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FRANCIS MONAGHAN v. PROVIDENT NATIONAL BANK (09/27/85)

filed: September 27, 1985.

FRANCIS MONAGHAN, T/A MONAGHAN'S COLLISION SERVICE
v.
PROVIDENT NATIONAL BANK, APPELLANT



Appeal from the Order of the Court of Common Pleas, Trial Division - Civil Section Philadelphia County, No. 1821 August Term, 1983.

COUNSEL

Walter Weir, Jr., Philadelphia, for appellant.

Melvin R. Shuster, Philadelphia, for appellee.

Tamilia, Lipez and Shiomos,*fn* JJ.

Author: Lipez

[ 346 Pa. Super. Page 165]

This action was brought in both trespass and assumpsit to recover amounts paid by defendant bank on checks drawn on plaintiff's account to plaintiff's bookkeeper, who had forged plaintiff's signature and cashed the forged checks. After defendant bank filed its answer, both sides moved for summary judgment. The court below granted the defendant bank's motion for summary judgment as to plaintiff's trespass claim, which the court held was barred by the two-year statute of limitations. 42 Pa.C.S. § 5524(3). The court also held, however, that the count in assumpsit was not time-barred, because it was brought within the four-year statute of limitations of 42 Pa.C.S. § 5525(3) and (4). The court further held that the bank was strictly liable to plaintiff for checks paid on a forged signature, and therefore summary judgment was granted for the plaintiff on the assumpsit count. Defendant bank then took this appeal, in which it contends: (1) the two-year statute of limitations in 42 Pa.C.S. § 5524(3) bars plaintiff's claim in the assumpsit count as well as in the trespass count; (2) plaintiff's claim is also barred by section 4406 of the Uniform Commercial Code, 13 Pa.C.S. § 4406; and (3) the court below should not have granted summary judgment to the plaintiff, because questions of material fact remained to be tried. We disagree that plaintiff's claim was barred by either 42 Pa.C.S. § 5524(3) or 13 Pa.C.S. § 4406, but we agree that material questions of fact remained to be tried. Therefore we vacate the order granting summary judgment to the plaintiff, and remand for trial on the assumpsit count in plaintiff's complaint.

The basic facts of the case are simple. Plaintiff is a businessman who maintained a checking account for his business with the defendant bank. Plaintiff himself was the only one authorized to sign checks drawn on the account,

[ 346 Pa. Super. Page 166]

    but plaintiff's bookkeeper regularly transacted business at the bank on plaintiff's behalf. During the period from February, 1979 to July, 1981, the bank honored a number of checks, made out to "CASH," which were presented for payment by the bookkeeper and on which she had forged plaintiff's signature. Since the bookkeeper herself was the only person in plaintiff's office who received and reviewed the monthly statements and cancelled checks sent by the bank, plaintiff did not discover and report the fraud until July, 1981, when the bookkeeper was in the hospital. The bank refused to recredit plaintiff's account for the amounts paid to the bookkeeper on the forged checks, and in August, 1983, plaintiff brought this action to recover on the thirty-one of the forged checks which were cashed between September, 1980 and July, 1981.*fn1

In contrast to this simple fact pattern, some of the bank's arguments are fairly labyrinthine. To facilitate discussion, we shall address the issues in a different order from that of the bank's brief, beginning with the relatively simple issue of the statute of limitations. It is undisputed that the action was brought more than two years, but less than four years, after accrual of the cause of action on each check on which plaintiff has sued, so the only question is whether the two-year or four-year statute of limitations governs. Plaintiff has not appealed the lower court's determination that the trespass count of the complaint is barred by the two-year limitation of 42 Pa.C.S. § 5524(3),*fn2 so all that is before us is the bank's contention that the two-year limitation of section 5524(3) also applies to the assumpsit count.

[ 346 Pa. Super. Page 167]

The bank contends that the only four-year statute of limitations which might apply to plaintiff's case is section 5525(4) of the Judicial Code, which provides a four-year limitation for "An action upon a contract implied in law, except an action subject to another limitation specified in this subchapter." 42 Pa.C.S. § 5525(4). The bank further argues that the trespass count and assumpsit count of plaintiff's complaint are not distinct causes of action but only alternative theories of recovery, and therefore plaintiff is subject to the exception in section 5525(4) for "an action subject to another limitation specified in this subchapter," viz., the two-year limitation of 42 Pa.C.S. § 5524(3). The first flaw in the bank's argument is that plaintiff's action is clearly based on alleged breach of an express contract between himself as customer and the bank, rather than a contract implied in law. See Hardex-Steubenville Corporation, Inc. v. Western Pennsylvania National Bank, 446 Pa. 446, 449-50, 285 A.2d 874, 876 (1971), reh'g denied (1972). Therefore the applicable statute of limitations here is not section 5525(4), but section 5525(3), which provides a four-year limitation for "An action upon an express contract not founded upon a instrument in writing." 42 Pa.C.S. § 5525(3). Unlike section 5525(4), section 5525(3) contains no exception, so the four-year limitation clearly applies here.

Moreover, even if the applicable section were 5525(4), we would not find the exception in that section for "an action subject to another limitation" applicable to this case. Plaintiff's action is not subject to the two-year statute of limitations for trespass actions in section 5524(3), because plaintiff has no cause of action for trespass under Pennsylvania law. See Cumis Insurance Society, Inc. v. Girard Bank, 522 F.Supp. 414, 418-19, n. 11 (E.D.Pa. 1981), as amended (collecting cases). Thus the court below correctly concluded that the four-year statute of limitations applies to the assumpsit count of plaintiff's complaint, and refusal to

[ 346 Pa. Super. Page 168]

    dismiss that count was proper, because it was filed within four years.

The bank's next argument is based on section 4406 of the Uniform Commercial Code, which provides in pertinent part:

(a) General rule. -- When a bank sends to its customer a statement of account accompanied by items paid in good faith in support of the debit entries or holds the statement and items pursuant to a request or instructions of its customer or otherwise in a reasonable manner makes the statements and items available to the customer, the customer must exercise reasonable care and promptness to examine the statement and items to discover his unauthorized signature or any alteration of an item and must notify the bank promptly after discovery thereof.

(b) Effect of failure to report unauthorized signature or alteration. -- If the bank establishes that the customer failed with respect to an item to comply with the duties imposed on the customer by subsection (a) ...


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