Editor's notes.

- In light of the similarity of the provisions, decisions under former Code 1933, §§ 14-223, 14-505 and former Code Section 11-3-404 are included in the annotations for this section.

A forged endorsement is wholly ineffective to pass any title to or confer any interest in the instrument. Citizens & S. Nat'l Bank v. New York Cas. Co., 84 Ga. App. 47, 65 S.E.2d 461 (1951) (decided under former Code 1933, § 14-223).

Payment over forged endorsement not protection against true owner.

- Payment of a promissory note to a supposed transferee, holding it by virtue of a forged endorsement, will not protect the maker or one who has assumed the debt, against payment to the true owner; and, consequently, in a suit by such an alleged transferee to enforce liability against such parties, the assumer may avail self of the defense that the alleged transfer by the payee was not genuine. Austell Bank v. National Bondholders Corp., 188 Ga. 757, 4 S.E.2d 913 (1939) (decided under former Code 1933, § 14-223).

Former §§ 11-3-404(1) and11-3-406 must be read together. Trust Co. of Ga. Bank v. Port Term. & Warehousing Co., 153 Ga. App. 735, 266 S.E.2d 254 (1980) (decided under former Code Section11-3-404).

Estoppel based on negligence.

- Former paragraph (1) does not establish separate and distinct estoppel by negligence defense for payor who pays instrument over forged endorsement. Trust Co. of Ga. Bank v. Port Term. & Warehousing Co., 153 Ga. App. 735, 266 S.E.2d 254 (1980) (decided under former Code Section11-3-404).

When one who has paid an instrument asserts that another is estopped by negligence from denying that unauthorized signature on it operates as own, payor personally must have paid in good faith and in accordance with reasonable commercial standards of one's business. Trust Co. of Ga. Bank v. Port Term. & Warehousing Co., 153 Ga. App. 735, 266 S.E.2d 254 (1980) (decided under former Code Section11-3-404).

When payor seeks to estop or preclude another from asserting that payor's signature on an instrument is forged under former paragraph (1) of this section and the basis for asserting this estoppel or preclusion is neglect of one whose "signature" appears, O.C.G.A. § 11-3-406 controls. Trust Co. of Ga. Bank v. Port Term. & Warehousing Co., 153 Ga. App. 735, 266 S.E.2d 254 (1980) (decided under former Code Section11-3-404).

The word "precluded" has been held to be synonymous with "estoppel," and not to include ratification or adoption of the instrument or signature thereon unless these involve also the elements of estoppel. To create such an estoppel, there must be actual injury or damage. Beeland v. Clark, 47 Ga. App. 77, 169 S.E. 681 (1933) (decided under former Code 1933, § 14-223).

Inquiry into plaintiff's title permissible.

- In suit instituted by person claiming to be owner and holder of promissory note for purpose of recovering thereon against maker and another alleged to have assumed the debt, it is permissible for the latter to inquire into plaintiff's title to the note, if necessary either for that one's protection or to let in any valid defense which that individual may seek to make. Austell Bank v. National Bondholders Corp., 188 Ga. 757, 4 S.E.2d 913 (1939) (decided under former Code 1933, §§ 14-223 and 14-505).

Acceptance of forged checks.

- Bank was properly granted summary judgment in a suit filed against it by a law firm for negligently accepting stolen checks and for conversion with regards to blank-endorsed cashier's checks, as such were bearer paper transferable by possession alone; however, because a fact issue remained as to whether it acted in good faith in accepting forged checks, it could not be a holder in due course, and summary judgment on that issue was improper. Gerber & Gerber, P.C. v. Regions Bank, 266 Ga. App. 8, 596 S.E.2d 174 (2004).

Note not enforceable against unauthorized signer.

- Trial court erred in finding that a bank took a note in good faith and in ruling that a co-owner was liable for a debt under O.C.G.A. § 11-3-403(a) because the undisputed testimony from the co-owner, the other owner, and the bank's own vice-president set forth that the co-owner was not authorized to sign a promissory note on behalf of the company and, therefore, the bank could not recover the debt from the co-owner in that regard. Davison v. Citizens Bank & Trust Company, 338 Ga. App. 671, 791 S.E.2d 437 (2016).

Cited in Southtrust Bank v. Parker, 226 Ga. App. 292, 486 S.E.2d 402 (1997); Kolodkin v. Cohen, 230 Ga. App. 384, 496 S.E.2d 515 (1998), but see Peterson v. Holtrachem, 239 Ga. App. 838, 521 S.E.2d 648 (1999). Dewberry Painting Ctrs., Inc. v. Duron, Inc., 235 Ga. App. 40, 508 S.E.2d 438 (1998); Envision Printing, LLC v. Evans, 336 Ga. App. 635, 786 S.E.2d 250 (2016).

Ratification of attorney's signature.

- If a bank customer, by the customer's own conduct, ratified attorney's unauthorized signature on a check, the customer was precluded from recovering on a claim for conversion against the bank which accepted for deposit to the attorney's escrow account a check payable to the customer bearing an allegedly forged endorsement. Hendrix v. First Bank, 195 Ga. App. 510, 394 S.E.2d 134 (1990) (decided under former Code Section11-3-404).

C.J.S.

- 10 C.J.S., Bills and Notes, § 27 et seq., 80.

U.L.A.

- Uniform Commercial Code (U.L.A.) § 3-403.

ALR.

- Payment of check upon forged or unauthorized indorsement as affecting the right of true owner against the bank, 14 A.L.R. 764; 69 A.L.R. 1076; 137 A.L.R. 874.

Necessity of endorsement by all payees before maturity to make a transferee a bona fide holder, 25 A.L.R. 163.

Construction of savings bank by-law expressly assented to by depositor, relieving bank from liability for payment to unauthorized person, 52 A.L.R. 760.

Ratification of forged or unauthorized signature on negotiable instrument under the provision of the Negotiable Instruments Act negativing effect of such signature unless the party against whom it is sought to enforce a right thereunder is precluded from setting up the forgery or want of authority, 150 A.L.R. 978.

Invalid instrument as subject of forgery, 174 A.L.R. 1300.

Rights of one who acquires lost or stolen traveler's checks, 42 A.L.R.3d 846.

What constitutes ratification of unauthorized signature under UCC § 3-404, 93 A.L.R.3d 967.