Appeal from judgment of Court of Common Pleas of Erie County, May T., 1962, No. 17, in case of Thompson Maple Products, Inc. v. The Citizens National Bank of Corry, now by merger, The Marine National Bank.
Malcolm Anderson, with him Frank G. McKnight, and Griggs, Moreland, Blair and Anderson, and Brown and McKnight, for appellant.
Irving Murphy, with him Frederick F. Jones, John A. Spaeder, and MacDonald, Illig, Jones & Britton, and Marsh, Spaeder, Baur, Spaeder & Schaaf, for appellee.
Ervin, P. J., Wright, Watkins, Montgomery, Jacobs, Hoffman, and Spaulding, JJ. Opinion by Hoffman, J. Watkins, J., dissents.
[ 211 Pa. Super. Page 43]
In this assumpsit action, the plaintiff, Thompson Maple Products, Inc., seeks to recover more than $100,000 paid out on a series of its checks by defendant bank, as drawee. The payee's signature on each of the checks was forged by one Emery Albers, who then cashed the checks or deposited them to his account with the defendant.
[ 211 Pa. Super. Page 44]
The case was tried in the court below sitting without a jury. That court entered judgment in favor of the plaintiff in the amount of $1258.51, the face amount of three checks which the defendant had paid without any endorsement whatever.*fn1 It dismissed the remainder of the claim, and this appeal followed.*fn2
The plaintiff is a small, closely-held corporation, principally engaged in the manufacture of bowling pin "blanks" from maple logs. Some knowledge of its operations from 1959 to 1962 is essential to an understanding of this litigation.
The plaintiff purchased logs from timber owners in the vicinity of its mill. Since these timber owners rarely had facilities for hauling logs, such transportation was furnished by a few local truckers, including Emery Albers.
At the mill site, newly delivered logs were "scaled" by mill personnel, to determine their quantity and grade. The employee on duty noted this information, together with the name of the owner of the logs, as furnished by the hauler, on duplicate "scaling slips."
In theory, the copy of the scaling slip was to be given to the hauler, and the original was to be retained by the mill employee until transmitted by him directly to the company's bookkeeper. This ideal procedure, however, was rarely followed. Instead, in a great many instances, the mill employee simply gave both slips to the hauler for delivery to the company office. Office personnel then prepared checks in payment for the
[ 211 Pa. Super. Page 45]
logs, naming as payee the owner indicated on the scaling slips. Blank sets of slips were readily accessible on the company premises.
Sometime prior to February, 1959, Emery Albers conceived the scheme which led to the forgeries at issue here. Albers was an independent log hauler who for many years had transported logs to the company mill. For a brief period in 1952, he had been employed by the plaintiff, and he was a trusted friend of the Thompson family. After procuring blank sets of scaling slips, Albers filled them in to show substantial, wholly fictitious deliveries of logs, together with the names of local timber owners as suppliers. He then delivered the slips to the company bookkeeper, who prepared checks payable to the purported owners. Finally, he volunteered to deliver the checks to the owners. The bookkeeper customarily entrusted the checks to him for that purpose.
Albers then forged the payee's signature and either cashed the checks or deposited them to his account at the defendant bank, where he was well known. Although he pursued this scheme for an undetermined period of time, only checks paid out over a three-year period prior to this litigation are here in controversy. See Uniform Commercial Code, Act of April 6, 1953, P. L. 3, as amended, § 4-406, 12A P.S. § 4-406.
In 1963, when the forgeries were uncovered, Albers confessed and was imprisoned. The plaintiff then instituted this suit against the drawee bank, asserting that the bank had breached its contract of deposit by paying the checks over forged endorsements. See U.C.C. § 3-404, 12A P.S. § 3-404.
The trial court determined that the plaintiff's own negligent activities had materially contributed to the unauthorized endorsements, and it therefore dismissed the substantial part of plaintiff's claim. We affirm the action of the trial court.
[ 211 Pa. Super. Page 46]
Both parties agree that, as between the payor bank and its customer, ordinarily the bank must bear the loss occasioned by the forgery of a payee's endorsement. Philadelphia Title Insurance Company v. Fidelity-Philadelphia Trust Company, 419 Pa. ...