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FEDERAL PACIFIC ELECTRIC COMPANY v. FIRST PENNSYLVANIA BANK AND FIDELITY BANK (06/01/79)

decided: June 1, 1979.

FEDERAL PACIFIC ELECTRIC COMPANY, APPELLANT,
v.
FIRST PENNSYLVANIA BANK AND THE FIDELITY BANK, DEFENDANTS, AND SHELDON PAUL AND LOREN ELECTRIC SERVICE COMPANY, ADDITIONAL DEFENDANTS, AND PBS, INC., ADDITIONAL DEFENDANT



No. 1136 OCTOBER TERM, 1978, Appeal from Judgment of the Court of Common Pleas of Philadelphia County, Trial Division-Law, at No. 4315 May Term, 1973.

COUNSEL

A. Martin Herring, Philadelphia, for appellant.

Marjorie G. Marinoff, Philadelphia, for appellees, First Pennsylvania Bank and The Fidelity Bank.

Henry I. Jacobson, Philadelphia, for appellees, Sheldon Paul and Loren Electric Service Company.

No brief filed for appellee, PBS, Inc.

Van der Voort, Wieand and Lipez, JJ.

Author: Van Der Voort

[ 266 Pa. Super. Page 473]

This action arises out of a dispute over the negotiation of a check drawn to two payees, Federal Pacific Electric Company (Federal Pacific) and Loren Electric Service Company (Loren). The check was drawn by PBS, Inc. (PBS) on First Pennsylvania Bank (First Pennsylvania), endorsed with the names of both payees by Mr. Sheldon Paul (Paul), president of Loren, and deposited in Loren's account at The Fidelity Bank (Fidelity). The check was forwarded for collection to First Pennsylvania which honored it and debited the account of PBS in the amount of the check, $50,337.40.

PBS assigned its rights against the banks for negotiating the check to Federal Pacific which brought suit against the two banks for that portion of the check not paid to it. It was Federal Pacific's contention that the endorsement of its name on the check by Paul was unauthorized. The banks joined Paul and Loren as additional defendants and they in turn joined PBS.

The case was tried without a jury and a judgment was entered in favor of the banks and Paul. Loren was awarded a judgment for $6,282.10 against Federal Pacific on a counterclaim for charge-backs growing out of the shipment of defective material and the shipment of other goods in an improper manner. PBS obtained a judgment by default against Loren for $3,520.51 for expenses incurred in completing Loren's contract. Loren's judgment was amply sustained by credible evidence and PBS's judgment was entered by default. We affirm both. They have no bearing on the lower court's judgment in favor of the banks, but relate only to the state of accounts between Federal Pacific, Loren and PBS.

[ 266 Pa. Super. Page 474]

The central issue in this litigation is whether the endorsement of the check by Paul on behalf of Loren was unauthorized and constituted a forgery. The circumstances out of which the check materialized were these: PBS was the prime contractor for the installation of fire protection equipment at the Philadelphia Navy Yard. Loren was a subcontractor for PBS for electrical work on the project for a contract price of $140,000 which was increased to $145,500 by authorized extras. Federal Pacific was a supplier of materials from whom Loren ordered three substations and motor control centers at a contract price of $85,000.

There were recurring problems between the contracting parties during the course of the work. Federal Pacific was late in deliveries and aggravated matters by occasional shipments of defective material which had to be returned. Loren, in turn, fell behind in delivery schedules with PBS, due in substantial part to its difficulties with Federal Pacific. Naval red tape delayed progress payments to PBS and this in turn delayed payments to Loren by PBS.

Loren was not a regular customer of Federal Pacific and did not have established credit. In order to expedite deliveries, PBS agreed to guarantee payment for equipment shipped by Federal Pacific by paying Loren in checks drawn jointly to Federal Pacific and Loren. Loren in turn was to endorse the checks and deliver them to Federal Pacific, which would apply them to its account with Loren.

Out of this background, PBS issued a check on May 8, 1972 in the sum of $50,337.40, payable jointly to the order of Loren and Federal Pacific and drawn upon First Pennsylvania. Upon receipt of the check by Loren, its president, Paul, attempted to negotiate an agreement with Federal Pacific whereby the proceeds would be divided between the payees. After attempting without success to reach the president of Federal Pacific by telephone, Paul telephoned the Philadelphia District Sales Manager of Federal Pacific and proposed a division of the proceeds under ...


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