Monday, December 31, 2018

Bank Fraud

            Francisco Calleja-Ahedo, a resident of Mexico, opened an account with Compass Bank in 1988. He may or may not have signed an account card directing the Bank to hold all correspondence. Conversely, he may or may not have instructed the Bank to send statements to his brother in The Woodlands, Texas.

            Regardless, the Bank sent monthly statements c/o Calleja’s brother at the Texas address from 2008 until 2012. Calleja’s brother routinely ignored all statements, but furnished them to Francisco when he visited.

            In May 2012 the Bank statement provided that Calleja had a balance of approximately $43,000. This would be the last statement provided by the Bank to the brother at the Texas address.

            Neither Calleja nor his brother nor the two other signatories on the account (Calleja’s wife and father) complained to the Bank that statements were no longer being received in The Woodlands.

            In June 2012 an unknown person identified himself as Calleja and instructed the Bank to change the address on file to a California address. Then, another California address. Later, a Georgia address. Still later, a new Georgia address.

             A forged check for $38,700 was paid from the account in July 2012. The imposter then drained the account balance through a series of smaller transactions.

             Calleja claims that he first learned of the change of address and fraudulent activity in January 2014, when a buddy told him a check from Calleja had been returned marked “account closed.” Calleja went to the Bank to sign an affidavit disputing the charges and demand reimbursement.

             Calleja sued the Bank when it refused to pay the unauthorized withdrawals. The Bank’s employee testified through an affidavit that: (1) Calleja never complained about his brother’s non-receipt of statements, (2) copies of Bank statements are available at any branch office, (3) Calleja could have reviewed the statements online, and (4) all statements have a toll-free number Calleja could have used to get statement copies or setup online banking for free.

            The trial court granted judgment for the Bank, holding that Calleja failed to exercise diligence by waiting too long to notify the Bank of the fraud.

             Calleja appealed.

             The Texas court of appeals reversed and rendered judgment for Calleja, concluding that sending statements to the imposter did not amount to sending the statements to Calleja. The appellate court further rejected the Bank’s contention that it made statements available by providing them at its offices, offering free online banking, and providing a toll free number that Calleja could have used to inquire about his missing statements and overdrawn account balance.

             The Bank appealed.
            The Supreme Court evaluated Texas laws found in Section 4.406 of the Texas Business and Commerce Code. That section states that if a bank sends or makes available a statement of account, the customer must exercise reasonable promptness in examining the statement. If the customer discovers an unauthorized payment, the customer must promptly notify the bank.

             Further, Texas laws provide that if a customer fails to promptly notify the bank, the customer is precluded from asserting claims against the bank for improper payment.
            Focusing on the disjunctive “. . . or makes available . . .,” the Court concluded that Calleja could have used the toll free number to inquire about his account. Or appeared at any bank branch to review statements. Or used online banking for the same purposes and verifications. Or asked his brother why statement delivery had been suspended for 18 months.
            The Texas Supreme Court held that due to Calleja’s failure to exercise reasonable diligence, the Bank could not be responsible for his losses. Compass Bank wins; Francisco Calleja-Ahedo loses.

See Compass Bank v. Francisco Calleja-Ahedo; Texas Supreme Court; Case No. 17-0065; December 21, 2018:
            Lessons Learned / Questions Asked:

1.      Most of us would consider it irresponsible to ignore a $43,000 bank account. And yet I can envision that an individual, living in a foreign country and likely unaware of Texas banking laws, may have trusted his USA-resident brother to oversee the account and review statements mailed to his brother. And press the alert button when delivery of the statements ended. 

2.      Texans are charged with the duty of promptly reviewing banking and credit union statements (likely brokerage and similar accounts as well), and asking hard questions if there are errors or improper transactions. Trusting that things will work themselves out without taking affirmative action could jeopardize a significant account balance.

3.      Past that, Happy New Year to all my loyal readers. Let me know if there are any subjects you want me to explore this year.

                                                                                              Stuart A. Lautin, Esq.*

* Board Certified, Commercial (1989) and Residential (1988) Real Estate Law,
Texas Board of Legal Specialization

 Licensed in the States of Texas and New York

Higier Allen & Lautin, PC
2711 N. Haskell Avenue, Suite 2400
Dallas Texas 75204
P: 972.716.1888


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