On pleadings consisting of a statement of claim, a stipulation of counsel, affidavit of defense, amended affidavit of defense, and a second stipulation of counsel, the court below entered judgment in favor of plaintiff.
A building and loan association was indebted in the sum of $3,051 to one Anna Hoffman. She died in December, 1939, and plaintiff, on January 29, 1940, became administratrix of her estate. William J. Ballen, a member of the bar, was employed by plaintiff as her attorney. He received from her a written power of attorney dated January 31, 1940, which authorized, directed and empowered him "to collect any and all moneys due the said estate, and to indorse any and all checks payable to me as administratrix of the said estate, and to deposit the funds so collected in his attorney's account." The building and loan association, in payment of its debt, executed two checks, one for $1,521 dated February 20, 1940, the other for $1,530 dated April 16, 1940, each payable to the order of "Estate of Anna Hoffman." When these checks were received, Ballen, without the knowledge of plaintiff, indorsed each of them *Page 82
"ESTATE OF ANNA HOFFMAN WM J BALLEN ATTORNEY"
and deposited them in his personal account with defendant bank. They were collected in due course from the drawee bank, the proceeds were paid out by defendant on Ballen's personal checks, and plaintiff has never received any of the money.
The present suit is to recover the amount of the checks with interest. A twofold defense is offered; first, that the payee named in the checks was "fictitious" and not a person, and therefore the checks were payable to bearer; second, that Ballen was a fiduciary and defendant bank, under the provisions of the Uniform Fiduciaries Act, was not bound to inquire whether he was committing a breach of trust in depositing the checks in his personal account.
Section 9 of the Negotiable Instruments Law of 1901, P. L. 194, provides that "The instrument is payable to bearer: . . . 3. When it is payable to the order of a fictitious or non-existing person, and such fact was known to the person making it so payable; or, 4. When the name of the payee does not purport to be the name of any person." In Hansen v.Northwestern National Bank of Minneapolis, 175 Minn. 453,221 N.W. 873, it was held, by a divided court, that a certificate of deposit payable to a decedent's estate was payable to bearer, because it did not designate as payee a name purporting to be that of a person. There are other decisions to the same effect.1 On the other hand, there are authorities holding that a note payable to the estate of a deceased person sufficiently designates the payee to enable the legal representative *Page 83 of the estate to maintain an action thereon.2 While there is apparently no precedent in Pennsylvania, we have repeatedly stated that in cases arising under this section of the Negotiable Instruments Law the guiding consideration is the intent of the drawer of the instrument in inserting the name of the payee: Snyder v. Corn Exchange National Bank, 221 Pa. 599,606, 607, 70 A. 876, 878, 879; National Union Fire InsuranceCo. v. Mellon National Bank, 276 Pa. 212, 218, 219, 119 A. 910,912, 913; Commonwealth v. Globe Indemnity Co., 323 Pa. 261,266, 270, 185 A. 796, 798, 800. It is certain that the checks in the present instance were not intended by the building and loan association to be payable to bearer. While it is true from a strictly literal standpoint that the estate of a decedent cannot be said to be a name purporting to be that of a person, it is obvious that the words "Estate of Anna Hoffman" were used merely as an abbreviated designation of the payee intended, and if the full appellation had been employed, namely, "Administratrix of the Estate of Anna Hoffman, Deceased," no question would have arisen under section 9 of the Negotiable Instruments Law, not only because the identity of the payee would thereby have been established, but because of the express provision of section 8 that "The instrument. . . . may be drawn payable to the order of: . . . 6. The holder of an office for the time being." In legal and non-legal circles alike it is so common to personify the estate of a deceased person and to use the term "estate" when what is really meant is the legal representative of the estate, that it would be the height of legalism to say that because of the use of the abbreviated form there was no person intended as payee who could indorse the instrument and it therefore became, *Page 84 under the terms of the statute, an instrument payable to bearer.3
Section 9 of the Uniform Fiduciaries Act of 1923, P. L. 468, provides that "If a fiduciary makes a deposit in a bank to his personal credit of checks . . . payable to his principal and indorsed by him, if he is empowered to indorse such checks, . . . 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." Section 1 defines "fiduciary" as including an "agent." The term as thus used is obviously more comprehensive than when confined to its purely technical meaning. However, the result in the present case is the same whether the facts be judged by common-law principles or by the provisions of the statute. In Safe Deposit Trust Company v. Diamond NationalBank, 194 Pa. 334, 44 A. 1064, it was held that, where checks were made payable to the administrator of a decedent's estate and he indorsed them as administrator and deposited them in his personal account in a bank, the fund was subject to be drawn out upon his personal checks and the bank was not liable for the loss occasioned by his misappropriation of the money. The theory of the decision was that, since he was entitled to indorse the checks, the bank, in the absence of any knowledge *Page 85 to the contrary, was justified in assuming that he was not committing a breach of his obligation by depositing the checks in his personal account, but that he would duly account for the proceeds. So, under section 9 of the act, it is provided that, unless the bank has actual knowledge that the fiduciary is committing a breach of his obligation as fiduciary, it is justified, if the fiduciary is empowered to indorse checks payable to his principal, in accepting them as a deposit to his personal credit.
It does not appear in the pleadings in the present case whether defendant bank had actual knowledge that a written power of attorney existed and that one of its provisions was that Ballen should deposit the checks in his attorney's account. When it accepted the deposit to Ballen's personal credit the only risk it took, in the absence of such knowledge, was that Ballen 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 Ballen 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; it was not under a duty to investigate whether he was committing a breach of his obligation as fiduciary in depositing the checks to his personal credit. If, on the other hand, the bank saw the letter of attorney, or otherwise had actual knowledge of the directions it contained, at or before the time it received the deposit or made payments thereout on Ballen's personal checks, plaintiff would be entitled to recover. The difficulty is, as already indicated, that the pleadings throw no light on the question as to when the bank first acquired knowledge of the provisions of that document, and, as a summary judgment should not be granted except in clear cases (Koehring Company v. Ventresca, 334 Pa. 566, *Page 86 6 A.2d 297), it becomes necessary to have this controlling fact determined by a jury.
The judgment is reversed with a procedendo.
1 Kluczny v. Matz, 187 Minn. 93, 244 N.W. 407; In re Ziegenhein, 187 S.W. 893, 895 (St. Louis, Mo., Court of Appeals); Lewisohnv. Kent Stanley Co., 87 Hun. (N.Y.) 257; Scott v. Parker, 5 N Y S. 753; see also Lyon v. Marshall, 11 Barb. (N.Y.) 241;Tittle v. Thomas, 30 Miss. 122.
2 Shaw v. Smith, 150 Mass. 166, 22 N.E. 887; Peltier v.Babillion, 45 Mich. 384, 8 N.W. 99; McKinney v. Harter, 7 Blackf. (Ind.) 385; Stern v. Eichberg, 83 Ill. App. 442;Hendricks v. Thornton, 45 Ala. 299; Holmes v. Dunning, 101 Fla. 55, 133 So. 557.
3 In 14 Harvard L. Rev. 442, 443, n. 3, Professor Ames characterizes as a "startling suggestion" Judge BREWSTER'S remark (in 10 Yale L. J. 84, 89) that a note payable to the order of the estate of a deceased person is payable to bearer by force of section 9 of the Negotiable Instruments Law.