For the latest in judicial twists of logic, one only need turn to an Ohio appeals court decision.  Apparently, a requirement of written notification does not always have to be in writing.  According to the Ohio Court of Appeals for Franklin County, Gollihue v. National City Bank, 969 NE2d 1233 (Oh Ct. App. 2011), the requirement in a bank’s deposit account agreement that a depositor notify the Bank in writing of any claim within one year after such claim accrues may be met by oral notice if there is evidence of “substantial compliance” with the notice requirement.  This ruling, along with several other rather liberal interpretations of UCC provisions in favor of the plaintiff, resulted in the court overturning a summary judgment motion awarded to the Bank by the trial court.  

In January, 2004, the plaintiff, Tom Gollihue, opened a savings account with National City Bank as sole owner.  He had discovered that his wife had run up credit card debt to support a gambling habit, and so he moved the remaining balance of a joint savings account into this account.  The Bank mailed periodic statements to Gollihue’s home address as required under the account agreement, although Gollihue does not recall receiving them.  Upon his wife’s death in February, 2007, Gollihue learned that she had depleted the account balance by presenting withdrawals slips with his forged signature, and that she had been hiding the account statements from him.  Gollihue’s wife had made a total of 32 unauthorized withdrawals from the account between June 29 and November 29, 2006.  Each of the withdrawals was reflected on the account statements, which also included copies of the withdrawal slips.  Gollihue and his daughter visited the Bank following her death and at that time discovered that the account had been depleted.  During that visit, Gollihue had a conversation with the Bank’s branch manager in which he asserted the unauthorized withdrawals.  Gollihue claims the Bank’s branch manager admitted the mistakes but disclaimed any liability.  The Bank heard nothing more about the claim until Gollihue filed suit in November, 2009, alleging that the Bank had breached the terms of its deposit agreement by permitting his wife to make unauthorized withdrawals from his account, and that the Bank was negligent in permitting the withdrawals.  

The trial court granted the Bank’s motion for summary judgment, concluding that the claim for breach of contract was barred by Gollihue’s failure to act within the one year contractual limitations period provided for in the deposit agreement, and that Gollihue’s claims were also barred by ORC 1304.35(F) (UCC 4-406(F)), which precludes a bank customer from asserting unauthorized signatures or alterations against a bank when the customer does not report them within one year after the statement or items are made available to the customer.  

Gollihue appealed, arguing that the one year period established by the account agreement and Section 1304.35(F) was a limitation on the time to assert a claim, not a limitation on the time within which an action must be filed.  The appeals court agreed, holding that although Gollihue didn’t file his Complaint until two and a half years after he discovered the unauthorized withdrawals, Section 1304.35(F) precludes a customer’s recovery if the customer failed to notify the bank within one year from the time the account statement was made available to the customer.  Unlike its predecessor section (ORC 1304.29(F)), it does not establish a statute of limitations against the filing of an action within the one-year period.  The Court also cited Ohio case law precedent for the position that the statute is not a statute of limitations, but merely establishes a condition to the assertion of a claim of unauthorized signature.  The customer must discover and report the lack of authority within the statutory time period.  Furthermore, by its terms the Bank’s deposit agreement does not bar an action not brought within the one year period, but merely precludes a depositor from asserting a claim against the Bank on the unauthorized signature or alteration if timely notice is not given.  It did not address how one could bring an action on a claim that has been precluded by contract.  

But what about the deposit agreement’s requirement that a depositor examine   statements and report errors and unauthorized transactions in writing within 60 calendar days after the statement was mailed or otherwise made available? And the provision that the failure of a depositor to notify the Bank in writing of any claim within one year after the date the claim accrues precludes the depositor from asserting such claim?  Wasn’t that a condition to assertion of a claim as well?  Gollihue admitted that he had not given the Bank written notification, but argued that he had met the requirement nonetheless because the Bank clearly had actual and constructive notice of his claims when he confronted the branch manager during his visit to the Bank, as witnessed by his daughter.  The appeals court agreed, finding that under Ohio law, in some circumstances courts need not strictly enforce contractual language requiring notice in writing where evidence of substantial compliance with notice requirements have been met.  

That conclusion left one additional hurdle for Gollihue to address in order to overturn the summary judgment – the failure to review his bank statements in a timely manner and notify the Bank of the unauthorized transactions.  On that issue, the Court found that there remained a genuine issue of fact as to when the statements had actually been mailed, and without that evidence the Court could not determine when his obligation to provide notice was triggered. The account statements neither indicated the date they were created nor the date they were mailed to Gollihue, and the Bank officer’s affidavit did not did not state when the statements were mailed nor described the bank’s normal times for generating and mailing account statements.  So the Court remanded the case to the trial court on this issue.  

This case illuminates the pitfalls faced by financial institutions when confronted with claims of unauthorized activity on a deposit account.  Financial institutions would be well advised to review their deposit agreements to be certain that they clearly limit the right of a depositor to bring an action following the stated limitations period, and to review their recordkeeping procedures for greater certainty as to the timing of statement and notice mailings.