Mercantile Bank of Arkansas v. Vowell

Dr. John G. Vowell (defendant) and his wife had a checking account and a savings account with Mercantile Bank of Arkansas (Mercantile Bank) (plaintiff). The customer-account agreements essentially tracked the language of Uniform Commercial Code (UCC) § 4-406 and required the Vowells to check their bank statements for any unauthorized payments or alterations within 30 days and to notify Mercantile Bank of any problems to avoid bearing some or all of the loss. Vowell entrusted his wife to review the bank statements even though she suffered from diabetes mellitus and alcoholism, which often rendered her bedridden. In June 1997, the Vowells’ daughter, Suzan, moved in with them. The Vowells knew that their daughter had a history of using drugs and alcohol, writing bad checks, and stealing, including prior incidents in which Suzan stole checks from the Vowells and forged their signatures. The Vowells hid their checkbook under the kitchen sink. Suzan found the checkbook and determined the personal-identification number for the Vowells’ ATM card because the number matched the code for the Vowells’ home-security system. Over the next several months, Suzan forged Mrs. Vowell’s signature on many checks drawn on both accounts and made multiple unauthorized ATM withdrawals. The Vowells received bank statements for their accounts on July 11, August 10, August 25, September 11, and September 26. Vowell discovered an unauthorized credit-card transaction on September 15, Mercantile Bank immediately froze the accounts, and the police arrested Suzan the following day. Mercantile Bank sued Vowell pursuant to UCC § 3-406 and § 4-406. The trial court found that the Vowells did not substantially contribute to the making of the forged signatures through negligence. However, the trial court found that the Vowells failed to check several of the bank statements with reasonable promptness and that Mercantile Bank exercised ordinary care in paying the forged checks. The trial court split the loss between the parties by awarding the Vowells $6,014.38.