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Arkansas Code Annotated

Ark. Code Ann. § 4-3-406 (2020)

Negligence contributing to forged signature or alteration of instrument

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  1. 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.
  2. Under subsection (a), if the person asserting the preclusion fails to exercise ordinary care in paying or taking the instrument and that failure substantially contributes to loss, the loss is allocated between the person precluded and the person asserting the preclusion according to the extent to which the failure of each to exercise ordinary care contributed to the loss.
  3. Under subsection (a), the burden of proving failure to exercise ordinary care is on the person asserting the preclusion. Under subsection (b), the burden of proving failure to exercise ordinary care is on the person precluded.

History. Acts 1991, No. 572, § 5.

Case Notes

Checks.

The alleged negligence of the issuer of a check in failing to timely stop payment on a check did not inure to the benefit of a joint payee of the check in its suit against the issuer, but instead could only be useful as a defense the bank might use as a defendant to the extent that the issuer's negligence contributed to a loss. A.C.E., Inc. v. Inland Mtg. Co., 333 Ark. 232, 969 S.W.2d 176 (1998).

Comparative Fault.

There was sufficient evidence to justify submitting to the jury the question of whether account holder's conduct after the forgery contributed to her loss, and trial court erroneously denied the instruction which would allow the jurors to compare the respective fault of the parties in causing the loss. Union Nat'l Bank v. Daneshvar, 33 Ark. App. 171, 803 S.W.2d 567 (1991) (decision under prior law).

Ordinary Care.

Bank customer attempted to take proper precautions to safeguard the checkbooks, ATM cards, and PIN from his daughter; thus, trial court did not err in concluding that the customer was not precluded from asserting the forgeries and unauthorized transactions against the bank pursuant to this section because the preclusion would only apply if the customer failed to exercise ordinary care that substantially contributed to the loss. Mercantile Bank v. Vowell, 82 Ark. App. 421, 117 S.W.3d 603 (2003).

Notes of Decisions
Cited in 5 cases, 1988–2008 · leading case: Mercantile Bank of Arkansas v. Vowell, 117 S.W.3d 603 (Ark. Ct. App. 2003).
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Mercantile Bank of Arkansas v. Vowell, 117 S.W.3d 603 (Ark. Ct. App. 2003). · cites it 90× “Vowell, did not substantially contribute to forgeries and unauthorized transactions by his daughter, Suzan Vowell, and that, as a result, appellee was not precluded from asserting the forgeries and unauthorized transactions against appellant pursuant to Ark.Code Ann. § 4-3-406;…”
Talbert v. U.S. Bank, N.A., 271 S.W.3d 486 (Ark. 2008). · cites it 10× “Bank under Ark. Code Ann. § 4-3-406 (Repl. 2001); 3) as a matter of law and equity, the conduct and representations of U.”
Union Nat'l Bank of Little Rock v. Daneshvar, 803 S.W.2d 567 (Ark. Ct. App. 1991). · cites it 4× “Appellant submitted an instruction pursuant to Ark. Code Ann. § 4-3-406 (2) (Supp. 1989), which states: In all actions between banks .”
Bank of Cave City v. Just. Farms, Inc., 761 S.W.2d 921 (Ark. 1988). · cites it 2× “In making its argument, the Bank, we note, failed to use Ark. Code Ann. § 4-3-406 (1) (Supp. 1987).”
A.C.E., Inc. v. Inland Mortg. Co., 969 S.W.2d 176 (Ark. 1998). · cites it 2× “See Ark. Code Ann. § 4-3-406 (Repl. 1997). We affirm.”
Ark. Code Ann. § 4-3-406(a): 1 case
Mercantile Bank of Arkansas v. Vowell, 117 S.W.3d 603 (Ark. Ct. App. 2003). “Vowell, did not substantially contribute to forgeries and unauthorized transactions by his daughter, Suzan Vowell, and that, as a result, appellee was not precluded from asserting the forgeries and unauthorized transactions against appellant pursuant to Ark.Code Ann. § 4-3-406;…”
Ark. Code Ann. § 4-3-406(b): 1 case
Mercantile Bank of Arkansas v. Vowell, 117 S.W.3d 603 (Ark. Ct. App. 2003). “Vowell, did not substantially contribute to forgeries and unauthorized transactions by his daughter, Suzan Vowell, and that, as a result, appellee was not precluded from asserting the forgeries and unauthorized transactions against appellant pursuant to Ark.Code Ann. § 4-3-406;…”
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