Farmers State Bank of Hart v. Ray, 8849

Citation565 S.W.2d 103
Decision Date10 April 1978
Docket NumberNo. 8849,8849
Parties23 UCC Rep.Serv. 959 FARMERS STATE BANK OF HART, Texas, Appellant, v. Nora RAY, Appellee.
CourtCourt of Appeals of Texas. Court of Civil Appeals of Texas

Gibson, Ochsner, Adkins (A. B. Hankins and Ira L. Edwards, Jr.), Amarillo, for appellant.

Moran & Miller (Russel A. Moran), Dimmitt, for appellee.

ROBINSON, Chief Justice.

Plaintiff-appellee Nora Ray sued Farmers State Bank to recover $1850 which she claims was wrongfully paid out of her checking account upon an altered check bearing her signature. Trial was held without a jury; the court entered judgment for Mrs. Ray based in part on a finding that her failure to properly execute the check did not amount to negligence substantially contributing to the material alteration of the instrument. Reversed and rendered.

On or about May 7, 1975, Robert Freeman came to the home of Mrs. Ray, an elderly woman living alone. Freeman gained entrance to her home by posing as an electric utility company serviceman. After examining several wall outlets, Freeman told Mrs. Ray that he would return after lunch to continue working on her electric service. He told her that he needed a check for $1.50 to cover the service charge, and would help her write the check. Freeman wrote the numbers "1.50" well to the right on the line provided, leaving considerable space between the dollar sign and the numbers. Mrs. Ray testified that she signed the check because it was written in ink and could not be changed, and also she wanted to get Freeman out of the house.

When Freeman left Mrs. Ray's home, he filled out the rest of the check. He inserted the date and his name as payee, added the numbers "185" between the dollar sign and the numbers "1.50", and wrote in the words "Eighteen Hundred Fifty-One and 50/100" in the appropriate space. Freeman presented the check at Farmers State Bank within the hour, showed the teller two pieces of photo-identification, and cashed the check. Mrs. Ray testified that a couple of hours after Freeman left she became suspicious because she never had to pay a public utility serviceman before. She attempted to stop payment on the check, but before she contacted the bank, the check had been cashed.

Plaintiff relies on the case of Lockwood National Bank v. Jennings, 381 S.W.2d 682 (Tex.Civ.App. Houston 1964, writ ref'd n. r. e.), which placed the loss on the bank in a similar situation. The rationale of that case was that the drawer of a check cannot foresee the commission of a crime by another. The bank argues that the enactment of the Uniform Commercial Code changed the law, and that plaintiff Ray should bear the loss because her negligence substantially contributed to the alteration of the instrument.

The trial court entered judgment for plaintiff based on the following conclusions of law:

1. The alteration of the check constituted forgery, and drawer cannot foresee or anticipate commission of crime by another, as held in Lockwood National Bank v. T. W. Jennings, 381 S.W.2d 682, and cases cited.

2. The conditions and circumstances under which the Plaintiff, Nora Ray, signed and delivered the check did not amount to negligence substantially contributing to the material alteration of the instrument, as required by Section 3.406 of the Uniform Commercial Code to constitute a defense.

Defendant bank challenges, inter alia, the trial court's reliance on Lockwood National Bank v. Jennings and the legal and factual sufficiency of the evidence to support the trial court's conclusion that Mrs. Ray's negligence did not substantially contribute to the material alteration of the check.

Texas Business & Commerce Code § 3.406 (Tex. UCC 1968) provides:

§ 3.406. Negligence Contributing to Alteration or Unauthorized Signature

Any person who by his negligence substantially contributes to a material alteration of the instrument or to the making of an unauthorized signature is precluded from asserting the alteration or lack of authority against a holder in due course or against a drawee or other payor who pays the instrument in good faith and...

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2 cases
  • Lambert v. Wansbrough, 05-87-00655-CV
    • United States
    • Court of Appeals of Texas
    • November 14, 1989
    ...became apparent during the first year and the clock of limitations began to run; a suit filed in the sixth year came too late. Richman, 565 S.W.2d at 103. Finally, Owner cites section 16.009 of the Texas Civil Practice and Remedies Code and urges that it provides him with a ten year period ......
  • Ray v. Farmers State Bank of Hart, B-7649
    • United States
    • Supreme Court of Texas
    • January 17, 1979
    ...was the amount of the alteration. The court of civil appeals reversed the judgment and rendered judgment that Mrs. Ray take nothing. 565 S.W.2d 103. We reverse the judgment of the court of civil appeals and affirm that of the trial The controlling issue in the case is whether Mrs. Ray was n......

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