47-3404. Impostors; fictitious payees
A. If an impostor, by use of the mails or otherwise, induces the issuer of an
instrument to issue the instrument to the impostor, or to a person acting in concert with
the impostor, by impersonating the payee of the instrument or a person authorized to act
for the payee, an indorsement of the instrument by any person in the name of the payee is
effective as the indorsement of the payee in favor of a person who, in good faith, pays
the instrument or takes it for value or for collection.
B. If a person whose intent determines to whom an instrument is payable (section
47-3110, subsection A or B) does not intend the person identified as payee to have any
interest in the instrument or the person identified as payee of an instrument is a
fictitious person, the following rules apply until the instrument is negotiated by
special indorsement:
1. Any person in possession of the instrument is its holder.
2. An indorsement by any person in the name of the payee stated in the instrument
is effective as the indorsement of the payee in favor of a person who, in good faith,
pays the instrument or takes it for value or for collection.
C. Under subsection A or B of this section, an indorsement is made in the name of a
payee if:
1. It is made in a name substantially similar to that of the payee; or
2. The instrument, whether or not indorsed, is deposited in a depositary bank to an
account in a name substantially similar to that of the payee.
D. With respect to an instrument to which subsection A or B of this section
applies, if a person paying the instrument or taking it for value or for collection fails
to exercise ordinary care in paying or taking the instrument and that failure
substantially contributes to loss resulting from payment of the instrument, the person
bearing the loss may recover from the person failing to exercise ordinary care to the
extent the failure to exercise ordinary care contributed to the loss.
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