Court Opinion

ID: 9627624
Source: CourtListenerOpinion
Date Created: 2023-08-22 08:48:48.798127+00
Date Added: 2024-06-11T18:06:47.823590
License: Public Domain

Wendell L. Griffen, Judge, concurring. I concur, because I agree in the outcome of this case, but write separately to express that I would have found additional error in the trial court’s analysis of Ark. Code Ann. § 4-3-406 — incidentally, a matter quite distinct from our analysis under Ark. Code Ann. § 4-4-406 (d)(2), with which I agree. Concerning the analysis under § 4-3-406, the trial court specifically found that appel-lee’s conduct did not substantially contribute to the forgeries and unauthorized transactions even though the facts of the case, as reflected in the trial court’s findings, appear to suggest otherwise, as I shall explain below. Thus, I disagree with the majority’s view that there were not enough facts for the trial court to find that appellee failed to exercise ordinary care and substantially contributed to his daughter’s unauthorized transactions and forgeries under the purview of Ark. Code Ann. § 4-3-406. Arkansas Code Annotated section 4-3-406 (Repl. 2001) states: (a) A person whose failure to exercise ordinary care substantially contributes to an alteration of an instrument or to the making of a forged signature on an instrument is precluded from asserting the alteration or the forgery against a person who, in good faith, pays the instrument or takes it for value or for collection. (b) Under subsection (a), if the person asserting the preclusion fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss, the loss is allocated between the person precluded and the person asserting the preclusion according to the extent to which the failure of each to exercise ordinary care contributed to the loss. (c) Under subsection (a), the burden of proving failure to exercise ordinary care is on the person asserting the preclusion. Under subsection (b), the burden of proving failure to exercise ordinary care is on the person precluded. Appellant correctly points out that Arkansas courts have not had many opportunities to provide guidance as to what constitutes negligence under Ark. Code Ann. § 4-3-406(a). The policy behind U.C.C. § 3-406, which is essentially what our State chose to codify under § 4-3-406, appears to be to shift the loss for negligence to the party who was in the best position to have prevented it. Guardian Life Ins. Co. of America v. Chemical Bank, 94 N.Y.2d 418 (2000). Courts in other jurisdictions have concluded that the bank customer’s failure to prompdy discover and report a forgery or unauthorized transaction after it has occurred may also constitute negligence under U.C.C. § 3-406, even though such negligence does not directly contribute to the making of a forgery or an alteration. The rationale generally appears to be that such failure to report contributes to the making of subsequent forgeries. See, e.g., Fundacion Museo de Arte Contemporaneo de Caracas — Sofia Imber v. CBI-TDB Union Bancaire Privee, 996 F. Supp. 277 (S.D. N.Y. 1998) (noting that customer’s negligence in maintaining and controlling blank checks along with failure to advise bank of the first forgery substantially contributed to the loss); Kramer v. Chase Manhattan Bank, N.A., 653 N.Y.S.2d 546 (1997) (holding that a bank should not be held responsible for losses caused by a customer’s failure to safeguard his or her ATM card and PIN and to timely examine statements); Gulf States Section, PGA, Inc. v. Whitney Nat’l Bank of New Orleans, 689 So.2d 638 (La. 1997) (finding that checks stolen from unsecured box under printer desk coupled with customer’s failure to account for breaks in check numbering and failure to notice employee’s substitution of forged account statements supported a finding of negligence on part of customer); Five Towns College v. Citibank, N.A., 489 N.Y.S.2d 338 (1985) (finding that a prolonged delay by a customer in discovering and reporting a forgery may constitute negligence under § 3-406). In light of this case law, I think we should hold that the trial court applied Ark. Code Ann. § 4-3-406 incorrectly. First, neither appellee, as plaintiff below, nor the trial court reasoned that appellant bank failed to exercise ordinary care in paying or taking the checks, pursuant to Ark. Code Ann. § 4-3-406 (b). Second, there is ample evidence that appellee and his wife, as joint account holders, failed to exercise ordinary care and thus substantially contributed to the forgeries. In fact, the trial court found that appellee left the monitoring of all account activities to his very ill wife, that both he and his wife knew of the propensities of their daughter, and that their entire attempt to protect their check books consisted in hiding the purse and the books under the kitchen sink. In addition, appellee’s PIN consisted of the same number used for his burglary alarm system, a fact that appears striking when one ostensibly tries to safeguard his ATM cards from unauthorized use by the daughter who is known to try to obtain any means possible to make unauthorized transactions— and when the ATM cards in question are hidden only within a purse under the kitchen sink. Finally, appellee failed to notify appellant of any problem until September 15, 1997. Appellant had no knowledge and, consequently, was unable to do anything about Suzan’s forgeries and unauthorized transactions until that date solely because appellee and his wife failed to examine the bank statements and timely notify- appellant about the unauthorized transactions that they reflected. Thus, appellee’s conduct falls squarely under the scope of the cases cited supra, holding that a customer’s failure to safeguard check books, cards, and PIN, can constitute failure to exercise ordinary care under U.C.C. § 3-406. It is quite understandable that loving parents will try to provide shelter to their prodigal children, even though the children remain unrehabilitated from propensities that are unsavory. Nevertheless, the decision to house a thieving relative does not absolve one of the duty to exercise common sense regarding family valuables. Although I join the decision to reverse and remand for entry of judgment as prescribed by the majority opinion based on application of Ark. Code Ann. § 4-4-406,1 fear that our refusal to reverse and remand under section 4-3-406 sends a powerful, and unsound, message. If the facts in this case do not demonstrate failure to exercise ordinary care under section 4-3-406, what set of facts would ever do so?