## Facts

- Debra Talbert received a check for $84,457.57 drawn on the Bank of New York and deposited it into her U.S. Bank account after expressing concerns about its validity.
- U.S. Bank processed the deposit under a paid “collection” procedure for which Talbert paid $75, and later credited her account after receiving funds for the item.
- Talbert attempted to wire $74,000 to a Hong Kong account; U.S. Bank refused, and Talbert instead made large cash withdrawals.
- The drawer’s representative later provided an affidavit that the check’s payee line had been altered to name Talbert.
- The Bank of New York dishonored the item as altered; U.S. Bank reimbursed the drawee, creating an overdraft of $84,010.53 after Talbert had withdrawn funds and closed the account.
- U.S. Bank sued Talbert to recover the overdraft under Ark. Code Ann. § 4-4-207 (UCC § 4-207) transfer warranties.
- Talbert counterclaimed for constructive fraud, alleging U.S. Bank misrepresented that the collection service would “protect” her from loss.

## Issues

1. Whether Talbert, by depositing the check, breached the Ark. Code Ann. § 4-4-207 transfer warranties, including the warranty that the item had not been altered.
2. Whether defenses under Ark. Code Ann. §§ 4-4-406 and 4-3-406, or equitable preclusion theories, barred or reduced U.S. Bank’s recovery.
3. Whether Talbert produced sufficient evidence of misrepresentation or concealment to support a constructive-fraud counterclaim.

## Decision

- The Arkansas Supreme Court affirmed summary judgment for U.S. Bank.
- The court held Talbert was liable for breach of the § 4-4-207 transfer warranties when the item was dishonored as altered and U.S. Bank reimbursed the drawee.
- The court held Talbert failed to establish statutory defenses under §§ 4-4-406 or 4-3-406, or any equitable bar to the bank’s claim.
- The court affirmed dismissal of Talbert’s constructive-fraud counterclaim for lack of evidence of actionable misrepresentation or concealment.

## Legal Principles

- A person who transfers an item for consideration to a bank (including by deposit) makes UCC § 4-207/Ark. Code Ann. § 4-4-207 transfer warranties, including that the transferor is entitled to enforce the item, signatures are authentic/authorized, and the item has not been altered.
- When a collecting bank reimburses the drawee after dishonor based on alteration, the collecting bank may recover its loss from the customer-transferor who warranted the item was not altered.
- Ark. Code Ann. § 4-4-406 (customer duties regarding account statements) does not negate a transferor’s independent § 4-4-207 warranty liability for an altered deposited item.
- Ark. Code Ann. § 4-3-406 shifts loss only upon proof that a party’s lack of ordinary care substantially contributed to the alteration or forgery; without such proof, it does not bar a transfer-warranty claim.
- A paid collection service is not, without proof of a false statement or waiver, a guarantee that displaces statutory transfer-warranty rights and remedies.

## Conclusion

The court held that Talbert’s deposit transferred the check with statutory warranties that it was unaltered; when the item was dishonored as altered and U.S. Bank reimbursed the drawee, Talbert remained liable for the resulting overdraft, and her statutory defenses and constructive-fraud counterclaim failed on the summary-judgment record.


Talbert v. U.S. Bank, N.A., 372 Ark. 148, 271 S.W.3d 486 (Ark. 2008)