Debra Talbert v. U.S. Bank, N.A.
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SUPREME COURT OF ARKANSAS
No. 07497
DEBRA TALBERT,
Opinion Delivered January 17, 2008
APPELLANT,
APPEAL FROM THE PULASKI
COUNTY CIRCUIT COURT,
NO. CV 20067718,
HON. JAY MOODY, JUDGE,
VS.
U.S. BANK, N.A.,
APPELLEE,
AFFIRMED.
ANNABELLE CLINTON IMBER, Associate Justice
The instant appeal arises from a complaint filed by Appellee U.S. Bank, N.A., seeking
payment by Appellant Debra Talbert of an overdraft balance. The balance originated when
a check in the amount of $84,457.57, deposited by Talbert with a U.S. Bank branch, was
dishonored by the drawee bank because the payee line was alleged to have been altered. The
Pulaski County Circuit Court granted summary judgment in favor of U.S. Bank, concluding
that Talbert breached the transfer warranties under Ark. Code Ann. § 44207 (Repl. 2001
& Supp. 2007), and dismissed Talbert’s counterclaim for constructive fraud. Talbert now
appeals, alleging that five points of error require reversal of the circuit court’s order: 1)
Talbert possesses a defense to the claims of U.S. Bank under Ark. Code Ann. § 44406
(Repl. 2001); 2) Talbert possesses a defense to the claims of U.S. Bank under Ark. Code
Ann. § 43406 (Repl. 2001); 3) as a matter of law and equity, the conduct and
representations of U.S. Bank precluded it from being able to assert a claim against Talbert;
4) U.S. Bank was precluded from asserting a claim against Talbert for the amount in her
account at the time that U.S. Bank learned of the drawee bank’s claim of an altered payee;
5) Talbert presented evidence sufficient to support her counterclaim for constructive fraud.
As this appeal presents issues of statutory interpretation and substantial public interest, our
jurisdiction is pursuant to Ark. Sup. Ct. R. 12(b)(4) & (6). We find no error and affirm.
During the summer of 2005, Talbert developed a relationship with a man known to
her as David Smith, who told her that he was from South Carolina but was currently working
in Nigeria. Over the course of several months, Smith borrowed approximately $25,000 from
Talbert. He told Talbert that he wanted to repay her by sending her a check. In mid
November of 2005, Talbert received a check in the amount of $84,457.57. The check was
drawn by Pelican Management, Inc., of New Rochelle, New York, and was drawn on the
Bank of New York. The payee line read, “Accounts Receivable: Debra Talbert.” On
November 29, 2005, Talbert deposited this check with a U.S. Bank branch in Maumelle.
When Talbert expressed concern about the validity of the check, she was informed of a
specialcollections procedure that could be employed for her protection; Talbert opted to use
this service and paid seventyfive dollars for it. A “collection receipt form” was executed
by U.S. Bank on December 6, and the check was sent for collection to the Bank of New
York. On January 6, 2006, the Bank of New York issued an official check to U.S. Bank for
the payment of the check, which was then credited to Talbert’s account. On January 12,
Talbert attempted to wire $74,000 to an account with Hong Seng Bank in Hong Kong, but
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U.S. Bank refused. Talbert then began making large cash withdrawals and purchasing
official checks. Talbert stated that she was sending the money to David Smith and his
friends as requested and that she also loaned approximately $35,000 to another individual.
On January 23, 2006, the Chief Financial Officer of Pelican Management, Inc.,
executed an “Affidavit of Forgery/Alteration” with the Bank of New York, alleging that the
payee line on the check had been changed from “Amerada Hess Corporation” to “Debra
Talbert.” The following day, the Bank of New York informed U.S. Bank that it was
returning the check because of the altered payee and requested that U.S. Bank place a hold
on the affected funds. U.S. Bank placed a hold on the approximately $15,000 remaining in
Talbert’s account at the time. Talbert was informed of the return of the check and the hold
on her account on January 26. The hold expired on February 28. On March 2, Talbert
withdrew most of the money and closed the account.
On April 13, 2006, Talbert was informed by letter that U.S. Bank had debited her
account for the full amount of the check. U.S. Bank remitted the funds to the Bank of New
York, leaving an overdraft balance of $84,010.53 in Talbert’s account. By that time, all of
the money that Talbert had withdrawn from the account had been disbursed to other persons.
A letter from U.S. Bank dated May 1 requested payment of the overdraft balance and
threatened Talbert with criminal prosecution for failure to pay. To date, Talbert has not
repaid any portion of the overdraft balance. U.S. Bank filed its complaint on July 14, 2006,
requesting judgment in the amount of $84,010.53 plus any additional overdraft charges,
attorneys’ fees, and costs. Talbert filed a counterclaim, alleging that U.S. Bank had
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committed fraud by repeatedly assuring Talbert that the specialcollections procedure, for
which she paid seventyfive dollars, would safeguard her, knowing that it would not protect
her from the situation that actually ensued. A hearing on the counterclaim and U.S. Bank’s
motion for summary judgment was held on January 8, 2007. On March 7, the circuit court
granted the summaryjudgment motion and dismissed Talbert’s counterclaim, finding that
Talbert had made and breached transfer warranties, that liability for such a breach is strict,
and that Talbert was liable to U.S. Bank for the amount of the check plus expenses and loss
of interest incurred as a result of the breach. Talbert filed a timely notice of appeal.
Abstract
As a preliminary matter, we note U.S. Bank’s contention that Talbert provided a
flagrantly deficient abstract in her rebrief, contrary to this court’s prior per curiam order and
our court rules. On November 1, 2007, after the parties’ briefs had been submitted to this
court, we ordered rebriefing due to Talbert’s failure to abstract a material portion of the
transcript of the summaryjudgment hearing. Talbert v. U.S. Bank, ___ Ark. ___, ___
S.W.3d ___, (November 1, 2007) (per curiam). Talbert’s revised abstract includes virtually
all portions of the hearing, with little condensed, and is largely a verbatim copy of the
transcript. Our rule on abstracting provides that the abstract “should consist of an impartial
condensation, without comment or emphasis, of only such material parts of the testimony of
the witnesses and colloquies between the court and counsel and other parties as are necessary
to an understanding of all questions presented to the Court for decision.” Ark. Sup. Ct. R.
42(a)(5). The rule further states, “If the Court finds the abstract or Addendum to be
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deficient such that the Court cannot reach the merits of the case, or such as to cause an
unreasonable or unjust delay in the disposition of the appeal, the Court will notify the
appellant that he or she will be afforded an opportunity to cure any deficiencies[.]” Ark. Sup.
Ct. R. 42(b)(3). If the appellant fails to file a complying abstract, “the judgment or decree
may be affirmed for noncompliance with the Rule.” Id. U.S. Bank urges this court to affirm
the circuit court’s order due to Talbert’s failure to provide a properly condensed abstract
after being given the opportunity to cure deficiencies.
We have stated that “excessive abstracting is as violative of our rules as omissions of
material pleadings, exhibits, and testimony.” Forrest City Machine Works, Inc. v.
Mosbacher, 312 Ark. 578, 587, 851 S.W.2d 443, 448 (1993). However, Talbert’s abstract
is a mere fifteen pages long and has not prevented us from reaching the merits of the case or
caused a delay in the disposition of the appeal. Moreover, a removal of all irrelevant or
immaterial portions would not result in a substantial change in the length of the abstract,
because nearly all portions are material and necessary to our understanding of the issues.
Finally, in its use of the word “may,” Ark. Sup. Ct. R. 42(b)(3) clearly indicates that this
court has discretion in deciding whether a circuit court’s order should be affirmed for
noncompliance with the rule. We do not find this to be a situation that warrants the remedy
of automatic affirmance. Thus, we choose to reach the merits of the case.
Standard of Review
The standard of review when summary judgment has been granted is well settled.
Summary judgment is to be granted by a trial court only when it is clear that there are no
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genuine issues of material fact to be litigated and the party is entitled to judgment as a matter
of law. Danner v. MBNA America Bank, N.A., 369 Ark. 435, ___ S.W.3d ___ (2007). The
standard is whether the evidence is sufficient to raise a fact issue, not whether the evidence
is sufficient to compel a conclusion. Id. A fact issue exists, even if the facts are not in
dispute, if the facts may result in differing conclusions as to whether the moving party is
entitled to judgment as a matter of law. Id. In such an instance, summary judgment is
inappropriate. Id.
On review, this court determines if summary judgment was appropriate based on
whether the evidence presented in support of summary judgment leaves a material question
of fact unanswered. Id. This court views the evidence in a light most favorable to the party
against whom the motion was filed, resolving all doubts and inferences against the moving
party. Id. Our review focuses not only on the pleadings, but also on the affidavits and other
documents filed by the parties. Id.
I. Ark. Code Ann. § 44406
Pursuant to Ark. Code Ann. § 44207 (Repl. 2001 & Supp. 2007), “[a] customer or
collecting bank that transfers an item and receives a settlement or other consideration
warrants to the transferee and to any subsequent collecting bank that ... (3) the item has not
been altered[.]” Ark. Code Ann. § 44207(a). Further, “[i]f an item is dishonored, a
customer or collecting bank transferring the item and receiving settlement and other
consideration is obliged to pay the amount due on the item[.]” Ark. Code Ann. § 44207(b).
Because Talbert deposited the check at issue and received payment for it, she, as a matter of
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law, warranted to U.S. Bank that the check had not been altered. Because the check was
dishonored due to the alteration, Talbert is obliged to pay the amount due on the item. U.S.
Bank may recover from Talbert “as damages for breach of warranty an amount equal to the
loss suffered as a result of the breach, but not more than the amount of the item plus
expenses and loss of interest incurred as a result of the breach.” Ark. Code Ann. § 44
207(c).
Talbert, however, claims to have a defense under Ark. Code Ann. § 44406 (Repl.
2001), commonly known as the “bankstatement rule.” Section 44406 reads as follows, in
pertinent part:
If a bank sends or makes available a statement of account or
items pursuant to subsection (a), the customer must exercise
reasonable promptness in examining the statement or the items
to determine whether any payment was not authorized because
of an alteration of an item or because a purported signature by
or on behalf of the customer was not authorized. If, based on
the statement or items provided, the customer should reasonably
have discovered the unauthorized payment, the customer must
promptly notify the bank of the relevant facts.
Ark. Code Ann. § 44406(c). If the customer fails to comply with this duty to promptly
notify the bank, “the customer is precluded from asserting against the bank” the customer’s
unauthorized signature or any alteration on the item. Ark. Code Ann. § 44406(d). In other
words, the bankstatement rule operates as a preclusion against the bank’s customer; if he
or she fails to review the statement of account and promptly notify the bank of any perceived
alterations or unauthorized signatures, then he or she loses the benefit of being able to assert
the alteration or unauthorized signature against the bank.
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According to Talbert, this rule provides her with a defense. As a threshold matter, we
must first determine whether this rule applies to Talbert’s situation. When reviewing issues
of statutory interpretation, the first rule in considering the meaning and effect of a statute is
to construe it just as it reads, giving the words their ordinary and usually accepted meaning
in common language. Maddox v. City of Fort Smith, 369 Ark. 143, ___ S.W.3d ___ (2007).
When the language of a statute is plain and unambiguous, there is no need to resort to rules
of statutory construction. Id. A statute is ambiguous only where it is open to two or more
constructions, or where it is of such obscure or doubtful meaning that reasonable minds
might disagree or be uncertain as to its meaning. Id. When a statute is clear, however, it is
given its plain meaning, and we will not reach for legislative intent; rather, that intent must
be gathered from the plain meaning of the language used. Id. We are very hesitant to
interpret a legislative act in a manner contrary to its express language, unless it is clear that
a drafting error or omission has circumvented legislative intent. Id.
We find the bankstatement rule to be clear and unambiguous. It is obvious from the
plain wording of the statute that it applies only to a customer who fails to comply with the
duty to promptly notify the bank of any perceived alterations or unauthorized signatures, and
it operates to preclude that customer from asserting the alteration or unauthorized signature
against the bank. Talbert misconstrues the statute by arguing that the alleged failure of
Pelican Management to promptly notify its bank, the Bank of New York, of the alteration
somehow provides a defense to her as against U.S. Bank. Section 44406 is relevant only
to the relationship between Pelican Management and the Bank of New York; it has no effect
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on the relationship between Talbert and U.S. Bank. Furthermore, even if section 44406 did
have some effect on Talbert’s relationship with her bank, Pelican Management completed
the Affidavit of Forgery/Alteration with the Bank of New York on January 23, 2006, only
twelve days after the amount of the check was credited to Talbert’s account. The bank
statement rule is clearly inapposite in this case.
II. Ark. Code Ann. § 43406
For her second point on appeal, Talbert claims a defense under Ark. Code Ann. § 43
406 (Repl. 2001), commonly known as the “negligence rule.” Section 43406 provides that
“[a] person whose failure to exercise ordinary care substantially contributes to an alteration
of an instrument or to the making of a forged signature on an instrument is precluded from
asserting the alteration or the forgery against a person who, in good faith, pays the instrument
or takes it for value or for collection.” Ark. Code Ann. § 43406(a). It is unclear whether
Talbert seeks to assert the preclusion against U.S. Bank or against Pelican Management, but
the defense fails in either situation.
Talbert has not, at any stage of this case, presented evidence to show that any alleged
failure to exercise ordinary care on the part of either U.S. Bank or Pelican Management
substantially contributed to the alteration. By Talbert’s own counsel’s admission, almost
nothing by way of discovery had been accomplished at the time of the hearing. A mere
suggestion that Talbert might be able to form a defense based on facts unknown to her at this
point is not sufficient to overcome summary judgment. This court has repeatedly stated that
if the party moving for summary judgment makes a prima facie showing that no issues of fact
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exist, and the nonmoving party fails to show that such issues do exist, then we must affirm
the circuit court’s grant of a summary judgment. Golden Tee, Inc. v. Venture Golf Schools,
Inc., 333 Ark. 253, 969 S.W.2d 625 (1998). Upon the moving party’s showing of an
entitlement to summary judgment, the nonmoving party must meet proof with proof and
demonstrate the existence of a material issue of fact. Mitchell v. Lincoln, 366 Ark. 592, 237
S.W.3d 455 (2006). Talbert has failed to meet proof with proof, as the record reveals no
evidence supporting an allegation that negligence on the part of U.S. Bank or Pelican
Management substantially contributed to the alteration.
III. Agreement
Talbert next contends that she and U.S. Bank agreed to impose the risk of loss on the
bank. She relies on Ark. Code Ann. § 44103 (Repl. 2001), which provides as follows, in
relevant part:
The effect of the provisions of this chapter may be varied by
agreement, but the parties to the agreement cannot disclaim a
bank’s responsibility for its lack of good faith or failure to
exercise ordinary care or limit the measure of damages for the
lack or failure. However, the parties may determine by
agreement the standards by which the bank’s responsibility is to
be measured if those standards are not manifestly unreasonable.
Ark. Code Ann. § 44103(a). Talbert asserts that, pursuant to this section, she and U.S.
Bank entered into an agreement to waive any obligations on the part of Talbert and to impose
the risk of loss on the bank. She argues that, by virtue of their agreement, the bank took on
an affirmative duty to assert any available defenses under law or equity upon the return of
the check from the drawee bank. As evidence of the existence of this agreement, Talbert
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points to her repeated concern about the validity of the check and the bank’s offer of a
specialcollections procedure that was intended to safeguard her. Talbert reiterates that she
paid seventyfive dollars for the service. She also notes that U.S. Bank never explained the
purpose of the specialcollections procedure and suggests that she was led to believe that it
would guarantee that the check would be “unconditionally verified.” Talbert contends that
U.S. Bank failed to comply with the terms of the agreement by refusing to pursue any
possible defenses against Pelican Management and the Bank of New York.
The primary problem with Talbert’s argument on this point is that Ark. Code Ann. §
44207 clearly states that the transfer warranties “cannot be disclaimed with respect to
checks.” Ark. Code Ann. § 44207(d) (Repl. 2001 & Supp. 2007). Talbert insists that she
did not disclaim the transfer warranties but that the agreement between her and U.S. Bank
simply waived her obligations. We find this argument unconvincing. An agreement to waive
all obligations would also be a disclaimer of those obligations. Although Talbert does not
characterize the agreement as disclaiming the transfer warranties, such an agreement would
have done just that. Because a disclaimer of transfer warranties is expressly prohibited with
respect to checks by Ark. Code Ann. § 44207(d), the alleged agreement would not have
been valid, even if Talbert had successfully proven its existence.
IV. Good Faith and Ordinary Care
Talbert next contends that U.S. Bank breached its duty to act in good faith and with
ordinary care by failing to protect the approximately $15,000 that remained in Talbert’s
account at the time the bank was notified about the allegation of an alteration. Talbert
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enumerates three ways in which U.S. Bank breached its duty. First, it failed to place a
permanent hold on her account, instead choosing to let the temporary hold expire, after
which Talbert withdrew most of the money. Second, it should have debited her account for
the amount of the check immediately, rather than waiting until the account was nearly empty.
Third, it “unconditionally reassured” her after the temporary hold expired that the remaining
money was available for withdrawal, knowing that the check was being returned. According
to Talbert, if not for these three failures, the approximately $15,000 would have remained
in the account and lessened the overdraft balance now due. She insists that U.S. Bank is now
precluded from an attempt to recover that amount.
Talbert provides no legal authority for the contention that the bank failed to act in
good faith and with ordinary care. In fact, she provides no legal authority for the contention
that the bank had a duty to place a permanent hold on her account and debit her account
immediately. Moreover, she fails to provide legal authority for the argument that a breach
of that duty results in a preclusion from asserting a claim. Because of Talbert’s complete
failure to support her assertions with legal citations, we find this point to be without merit.
In addition, her insistence that the bank should have protected her from withdrawing money
from the account is somewhat disingenuous. Talbert was previously informed that the check
was being returned due to an alteration; yet, she chose to withdraw and spend most of the
remaining funds. The bank was not responsible for preventing this behavior.
V. Counterclaim
Finally, Talbert argues that she provided sufficient evidence to support her
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counterclaim of constructive fraud. This court has continuously held that the charge of fraud
must be sustained by clear, strong, and satisfactory proof. Knight v. Day, 343 Ark. 402, 36
S.W.3d 300 (2001). In the instant case, Talbert has failed to meet this standard. She asserts
that the repeated assurances made to her by U.S. Bank that the money could be withdrawn
without a problem, as well as the offer of the specialcollections procedure, constituted
actionable misrepresentations. However, she has failed to submit proof supporting her
constructivefraud claim. As previously noted, Talbert’s counsel stated at the summary
judgment hearing that essentially no discovery had been completed.
Additionally, Talbert’s argument on this point strikes us as a reframing of her
contention that the specialcollections procedure represented an agreement to impose the risk
of loss on the bank. Talbert presents this final point as a counterclaim, but it is, in reality,
a defense she has already articulated. Once again, we note that an alleged agreement to
waive Talbert’s obligations is essentially identical to a disclaimer, prohibited by Ark. Code
Ann. § 44207(d).
Affirmed.
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