Arizona Revised Statutes

Ariz. Rev. Stat. § 47-3405 (2026)

Employer's responsibility for fraudulent indorsement by employee

✓ current as of May 2026

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A. In this section:

1. "Employee" includes an independent contractor and employee of an independent contractor retained by the employer.

2. "Fraudulent indorsement" means:

(a) In the case of an instrument payable to the employer, a forged indorsement purporting to be that of the employer; or

(b) In the case of an instrument with respect to which the employer is the issuer, a forged indorsement purporting to be that of the person identified as payee.

3. "Responsibility" with respect to instruments means authority to:

(a) Sign or indorse instruments on behalf of the employer;

(b) Process instruments received by the employer for bookkeeping purposes, for deposit to an account or for other disposition;

(d) Supply information determining the names or addresses of payees of instruments to be issued in the name of the employer;

(e) Control the disposition of instruments to be issued in the name of the employer; or

(f) Act otherwise with respect to instruments in a responsible capacity.

Responsibility does not include authority that merely allows an employee to have access to instruments or blank or incomplete instrument forms that are being stored or transported or are part of incoming or outgoing mail, or similar access.

B. For the purpose of determining the rights and liabilities of a person who, in good faith, pays an instrument or takes it for value or for collection, if an employer entrusted an employee with responsibility with respect to the instrument and the employee or a person acting in concert with the employee makes a fraudulent indorsement of the instrument, the indorsement is effective as the indorsement of the person to whom the instrument is payable if it is made in the name of that person. If the 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 the fraud, 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.

C. Under subsection B, an indorsement is made in the name of the person to whom an instrument is payable if:

1. It is made in a name substantially similar to the name of that person; or

2. The instrument, whether or not indorsed, is deposited in a depositary bank to an account in a name substantially similar to the name of that person.

Notes of Decisions

Cited in 4 cases (1 in the last 5 years), 1985–2024 · leading case: City of Phoenix v. Great W. Bank & Trust, 712 P.2d 966 (Ariz. Ct. App. 1985).

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City of Phoenix v. Great W. Bank & Trust, 712 P.2d 966 (Ariz. Ct. App. 1985). · cites it 24× “The apparent basis of the summary judgment was a determination that there were no material questions of fact as to the good faith of the Bank, or that A.R.S. § 47-3405 relieved it from liability as a matter of law.”

San Tan Irrigation Dist. v. Wells Fargo Bank, 3 P.3d 1113 (Ariz. Ct. App. 2000). · cites it 10× “Miller came to *195 light was because a customer questioned why it had not been credited with a payment it had made, a payment that had been diverted by Ms.”

Pierce v. Molet, 87 P.3d 89 (Ariz. Ct. App. 2004). · cites it 2× “2000) (A.R.S. § 47-3405); Gilbert v. Board of Medical Examiners, 155 Ariz.”

Green Valley Villas West Condo. Ass'n v. Washington Fed. Bank (D. Ariz. 2024). · cites it 3× “) 22 Similarly, Wells Fargo argues that a claim under § 47-3405 fails because Villas 23 West has not plausibly alleged that Wells Fargo failed to exercise ordinary care.”

— Ariz. Rev. Stat. § 47-3405(A)(3) — 1 case

City of Phoenix v. Great W. Bank & Trust, 712 P.2d 966 (Ariz. Ct. App. 1985). “The apparent basis of the summary judgment was a determination that there were no material questions of fact as to the good faith of the Bank, or that A.R.S. § 47-3405 relieved it from liability as a matter of law.”

— Ariz. Rev. Stat. § 47-3405(B) — 2 cases

San Tan Irrigation Dist. v. Wells Fargo Bank, 3 P.3d 1113 (Ariz. Ct. App. 2000). “Miller came to *195 light was because a customer questioned why it had not been credited with a payment it had made, a payment that had been diverted by Ms.”

Green Valley Villas West Condo. Ass'n v. Washington Fed. Bank (D. Ariz. 2024). “) 22 Similarly, Wells Fargo argues that a claim under § 47-3405 fails because Villas 23 West has not plausibly alleged that Wells Fargo failed to exercise ordinary care.”

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