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AMI 3003 Defense—Failure to Promptly Notify—Loss Allocation

Arkansas Supreme Court Committee On Jury Instructions-Civil

Ark. Model Jury Instr., Civil AMI 3003
Arkansas Model Jury Instructions-Civil
November 2021 Update
Arkansas Supreme Court Committee On Jury Instructions-Civil
Chapter 30. Bank Deposits and Collections
AMI 3003 Defense—Failure to Promptly Notify—Loss Allocation
A. Defendant’s Burden of Proof
(Defendant) claims and has the burden of proving that there was fault on the part of (plaintiff) which substantially contributed to (plaintiff)’s loss and has the burden of proving each of four essential propositions:
First, that (defendant) sent or made available to (plaintiff) a statement of account showing payment of the items in question by item number, amount and date of payment;
Second, that (plaintiff) did not exercise reasonable promptness in examining the statement to determine whether any payment was not authorized and did not promptly notify (defendant) of (plaintiff)'s contention that payment[s] [was] [were] unauthorized;
Third, that (plaintiff) should reasonably have discovered the unauthorized payment[s]; and
Fourth, [that (defendant) suffered a loss by reason of (plaintiff)’s failure to promptly notify (defendant) that the payment was not authorized] [or] [with respect to any other item, that (defendant) paid the item in good faith before it received notice from (plaintiff) of the (unauthorized signature) (alteration) and after (plaintiff) had been afforded a reasonable period of time, not exceeding thirty days, in which to examine the item or statement of account and notify (defendant)].
B. Plaintiff’s Burden of Proof
If you find that (defendant) has proved each of the propositions in Part A, then (plaintiff) has the burden of proving each of the following two essential propositions:
First, that (defendant) failed to exercise ordinary care in paying the item;
And second, that the failure of (defendant) to exercise ordinary care substantially contributed to (plaintiff)'s loss.
C. Allocation of Loss
[If you find that (defendant) has proved each of the propositions in Part A and you have also found that (plaintiff) has proved each of the propositions in Part B, then you are to allocate the loss of (plaintiff) between (plaintiff) and (defendant) according to the extent to which the failure of (plaintiff) to promptly notify (defendant) of the unauthorized payment and the failure of (defendant) to exercise ordinary care each contributed to the loss.]
NOTE ON USE
Use this instruction when there is evidence that the plaintiff failed to notify the defendant promptly of an unauthorized payment of an item after being afforded the opportunity to review the item or a statement of account.
Use this instruction with AMI 3001 and AMI 3002. Because this instruction requires an allocation of loss similar to the issue of comparative fault, when this instruction is used, the issues in this instruction and AMI 3001 should be submitted to the jury on interrogatories.
If this instruction is used, also use AMI 3004 (Definition of “Ordinary Care”) and AMI 3005 (Definition of “Good Faith”).
COMMENT
This instruction is based on Ark. Code Ann. § 4-4-406, Mercantile Bank of Ark. v. Vowell, 82 Ark. App. 421, 117 S.W.3d 603 (2003), and Coast to Coast Stores, Inc. v. Citizens Bank, 676 F. Supp. 923 (E.D. Ark. 1987). If the bank’s customer proves that the bank did not pay the item in good faith, Ark. Code Ann. § 4-4-406(d) does not apply.
Without regard to care or lack of care of either the customer or the bank, a customer who does not within one year after the statement or items are made available to the customer discover and report the customer’s unauthorized signature or any alteration of an item is precluded from asserting against the bank the unauthorized signature or alteration. Ark. Code Ann. § 4-4-406(f). The requirement is to notify the bank within the stated time, not to file suit. See Coast to Coast Stores, Inc., supra.
In Douglas Cos., Inc. v. Commercial Nat. Bank of Texarkana, 419 F.3d 812 (8th Cir. 2005), the court held that § 4-4-406 was not applicable to an encoding error and approved the use of standard negligence instructions to address the issue of ordinary care.
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