Monthly Statements. Steven Gerber had a joint checking account with his mother at City National Bank of Florida. Between January and May 1990, a number of checks were allegedly forged on the account. Gerber asked City National to recredit the account

Question

for the amount of the checks, but the bank refused. In March 1992, Gerber filed a lawsuit against the bank. City National filed a motion to dismiss, claiming that the suit was barred because Gerber did not file it within a year of City National's making available to Gerber the bank statements that reflected the forged checks. Gerber argued that the only requirement was that he notify the bank of any unauthorized signatures within a year. How should the court rule?

Answer 1

Monthly statements
The court agreed with Gerber and held that UCC 4-406 "is not a statute of limitations, which requires a customer to actually file suit against a bank within the one-year period, but is merely a notice requirement, which must be satisfied in order for a customer to preserve the right to bring suit against the bank at a later time." UCC 4-406 "merely requires a customer to ‘discover and report' an unauthorized signature, or else be ‘precluded from asserting' liability against the bank." The section "does not require that suit be filed, nor does it state that an action ‘shall be commenced,'" but "only imposes on bank customers, who are in a better position to detect for-geries than bank personnel, a duty to notify a bank of an unauthorized signature in order to facilitate discovery and prevention of further wrongdoing." The court recognized, however, that "when a series of checks, rather than a single check, are alleged to have been improperly hon-ored by a bank, the proper application of [UCC 4-406] may serve to preclude a customer's re-covery on some checks, while allowing recovery on others, depending upon when bank state-ments are issued and when notice is given." (This case was decided before the revisions to Articles 3 and 4, but the result would likely be the same under those revisions.)