## Facts

- Tim Martin opened a savings account with American Airlines Employees Federal Credit Union and signed a membership application making the account subject to the credit union’s rules and policies “now in effect and as changed, amended or adopted hereafter.”
- In 1994, the credit union adopted a Deposit Account Agreement requiring members to examine statements and submit written objections to statement items within 60 days after a statement was mailed; otherwise objections were waived and the credit union would not be liable for forged or altered items.
- The credit union disclosed the 60-day requirement through newsletters and account statements (including statement notations); it did not automatically mail the full Deposit Account Agreement to every member.
- In June 1995, the credit union received a mailed change card adding Molly Blair as a joint owner on Martin’s account; Martin’s signature on the card was forged, but the credit union processed the change after comparing signatures and verifying information.
- Blair made 14 transfers from Martin’s account to her own totaling $49,800; most of the transfers and Blair’s joint-owner status appeared on Martin’s quarterly statements.
- On December 20, 1995, Martin discovered the depleted balance during an in-person visit and immediately notified the credit union; an investigation confirmed the forgery and unauthorized transfers.
- Martin sued to recover the funds; the credit union asserted that the statutory one-year notice period for reporting unauthorized signatures under former Tex. Bus. & Com. Code § 4.406(d) had been shortened to 60 days by agreement.

## Issues

1. Whether former Tex. Bus. & Com. Code § 4.406(d)’s one-year period for reporting unauthorized signatures may be shortened by agreement under the UCC’s general authorization to vary provisions by agreement.
2. Whether the membership application, Deposit Account Agreement, and statement disclosures formed an enforceable agreement binding Martin to a 60-day notice requirement and, if so, which transfers were barred.

## Decision

- The Texas Supreme Court held that former § 4.406(d) can be modified by agreement and that a 60-day period is not unreasonable as a matter of law.
- The court held Martin was bound by the 60-day notice provision based on the membership application’s assent to later-adopted rules, together with the credit union’s adoption and disclosure of the Deposit Account Agreement terms.
- Applying the 60-day bar to the statement mailing dates, the court held Martin’s claims were precluded as to ten of the fourteen transfers, but not precluded as to four transfers.
- The court reversed in part and affirmed in part and rendered judgment consistent with allowing recovery only for the four non-barred transactions.

## Legal Principles

- Under the Texas UCC, provisions may be varied by agreement unless the UCC provision at issue prohibits variation; former § 4.406(d) did not prohibit shortening the notice period.
- A bank/customer agreement may allocate loss and impose a shortened deadline for reporting unauthorized signatures or items, so long as the agreed period satisfies UCC limits tied to good faith and reasonableness (i.e., not manifestly unreasonable).
- An account holder can be bound to later-adopted account terms when the initial account contract expressly subjects the account to future rules and policies and the institution provides reasonable notice of the change.
- Failure to provide notice within the contractually required period can waive objections and preclude recovery for unauthorized items reflected on statements mailed outside the notice window, evaluated transaction-by-transaction.

## Conclusion

The Texas Supreme Court enforced a 60-day contractual statement-notice provision, holding it could validly shorten the UCC’s one-year notice period for unauthorized signatures and thereby barred the account holder’s claims for transfers not reported within 60 days of the relevant statement mailings.


American Airlines Emps. Fed. Credit Union v. Martin, 29 S.W.3d 86 (Tex. 2000)