Defendant is not Responsible for Fraudulent Check Transactions.

Citation. 211 Pa. Super. 42, 234 A.2d 32, 1967 Pa. Super. 724, 4 U.C.C. Rep. Serv. (Callaghan) 624
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Brief Fact Summary. This is an appeal of the trial court’s holding that the defendant is not responsible for fraudulent check transactions. An employee of the plaintiff stole scaling slips and used the slips to obtain checks which he cashed with fraudulent endorsements. The plaintiff is suing the defendant bank to recover the amount procured by the fraud. Synopsis of Rule of Law. “Any person who by his negligence substantially contributes to the making of an unauthorized signature is precluded from asserting the lack of authority against a drawee or other payor who pays the instrument in good faith and in accordance with the reasonable commercial standards of the drawee’s or payor’s business.”

Facts. Emery Albers was an independent log hauler that frequently transported logs to the Thompson Maple Products’ (the “plaintiff”), company mill. After establishing a close relationship with the plaintiff, Albers obtained blank sets of scaling slips and filled them out to show substantial deliveries of logs with the names of local timber owners as suppliers. Albers then delivered the slips to the bookkeeper who prepared checks payable to the timber owners listed on the scaling slips. Albers then volunteered to deliver the checks to the owners and would forge the payee’s signature and either cash the checks or deposit them in his account at the defendant, Citizens National Bank (the “defendant”). In 1963, the forgeries were uncovered and Albers was imprisoned. The plaintiff then instituted this suit against the defendant alleging that the defendant breached its contract of deposit by paying the checks over forged endorsements. The trial court ruled that the plaintiff’s own ne gligence contributed to the unauthorized endorsements and consequentially dismissed part of the plaintiff’s claim.


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