Texas Supreme Court Holds Customer Liable for Forged Check Loss Where Bank Makes Available Statements of Account

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The Texas Supreme Court has found that where a bank makes available a statement of account, consistent with Section 4-406 of the Uniform Commercial Code ("UCC"), the customer must bear the loss of forged checks, even when the bank did not send physical statements for the account. Compass Bank v. Calleja-Ahedo, 2018 Tex. LEXIS 1314 (Tex. Dec. 21, 2018).

Plaintiff opened an account with Compass Bank in 1988, directing the bank to hold all correspondence. The Plaintiff further testified that he directed the bank to send statements to his brother at a Texas address. The bank sent such statements through June 2012. In June 2012, an unidentified person identified himself as the Plaintiff, changed the delivery instructions for the statements to a California address, ordered checks, and drained the account through forged checks in 2012 and 2013.

The plaintiff first learned of the fraudulent activity in January 2013. In January 2014, the Plaintiff disputed the debits, but was denied a recredit by the bank, and filed suit. The trial court found for the bank, holding that, under UCC § 4-406, the bank had made statements available to the Plaintiff, who waited beyond the UCC's one-year statute of repose to raise the fraudulent activity with the bank. The Texas court of appeals reversed, holding that sending the statements to the California address did not satisfy the requirement to send them to the Plaintiff, and rejecting the contention that making the statements available by other means was sufficient.

The Texas Supreme Court reversed the intermediate appellate court, finding that UCC § 4-406 shielded the bank from liability. Where the UCC states the bank can satisfy its duty by making statements available, a bank is shielded from liability where it does so. Where, as here

  1. Plaintiff never raised the issue of non-delivery of statements to the Texas address,
  2. statements were available at any branch,
  3. statements could be viewed or ordered online, and
  4. the statements contained a toll-free number through which Plaintiff could have inquired or ordered duplicate statements, the Plaintiff failed to make a reasonable effort to examine his statements and notify the bank regarding any unauthorized payment. The Court went on to note that a bank's statutory burden to make the statements available cannot amount to a burden to ensure the customer receives those statements.

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