Jensen v. Fleet Bank, 96 N.Y.2d 283 (2001)
Under UCC 4-406(4), when a bank customer’s account is charged for a series of forged or altered checks by the same wrongdoer over multiple years, each monthly statement of account triggers a new, independent one-year statute of limitations period for claims related to the items included in that specific statement.
Summary
Dr. Jensen sued Fleet Bank, alleging the bank negligently paid forged or altered checks perpetrated by his bookkeeper over a seven-year period. The bank argued that UCC 4-406(4)’s one-year statute of limitations barred all claims because the forgeries began in 1988, more than one year before the suit was filed in 1995. The New York Court of Appeals held that each monthly statement issued by the bank started a new one-year limitations period. Therefore, Jensen could pursue claims for forgeries appearing on statements issued within one year of his reporting the fraud to the bank, provided he could prove the bank failed to exercise ordinary care.
Facts
Plaintiff, Dr. Jensen, maintained a checking account with Fleet Bank.
From 1988 to May 10, 1995, Jensen’s bookkeeper embezzled funds by forging Jensen’s signature on checks or altering the payees’ names.
Fleet Bank regularly sent Jensen monthly statements of account and canceled checks.
Jensen discovered the embezzlement on May 17, 1995, and reported it to the bank on May 18, 1995.
Jensen then sued Fleet Bank, claiming negligence in paying the forged or altered checks.
Procedural History
Supreme Court held that each statement of account carried its own one-year period, allowing claims within one year of May 18, 1995.
The Appellate Division reversed, agreeing with the bank that the one-year period expired in 1989, dismissing all claims.
The New York Court of Appeals reversed the Appellate Division and reinstated the Supreme Court’s order.
Issue(s)
Whether, under UCC 4-406(4), the one-year period for a customer to assert claims against a bank for paying forged or altered checks begins to run from the date of the first statement containing such items, or whether each statement containing forged or altered items triggers a new, independent one-year period.
Holding
Yes, each statement of account carries its own one-year period because UCC 4-406(4) states the one-year period runs from “the statement” without specifying it refers only to the “first” statement, unlike other provisions in the same section of the UCC.
Court’s Reasoning
The court reasoned that UCC 4-406(4) does not explicitly state when the one-year period begins when the same wrongdoer forges or alters items in successive statements.
The bank argued that the one-year period begins with the first statement containing an unauthorized signature or altered item, relying on Official Comment 5 to UCC 4-406, which notes that “there is little excuse for a customer not detecting an alteration of his own check or a forgery of his own signature.” However, the Court of Appeals pointed out that this comment was made in the context of differentiating the time limit for reporting alterations/forgeries of a customer’s own signature (one year) versus unauthorized endorsements (three years), highlighting that the former is easier for customers to detect.
Crucially, the court compared UCC 4-406(2)(b) (which uses the phrase “the first item and statement”) with UCC 4-406(4) (which uses only “the statement”). The omission of “first” in 4-406(4) was deemed intentional, indicating that each statement triggers a new one-year period.
The court cited UCC 1-102(2)(c), noting that one of the UCC’s basic purposes is to “make uniform the law among the various jurisdictions.” The court observed that its holding aligned with decisions in other jurisdictions such as California (Sun ‘n Sand v United Cal. Bank), Florida (Space Distribs. v Flagship Bank), and Ohio (Neo-Tech Sys. v Provident Bank).