## Facts

- Charles R. Hughes, acting as trustee, was defrauded in a “Nigerian scam” involving promises of a large commission for assisting with overseas transactions.
- On March 22, 2002, Hughes deposited four checks into accounts at Valley Bank of Ronan; the checks were later determined to be counterfeit.
- Hughes sought reassurance about the checks before deposit; bank personnel allegedly represented that “official checks” were comparable to cashier’s checks and did not require verification.
- After the deposits, Valley Bank wired approximately $800,000, at Hughes’s direction, to a foreign account connected to the scammers; the funds were withdrawn and not recovered.
- When the checks were dishonored, Valley Bank charged back the items to Hughes’s accounts under UCC Article 4, creating a large negative balance.
- Hughes made partial payments and executed a secured promissory note for the remaining deficiency (about $351,000), secured by real property, and later defaulted.

## Issues

1. Whether Valley Bank breached the UCC duty of ordinary care in processing the deposits and charging back the dishonored checks.
2. Whether the UCC displaced Hughes’s common-law claims for negligence and negligent misrepresentation based on the bank’s alleged statements about the checks and the status/finality of funds.
3. Whether Valley Bank was entitled to summary judgment enforcing the promissory note and foreclosing on the collateral notwithstanding Hughes’s defenses tied to alleged bank misconduct.
4. Whether excluding Hughes’s banking expert was an abuse of discretion where the remaining claims concerned banking standards for communications and advice.

## Decision

- The Montana Supreme Court affirmed summary judgment for Valley Bank on UCC-based claims, holding the bank’s check processing and charge-back complied with the UCC ordinary-care standard.
- The court reversed summary judgment against Hughes on certain common-law negligence and negligent misrepresentation claims based on alleged affirmative misstatements or misleading advice separate from UCC processing duties.
- The court affirmed summary judgment for Valley Bank on the promissory note and foreclosure, concluding Hughes was contractually bound on the existing record.
- The court reversed the exclusion of Hughes’s banking expert, holding the testimony was relevant and helpful to evaluate banking standards of care for the remanded tort claims.
- The case was remanded for further proceedings consistent with these rulings.

## Legal Principles

- A depositary bank may provisionally credit deposited items and later charge back dishonored items under UCC Article 4, even if the customer has withdrawn funds, if the bank follows UCC procedures and acts with ordinary care.
- The UCC supersedes inconsistent common-law rules in covered areas but may be supplemented by common-law and equitable principles when not inconsistent.
- Common-law negligence and negligent misrepresentation claims may proceed alongside the UCC when they rest on affirmative representations or advice by bank personnel that are separate from the mechanical check-collection and charge-back process.
- A promissory note executed to cover an account deficiency is enforceable absent a recognized defense invalidating the note; related tort disputes do not, by themselves, bar enforcement on summary judgment.
- Expert testimony on banking customs, standards, and reasonable communications to customers may be admissible and probative in negligence and negligent misrepresentation claims involving bank–customer interactions.

## Conclusion

The court held that the bank’s UCC charge-back conduct satisfied ordinary care and that the promissory note was enforceable, but it allowed tort claims based on alleged misstatements about the safety and finality of deposited funds to proceed and required reconsideration with admissible expert testimony on banking standards.


Valley Bank of Ronan v. Hughes, 147 P.3d 185 (Mont. 2006)