Whether the one-year period for asserting claims against a bank for negligently paying checks bearing forged signatures of a single wrongdoer over a span of several years begins with the first statement to the customer.

No. Each bank statement carries its own one-year period during which the customer may assert a claim.

Plaintiff maintained a checking account with Fleet Bank. Plaintiff alleged that his bookkeeper embezzled money by forging his name on his checks or altering the names of payees over a period of seven years, from 1988 through May 10, 1995. During this period, the bank regularly furnished plaintiff with statements of account and canceled checks. Plaintiff reported the embezzlement to the bank on May 18, 1995 then sued, claiming the bank was negligent in paying the forged or altered checks.

The bank asserted that the one-year period to bring claims against the bank as provided in UCC 4-406(4) had expired in 1989, one year after the first instance of fraud. The Supreme Court disagreed, holding instead that each account statement carried its own one-year period. Appellate Division reversed and dismissed plaintiff's claims.

The Court looked to the duties Article 4, Part 4 of the UCC assigns the customer and the bank and to the language of UCC 4-406(4). The UCC fastens strict liability on a bank that charges against its customer's account any "item" that is not properly "payable;" but this strict liability is offset by duties of a customer to exercise reasonable care and promptness when examining bank statements. While the UCC sets the one-year statutory limit to run from the time "the statement" becomes available to the customer, UCC 4-406(4) does not specifically address situations where forged or altered items by the same wrongdoer appear in successive statements of account.

The bank argued that comments to UCC 4-406(4) allows little excuse for a customer not detecting an alteration of his own check. However, those comments do not refer to when the one-year period commences. The Court observed that UCC 4-406(4) states the one-year period runs from receipt of "the statement and items," and omits the word "first," which is seen in UCC 4-406(2)'s language (concerning a 14 day period) of "the first item and statement... available to the customer." The Court held that this omission was legislatively willed and concluded therefore that each statement carried its own one-year period. The Court noted that this interpretation was consistent with the decisions of courts in other jurisdictions. The Court reversed the Appellate Division and reinstated the order of the Supreme Court.