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Jefferson State Bank v. Lenk

The Texas Supreme Court held that the statute of repose in �4.406 of the Texas Business and Commerce Code begins to run once a court appoints an administrator. In this case, the repose period had expired before the administrator brought suit almost two years later. Texas Supreme Court, No. 09-0269, 08-31-2010

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Argued February 16, 2010

Section 4.406 of the Texas Business and Commerce Code requires customers to timely notify their banks of unauthorized transactions. Today, we decide when that duty arises for estate administrators who are appointed after the unauthorized transactions occur on the estate’s account. The unauthorized transactions in this case took place approximately two years before the appointment of the administrator, who sued the bank to recover the money twenty-one months after her appointment. Section 4.406, however, precludes a customer from bringing a claim based on an unauthorized transaction if the customer fails to report the transaction to the bank within one year-contractually shortened to sixty days in this case-after the bank provides the customer with the relevant account statement.*fn1 Here, although the bank never mailed any account statements to the administrator, it did hold the statements at its office, and the administrator could have obtained them at any time after the appointment. We thus hold that the statute of repose*fn2 in section 4.406 begins to run once a court appoints an administrator. In this case, the repose period had expired before the administrator brought suit almost two years later.*fn3

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