O.C.G.A. § 11-3-404 (2019)
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 in accordance with subsection (a) or (b) of Code Section 11-3-110 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; and
(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 Code 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) 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 Code 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.
History
Code 1981, § 11-3-404, enacted by Ga. L. 1996, p. 1306, § 3.
Annotations
Law reviews. For comment on Perini Corp. v. First
Nat’l Bank, 553 F.2d 398 (5th Cir. 1977), see 27 Emory L.J. 393 (1978). For comment on Trust Co. v. Refrigeration Supplies, Inc., 241 Ga. 406, 246 S.E.2d 282 (1978), discussing liability of
collecting and payor banks for payment of check over missing endorsement of copayee, see 13 Ga. L. Rev. 677 (1979). JUDICIAL DECISIONS Editor’s notes. - In light of the similarity of the statutory provisions, decisions under former Code 1933, § 109A-3405 and former Code Section 11-3-405 are included in the annotations for this Code section. “Impostor” refers to impersonation not to false representation that party is authorized agent of payee; this section does not cover one who represents self as agent of a principal and procures check payable to order of the principal. Thornton & Co. v. Gwinnett Bank & Trust Co., 151 Ga. App. 641, 260 S.E.2d 765, 1979 Ga. App. LEXIS 2673 (1979) (decided under former Code 1933, § 109A-3-405). Applicable in forged check cases. - Nothing in this section limits its application to cases in which drawer’s signature is authorized. The provision has also been
applied in forged check cases. Perini Corp. v. First Nat’l Bank, 553 F.2d 398, 1977 U.S. App. LEXIS 13115 (5th Cir. 1977) (decided under former Code 1933, § 109A3-405). Negligence by bank. - Any loss arising from situations provided for in this section should fall upon the employer of a faithless employee who cashes numerous checks payable to fictitious persons, and negligence on the part of the bank in cashing the checks is irrelevant. Only bad faith by a bank prevents invoking the code section to defeat a claim. Northbrook Property & Cas. Ins. Co. v. Citizens & S. Nat’l Bank, 184 Ga. App. 326, 361 S.E.2d 531, 1987 Ga. App. LEXIS 2267 (1987) (decided under former Code Section 11-3405).
RESEARCH REFERENCES Am. Jur. 2d. 11 Am. Jur. 2d, Banks and Financial Institutions, § 921. 11 Am. Jur. 2d, Bills and Notes, §§ 82, 88, 222, 223. 12 Am Jur. 2d, Bills and Notes, §§ 547, 612. C.J.S. 10 C.J.S., Bills and Notes, §§ 129, 192, 220. U.L.A. Uniform Commercial Code (U.L.A.) § 3404. 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. Criminal charge predicated upon fraudulently obtaining a check, note, etc.,
or signature thereon, from the person executing the same, 141 A.L.R. 210. 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. Deception as to character of paper signed as defense as against bona fide holder of negotiable paper, 160 A.L.R. 1295. Invalid instrument as subject of forgery, 174 A.L.R. 1300. Who must bear loss as between drawer or indorser who delivers check to an impostor and one who purchases, cashes, or pays it upon the impostor’s indorsement, 81 A.L.R.2d 1365. Bank’s liability to nonsigning payee for payment of check drawn to joint payees without obtaining endorsement by both, 47 A.L.R.3d 537.
Bills and notes: nominal payee rule of UCC § 3-405(1)(b), 92 A.L.R.3d 268. Construction and application of UCC § 3-405(1)(a) involving issuance of negotiable instrument induced by impostor, 92 A.L.R.3d 608.
Liability of bank for diversion to benefit of presenter or third party of proceeds of check drawn to bank’s order by drawer not indebted to bank, 69 A.L.R.4th 778.