Opinion ID: 344807
Heading Depth: 3
Heading Rank: 1

Heading: Forged Indorsements

Text: 32 A check bearing a forged indorsement, included in the § 1-201(43) definition of unauthorized signatures, 6 is not properly payable. J. White and R. Summers, Uniform Commercial Code 559 (1972). 7 Regardless of the care exercised, a drawee bank is with few exceptions liable to its drawer customer for payment of such a check. See § 4-401. 33 Upon recrediting the drawer's account after payment over a forged indorsement, the drawee will seek redress against prior parties in the collection chain through an action for breach of the statutory warranty of good title. Each person who obtains payment of a check from the drawee and each prior transferor warrants to the party who in good faith pays the check that he has good title to the instrument. §§ 3-417(1)(a), 4-207(1)(a). 8 A forged indorsement is ineffective to pass title; see § 3-417, Comment 3. The drawee may therefore bring a breach of warranty action against a person who presented a check bearing a forged indorsement. These warranty actions will continue up the collection chain to the party who took from the forger or to the forger himself. 34 Additionally, payment of a check bearing a forged indorsement constitutes conversion under § 3-419(1)(c). This conversion action at least provides the check's true owner, the payee or indorsee from whom it was stolen and whose name was falsely indorsed, direct relief from the drawee. See White and Summers, supra, 500. Without the conversion action the true owner would have to seek payment from the drawer, who might be overcautious and unaware of his right to force the drawee to recredit his account for any payment over a forged indorsement. 35 The danger created by forged indorsements is that the party designated by the instrument as entitled to its proceeds will appear with a claim to those proceeds after payment has been made to the malefactor. The statutory actions for improper payment, conversion, and breach of warranty of good title combine, however inartfully, to safeguard the drawer against double liability and to assure the payee of payment. The loss falls on the party who took the check from the forger, or on the forger himself.