John G Vowell and his wife now deceased had a checking accou

John G. Vowell and his wife, now deceased, had a checking account and a savings/money market account with Mercantile Bank of Arkansas. In June 1997, Dr. Vowell and his wife allowed their daughter, Suzan Vowell, now also deceased and her boyfriend to move in with them at their home. At that time, they knew that Suzan and her boyfriend had been involved with drugs, alcohol, writing bad checks, and stealing. They also knew that Suzan had stolen checks from them in the past and forged either Dr. Vowell’s or his wife’s signatures. They took precautions by hiding Mrs. Vowell’s purse, which contained their checkbook, under the kitchen sink.

Beginning in June 1997, Suzan forged Mrs. Vowell’s signature on 42 checks, drawn on both accounts, and committed non unauthorized ATM withdrawals in the aggregate amount of $12,028.75. Suzan found her mother’s purse hidden under the kitchen sink and stole the checkbooks and ATM card from the purse. She apparently had access to the personal identification number (PIN) for the accounts because the number was identical to the home security system code.

The Vowells received the following statements from the bank for the checking and savings accounts:

July 9, 1997 - $230.00. - June 6 through July 7, 1997.

August 8, 1997 - $1,235.25 - July 8 through August 6, 1997

August 23, 1997 - $5,140.00 - July 23 through August 21, 1997

September 9, 1997 - $1,423.50 - August 7 through September 7, 1997

September 26, 1997 - $4,000.00 - August 22 through September 22, 1997

On September 15, 1997, Dr. Vowell had Mercantile freeze their accounts and begin investigating the alleged forgeries and other unauthorized transactions pursuant to its policy. Suzan was arrested subsequently when she tried to use the ATM card again.

The bank refused to credit the Vowell’s account because it maintained that their negligence in handling their daughter caused the losses. The court found that the bank was liable for only $6,104.38, one-half of the entire sum of Suzan Vowell’s unauthorized bank transactions and forgeries. The bank appealed. Can the Vowells recover? How much and why?

Solution

Vowell can recover the amount only the amount which is found by the court of $6104.38 from the bank. The negligence of customer and the failure of the customer to notify the bank of any forged transaction processed through the atm or withdrawal of fund, release the bank from the liability of unauthorized transfers after some months. Thus, in this case the major liability is of Vowell who remained negligence in maintaining the cards and security pin despite knowing the reason that suzan was involved in forgeries and other criminal activities.

However, once vowell freeze the account then any tranaction processwd or withfrawal thereafter make the bank liable and thus the liability of $6104.38 can be ploughe onto the bank.