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DRUG HOUSE v. KEYSTONE BANK (04/10/79)

submitted: April 10, 1979.

THE DRUG HOUSE, INC., A CORPORATION, APPELLANT,
v.
KEYSTONE BANK, A BANKING CORPORATION



No. 1166 April Term, 1978, Appeal From The Order Of The Court Of Common Pleas, Civil Division, of Allegheny County at No. G.D. 78-11484

COUNSEL

Philip E. Beard, Pittsburgh, for appellant.

Abraham Fishkin, Pittsburgh, for appellee.

Price, Hester and Montgomery, JJ.

Author: Montgomery

[ 272 Pa. Super. Page 131]

Appellant, The Drug House, Inc., brought an action in assumpsit in the Court of Common Pleas of Allegheny County, Civil Division, against Keystone Bank, Appellee. The suit sought to recover the proceeds of a check, in the amount of $3,000.00, of which Appellant was the payee. The check had been forwarded to a third party which indorsed it in its own name and deposited it in its own bank. The check was then forwarded to Appellee, which made payment to the third party's bank. Appellee filed preliminary objections in the nature of a demurrer claiming that since no privity of contract existed between Appellant and Appellee, there could be no breach of contract duty upon which to base a cause of action. After argument, the Court below entered an Order on July 10, 1978, sustaining Appellee's preliminary objections and dismissing the Complaint. This appeal followed.

In an appeal from an order sustaining preliminary objections to a complaint in the nature of a demurrer, a court must accept as true the well-pleaded facts of the complaint. Woodyatt v. Bank of Old York Road, 408 Pa. 257,

[ 272 Pa. Super. Page 132182]

A.2d 500 (1962); Ammlung v. City of Chester, 224 Pa. Super. 47, 302 A.2d 491 (1973). Thus viewed, the factual record before this Court, taken from the averments of Appellant's Complaint, shows the following:

Appellant is a Pennsylvania corporation with its principal place of business in Philadelphia. Appellee is a banking corporation located in Pittsburgh. Appellant was the payee of a check, drawn on Appellee, in the amount of $3,000.00 and dated May 5, 1976. The check was never received by Appellant, nor did Appellant ever indorse or negotiate it in any manner. Instead, the check was received and indorsed by Equity Conversion, Inc., which deposited it in its own account with Chemical Bank of New York (hereinafter referred to as collecting bank). The collecting bank subsequently indorsed the check and presented it to Appellee, which made payment despite the fact that the check did not bear the endorsement of Appellant. Equity Conversion had no authority to indorse and deposit the check for Appellant and was neither the assignee or agent of Appellant with respect to the check.

In the procedural circumstances of this case, our Court must give to a demurrer the same effect with respect to admissions of fact as is required in the lower court. Stollar v. Continental Can Co., 407 Pa. 264, 180 A.2d 71 (1962); Pritchard v. Wick, 406 Pa. 598, 178 A.2d 725 (1962); Mulholland v. Pittsburgh National Bank, 405 Pa. 268, 174 A.2d 861 (1961). However, this Court may make its own inferences and draw its own conclusions of law from the facts which are deemed admitted by the demurrer. Mulholland v. Pittsburgh National Bank, supra. Accordingly, in light of the facts set forth in Appellant's Complaint, we find that the primary issue for our consideration is whether the payee of a check may recover the proceeds thereof from a drawee bank which pays the check upon an unauthorized endorsement by a collecting bank.

In sustaining Appellee's demurrer, the Court below relied upon the case of Lindsley v. First National Bank of Philadelphia, 325 Pa. 393, 190 ...


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