## Facts

- Tomáz Mendes Regatos maintained a commercial bank account with Commercial Bank of New York, later succeeded by North Fork Bank.
- The account agreement required Regatos to notify the bank of any account “irregularity” within 15 days after statements were “first mailed or made available.”
- The bank used a “hold-mail” practice: it held Regatos’s statements instead of mailing them, and expected him to request them when desired.
- In March and April 2001, the bank executed two large unauthorized wire transfers ($450,000 and $150,000) after failing to follow agreed security procedures.
- Regatos first discovered the transfers on August 9, 2001, when he requested and reviewed his statements, and he notified the bank the same day.
- The bank refused to reimburse Regatos, and he sued in federal court; after a jury verdict, judgment was entered for Regatos for approximately $600,000 plus interest.
- On appeal, the Second Circuit certified questions of New York law to the New York Court of Appeals concerning U.C.C. Article 4-A.

## Issues

1. Whether the one-year period of repose in U.C.C. § 4-A-505 may be modified by agreement.
2. Whether U.C.C. § 4-A-204(1)’s “reasonable time” notice condition is triggered only by the customer’s actual receipt of notice, or may be triggered by constructive notice through a hold-mail arrangement.
3. Whether a bank may rely on “made available” monthly statements (without mailing or delivery) to start the running of Article 4-A notice periods.

## Decision

- The court answered both certified questions in favor of the customer.
- The one-year period of repose in U.C.C. § 4-A-505 may not be shortened by contract.
- The one-year period in § 4-A-505 and the “reasonable time” clock in § 4-A-204(1) begin to run only when the customer receives actual notice of the unauthorized transfer.
- A hold-mail practice and an agreement deeming statements “available” cannot substitute for actual notice to trigger the statutory periods.

## Legal Principles

- U.C.C. § 4-A-505 establishes a fixed one-year period of repose that precludes a customer’s claim if the customer fails to notify the bank within one year after receiving notification; that period is not subject to contractual reduction.
- Under U.C.C. § 4-A-204(1), a customer’s entitlement to interest on a refund for an unauthorized payment order depends on notice within a “reasonable time” after the customer receives notification reasonably identifying the order; “receipt” requires actual notice.
- A bank cannot start Article 4-A notice periods by constructive notice based solely on internal “hold-mail” practices or by treating undelivered statements as “made available.”

## Conclusion

The court held that Article 4-A’s one-year repose period for contesting unauthorized wire transfers cannot be reduced by bank-customer agreement and that both § 4-A-505 preclusion and § 4-A-204(1) timing consequences run only from the customer’s actual notice, not from undelivered “available” statements under a hold-mail arrangement.


Regatos v. N. Fork Bank, 5 N.Y.3d 395, 838 N.E.2d 629 (N.Y. 2005)