JAMES J. SWEENEY, Judge.
{¶ 1} Defendant-appellant, Dollar Bank, Federal Savings Bank ("Dollar Bank"), appeals from the judgment of the trial court rendered in favor of plaintiff-appellee, David Chesler, in Chesler's action against the bank for improper payment of forged checks. For the reasons set forth below, we affirm.
{¶ 3} The matter proceeded to a bench trial on August 7, 2009.
{¶ 4} Chesler testified that he lives at East 71st Street and Euclid Avenue, in a loft above a commercial establishment. A portion of the loft is used for business operations and has a long table, bookshelf, and computer. Chesler keeps his checkbook in a drawer in this business area. The checkbook is a large aluminum-covered book that has a register and attached carbon-copy forms for recording the information on each check that is written. Chesler further established that he opened the account at the downtown branch and provided Dollar Bank with his telephone number and a completed signature card.
{¶ 5} Finally, Chesler established that he noticed the forgeries on June 16, 2008. He became suspicious on this date after observing that the check statement contained a large amount of checks. He did not suspect prior to this time that Velez had stolen checks from him or that checks from his checking account were being forged, and no checks had bounced. In total, Velez had forged and negotiated 28 checks from Chesler's checking account and had improperly obtained $19,135 in the time period from April 7, 2008, to June 10, 2008. Dollar Bank cashed a number of the checks; prior to doing so, the bank did not call Chesler to determine whether the checks were authorized and did not compare the signature on the check with the signature card on file for the account.
{¶ 6} On cross-examination, Chesler acknowledged that when he opened the checking account, he had signed the following agreements:
{¶ 7} An additional deposit agreement was promulgated on June 1, 2007. This agreement stated that the bank is not barred by any acts of waiver, recognized that automated procedures are in place and that the bank does not require verification of the maker's signature on all checks, and limited recovery for reimbursements on forged instruments to the 30-day period after the statement
{¶ 8} Chesler testified that Velez was permitted to sleep at the loft two or three times a week for a few weeks when he needed a place to stay but he did not know that Velez had a criminal record. He further testified that there were loose checks in the checkbook and it was not kept in a locked drawer.
{¶ 9} Chesler acknowledged that he usually received the checking-account statements by the 15th of each month but it was not uncommon for him to ignore the statements for a week or two. The statement for the time period from April 1, 2008, to May 1, 2008, contained copies of three forged checks that had signatures unlike his own and totaled $485. The statement reflected that the forged checks contained numbers that were out of sequence for the checkbook. Chesler did not review this statement until June 16, 2008.
{¶ 10} The statement for the time period of May 2, 2008, to June 1, 2008, contained forged checks and again listed checks out of the proper sequence for the checkbook. Chesler notified the bank of these forgeries on June 16, 2008.
{¶ 12} Augustine testified that not all of the forged checks were cashed at Dollar Bank branches. With regard to the checks cashed at Dollar Bank, the teller must ask for the payee's identification, but if the payee is a Dollar Bank customer, then the Dollar Bank card will suffice. She admitted that the bank has the ability to verify that the drawer's signature is genuine. The bank does not do so, however, unless the check is written for over a specific amount. In general, the teller is not responsible for verifying the drawer of the check, and the customer is supposed to review the statement each month and notify the bank of any irregularity. The bank does contact the customer if it detects suspicious activity such as check kiting
{¶ 13} At the conclusion of the plaintiff's case-in-chief, Dollar Bank moved for a directed verdict pursuant to R.C. 1304.35. The trial court denied this motion, and Dollar Bank presented testimony from Melinda Augustine and Cynthia Grey.
{¶ 14} Augustine testified that the forgeries that plaintiff reported to the bank were all from his June 2008 statement. Augustine then conducted an investigation and learned that Velez had forged other instruments in April 2008. On this information, the bank determined that the forgeries were not reported in a timely fashion, so it denied reimbursement for all but $485 from April 2008.
{¶ 15} Augustine further testified that Velez opened a Dollar Bank checking account in May 2008. As a Dollar Bank customer, he could present his bank card in order to cash a check.
{¶ 17} Cynthia Grey, a private banker with Dollar Bank, testified that the May 2, 2008 statement was printed on that date and then mailed the following day from the Pittsburgh operation center. The June 2, 2008 statement was mailed on June 4, 2008. On each statement, the checks are listed in numerical order.
{¶ 18} Based upon the 30-day period for asserting that the bank has paid on a forged indorsement, Grey stated that Chesler had 30 days from the May 2, 2008 statement in which to report any forgeries. She further stated that by operation of the June 1, 2007 agreement, the 30-day period takes priority and applies regardless of whether the bank exercised ordinary care in paying the forged instrument.
{¶ 19} In a written opinion, the trial court concluded:
{¶ 20} The trial court rendered a verdict in favor of Chesler and against Dollar Bank in the amount of $18,720. Dollar Bank now appeals and assigns two errors for our review.
{¶ 21} Within this assignment of error, Dollar Bank asserts that the trial court erroneously required Dollar Bank to reimburse Chesler for the forged checks because Chesler failed to exercise "reasonable promptness" in examining his bank statements, so he is therefore barred from recovering under R.C. 1304.35(D).
{¶ 22} Judgments supported by some competent, credible evidence relating to all the essential elements of the case will not be reversed by a reviewing
{¶ 23} Further, with regard to the substantive law, the "Uniform Commercial Code is a delicately balanced statutory scheme designed, in principle, to ultimately shift the loss occasioned by negotiation of a forged instrument to the party bearing the responsibility for the loss." Ed Stinn Chevrolet, Inc. v. Natl. City Bank (1986), 28 Ohio St.3d 221, 226, 28 OBR 305, 503 N.E.2d 524, modified on rehearing (1987), 31 Ohio St.3d 150, 31 OBR 316, 509 N.E.2d 945. A check bearing a forged drawer's signature is not "properly payable" pursuant to R.C. 1304.24, and if the bank pays the check, the bank is generally liable to its customer. Id. at 227.
{¶ 24} There are exceptions to this rule, however. RDH Ents., Inc. v. Farmers & Merchants Bank, Montgomery App. No. 19934, 2003-Ohio-6247, 2003 WL 22764429.
{¶ 25} R.C. 1304.35 contains an exception to this rule and sets forth the customer's duty to discover and report an unauthorized signature or alteration. R.C. 1304.35 states:
(Emphasis added.)
{¶ 26} Under this provision, as explained in Chester Twp. Bd. of Trustees v. Bank One, N.A., Geauga App. No.2005-G-2660, 2007-Ohio-3365, 2007 WL 1881311, ¶ 34:
{¶ 27} Relying upon Tatis v. U.S. Bancorp (C.A.6, 2007), 473 F.3d 672, 674, Dollar Bank asserts that the 30-day time limit set forth in R.C. 1304.35 operates as a limitations period that bars recovery for the forgeries that occurred within the 30 days prior to his giving notice to the bank because he had failed to review his statements and report the forgeries in that time period. In opposition,
{¶ 28} The Official Comment for this provision states:
{¶ 29} Further, the plain language of the statute supports Chesler's interpretation: "If the bank proves that the customer failed with respect to an item to comply with the duties imposed on the customer by division (C) of this section, the customer is precluded * * *." R.C. 1304.35(D).
{¶ 30} In addition, this was the analysis applied in Mueller v. Miller, 162 Ohio App.3d 698, 2005-Ohio-4213, 834 N.E.2d 862. The Mueller court stated: "Having failed, as a matter of law, to exercise `reasonable promptness' to examine the monthly statements, the statute then abridges appellants' ability to challenge other forged checks signed by the `same wrongdoer.'" Id. at ¶ 31.
{¶ 31} Further, although Tatis appears to apply R.C. 1304.35(D) as a limitations period, without a predicate inquiry as to whether the customer exercised "reasonable promptness" in reviewing the statement, it is undisputed that the customer in that case did not report the first forgery until five months after it was reported in a bank statement. Therefore, Tatis did not squarely present the issue of whether the customer had acted with reasonable promptness, as it was established that it had not done so.
{¶ 32} In this matter, the trial court specifically found that "[p]laintiff paid Mr. Velez for various odd jobs, and he paid Mr. Velez in both cash and checks and that Mr. Velez had performed work for Plaintiff for a period extending over three years." The trial court therefore concluded that the three forged checks noted in the May 2008 statement were not "sufficient to trigger any belief that
{¶ 33} Dollar Bank's second assignment of error states:
{¶ 34} In this assignment of error, the bank contends that the trial court ignored plaintiff's statutory duty to prevent a forgery from occurring under R.C. 1303.49 and erred in failing to find that plaintiff's conduct substantially contributed to the forgeries.
{¶ 35} R.C. 1303.49 states:
{¶ 36} Under this provision, if the customer's failure to exercise ordinary care substantially contributed to the forged signature, then he is precluded from asserting the forgery against the bank that pays it in good faith. Mueller, 162 Ohio App.3d 698, 2005-Ohio-4213, 834 N.E.2d 862. If, however, the bank's failure
{¶ 37} The Official Comment to R.C. 1303.49 further provides:
{¶ 38} The burden of demonstrating the lack of ordinary care under R.C. 1303.49(A) falls on the person or entity that is asserting the preclusion. Nesper v. Bank of Am., Ottawa App. No. OT-03-012, 2004-Ohio-1660, 2004 WL 628783.
{¶ 39} Dollar Bank relies upon Jurcisin v. Fifth Third Bank, Clermont App. No. 2006-10-078, 2007-Ohio-3000, 2007 WL 1731419, in support of its claim that Chesler failed to use ordinary care in securing his checkbook and therefore substantially contributed to the loss in this matter.
{¶ 40} In Jurcisin, the bank customer chose as her roommate a woman with "serious credit problems following her divorce and * * * `red flags all over the place'" and gave the roommate her debit card with her signature on it. Jurcisin kept her financial records unsecured and authorized the roommate to handle these documents during a move. The facts of Jurcisin are therefore distinguishable from this matter because Chesler did not have reason to distrust Velez, did not entrust him with his checkbook, and did not authorize him to handle his financial records. On this record, there is no basis on which we may overturn the trial court's determination that Chesler's conduct did not substantially contribute to the forgeries.
{¶ 41} The second assignment of error is without merit.
Judgment affirmed.
STEWART, P.J., and GALLAGHER, J., concur.
{¶ b} 5. Waiver of Rights by the Bank. The Bank reserves the right to waive the enforcement of any of the terms of this Agreement with you with respect to any transaction or transactions. Any waiver will not affect the bank's right to enforce any of its rights with respect to other customers, or to enforce any of its rights with respect to other transactions with you and is not sufficient to modify the terms and conditions of this Agreement.
{¶ c} * * *
{¶ d} 23. * * * You are in the best position to discover a forged, unauthorized or missing signature or endorsement * * * or any other discrepancy relating to a check * * *. Therefore you should carefully examine your statements, cancelled checks and/or copies thereof, when you receive them. * * *
{¶ e} If you do not discover a forged, unauthorized or missing signature or an alteration promptly after the Bank has sent or otherwise made your statements and cancelled checks available to you, you agree to assert against the Bank * * * (b) any forged, unauthorized or missing signature or alteration by the same wrongdoer on items paid by the bank after you have had a reasonable amount of time (not to exceed 30 days) to examine the statement containing or reflecting the first forged, unauthorized or missing signature or alteration but before the bank receives notice of the problem from you [unless] you are able to prove that the Bank failed to exercise ordinary care in paying the item in question and that the Bank's failure substantially contributed to the loss * * * the loss will be allocated between you and the Bank. * * * [T]he Bank processes checks and other items by automated means and does not visually examine or verify signatures on all checks or other items. You agree that the bank does not fail to use ordinary care because it uses these automated procedures. * * *
{¶ f} If you have not discovered and reported a forged, unauthorized or missing signature or endorsement * * * within 30 days of the date on which the first statement containing or reflecting * * * those items was mailed to you or otherwise made available to you, you agree not to assert that problem against the Bank. This 30-day limitation takes priority over the provisions in the previous paragraph and applies regardless of whether you or the Bank exercised ordinary care with respect to the item in question * * *.
