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HARDEX-STEUBENVILLE CORPORATION v. WESTERN PENNSYLVANIA NATIONAL BANK (12/20/71)

decided: December 20, 1971.

HARDEX-STEUBENVILLE CORPORATION, INC., APPELLANT,
v.
WESTERN PENNSYLVANIA NATIONAL BANK



Appeal from judgment of Court of Common Pleas, Civil Division, of Allegheny County, April T., 1967, No. 3453, in case of Hardex-Steubenville Corporation, Inc., also trading and doing business under the fictitious name registration Hardex-Sharon, Inc. v. Western Pennsylvania National Bank.

COUNSEL

James K. O'Malley, with him Morris, Safier & Makoroff, for appellant.

Harold Gondelman, with him Gerald S. Lesher, and Baskin, Boreman, Wilner, Sachs, Gondelman & Craig, for appellee.

Bell, C. J., Jones, Eagen, O'Brien, Roberts, Pomeroy and Barbieri, JJ. Opinion by Mr. Justice Pomeroy. Mr. Chief Justice Bell dissents.

Author: Pomeroy

[ 446 Pa. Page 447]

We are concerned on this appeal with the right of a depositor in a bank to recoup from the bank the sums paid from his bank account on forged checks, and the defenses available to the bank against its customer's

[ 446 Pa. Page 448]

    claim. Appellant here sued appellee bank to recover amounts so charged against its account. After a jury trial a verdict was returned in favor of the appellee bank. Appellant's motion for a new trial was denied and judgment was entered on the verdict. Because we hold that the trial court's charge to the jury contained prejudicial error, we will reverse and remand for a new trial.

The basic facts of this case are not complex. In 1962 Hardex-Steubenville Corporation, Inc., appellant (herein "the Customer") opened a checking account with appellee (herein "the Bank"), executing signature cards which, inter alia, authorized Myron Swartz, the President of the Customer, to sign checks on its behalf. In 1963 the Customer employed one Frank Iskra as an office manager and accountant. Early in 1964, Mr. Iskra began forging Mr. Swartz' signature to checks purportedly made by the Customer, payable to Mr. Iskra's order. Mr. Iskra continued this practice until it was detected in January, 1967. In the three-year period before discovery Mr. Iskra forged and the Bank paid checks in amounts totaling $97,000. Recovery is sought in the present suit only for these checks forged between January, 1966 and January, 1967, in amounts aggregating $63,105.28.*fn1

As is revealed by Mr. Iskra's deposition which was read into the record at trial,*fn2 he was in an ideal position to carry off this fraud. As office manager, he received the Bank's monthly statements of his employer's

[ 446 Pa. Page 449]

    accounts, together with the month's cancelled checks. From the latter, he removed the forged checks and altered the Customer's books so as to make the missing funds appear to be attributable to inventory pilferage. The Customer notified the Bank promptly upon discovery of Mr. Iskra's defalcations, but the Bank refused to credit the Customer's account with the amounts it had paid out on the forged checks.

At trial the Customer introduced testimony tending to show that the Bank had been negligent in honoring the forged checks. The Bank introduced testimony to the contrary and showing that during the period involved it had sent to the Customer regular monthly statements of its ...


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