Flagship Bank of Seminole v. Complete Interiors, Inc.
| Decision Date | 24 May 1984 |
| Docket Number | No. 83-882,83-882 |
| Citation | 450 So.2d 337 |
| Parties | 38 UCC Rep.Serv. 957 FLAGSHIP BANK OF SEMINOLE, Appellant, v. COMPLETE INTERIORS, INC., d/b/a Continental Homes of Florida, Appellee. |
| Court | Florida District Court of Appeals |
Jack T. Bridges of Cleveland & Bridges, Sanford, for appellant.
Sutton G. Hilyard, Jr., and Greg W. Sahlsten of Pitts, Eubanks & Ross, P.A., Orlando, for appellee.
Flagship Bank appeals a partial summary final judgment against it in favor of Complete Interiors, Inc., a bank customer which had sued the bank to recover on ten checks which allegedly had been altered, thus improperly charged against its account. The bank contends that factual issues exist for trial and that a summary judgment was therefore erroneously entered. We agree and reverse for trial.
The partial summary judgment involves only five of the ten checks sued upon. The record reflects that all ten checks were apparently altered by the same person, the customer's bookkeeper. The bookkeeper would prepare checks in accordance with written authorization of appellee's general manager, who would then compare the prepared checks with the authorizations, and if the checks matched, he would sign them and return them to the bookkeeper for distribution. It appears that the bookkeeper then proceeded to alter the checks using either an eraser or a correcting typewriter, naming herself as payee of the checks and in some instances, increasing the amount.
The first four of the series of checks were written and paid by the bank between April 3, 1981 and April 29, 1981. These checks appeared on and were returned to appellee with the April bank statement which appellee received on or about May 2, 1981. The fifth in the series of checks was paid by the bank on May 11, 1981, and it appeared on and was returned to appellee with the May bank statement, which appellee received on or about June 2, 1981. The remaining checks were paid between May 21, 1981 and August 13, 1981, and are not involved in this appeal. The trial court entered a partial summary judgment for the first five checks, totalling $19,697.30, plus interest of $4,809.84.
To support the trial court's judgment, appellee relies on section 674.406, Florida Statutes (1981) 1. Subsection (1) of this statute, provides, in essence, that the bank's customer has the duty to exercise reasonable care and promptness to examine its bank statements and items to discover any unauthorized signatures or alterations. The customer must notify the bank promptly if any irregularities are discovered. Under section (2)(a), the failure of the customer to comply with this duty precludes his assertion against the bank of unauthorized signatures or alterations if the bank establishes that it suffered a loss by reason of such failure. Under Subsection (2)(b) of the statute, if the customer fails to comply with this statutory obligation the customer is precluded from asserting against the bank payment on any subsequent unauthorized signature or alteration by the same wrongdoer, paid in good faith by the bank after the first item and statement was available to the customer for a reasonable period not exceeding fourteen calendar days. Appellee contends that the summary judgment was properly entered because, on May 11, 1981, when the last of the five checks was paid, appellee had not had its April bank statement for fourteen days, thus making the bank absolutely liable for at least these checks.
When a bank is sued because it has charged a customer's account with unauthorized or altered checks, it may raise as a defense thereto and present evidence, if it can, that the customer did not exercise due care and promptness to examine the bank statement where such items appear and failed to "promptly" notify the bank after discovery thereof, and that the bank has suffered a loss by reason of such failure (subsection (2)(a)). Additionally, under subsection (2)(b) of the statute, with respect to subsequent alterations or forgeries by the same wrongdoer, the bank may assert the customer's failure to comply with its duty under subsection (1), after the first item and statement was available to the customer "for a reasonable period not to exceed fourteen days."
With respect to the first four checks involved here, the bank may establish, under subsection (2)(a) of the statute, that notwithstanding the fact that these checks appeared for the first time on the April statement, the customer did not comply with its duty under subsection (1) to "promptly" notify the bank of these alterations, and that because of such failure the bank suffered a loss. With respect to the fifth check, the bank has the right, under subsection (2)(b) of the statute to establish that the customer failed to "promptly" notify the bank of the alterations after it received the statement on May 2, 1981 which reflected the alteration of the first four checks in question. If this can be established, and if the customer is not able then to establish the lack of ordinary care on the part of the bank in paying the item(s) as provided under subsection 3 of § 674.406, then the customer is precluded from asserting the alteration against the bank. The issues of whether the customer exercised reasonable care and promptness to examine the statement, and whether the customer had an opportunity to review the statement for a reasonable length of time, raise substantial questions of material fact ordinarily making summary judgment inappropriate. Space Distributors, Inc. v. Flagship Bank of Melbourne, 402 So.2d 586 (Fla. 5th DCA 1981).
Contrary to the appellee's position, section 674.406 does not create an absolute liability on the part of the bank for payments...
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