§ 25-3-404. Impostors; fictitious payees.
§25‑3‑404. Impostors; fictitious payees.
(a) If an impostor, byuse of the mails or otherwise, induces the issuer of an instrument to issue theinstrument 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 forthe payee, an indorsement of the instrument by any person in the name of thepayee is effective as the indorsement of the payee in favor of a person who, ingood faith, pays the instrument or takes it for value or for collection.
(b) If (i) a personwhose intent determines to whom an instrument is payable (G.S. 25‑3‑110(a)or (b)) does not intend the person identified as payee to have any interest inthe instrument, or (ii) the person identified as payee of an instrument is afictitious person, the following rules apply until the instrument is negotiatedby special indorsement:
(1) Any person inpossession of the instrument is its holder.
(2) An indorsement byany person in the name of the payee stated in the instrument is effective asthe indorsement of the payee in favor of a person who, in good faith, pays theinstrument 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 (i)it is made in a name substantially similar to that of the payee or (ii) theinstrument, whether or not indorsed, is deposited in a depositary bank to anaccount in a name substantially similar to that of the payee.
(d) With respect to aninstrument to which subsection (a) or (b) of this section applies, if a personpaying the instrument or taking it for value or for collection fails toexercise ordinary care in paying or taking the instrument and that failuresubstantially contributes to loss resulting from payment of the instrument, theperson bearing the loss may recover from the person failing to exerciseordinary care to the extent the failure to exercise ordinary care contributedto the loss. (1899, c. 733, s. 9; Rev., s. 2159; C.S., s. 2990;1949, c. 953; 1965, c. 700, s. 1; 1995, c. 232, s. 1.)