SPACE DISTRIBUTORS, INC., а Florida Corporation, D/B/a Tropic Air, Appellant,
v.
FLAGSHIP BANK OF MELBOURNE, N.A., and Kenneth R. Wooldridge, Appellees.
District Court of Appeal of Florida, Fifth District.
*587 Gregory M. Wilson of Taylor & Wilson, Orlando, for appellant.
Armisted W. Ellis, Jr. of Nohrr, Nohrr, Brushwood & Howze, P.A., Melbourne, for appellees.
FRANK D. UPCHURCH, Jr., Judge.
This is an appeal from a final summary judgment in an action to reсover for forged checks cashed by Flagship.
*588 Tropic Air sued Kenneth Wooldridge, its bookkeeper, and Flagship Bank alleging that they were jointly and severally liable for checks totaling $158,251.49 which were forged by Wooldridge and cashed by Flagship. The checks were written over a two-year period from June 11, 1976 to November 13, 1978. Flagship was first given notice on January 23, 1979, after Tropic Air discovered the forgery scheme of Wooldridge.
On March, 31, 1980, the court entered a final default judgment against Wooldridge and dismissed the complaint against Flagship for all checks written prior to one year from the notice given Flagship of the forged signatures. The dismissal was bаsed on the notice requirement of section 674.406(4), Florida Statutes (1979). As to the rest of the checks, the court held that the complaint stated a cause of action for negligence against Flagship. Flagship subsequently moved for summary judgment claiming that the bank used due care in honoring the checks and that Tropic Air's failure to еxamine its monthly statements and to verify the signatures on its checks was the proximate cause of its loss. On November 12, 1980, the court entered final summary judgment for Flagship. Troрic Air appeals from that judgment. We REVERSE.
Section 674.406(1), Florida Statutes (1979), imposes the following duties upon a bank customer:
When a bank sends to its customer a statement of account accompanied by items paid in good faith in support of the debit entries or holds the statement and items pursuant to a request or instructions of its сustomer or otherwise in a reasonable manner makes the statement and items available to the customer, the customer must exercise reasonable care and promptness to examine the statement and items to discover his unauthorized signature or any alteration on an item and must notify the bank promptly аfter discovery thereof.
The depositions reflect that Wooldridge was responsible for writing the checks and for reconciling the bank statements. The President, Vice-President and the Secretary of Tropic Air all conceded that the account statements had been received on a monthly basis but that they had not exаmined any checks to determine the authenticity of signatures during the twenty-six months the checks were being cashed. This evidence is sufficient to warrant the conclusion thаt Tropic Air totally failed to exercise reasonable care by promptly examining its cancelled checks as required by section 674.406(1). See Industrial Systems of Huntsville, Inc. v. American Nat. Bank of Huntsville,
Section 674.406(2) defines the effect of the failure of the customer to comply with subsection (1):
If the bank establishes that the customer failеd with respect to an item to comply with the duties imposed on the customer by subsection (1) the customer is precluded from asserting against the bank.
... .
(b) An unauthorized signature or alteration by the same wrongdоer on any other item paid in good faith by the bank after the first item and statement was available to the customer for a reasonable period not exсeeding fourteen calendar days and before the bank receives notification from the customer of any such unauthorized signature or alteration. (Emphasis supplied.)
This provision applies only if all the forgeries were perpetrated by the same wrongdoer on items paid after the first item and statement were available to the customer for a period not to exceed fourteen days and before the bank receives notification. There were no allegatiоns that anyone other than Wooldridge was responsible for the forged checks.
*589 The first item was written June 6, 1976; thus, it would appear that Tropic Air because of its failurе to examine is precluded from asserting any liability against Flagship. However, under subsection 674.406(3),[1] Tropic Air would not be precluded from asserting liability against Flagship if it could establish that the bank failed to exercise ordinary care in paying the items. Indiana Nat. Corp. v. FACO, Inc.,
Section 674.406(4) provides that:
Without regard to care or lack of care of either the customer or the bаnk a customer who does not within one year from the time the statement and items are made available to the customer (subsection (1)) discover and repоrt his unauthorized signature or any alteration on the face or back of the item or does not within three years from that time discover and report any unauthorized indorsement is precluded from asserting against the bank such unauthorized signature or indorsement or such alteration.
The one-year period of limitation in subsectiоn (4) is not merely a statute of limitations but is a rule of substantive law absolutely barring a customer's right to make a claim against the bank without regard to the care or laсk of care of either the customer or the bank. Brighton, Inc. v. Colonial First Nat. Bank,
As was noted above, the checks were fоrged and cashed from June 11, 1976 to November 13, 1978. Tropic Air notified Flagship of the forgeries on January 23, 1979. Thus, under section 674.406(4), Tropic Air is not precluded from asserting unauthorized signatures on checks for which the check and statement were furnished after January 23, 1978. As to these checks, Tropic Air was entitled to establish the lack of ordinary care on the part of Flagship.
The court below, however, erroneously entered final summary judgment as to these checks based in part on George Whalley Co. v. National City Bank of Cleveland,
Based on George Whalley, the court below held that only Flagship's negligence in *590 cashing the first forged item was relevant and as the claim for that check was barred because of the notice requirements of section 674.406(4), Flagship was entitled to summary judgment for all subsequent checks.
The trial court's reliance on George Whalley is misplaced. The U.C.C. provision 4-406(3) as adopted by Ohio differs materially from the provision as adopted by Florida. The U.C.C. § 4-406(3) and the Florida рrovision provides that "the preclusion... does not apply if the customer establishes lack of ordinary care on the part of the bank in paying the item(s)." (Emphasis added.) The Ohio provision, however, reads the same except that it refers to "lack of ordinary care on the part of the bank in paying the item." (Emphasis аdded.) The use of the singular "item" warranted the court's interpretation that the negligence of section 4-406(3) refers back only to the first item. As was noted above, the U.C.C. аnd the Florida provision use the singular and plural "item(s)" and thus the construction that the negligence in 4-406(3) refers only to the first item is not warranted. In jurisdictions where the U.C.C. provision employing the word "item(s)" has been adopted, the customer has been permitted to establish the negligence of the bank in paying subsequent checks even though thе claim as to the initial forged check was barred by the time limitation of 4-406(4). See, e.g., Indiana National Corp. v. FACO, Inc.,
Here, Tropic Air should have been permitted to establish the lack of ordinary carе, if any, on the part of Flagship in paying subsequent checks not barred by the notice requirement of section 674.406(4) even though the claim as to the initial forged check was barred.
We therefore REVERSE the summary judgment and REMAND for trial on the issue of the bank's negligence, if any.
COBB and SHARP, JJ., concur.
NOTES
Notes
[1] Section 674.406(3) provides as follows:
The preclusion under subsection (2) does not apply if the customer establishes lack of ordinary care on the part of the bank in paying the item(s).