel. In Commonwealth v. Globe Indemnity Company, 323 Pa. 261, 266, 185 A. 796, Mr. Justice LINN, speaking for this court, said with respect to the effect of a forgery, -- "Being a forgery, section 23 declares that 'it is wholly inoperative' and confers 'no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto' unless the drawer is estopped" (Emphasis supplied). In First National Bank of Shoemakersville v. Albright, 111 Pa. Superior Ct. 392, 397-398, 170 A. 370, Judge (later Mr. Justice) PARKER said, -- "We understand that the word 'precluded' as used in the Act of 1901 is equivalent to 'estopped.'" In such connection, the same opinion further stated
that "negligence is treated as a ground of estoppel" and that this is but "'... an application of the general principle that when one of two innocent persons, that is, persons each guiltless of an intentional, moral wrong, must suffer a loss, it must be borne by that one of them who by his conduct has rendered the injury possible': 10 R.C.L. 695." See also Clearfield National Bank v. Madera National Bank, 87 Pa. Superior Ct. 564, 568; and, generally, Brannan, Negotiable Instruments Law, 7th Ed., § 23, p. 455.
Among the acts of negligence capable of estopping a depositor from recovering from his bank for its payment of a check bearing the depositor's forged signature is his failure to promptly notify the bank of the forgery: see McNeely Company v. Bank of North America, 221 Pa. 588, 592, 70 A. 891, where it was said that "The duty of a depositor in a bank, upon discovering that it has paid and charged to his account either a check bearing his forged signature as drawer or his check on the forged endorsement of the payee, is to promptly notify it of the forgery." However, as we later and occasion to note, what constitutes prompt notice "varies with the circumstances" of each case: Commonwealth v. Globe Indemnity Company, supra. The McNeely case, itself, had impliedly so recognized. In Iron City Nat. Bank v. Fort Pitt Nat. Bank, 159 Pa. 46, 28 A. 195, Mr. Justice MITCHELL had said that, short of an equitable estoppel in favor of a bank which has paid out the proceeds of a check ...