Opinion ID: 2359528
Heading Depth: 1
Heading Rank: 2

Heading: The Theory of Liability

Text: The UFA protects banks only in actions for negligence. The lower court found for the bank on two of the certificates. Given that the law firm did not plead the bank was liable in negligence, the law firm must have pleaded and proved some other cause of action for us to affirm the relief granted. The law firm originally sued for indemnity or contribution, and breach of contract. The trespass and assumpsit actions were based on the bank's alleged breach of the escrow agreement, and the breach of contract was based on the terms of the certificates of deposit. We address these issues in order. The court below held that the bank, having never received a copy of the escrow agreement, was not liable for failing to live up to its terms. Lower court opinion at 28. When the trial court has made a finding of fact, we will not overturn it when evidence in the record supports the finding. Spatz v. Nascone, 283 Pa.Super. 517, 424 A.2d 929 (1981). We agree with the trial court's determination that Continental did not know of the escrow agreement and therefore had no duty to conform to its terms; we affirm the trial court's holding that no liability for indemnity or contribution arises from the escrow agreement. Likewise, there was no breach of contractual duties arising from the escrow agreement where the bank knew nothing of the agreement. [14] The bank's liability, then, must arise from its breach of the terms of the certificates. Before we address the terms of the contract, we must deal with the bank's contention that the trial court improperly permitted the law firm to amend its pleadings, on the eve of trial, to state this theory of liability. A trial court may allow amendment at any time, under Pa.R.Civ.P. 1033. Whether amendment should be allowed is discretionary, but the court should not allow it when surprise or prejudice will result. William Penn Parking Garage, Inc. v. City of Pittsburgh, 464 Pa. 168, 346 A.2d 269 (1975); Berman v. Herrick, 424 Pa. 490, 227 A.2d 840 (1967). The bank claims it was prejudiced because it had not deposed Richard Robinson as to his customary practices in redeeming certificates, and because a witness it would have called otherwise was not available when the new theory was argued. Appellant's brief at 36. The bank argues that it would have submitted evidence on a course of dealing between Richard Robinson and the bank that would have established that no breach of the terms of the certificates occurred. [15] The law firm contends that the evidence would not have been admissible. Appellee/Cross-appellant's brief at 45. Our examination of the pleadings indicates that the law firm's claim of breach of the escrow agreement afforded the bank adequate opportunity to prepare for the theory proposed in the amended complaint. The escrow agreement, being a contract, was subject to the same legal arguments about course of dealing that the bank states it would have made had it known of the theory premising liability on breach of terms of the certificates. We find no prejudice. With respect to the alleged breach of the terms of the certificates, the contract of redemption on the face of the certificates clearly states that they may be redeemed on presentation and surrender duly endorsed. Record at 743a, 745a. We think that this requires endorsement before redemption. The bank failed to require endorsement before redemption. There was a breach. [16] The bank, however, is protected in part from liability for its breach by 13 Pa.C.S. § 3419(c). This section of the UCC states: § 3419. Conversion of instrument; innocent representative ..... (c) Limitation on liability of representative.  Subject to the provisions of this title concerning restrictive endorsements a representative, including a depositary or collecting bank, who has in good faith and in accordance with the reasonable commercial standards applicable to the business of such representative dealt with an instrument or its proceeds on behalf of one who was not the true owner is not liable in conversion or otherwise to the true owner beyond the amount of any proceeds remaining in his hands. 13 Pa.C.S. § 3419(c). In our opinion, this shields the bank from liability in breach of contract claims when it acts in accordance with reasonable commercial standards. Since the bank acted reasonably in redeeming the first certificate to the savings account and the third in a check to its owner, it is shielded with respect to those two items. It is not shielded with respect to certificate 3-94855, and is liable in contract to the law firm for its value. Judgment affirmed. McEWEN, J., concurs in the result.