§ 41-03-41 — (3-404) Impostors - Fictitious payees

1. 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 endorsement of the instrument by any person in the name of the payee is
effective as the endorsement of the payee in favor or any person that in good faith
pays the instrument or takes it for value or for collection.
2. If a person whose intent determines to whom an instrument is payable under
subsection 1 or 2 of section 41-03-10 does not intend the person identified as payee to
have any interest in the instrument or if the person identified as payee of an instrument
is a fictitious person, the following rules apply until the instrument is negotiated by
special endorsement:
a. Any person in possession of the instrument is its holder.
b. An endorsement by any person in the name of the payee stated in the instrument
is effective as the endorsement of the payee in favor of any person that in good
faith pays the instrument or takes it for value or for collection.
3. Under subsection 1 or 2, an endorsement is made in the name of a payee if it is made
in a name substantially similar to that of the payee or if the instrument, whether or not
endorsed, or deposited in a depositary bank to an account in a name substantially
similar to that of the payee.

4. With respect to an instrument to which subsection 1 or 2 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.