(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 (1) of this section, 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 (1) of this section, the burden of proving failure to exercise ordinary care is on the person asserting the preclusion. Under subsection (2) of this section, the burden of proving failure to exercise ordinary care is on the person precluded. Effective: January 1, 1997 History: Repealed and reenacted 1996 Ky. Acts ch. 130, sec. 44, effective January 1, 1997. -- Created 1958 Ky. Acts ch. 77, sec. 3-406, effective July 1, 1960.
Notes of Decisions
Am. Founders Bank, Inc. v. Moden Investments, LLC., 432 S.W.3d 715 (Ky. Ct. App. 2014).
· cites it 24× “ANALYSIS AFB states “the only issues [before the Court of Appeals] are the failure of the [Circuit] Court to apply the provisions of KRS 355.3-406 and the failure of the [Circuit] Court to credit the $50,000.”
Mark D. Dean, P.S.C. v. Commonwealth Bank & Trust Co., 434 S.W.3d 489 (Ky. 2014).
“3-404 (allocating loss to the person failing to exercise ordinary care); pays on a forged signature or altered instrument, KRS 355.3-406 (allocating loss to person(s) failing to exercise ordinary care); and pays on an employee’s fraudulent endorsement, KRS 355.”
Owensboro Nat'l Bank v. Crisp, 608 S.W.2d 51 (Ky. 1980).
· cites it 2× “KRS 355.3-406 is designed for the benefit of the bank and provides as follows: “Negligence contributing to alteration or unauthorized signature.”
— Ky. Rev. Stat. § 355.3-406(1) — 1 case
Am. Founders Bank, Inc. v. Moden Investments, LLC., 432 S.W.3d 715 (Ky. Ct. App. 2014).
“ANALYSIS AFB states “the only issues [before the Court of Appeals] are the failure of the [Circuit] Court to apply the provisions of KRS 355.3-406 and the failure of the [Circuit] Court to credit the $50,000.”
— Ky. Rev. Stat. § 355.3-406(2) — 1 case
Am. Founders Bank, Inc. v. Moden Investments, LLC., 432 S.W.3d 715 (Ky. Ct. App. 2014).
“ANALYSIS AFB states “the only issues [before the Court of Appeals] are the failure of the [Circuit] Court to apply the provisions of KRS 355.3-406 and the failure of the [Circuit] Court to credit the $50,000.”
— Ky. Rev. Stat. § 355.3-406(3) — 1 case
Am. Founders Bank, Inc. v. Moden Investments, LLC., 432 S.W.3d 715 (Ky. Ct. App. 2014).
“ANALYSIS AFB states “the only issues [before the Court of Appeals] are the failure of the [Circuit] Court to apply the provisions of KRS 355.3-406 and the failure of the [Circuit] Court to credit the $50,000.”
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