70A-3-404 - Impostors -- Fictitious payees.
70A-3-404. Impostors -- Fictitious payees.
(1) If an impostor, by use of the mails or otherwise, induces the issuer of an instrument toissue the instrument to the impostor, or to a person acting in concert with the impostor, byimpersonating the payee of the instrument or a person authorized to act for the payee, anindorsement of the instrument by any person in the name of the payee is effective as theindorsement of the payee in favor of a person who, in good faith, pays the instrument or takes itfor value or for collection.
(2) If a person whose intent determines to whom an instrument is payable, Subsection70A-3-110(1) or (2) does not intend the person identified as payee to have any interest in theinstrument, or the person identified as payee of an instrument is a fictitious person, the followingrules apply until the instrument is negotiated by special indorsement:
(a) Any person in possession of the instrument is its holder.
(b) An indorsement by any person in the name of the payee stated in the instrument iseffective as the indorsement of the payee in favor of a person who, in good faith, pays theinstrument or takes it for value or for collection.
(3) Under Subsection (1) or (2), an indorsement is made in the name of a payee if it ismade in a name substantially similar to that of the payee, or the instrument, whether or notindorsed, is deposited in a depositary bank to an account in a name substantially similar to that ofthe payee.
(4) With respect to an instrument to which Subsection (1) or (2) applies, if a personpaying the instrument or taking it for value or for collection fails to exercise ordinary care inpaying or taking the instrument and that failure substantially contributes to loss resulting frompayment of the instrument, the person bearing the loss may recover from the person failing toexercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss.
Repealed and Re-enacted by Chapter 237, 1993 General Session