Borowski v. Firstar Bank Milwaukee, N.A., 96-3277

• Decision Date: 10 February 1998
• Docket Number: No. 96-3277,96-3277
• Citation: 579 N.W.2d 247,217 Wis.2d 565
• Parties: , 35 UCC Rep.Serv.2d 221 Jerrold A. BOROWSKI and Jerrold A. Borowski, Personal Representative of the Estate of Anthony P. Borowski, Plaintiffs-Appellants, v. FIRSTAR BANK MILWAUKEE, N.A., Defendant-Respondent, American Family Mutual Insurance Company and Allstate Insurance Company, Defendants. . Oral Argument
• Court: Wisconsin Court of Appeals

Page 247

579 N.W.2d 247

217 Wis.2d 565, 35 UCC Rep.Serv.2d 221

Jerrold A. BOROWSKI and Jerrold A. Borowski, Personal

Representative of the Estate of Anthony P.

Borowski, Plaintiffs-Appellants, v. FIRSTAR BANK MILWAUKEE, N.A., Defendant-Respondent,

American Family Mutual Insurance Company and Allstate

Insurance Company, Defendants.

No. 96-3277.

Court of Appeals of Wisconsin.

Oral Argument Argued Jan. 8, 1998.

Opinion Released Feb. 10, 1998.

Opinion Filed Feb. 10, 1998.

On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of James J. Winiarski of Milwaukee. There was oral argument by James J. Winiarski.

On behalf of the defendant-respondent, the cause was submitted on the brief of Andrew N. Herbach of Howard, Solochek & Weber, S.C., of Milwaukee. There was oral argument by Andrew N. Herbach.

Before FINE, SCHUDSON and CURLEY, JJ.

FINE, Judge.

Jerrold A. Borowski, individually and as personal representative of the estate of his father, Anthony P. Borowski, appeals from the trial court's grant of summary judgment to Firstar Bank Milwaukee dismissing Borowski's negligence action against Firstar Bank. Borowski claimed that Firstar Bank negligently paid forged checks drawn on both the estate's account and his personal account by Lisa Kaczmarek, the woman whom he thought he was going to marry, and that Firstar Bank negligently honored other requests for money she made, including forged notes that asked Firstar Bank to send cashier's checks to Borowski's home, where she intercepted them. The trial court held that Borowski did not comply with his contractual obligation to timely notify Firstar Bank that there was something wrong, and that this was a condition precedent to Borowski's suit against Firstar Bank. We affirm in part and reverse in part.

Summary judgment is used to determine whether there are any disputed facts that require a trial, and, if not, whether a party is entitled to judgment as a matter of law. RULE 802.08(2), STATS.; U.S. Oil Co., Inc. v. Midwest Auto Care Servs., Inc., 150 Wis.2d 80, 86, 440 N.W.2d 825, 827 (Ct.App.1989). Although assisted by the trial court's written decision, our review of a trial court's grant of summary judgment is de novo. See Green Spring Farms v. Kersten, 136 Wis.2d 304, 315, 401 N.W.2d 816, 820 (1987).

The facts material to this appeal are not disputed. Borowski maintained two accounts with Firstar Bank--his account and the account for his father's estate. According to an affidavit submitted to the trial court by Borowski in opposition to Firstar Bank's motion for summary judgment, Kaczmarek "systematically took approximately $100,000" from the estate's account with Firstar Bank, and "approximately $50,000" from his personal account with Firstar Bank. Borowski's affidavit accused Kaczmarek of using "forged checks, telephone transfers, and forged handwritten notes which she left in the overnight depository boxes at Firstar's branch banks, requesting that they send cashiers check[s] for various sums" to him, which she intercepted.

This appeal is governed by provisions of Wisconsin's Uniform Commercial Code that were in effect during the time relevant to this appeal, specifically Chapter 404, STATS., 1991-92. ¹ Section 404.406(4), STATS., 1991-92, relieved a bank of liability for a customer's "unauthorized signature or any alteration" on an "item" if the customer did not timely "discover and report" it. ² The period specified in § 404.406(4) for such discovery and report is "within one year from the time the statement and items are made available to the customer." As the trial court recognized, this establishes a precondition to a customer's lawsuit against a bank. See Jensen v. Essexbank, 396 Mass. 65, 483 N.E.2d 821, 822 (1985) (collecting cases).

Section 404.406(4), STATS., 1991-92, and other provisions in Chapter 404, can be modified by agreement between the bank and the customer. Section 404.103(1), STATS., 1991-92. ³ Firstar Bank claims that agreements between Firstar Bank and Borowski reduced § 404.406(4)'s one-year period to fourteen days. ⁴ There are two such provisions--one for Borowski's personal account, and another for the estate's account. The provisions are not identical. The first, applicable to the estate's account, reads:

Review your statement promptly. You must inform us of an unauthorized signature or alteration on an item within 14 days after we send or make available to you your statement and items or copies of the items. If you do not, you lose any claim you have against us due to an unauthorized signature or alteration. You also lose any claim against us on any later item paid after the 14-day period but before we receive your notice if the item was signed or altered by the same unauthorized party.

The second, applicable to Borowski's personal account, reads:

You will promptly inspect Account statements. If you do not notify us of an unauthorized or altered item shown on your statement within fourteen (14) days of the statement date, you will lose any claim against us with regard to that item and any later items signed or altered by that same unauthorized party.

The agreement in connection with the estate's account required notification to Firstar Bank "of an unauthorized signature or alteration on an item within 14 days after we send or make available to you your statement and items or copies of the items." (Emphasis added.) The agreement in connection with the Borowski's personal account required notification to Firstar Bank "of an unauthorized or altered item shown on your statement within fourteen (14) days of the statement date." (Emphasis added.) As explained below, these two clauses result in the barring of all of Borowski's claims against Firstar Bank except those claims that he asserts on the estate's behalf in connection with the cashier's checks sent by Firstar Bank in response to Kaczmarek's handwritten requests.

1. Borowski does not point to anything in the record that disputes Firstar Bank's evidence that the statements and cancelled checks for each of the two accounts were sent to him in due course, consistent with Firstar's custom and practice. See RULE 904.06, STATS. ⁵ Borowski concedes that he did not review the statements and checks within fourteen days. According to Borowski's affidavit submitted to the trial court in opposition to Firstar Bank's motion for summary judgment, Kaczmarek "was intercepting all such bank statements and then lying to [Borowski] as to why the statements were not received." Interception of bank statements by a third person, however, at least under the circumstances presented here, does not relieve the customer of his or her responsibilities to either examine those statements or find out why they are not coming. See Stowell v. Cloquet Co-op Credit Union, 557 N.W.2d 567, 571-572 (Minn.1997) ("The modern UCC case law of other jurisdictions is virtually unanimous in holding that, once account statements are mailed to the account holder's proper address, the risk of nonreceipt falls on the account holder and interception of the statements by a wrongdoer does not relieve the account holder of the duty to examine the statements and report unauthorized items to the bank.") (collecting cases). ⁶

Although expressed in a series of scatter-shot arguments, the essence of Borowski's claim of trial-court error is that there were issues of fact as to whether Firstar Bank was negligent in handling the two accounts, and, therefore, that summary judgment was not appropriate. ⁷ We disagree. Section 404.406(4), STATS., 1991-92, precluded a customer "from asserting against the bank" any "unauthorized signature or ... alteration" unless the customer timely notifies the bank of the unauthorized signature or alteration. This preclusion applies "[w]ithout regard to care or lack of care of either the customer or the bank." Ibid. Stated another way, under § 404.406(4) a bank is not liable for its own negligence with respect to payments made from a customer's account as the result of an unauthorized signature or alteration unless the bank receives timely notification from the customer of the unauthorized signature or alteration. Thus, whether a bank is at fault is not material if the customer does not give the bank timely notice under § 404.406(4) that something is amiss.

As noted, although § 404.406(4), STATS., 1991-92, provided that the notice must be made "within one year from the time the statement and items are made available to the customer," Firstar Bank contends that this one-year period was lawfully reduced to fourteen days by the clauses quoted above from Borowski's agreements with Firstar Bank in connection with the two accounts. Borowski does not argue that the two clauses did not attempt to modify the one-year period in § 404.406(4). ⁸ Rather, he asserts that the attempted modification was ineffective because § 404.103(1), STATS., 1991-92, prevents any agreement between a bank and its customer from "disclaim[ing] a bank's responsibility for its own lack of good faith or failure to exercise ordinary care or limit[ing] the measure of damages for such lack or failure." We disagree--it is not the agreement between Borowski and Firstar Bank that gives the bank immunity even if it is negligent, it is § 404.406(4); all the agreement does is reduce the time within which the customer must notify the bank of an unauthorized signature or an alteration from one year to fourteen days. Cf. Keiting v. Skauge, 198 Wis.2d 887, 894-895, 543 N.W.2d 565, 568 (Ct.App.1995) (contract provision reducing statute-of-limitation period not exculpatory contract because it "merely alters the limitations period which the law would otherwise impose"). ⁹

Borowski also contends that the fourteen-day period is unreasonably short, especially in light of § 404.406(4), STATS., 1991-92's default-provision of one year. As noted, § 404.103(1), STATS., 1991-92, permitted a bank and its customer to vary the...