Court Opinion

ID: 2824345
Source: CourtListenerOpinion
Date Created: 2015-08-11 04:42:31.770741+00
Date Added: 2024-06-11T09:14:04.604213
License: Public Domain

131 Nev., Advance Opinion 441
                         IN THE SUPREME COURT OF THE STATE OF NEVADA

                C. NICHOLAS PEREOS, LTD.,                              No, 61553
                Appellant,
                vs.
                BANK OF AMERICA, N.A.,
                                                                       FILED
                Respondent.                                            JUL 0 2 2015
                                                                     TRACE K LINDEMAN
                                                                  CLERK OF SUPREME COURT
                                                                S"BY
                                                                  DEPUTY nf4-
                            Appeal from a district court summary judgment in a tort
                action. Second Judicial District Court, Washoe County; Janet J. Berry,
                Judge.
                            Reversed and remanded.

                C. Nicholas Pereos, Ltd., and C. Nicholas Pereos, Reno,
                for Appellant.

                Poli & Ball, P.L.C., and Michael N. Poli and Jody L. Buzicky, Las Vegas,
                for Respondent.

                BEFORE HARDESTY, C.J., PARRAGUIRRE and CHERRY, JJ.

                                                OPINION

                By the Court, HARDESTY, C.J.:
                            NRS 104.4406 regulates the relationship between a bank and
                its customers concerning losses sustained due to unauthorized activity in
                the customer's bank account. Generally, a customer "must exercise
                reasonable promptness" in examining a bank statement and within 30
                days notify the bank of any unauthorized transactions. NRS 104.4406(3),
                4(b).
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                             Because genuine issues of material fact exist in this case
                 regarding the manner of delivery of bank statements, the contents of
                 online and received-in-branch statements, and the bank's exercise of due
                 care in paying certain unauthorized transactions, we conclude that the
                 district court erred in granting summary judgment. We further conclude
                 that unauthorized account transactions that occur within the one-year
                 period before the customer gives notice to the bank are not time-barred
                 under NRS 104.4406(6)'s one-year period of repose because the statute
                 does not differentiate between a single forgery and multiple forgeries by
                 the same wrongdoer. Therefore, the one-year period of repose begins to
                 run with each successive forgery.
                                  FACTS AND PROCEDURAL HISTORY
                             Mary Williams, a long-time employee of appellant, the C.
                 Nicholas Pereos, Ltd., law firm, was a signator on the firm's operating
                 account with respondent Bank of America. In September 2006, the firm's
                 solo practitioner, C. Nicholas Pereos, removed Williams as a signator on
                 the account, leaving Pereos as the sole signator. Pereos told Williams to
                 let the Bank of America account "run itself out" to cover any outstanding
                 checks, but he never took any action to affirmatively close the account.
                             In 2010, Pereos discovered that Williams had been embezzling
                 money since 2006. Despite being removed as a signator on the account,
                 Williams deposited checks made out to Pereos, Ltd. into the Bank of
                 America account and would then write and sign checks for her own
                 personal use. Pereos notified the bank of the unauthorized transactions
                 on January 28, 2010. The next month, Pereos, Ltd. filed a complaint
                 against Bank of America based on Williams' use of unauthorized
                 signatures to withdraw funds from the account from 2006 to 2010. When
                 it was discovered that Williams had enrolled the Pereos, Ltd. account in
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                online banking and the bank statements had not been mailed, Pereos
                amended the complaint to include an allegation that Bank of America had
                failed to make Pereos, Ltd.'s statements available as required by NRS
                104.4406(1).
                               Bank of America moved to dismiss the amended complaint, or
                alternatively for summary judgment, on the ground that Pereos, Ltd.'s
                claims for unauthorized transactions were time-barred either because they
                were not reported by Pereos, Ltd. within 30 days under NRS
                104.4406(4)(b) or within the one-year period of repose under NRS
                104.4406(6). The bank argued that, notwithstanding Pereos, Ltd.'s
                contention that the account statements were not mailed to it, Pereos'
                deposition testimony revealed that Pereos had on occasion personally
                picked up some of Pereos, Ltd.'s bank account statements from Bank of
                America in 2006, 2007, and 2008. The bank attached copies of the
                account's statements to its motion and argued that the "fulnauthorized
                transactions . . . were contained in the bank statements that were made
                available to [Pereos]". In opposition, Pereos, Ltd. argued that the
                statements he obtained were insufficient to provide it with notice of the
                unauthorized signatures as they "were only a single page or two-page
                document. . . that showed check numbers and the amount of the check,
                and balances. Nothing more[.]" Moreover, he contended that the
                statements were insufficient because they did not contain a copy of the
                canceled checks. Pereos also argued that his claims for unauthorized
                checks cashed within the year preceding his notification to the bank were
                not time-barred. Conversely, Bank of America argued that, because the
                same wrongdoer committed all of the wrongful transactions, all claims

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                 were time-barred by Pereos, Ltd.'s failure to give the bank notice within
                 30 days after receiving the account statements.
                               The district court granted summary judgment in favor of Bank
                 of America, finding that it was irrelevant whether Pereos, Ltd. received
                 copies of the checks because NRS 104.4406(1) does not require the
                 inclusion of check images. Moreover, the district court found that there
                 was "no dispute that the bank statements received by [Pereosl contained
                 item numbers, amounts, and dates of payment," and thus, the account
                 statements Pereos received were sufficient to notify him of the
                 unauthorized activity on the firm's account. Accordingly, all claims were
                 time-barred under NRS 104.4406(4)(b) and NRS 104.4406(6). This appeal
                 followed.
                                                 DISCUSSION
                               Nevada's version of the Uniform Commercial Code is codified
                 in NRS Chapters 104 and 104A. See NRS 104.1101. Article 4, located at
                 NRS 104.4101-.4504, deals with bank deposits and collections, and,
                 specific to this action, NRS 104.4406 regulates the relationship between
                 banks and bank customers concerning unauthorized activity in a
                 customer's bank account. See also U.C.C. § 4-406 (2002). Generally, the
                 statute absolves a bank of liability for payment on an unauthorized
                 transaction when it provides the customer with information that would
                 allow the customer to identify any unauthorized transactions, such as an
                 account statement, and the customer then fails to timely act in response to
                 unauthorized transactions reflected therein. 1 See Prestridge v. Bank of

                       1 NRS   104.4406, in its entirety, reads

                                                                   continued on next page...
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                ...continued
                                     1. A bank that sends or makes available to
                               a customer a statement of account showing
                               payment of items for the account shall either
                               return or make available to the customer the
                               items paid or provide information in the statement
                               of account sufficient to allow the customer
                               reasonably to identify the items paid. The
                               statement of account provides sufficient
                               information if the item is described by item
                               number, amount and date of payment.
                                      2. If the items are not returned to the
                               customer, the person retaining the items shall
                               either retain the items or, if the items are
                               destroyed, maintain the capacity to furnish legible
                               copies of the items until the expiration of 7 years
                               after receipt of the items. A customer may request
                               an item from the bank that paid the item, and
                               that bank must provide in a reasonable time
                               either the item or, if the item has been destroyed
                               or is not otherwise obtainable, a legible copy of the
                               item.
                                     3. If a bank sends or makes available a
                               statement of account or items pursuant to
                               subsection 1, the customer must exercise
                               reasonable promptness in examining the
                               statement or the items to determine whether any
                               payment was not authorized because of an
                               alteration of an item or because a purported
                               signature by or on behalf of the customer was not
                               authorized. If, based on the statement or items
                               provided, the customer should reasonably have
                               discovered the unauthorized payment, the
                               customer must promptly notify the bank of the
                               relevant facts.
                                     4. If the bank proves that the customer
                               failed, with respect to an item, to comply with the
                               duties imposed on the customer by subsection 3,
                                                                      continued on next page...
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                ...continued
                               the customer is precluded from asserting against
                               the bank:
                                      (a) His or her unauthorized signature or any
                               alteration on the item, if the bank also proves that
                               it suffered a loss by reason of the failure; and
                                     (b) His or her unauthorized signature or
                               alteration by the same wrongdoer on any other
                               item paid in good faith by the bank if the payment
                               was made before the bank received notice from the
                               customer of the unauthorized signature or
                               alteration and after the customer had been
                               afforded a reasonable period of time, not exceeding
                               30 days, in which to examine the item or
                               statement of account and notify the bank.
                                      5. If subsection 4 applies and the customer
                               proves that the bank failed to exercise ordinary
                               care in paying the item and that the failure
                               substantially contributed to loss, the loss is
                               allocated between the customer precluded and the
                               bank asserting the preclusion according to the
                               extent to which the failure of the customer to
                               comply with subsection 3 and the failure of the
                               bank to exercise ordinary care contributed to the
                               loss. If the customer proves that the bank did not
                               pay the item in good faith, the preclusion under
                               subsection 4 does not apply.
                                     6. Without regard to care or lack of care of
                               either the customer or the bank a customer who
                               does not within 1 year after the statement or
                               items are made available to him or her (subsection
                               1) discover and report his or her unauthorized
                               signature or any alteration on the item, is
                               precluded from asserting against the bank the
                               unauthorized signature or the alteration. If there
                               is a preclusion under this subsection, the payor
                               bank may not recover for breach of warranty
                                                                     continued on next page...
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                Jena, 924 So. 2d 1266, 1270 (La. Ct. App. 2006) (discussing analogous
                Louisiana statute).
                               Thus, once the customer is provided with the necessary
                account information, the customer must "exercise reasonable promptness"
                in examining the information and notifying the bank of any unauthorized
                transactions. NRS 104.4406(3). Failure to do so may limit the bank's
                liability for the unauthorized transactions contained in the information
                and also for any others made by the "same wrongdoer" that occur before
                the bank receives notice, depending on whether the bank exercised
                ordinary care in making the payments. NRS 104.4406(4), (5). Regardless
                of fault, however, a customer is barred from asserting any claims with
                respect to an unauthorized transaction more than one year after the bank
                made the information available to the customer. NRS 104.4406(6),
                               Here, Pereos, Ltd. argues that summary judgment was
                inappropriate because genuine issues of material fact remain as to (1)
                whether the account statements were sufficient to give notice of the
                unauthorized activity on its account so as to trigger its duty to examine
                the statements for and notify the bank of any unauthorized activity; and
                (2) even if its duty was triggered, whether its claims concerning payments
                made within the one-year period before it notified the bank of the
                unauthorized activity were time-barred.
                               This court reviews a district court's order granting summary
                judgment de novo.      Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d

                ...continued
                               under NRS 104.4208 with respect to the
                               unauthorized signature or alteration to which the
                               preclusion applies.

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                      1026, 1029 (2005). Summary judgment is proper if the pleadings and all
                      other evidence on file demonstrate that no genuine issue of material fact
                      exists and that the moving party is entitled to judgment as a matter of
                      law. Id. When deciding a summary judgment motion, all evidence must
                      be viewed in a light most favorable to the nonmoving party.     Id. General
                      allegations and conclusory statements do not create genuine issues of fact.
                      Id. at 731, 121 P.3d at 1030-31.
                                  Additionally, statutory interpretation is a question of law that
                      this court reviews de novo. Consipio Holding, BV v. Carl berg, 128 Nev.,
                      Adv, Op. 43, 282 P.3d 751, 756 (2012). "When a statute is clear and
                      unambiguous, this court gives effect to the plain and ordinary meaning of
                      the words and does not resort to the rules of construction."     Id.   When
                      interpreting a statute, "this court considers the statute's multiple
                      legislative provisions as a whole." Leven v. Frey, 123 Nev. 399, 405, 168
P.3d 712, 716 (2007). We will not interpret a statute in a way that would
                      "render any part of [the] statute meaningless." Id.
                      Summary judgment is inappropriate because a genuine issue of material
                      fact remains as to whether the account statements Bank of America
                      provided to Pereos were sufficient to trigger Pereos, Ltd.'s duty to act
                                  To trigger a customer's duty to examine its account for
                      unauthorized account activity, a bank may either (1) return or make
                      available copies of the canceled checks to the customer, or (2) furnish an
                      account statement to the customer. NRS 104.4406(1). If copies of
                      canceled checks are not returned, the account statement must provide the
                      customer with sufficient information for "the customer reasonably to
                      identify the items paid" on the account. NRS 104.4406(1). This
                      requirement is met "if the item is described by item number, amount and
                      date of payment." Id.

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                               This "safe harbor" rule permitting banks to furnish account
                   statements to customers that contain the item number, amount, and date
                   of payment in lieu of providing customers with copies of canceled checks
                   was intended to reduce the costs associated with check collection. See
                   U.C.C. § 4-406 cmt. 1 (2002). The drafters reasoned that this information
                   is generally sufficient to notify "[a] customer who keeps a record of checks
                   written" of any unauthorized signatures, while also recognizing that this
                   information may be insufficient for a customer who does not "utilize [a]
                   record-keeping method." Id. The drafters explained that "accommodating
                   customers who do not keep adequate records is not as desirable as
                   accommodating customers who keep more careful records," nor does it
                   reduce the cost of the check collection system to all customers.         Id.
                   Therefore, the drafters placed the burden on the bank's customers to
                   remain reasonably aware of the activity on their accounts.           See id.
                   Accordingly, if the customer "should reasonably have discovered the
                   unauthorized payment" from the information provided, the customer must
                   promptly notify the bank. NRS 104.4406(3).
                               Here, there are genuine issues of material fact as to the
                   manner of delivery and the content of the "statements" that Bank of
                   America contends were mailed to Pereos or delivered to him during his
                   branch visits. Pereos, Ltd. disputes the fact that Bank of America mailed
                   bank statements to its office location during the time in question. While
                   Bank of America supplied copies of the bank statements to the district
                   court, it appears from the record that the bank did not actually mail those
                   statements to Pereos, Ltd., but rather, they were made available online at
                   the direction of Williams. It is not clear from the record the extent of
                   Williams' authority and when she converted delivery of the bank

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                 statements to an online format. Nonetheless, Bank of America continues
                 to maintain that, regardless of the method of delivery, Pereos received
                 some of the statements during his visits to the bank between September
                 2006 and January 2008, the contents of which would have put him on
                 notice of the unauthorized activity. And even though Pereos concedes that
                 the statements he received contained the item number and amount for
                 each item paid, he maintains that they did not contain the date of
                 payment. Because genuine issues of material fact remain as to the
                 delivery method of the bank statements and whether the statements
                 Pereos received during his visits to Bank of America contained the
                 statutory safe harbor information to discover the unauthorized
                 transactions, we conclude that the district court erred in granting
                 summary judgment under the 30-day rule in NRS 104.4406(4)(b).
                 The district court erred in dismissing Pereos, Ltd. 's claims for
                 embezzlement that occurred between January 2009 and January 2010 2
                             Pereos, Ltd. next argues that, even if the statements triggered
                 its duty to identify and promptly notify Bank of America of the
                 unauthorized activity, its claims for checks forged within the year
                 preceding giving notice to the bank are not time-barred by the one-year
                 deadline. Bank of America argues that all of Pereos, Ltd.'s claims are
                 barred pursuant to NRS 104.4406(4)(b), because payment on all of the acts

                       2Pereos acknowledged obtaining a statement in a Bank of America
                 branch in September 2006, occasional statements between late 2006 and
                 early 2007, and a statement in January 2008. Pereos argues that he
                 received no statements after January 2008, and we thus address this time
                 period separately. See NRS 104.4406(6) (providing that any customer who
                 does not report unauthorized activity to the bank within one year after the
                 statement giving notice of that activity is made available to it is precluded
                 from recovering on that activity against the bank.)

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                 of forgery, committed by the same wrongdoer, occurred after Pereos, Ltd.
                 had 30 days to examine the first account statement containing forged
                 transactions and before Pereos, Ltd. reported the unauthorized
                 transactions to Bank of America. To resolve this issue, we examine the
                 interplay between NRS 104.4406's subsections 4, 5, and 6, to determine
                 whether Pereos, Ltd.'s claims for unauthorized payments made from its
                 bank account during the one-year period before January 2010 are
                 statutorily barred.
                             Distinguishing between a single forgery and multiple forgeries
                 by the same wrongdoer, subsection 4 provides that a customer who fails to
                 exercise the reasonable diligence required in subsection 3 is precluded
                 from asserting a claim against the bank for a single forged item if the
                 bank "proves that it suffered a loss" from that failure, NRS 104.4406(4)(a),
                 or for multiple forged items "by the same wrongdoer. . . paid in good faith
                 by the bank[i if the payment was made before the bank received notice
                 from the customer of the unauthorized signature or alteration," but after
                 the customer had 30 days to review the account statement. NRS
                 104.4406(4)(b). These preclusions are subject to exception for the bank's
                 failure to exercise due care, however: "[i]f. . the customer proves that the
                 bank failed to exercise ordinary care in paying the item and that the
                 failure substantially contributed to loss," the loss is to be divided between
                 the bank and the customer. NRS 104.4406(5). And if the bank pays the
                 item without good faith, subsection 4's prohibitions against the customer
                 asserting a claim are inapplicable altogether. Id. But regardless of either
                 the bank's or the customer's failure to exercise ordinary care, a customer is
                 precluded from bringing any claim against the bank if it is not brought

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                  within one year of the account statement being made available. NRS
                  104.4406(6).
                                 To the extent that Bank of America argues that all of Pereos'
                  claims are barred by MRS 104.4406(4)(b) because the same wrongdoer was
                  responsible for all of the embezzlements and Pereos did not report them
                  within 30 days of receiving the first account statement reflecting the
                  forgeries, we note that the one-year period of repose in NRS 104.4406(6)
                  does not differentiate between a single forgery and multiple forgeries by
                  the same wrongdoer.       See MRS 104.4406(6). Because NRS 104.4406(6)
                  does not expressly differentiate between a single forgery and multiple
                  forgeries by the same wrongdoer, we conclude that a new limitations
                  period under its one-year statute of repose begins to run with each
                  successive forgery. See Sun 'it Sand, Inc. v. United Cal. Bank, 582 P.2d
920, 935 (Cal. 1978) ("This failure to explicitly differentiate between one-
                  time and repetitive forgeries and alterations in [the one-year statute of
                  repose] leads us, in light of the express distinction in [the 'same
                  wrongdoer' subsection], to conclude that a new one-year period begins to
                  run with each successive check."); Associated Home & RV Sales, Inc. v.
                  Bank of Belen, 294 P.3d 1276, 1283 (N.M. Ct. App. 2012) (holding that the
                  one-year statute of repose controls because there is "no natural connection
                  between [the] 'same wrongdoer' rule and the more general wording in [the
                  one-year statute of repose subsection]"). Thus, Pereos is permitted to
                  bring claims consistent with the provisions in NRS 104.4406.
                                 Moreover, if the customer sufficiently proves that the bank
                  failed to exercise ordinary care in making the unauthorized payment, NRS
                  104.4406(4)(b)'s limitation period is negated. Here, Pereos, Ltd. has

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                alleged, and Bank of America has not denied, that it paid on checks drawn
                from the account signed by Williams after Williams' authority over the
                account was removed. Thus, Pereos may be able to prove that Bank of
                America failed to exercise ordinary care in continuing to honor Williams'
                signature on checks despite the account owner's instructions otherwise.
                Accordingly, genuine issues of material fact exist regarding the parties'
                fault with respect to these transactions. Even if Pereos, Ltd.'s claims for
                unauthorized transactions before January 2009 are barred by NRS
                104.4406(4)(b), Pereos, Ltd. is entitled to go forward with its claims
                against Bank of America for those unauthorized payments made during
                the year before Pereos notified the bank in January 2010.           See NRS
                104.4406(5); Associated Home, 294 P.3d at 1283 (holding that, even though
                the 30-day statutory limitation period had elapsed, because the one-year
                statute of repose had yet not expired, the customer could bring a claim
                against the bank if the customer could prove that the bank did not
                exercise ordinary care).
                              Accordingly, we reverse the district court's summary judgment
                and remand this matter to the district court for further proceedings
                consistent with this opinion.

                                                                                ,   C.J.
                                                     Hardesty

                                                J.
                Parraguirre

                                                J.

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