Wаlter JONES, Appellee, v. David VAN NORMAN and Mary Ellen Van Norman, his wife, Appellees, and First Valley Bank, Appellant
522 A.2d 503
Supreme Court of Pennsylvania
March 10, 1987
Reargument Denied May 27, 1987
PER CURIAM
This appeal is dismissed as improvidently granted, without prejudice to appellant‘s rights under the Post Conviction Hearing Act.
Hutchinson, J., filed dissenting opinion.
McDermott, J., noted dissent.
Ronald J. Karasek, Bangor, for Van Normans.
Sandor Engel, Allentown, for Walter Jones.
Before NIX, C.J., and LARSEN, FLAHERTY, MCDERMOTT, HUTCHINSON, ZAPPALA and PAPADAKOS, JJ.
LARSEN, Justice.
In this appeal we are faced with an issue of the liability of appellant First Valley Bank (First Valley) under Section 3-419 of the Uniform Commercial Code (U.C.C.) for conversion of four checks of appellee, Walter Jones (Jones). The checks in question were negotiated at First Valley by appellee, Mary Ellen Van Norman. Jones filed suit against appellees, David Van Norman and Mary Ellen Van Norman and appellant, First Valley Bank. The Northampton County Common Pleas Court, in a non-jury trial, found that Mrs. Van Norman was authorized by Jones to receive certain of his checks and endorse his name to those checks. The trial court found further that Mrs. Van Norman was instructed by Jones to deposit the checks in Jones’ bank account at Manufacturers Hanover Bank in New Yоrk. Instead of depositing them in Jones’ bank account as instructed, Mrs. Van Norman took the checks to First Valley where she received some cash and deposited the balance in her and her husband‘s personal account. The lower court, concluding that the case involved a misappropriation of funds by an authorized agent, declined to find liability on the part of First Valley.1 On appeal by Jones and the Van Normans,2 the Superior Court reversed, citing its decision in Levy v. First Pennsylvania Bank, 338 Pa.Super. 73, 487 A.2d 857 (1985) as controlling, and held that Mrs. Van Norman‘s action in signing Jones’ name and depositing the checks in her personal account was unauthorized, and therefore, for purposes of this action in conversion, was the same as forgery. The Superior Court concluded that First Valley was liable for paying the checks to Mrs. Van Norman on forged or unauthorized endorsements unless First Valley
The appellee Walter Jones owned and operated an interstate boiler installation and repair business. His business involved extensive travel, primarily in the east and mid-west regions of the United States. In or about 1978, appellee David Vаn Norman was employed to work for Jones. Several months after he was hired, Jones and David Van Norman agreed that they would continue as employer and employee but the method of compensating Van Norman was changed. Instead of an hourly wage or a salary, it was agreed that David Van Norman would receive fifty (50%) percent of the net profits on each job. He also was to be reimbursed for expenses.
Jones lived in Brooklyn, New York and did his banking there. When he was traveling and working in other states, there was no one in New York to handle his mail and make bank deposits. Because of this, checks that were sent to him by customers would stay undeposited until he returned. Apparently, this lag between receipt of customer checks and their deposit into Jones’ bank account presented a cash flow problem for Jones. After discussing this problem with David Van Norman and David‘s wife Mary Ellen, Jones reached an agreement with Mrs. Van Norman that she would become involved in handling certain transactions for Jones. Jones notified customers to send their checks to the Van Normans’ address in Bangor, Pennsylvania. Mary Ellen Van Norman was authorized to endorse Jones’ name to the checks she received and deposit them in Jones’ New York bank account. Jones furnished Mrs. Van Norman with a supply of deposit slips for that purpose. It is unclear whether Mrs. Van Norman ever deposited any
The first of these checks was dated May 15, 1979, issued by Helicopter Applicators, Inc. in the sum of $1,800.00; the next was dated July 7, 1980, issued by Tabor Products Manufacturing Co. in the sum of $5,856.50; the next was dated November 12, 1980, issued by Highland Fashions, Ltd. in the amount of $1,195.00; and the last was dated December 4, 1980, issued by Southern Athletic in the sum of $2,027.08. As to the check issued by Helicopter Applicators, Inc., Mrs. Van Norman endorsed the name of Walter Jones and then signed her husband‘s name directly below. She took that check to First Valley where she received some cash and deposited the balance in her and her husband‘s account. Since Mrs. Van Norman requested some cash from First Valley when she presented the check drawn on the account of Helicopter Applicators, Inc., she was questioned by the head teller. Mrs. Van Norman told the teller that there was a partnership type arrangement with Walter Jones. That Jones coordinated and set up jobs that he and David Van Norman worked on together. Based upon the information given and a ten-year history of the Van Normans as good and reliable customers of the bank, the head teller authorized the transaction. (See N.T., p. 70.) As to the other three checks, Mrs. Van Norman signed Jones’ name and then her own below his. When the checks drawn on the accounts of Tabor Products and Highland Fashions were presented to First Valley by Mrs. Van Norman, she likewise requested some cash. In each instance she was questioned by the head teller. In each instance the transaction was approved based upon the same information and for the same reasons as the first check was approved. The last check from Southern Athletic was totally deposited in a personal savings account.
(a) Acts constituting conversion. — An instrument is converted when:
(1) a drawee to whom it is delivered for acceptance refuses to return it on demand;
(2) any person to whom it is delivered for payment refuses on demand either to pay or to return it; or
(3) it is paid on a forged indorsement.
The Common Pleas court found that David and Mary Ellen Van Norman were liable to Jones,4 but declined to enter a verdict against First Valley. The lower court determined that since Mary Ellen Van Norman was authorized to sign Jones’ name to the checks, the endorsements did not
In Levy, the plaintiffs, Sidney and Frieda Levy sold their business, Novelty Printing. At the time of the sale they authorized their attorney to take the proceeds of the sale and open an account for them at a local brokerage house in the name of B & J Corp. which was to be the Levy‘s new business. With the funds, the broker purchased Treasury Bills on the account of the Levys. When the Treasury Bills matured the Levys instructed their attorney to receive the proceeds from the broker and deposit them into Levys’ bank accounts at Girard Bank and at Industrial Valley Bank. The attorney received three checks totaling $222,776.87 from the broker. The payee of two of the checks was Novelty Printing Company Profit Sharing Trust. The third check was payable to the order of B & J Corp. The attorney signed the back of each check with the name of the payee and added the notation “deposit to account No. 973–784-4.” The number written was the attorney‘s personal account number. All of the monies were applied by the attorney for the attorney‘s own benefit. The trial court in Levy found that the attorney‘s authority was limited to endorsing the checks for deposit intо Levys’ bank accounts at Girard Bank and Industrial Valley Bank. That court concluded that the restrictive endorsements he actually made, therefore, were unauthorized.
On appeal, the Superior Court determined that the trial court‘s finding that the endorsements were unauthorized was supported by the record. The court then considered the question of whether the unauthorized endorsements constituted forgeries under Section 3-419 of the U.C.C. The Superior Court in Levy concluded that “an unauthorized signature is the same as a forgery for purposes of an action for conversion under
In the present case, the Superior Court found that the holding in Levy was controlling as to the liability of First Valley for paying the checks to the Van Normans. The Superior Court stated:
Because Mrs. Van Norman was authorized to endorse checks with Jones’ name for one purpose does not mean that she had unlimited power to sign his name for other purposes. It is clear that Mrs. Van Norman‘s authority to endorse Walter Jones’ name was limited to endorsing checks payable to Jones in order to deposit those checks into Jones’ New York bank account. Mrs. Van Norman did not have authority to endorse checks with Jones’ name in order to deposit those checks into her personal account at a different bank, or to cash those checks at any bank. Thus, her conduct in signing Jones’ name to achieve such a purpose was unauthorized. Under the holding in Levy, her unauthorized signature was the same as a forgery for purposes of an action for conversion instituted against First Pennsylvania Bank.
The appellant, First Valley, argues that the Superior Court‘s holding announced in Levy and applied in the present case imposes an unreasonable burden on appellant, and on banks generally, to bear responsibility for the misconduct of authorized agents who deviate from the instructions of the principal. Appellant points out that the Uniform Commercial Code specifically provides for a signature by an authorized representative. Section 3-403(a) of the U.C.C. provides:
(a) General rule. — A signature may be made by an agent or other representative, and his authority to make it may be established as in other cases of representation. No particular form of appointment is necessary to establish such authority.
The appellant‘s argument is predicated upon the authority given to Mary Ellen Van Norman to sign Jones’ name to the checks sent to her. Jones saw fit to direct his customers to send their payments to the Van Normans in Bangor, Pennsylvania. He found it convenient and appropriate to vest Mrs. Van Norman with the authority to receive those checks and endorse his name to them. Since the endorsements on the checks in question were authorized by Jones, thеy cannot be the equivalent of forgeries as determined by the Superior Court. We agree with the lower court that it was not the signing of Jones’ name that was unauthorized. Rather, it was the cashing of the checks and the depositing of the proceeds into Van Normans’ personal account that constituted the wrongful acts. It is obvious that the misappropriation of the checks was unauthorized. The misappropriations, however, did not convert authorized endorsements into forgeries. The signing of the payee-principal‘s name on the check is either authorized or it is not. That status does not depend upon whether the authorized representative properly applies the checks to the account of the payee or misapplies them to his own use.
The appellee argues that the principle established by the Superior Court in Levy and applied in the instant case is accepted law in several other jurisdictions. In support of this proposition the apрellee refers us to Levy and the cases cited therein by the Superior Court: Top Crop Seed & Supply Co., Inc. v. Bank of Southwest Louisiana, 392 So.2d 738 (La.App.1980); Equipment Distributors, Inc. v. Charter Oak Bank & Trust Company, 34 Conn.Supp. 606, 379 A.2d 682 (1977); Hartford Accident & Indemnity Co. v. South Windsor Bank and Trust Co., 171 Conn. 63, 368 A.2d 76 (1976); and Salsman v. National Community Bank of Rutherford, 102 N.J.Super. 482, 246 A.2d 162 (1968), aff‘d 105 N.J.Super. 164, 251 A.2d 460 (1969). We have reviewed these cases and find that in each the signing
In Top Crop Seed, a traveling salesman, who never had authority to endorse his employer‘s name to checks, converted company funds to his own use by signing the company name on customer checks and depositing them in his own account. In Charter Oak, the name of Equipment Distributors, Inc. was endorsed on a check by a co-payee who did not have authority to sign for the co-payee. In Hartford Accident, an insurance broker endorsed Hartford‘s name to a check payable to Hartford and then deposited it in his own agency account. It was found that the broker had no express, apparent or implied authority to endorse Hartford‘s name. Finally, in Salsman, Harold Breslow, an attorney, had his administratrix client endorse her name to a cashier‘s check which he said was to be deposited in the decedent‘s estate account. After his client signed and left his presence, the attorney wrote under her endorsement, “estate of Arthur J. Odgers — for deposit Harold Breslow, Trustee.” Under that his secretary wrote, “For deposit Harold Breslow Trustee.” The checks were deposited in the attorney‘s account and converted to his use.
In each of the above cited cases the lower court found no evidence of authority on the part of the purported representative to endorse the name of the payee. On the contrary, the trial court in the instant case found specifically that Mary Ellen Van Norman was authorized to endorse Jones’ name to the checks. That finding is supported by the record.
When Jones authorized Mrs. Van Norman to endorse his name to checks and gave her instructions to deposit the checks in his bank account, he assumed the risk of her competence and honesty. First Valley in paying Mrs. Van Norman on the four checks she endorsed with Jones’ name assumed the risk that the signature of Jones was authorized.6
Next before us is the issue of the Van Normans’ right to a jury trial. One of the alleged errors before the Superior Court was the trial court‘s denial of the Van Normans’ request for a trial by a jury. The trial court held that the right to a jury trial was waived because of the failure to make a timely request in accordance with the provision of
The Superior Court did not consider this issue and the arguments offered. It was merely noted that the remand for a new trial ordered by that court was “without prejudice to the right of the Van Normans to renew their request for a jury trial.”
Although it would be procedurally correct to remand this case to the Superior Court for consideration of the “jury trial question” raised, in the interest of judicial economy, and because the Van Normans’ position is clearly meritless, we now decide this issue.
The pre-trial memorandum filed by the Van Normans did not constitute a permissible pleading under
(a) The pleadings in an action are limited to a complaint, an answer thereto, a reply if the answer contains new matter or a counterclaim, a counter-reply if the reply to a counterclaim contains new matter, a preliminary objection and an answer thereto.
The record is clear that the Van Normans’ demand for a jury trial, first asserted in their pre-trial memorandum, was made more than twenty days after the last permissible pleading and, therefore, failed to satisfy the requirements of
The order of the Superior Court is reversed and the judgment of the trial court reinstated.
HUTCHINSON, J., filed a dissenting opinion.
MCDERMOTT, J., notes a dissent.
I respectfully dissent. I believe appellant converted the instruments payable to appellee Walter Jones because Mrs. Van Norman‘s endorsement of Walter Jones‘s name was unauthorized and, therefore, a forgery under Section 3-419(a) of the Uniform Commercial Code as adopted by our Legislature.
I believe Mrs. Van Norman‘s endorsement of Walter Jones‘s name was unauthorized because her authority to endorse Walter Jones‘s name was limited to an endorsement “for deposit only.” There was no authority for an endorsement in blank, and it is not logical to imply it. Furthermore, there was no basis for apparent authority and no indicia sufficient to create an estoppel. Therefore, the in blank endorsement of Walter Jones‘s name was unauthorized.
I
This case deals with the interpretation of Section 3419 of Pennsylvania‘s Commercial Code. It states:
(a) Acts constituting conversion. — An instrument is converted when:
(1) a drawee to whom it is delivered for acceptance refuses to return it on demand;
(2) any person to whom it is delivered for payment refuses on demand either to pay or to return it; or
(3) it is paid on a forged [e]ndorsement.
An unauthorized endorsement constitutes a forgery for the purpose of Section 3419(a)(3). This is an issue that has arisen in numerous jurisdictions which hold that the words “forged [e]ndorsement” in Section 3419 were intended to include unauthorized endorsements.
The Code does not define forgery. It does define an unauthorized endorsement as an “[e]ndorsement made without actual, implied or apparent authority and includes a forgery.”
All the courts in other jurisdictions that have dealt with this issue have held that an unauthorized endorsement is the same as a forgery for the purpose of Section 3-419 of the Uniform Commercial Code.1
The basic reasoning for this rule is well summarized in 6 R. Anderson, Uniform Commercial Code § 3-419:18(d) at 428 (3d ed. 1971):
If the instrument is paid on an unauthorized [e]ndorsement, such act of payment is a conversion. That is to say, Code § 3-419 is to be interpreted so that payment under an unauthorized signature is a conversion even though the signature may not be a technical forgery, for the reason that with respect to the transfer of title there is no differenсe between a forgery and an unauthorized [e]ndorsement.
It is well accepted law, therefore, that a bank will be liable if it pays a check on either a forged or unauthorized endorsement. To this extent, the majority and I are in agreement. See Majority at 583.
II
The question presented in this case, however, is what constitutes an unauthorized endorsement. The Code defines an unauthorized endorsement as one made without actual, implied or apparent authority.
The Code expressly provides its terms can be supplemented by the underlying common law unless a particular provision expresses otherwise.
Express authority exists where the principal directly states that an agent has the authority to perform a particular act on the principal‘s behalf. Hartley v. Robena Local Union No. 6321, 2 Pa.D & C.2d 1, aff‘d per curiam, 381 Pa. 430, 113 A.2d 239 (1955) (based on reasoning of Common Pleas Court opinion). Express authority is to be strictly construed. Fierst v. Commonwealth Land Title Insurance Co., 499 Pa. 68, 451 A.2d 674 (1982).
When an agent is given express authority, he also acquires, in addition, the implied authority to do all that is proper, necessary and ordinary to exercise the authority that has expressly been granted to him. Hartley v. Robena
Apparent authority also flows from the conduct of the principal, but focuses on the reasonable expectations of the party with whom the agent deals. If the agent has not been granted express authority and no authority can be implied from the principal‘s express statements, nevertheless, acts or omissions by the principal which lead a reasonably prudent person to believe such authority had been given to the agent, causes us to trеat the matter as if authority had actually been granted. Capetola v. Orlando, 463 F.Supp. 498 (E.D.Pa.1978); Jennings v. Pittsburgh Mercantile Co., 414 Pa. 641, 202 A.2d 51 (1964). A doctrine similar to apparent authority is agency by estoppel. Where a principal intentionally or negligently causes a third party to rely on the belief that an agent has the authority to act on the principal‘s behalf, the principal is estopped from contending that the agent had no such authority if the third party changed his position based on that belief. See, e.g., University Mktg. and Consulting, Inc. v. Hartford Life and Accident Ins. Co., 413 F.Supp. 1250 (E.D.Pa.1976). As this Court has noted, a principal who clothes his agent with apparent authority is estopped from denying such authority. Turnway Corp. v. Soffer, 461 Pa. 447, 336 A.2d 871 (1975). However, authority by estoppel is not precisely the same as apparent authority, and it can be applied where the formalities necessary for apparent authority do not exist if detrimental reliance has occurred. See Restatement (Second) of Agency § 8B (1958). Section 3404(a) of the Code seems to include estoppel by its use of the term “precluded.”
Applying these general rules of agency law to negotiable instruments, courts have held that where an agent is expressly authorized to endorse a principal‘s name only in some restrictive form, such as, “for deposit only,” a blank endorsement is unauthorized if used for another purpose,
In Safe Deposit, supra, it was found that an administrator had authority to endorse a check as administrator, without restriction. The facts of that case also show that he had the authority to deposit the negotiated checks into his personal account. We reasoned that since he had actual authority to deposit the checks in his personal account, it was too burdensome to require the bank, without notice that he was using trust money, to reject checks drawn on his personal account.
III
In the instant case, the trial court, as fact-finder, found that Mrs. Van Norman was authorized to endorse Walter Jones‘s name for the sole purpose of depositing the checks into his New York bank account. The trial court stated; “[t]he testimony leaves no doubt that [Walter Jones] authorized Mary Van Norman to accept his checks, act for him by affixing his name, and depositing the checks into his New York account.” Common Pleas slip op. at 5. In other words, the trial court found that Mrs. Van Norman was authorized to do whatever was necessary in order to deposit the checks into Walter Jones‘s New York account.2 If the bank required Mrs. Van Norman to endorse Walter Jones‘s
name in order to deposit the checks, then implied authority to endorse had been granted.
The majority reasons that since Mrs. Van Norman had the necessarily implied authority to endorse the checks for the purpose of depositing the checks into his New York account, the endorsement could not be found unauthorized. It goes on to say:
it was not the signing of Jones’ [sic] name that was unauthorized. Rather, it was the cashing of the checks and the depositing of the proceeds into Van Normans’ personal account that constituted the wrongful acts. It is obvious that the misappropriation of the checks was unauthorized. The misappropriations, however, did not convert authorized endorsements into forgeries.
Majority at 580. In short, the majority‘s analysis presumes that an agent who has the implied authority to endorse the
To ignore the limitations placed upon an agent creates absurd results. Assume that principals A and B each tell their agents to “do whatever is necessary to deposit a check in principal‘s account.” Principal A‘s bank requires the еndorsement of the principal before depositing the check. Principal B‘s bank does not require such an endorsement, but instead provides a stamp endorsement pursuant to
Under the majority‘s analysis, principal A‘s bank would not be liable to other parties to the instrument since his agent would have had the implied authority to endorse the check for the purpose of placing it into his principal‘s account. However, principal B‘s bank would be liable since no endorsement would have been necessary to deposit the check. Therefore, while the principals, agents and banks acted in substantially the same manner, two completely different results would occur.
Express authority is to be strictly construed. Fierst v. Commonwealth Land Title Insurance Co., 499 Pa. 68, 451 A.2d 674 (1982). The trial court found that Mrs. Van Norman was expressly authorized to endorse for the sole purpose of depositing the checks into Walter Jones‘s New York bank account.
There is no evidence that Walter Jones expressly authorized Mrs. Van Norman to endorse his name in blank and, since an endorsement in blank would not be necessary for her to fulfill the purpose of her agency, such actual authority should not be implied.
If Mrs. Van Norman had signed Walter Jones‘s name along with the words “for deposit only,” it would have been
Postponing for the moment the problems this record poses in terms of endorsements which the Code would treat as if authorized under agency principles of apparent authority or estoppel this analysis of the implied actual authority of an agent expressly authorized to deposit checks in his principal‘s account is consistent with the common law of agency. It also avoids the illogically disparate result of freeing one bank from liability and holding the other on actual implied authority when the principal‘s acts and intent are substantially the same. These different results are illogical because actual authority, both express and implied, focuses on the reasonableness of the principal, whereas apparent authority and estoppel focus on that of the third party.
The majority cites no cases which hold that authority to endorse implies authority to endorse in blank. The authority for that proposition is discussed hеrein, at 593, infra. The cases the majority does cite are cited and discussed in an effort to demonstrate Superior Court‘s error in relying on them in its decision in Levy v. First Pennsylvania Bank, 338 Pa.Superior Ct. 73, 487 A.2d 857 (1985), the case that Superior Court found controlling here. It is true that the cases the majority cites all involved an absence of any authority to endorse and are thus distinguishable from both Levy and the present case. However, they do not affirmatively support an implication of authority to receive funds by blank endorsement from express authority to deposit to the agent‘s account. The majority does cite Bacher v. City Nat‘l. Bank of Philadelphia, 347 Pa. 80, 31 A.2d 725 (1943),
It should be noted that one commentator does suggest that the authority to deposit bank checks includes implied authority to endorse in blank and receive the proceeds. Bailey, Brady on Bank Chеcks, at 505 (4th ed. 1969). The cases Professor Bailey cites to support this proposition are distinguishable on their facts by either apparent authority, estoppel by agency, or express authority to endorse in blank. Indeed, the text writer‘s assumption that these cases depend on an actual authority necessarily implied for the purpose of accomplishing the agency is illogical. Blank endorsement is not necessary to accomplish the agency because a restrictive endorsement would accomplish its purpose to protect all parties.
Professor Bailey states:
Where, ... the agent is authorized to [e]ndorse checks in blank for the purpose of depositing them to the credit of the principal, or where he is authorized to [e]ndorse for that purpose, and his authority is not limited by any restriction as to the form of the [e]ndorsement, his [e]ndorsement in blank will transfer good title to one who takes the check without notice that he is authorized to [e]ndorse for deposit only.
Bailey, Brady on Bank Checks, at 505 (4th ed. 1969).
This analysis puts the burden on the principal to expressly restrict and negate an authority unnecessary to the agency. I believe that approach reverses the usual rules of logical inference. As stated, the cases Professor Bailey cites to support his proposition are explicable on their facts by either apparent authority, estoppel by agency, or express authority to endorse in blank.
In Hartford Accident and Indemnity Co. v. Bear Butte Valley Bank, 63 S.D. 262, 257 N.W. 642 (1934), cited by Professor Bailey to support his proposition, the principal
In other cases cited by Bailey, the courts found that the agent had the express authority to endorse in blank. In Palmer & Ray Dental Supply of Abilene, Inc. v. First National Bank of Abilene, 477 S.W.2d 954 (Tex.Civ.App., 1972), the agent was authorized to use a rubber stamp which stated “Palmer and Ray Dental Supply ...” (principal) without any restrictions. The agent was then instructed to deposit the checks into the bank. In a very short opinion, the court reasoned that this rubber stamp gave the agent the express authority to endorse in blank. Id. at 955. Finally, in Cluett v. Couture, 140 App.Div. 830, 125 N.Y.S. 813 (1910), the agent was authorized to endorse the principal‘s checks and place the checks into the principal‘s account. As in the present case, no particular form of endorsement was prescribed, but it was the custom of the agent to just sign the principal‘s name in blank. The court specifically found that thе facts did “not warrant a finding of implied authority” to transfer title to the checks. Id. at 832, 125 N.Y.S. at 815. The court reasoned, however, that actual authority existed (apparently express authority), because the agent‘s “customary way was to write the name Cluett and Sons on the back without further words.” Id. The court apparently felt that the principal‘s failure to restrict the endorsement when he became aware that the
Despite the absence of express or implied authority, the bank here could still seek protection under a theory of either apparent authority or agency by estoppel. These two theories should be addressed in several contexts. First, it must be decided whether a principal, who authorizes an agent to deposit checks, is estopped, as a matter of law from bringing an action against the bank if the agent signs the principal‘s name in blank and misappropriatеs the proceeds. Secondly, it must be decided whether normal banking practice led First Valley Bank to reasonably believe that Mrs. Van Norman had authority to endorse in blank, which would protect the bank under a theory of apparent authority. Finally, it must be decided whether Walter Jones permitted Mrs. Van Norman to hold herself out as an agent authorized to endorse in blank, either intentionally or through negligence and, therefore, is estopped from bringing this action against the bank.
In addition, there are special indications on which a bank could premise the reliance necessary to work an estoppel or preclusion of the principal‘s ability to defend for lack of actual or apparent authority. They include, for example, course of dealing by the principal, authority or apparent authority for the agent to reсeive cash, the agent‘s possession and use of a signature stamp. These types of indicia explain on their facts the cases noted by Professor Bailey for the proposition that authority to deposit bank checks includes implied authority to endorse in blank and receive their proceeds. See at 594-596 for a discussion of the cases cited by Professor Bailey.
Furthermore, this does not place an undue burden on First Valley Bank in the present case. As the testimony at the trial shows, it decided to cash the first check because it trusted Mrs. Van Norman, not because of any evidence of
Because the trial court relied on what I believe is a mistakenly broad and illogical view of this agent‘s implied authority with respect to endorsements, it never reached the issues of whether normal banking practice led the bank to reasonably believe Mrs. Van Norman had apparent authority or whether the principal suffered her to obtain sufficient indicia of authority to estop the principal, Jones, from denying authority when the bank had relied on those indicia by paying the proceeds of the checks to Mrs. Van Norman. On this point, the present record is scanty. However, it does have testimony that in August or September of 1980 Wаlter Jones became aware that Mrs. Van Norman did not deposit two of the checks into his account. R.R. at 88(a). Yet he never approached the bank, and failed to bring an action for conversion for almost one year. In fact, he kept Mr. Van Norman in his employment until February, 1981. R.R. at 93(a). The trial court should determine whether this evidence, if believed, either alone or together with such other evidence as may be developed is sufficient to create an apparent authority or estoppel in favor of the bank.
For these reasons, I would remand the case to Common Pleas for further proceedings consistent with this opinion. Those proceedings could develop the record as necessary to determine whether apparent authority or estoppel precluded
Notes
Q. Now, I assume that you had a trust in both Mr. & Mrs. Van Norman, since you permitted Mrs. Van Norman to sign your name after the word, for deposit only?
R.R. at 114(a).
Q. Okay, Now, sir, it is true that you authorized Mrs. Van Norman to deposit checks in your account, in your account in New York; is that correct, in Manufacturers Hanover?
R.R. at 90(a). The only other statement that relates to the form of the endorsement granted to Mrs. Van Norman for the purpоse of depositing in his New York account was made by Walter Jones himself.
A. I approached Mrs. Van Norman, and I said did you make that deposit. She said, yes. I said, how did you make it. She said, I marked it for deposit only and mailed it into New York. I said, there must be some mistake because it has your signature on it and my signature on the top and I never seen that check.
R.R. at 123(a).
Therefore, based on the testimony at trial, it would appear that Mrs. Van Norman was authorized only to endorse Walter Jones‘s name “for deposit only.”
Section 1 of the Act,If a fiduciary makes a deposit in a bank to his personal credit of checks drawn by him upon an account in his own name as fiduciary; or of checks payable to him as fiduciary; or of checks drawn by him upon an account in the name of his principal, if he is empowered to draw checks thereon; or of checks payable to his principal and indorsed by him, if he is empowered to indorse such checks; or if he otherwise makes a deposit of funds held by him as fiduciary, — the bank receiving such deposit is not bound to inquire whether the fiduciary is committing thereby a breach of his obligation as fiduciary, and the bank is authorized to pay the amount of the deposit, or any part thereof, upon the personal check of the fiduciary, without being liable to the principal, unless the bank receives the deposit or pays the check with actual knowledge that the fiduciary is committing a breach of his obligation as fiduciary in making such deposit or in drawing such check or with knowledge of such facts that its action in receiving the deposit or paying the check amounts to bad faith. 1923, May 31, P.L. 468, § 9.
The bank, as provided in section 9 of the Act, was authorized to pay the amount of the deposits on [the attorney‘s] personal checks unless it had actual knowledge of the limitations of his authority in that regard, but its knowledge or lack of knowledge as to his right to indorse the checks was wholly immaterial. The condition prescribed by thе Act as necessary to relieve the bank from liability is that the fiduciary must in fact have been empowered to indorse the checks, not that the bank must have known that he had such authority. As stated in our former opinion: “When it accepted the deposit to [the attorney‘s] personal credit the only risk it took ... was that [the attorney] might not have been authorized to indorse the checks; if no such authorization had existed, the bank clearly would have been liable for paying out funds on the basis of an unauthorized indorsement of the payee‘s name. But [the attorney] did have the power to indorse, and if the bank did not actually know that he had been directed to deposit the checks in his attorney‘s account it would not be liable because of his violation of this instruction and his misappropriation of the funds after receiving them upon his authorized indorsement; ...” [the attorney‘s] power to indorse depended on his possession of such authority and not on the bank‘s knowledge as to whether or not it existed: (Citations omittеd.) Since he actually had the authority to indorse, the bank, by the express wording of the Act, was permitted to pay the amount of the deposits on his personal checks unless it had knowledge — which the court below found it did not have — of the provision in the power of attorney designating the account in which the checks should be deposited. (Emphasis in original.)