Section 3-405 - Employer's Responsibility for Fraudulent Indorsement by Employee(a) In this section: (1) "Employee" includes an independent contractor and employee of an independent contractor retained by the employer;(2) "Fraudulent indorsement" means(i) in the case of an instrument payable to the employer, a forged indorsement purporting to be that of the employer, or (ii) 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; and(3) "Responsibility" with respect to instruments means authority (i) to sign or indorse instruments on behalf of the employer, (ii) to process instruments received by the employer for bookkeeping purposes, for deposit to an account, or for other disposition, (iii) to prepare or process instruments for issue in the name of the employer, (iv) to supply information determining the names or addresses of payees of instruments to be issued in the name of the employer, (v) to control the disposition of instruments to be issued in the name of the employer, or (vi) to 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) of this section, an indorsement is made in the name of the person to whom an instrument is payable if(i) it is made in a name substantially similar to the name of that person or (ii) 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.Okla. Stat. tit. 12A, § 3-405
Laws 1961, p. 111, § 3-405; Amended by Laws 1991, SB 25, c. 117, § 68, eff. 1/1/1992.Oklahoma Code Comment
Under this Section, which was substantially revised in 1992, an employer will be liable without proof of negligence for employee forgeries of the employer's indorsement in certain circumstances. Pre-revision sub section 3-405(1)(c) did not address the case where a faithless employee fraudulently indorsed the employer's name to an instrument payable to the employer. Thus, the employer was only liable if the employer's negligence could be established under pre-revision Section 3-406 . This Section 3-405 imposes liability on the employer without proof of negligence if the employer has "entrusted" the employee "with responsibility with respect to the instrument" as part of the employee's duties. As a result, this Section could change the result in circumstances similar to the pre-Code case of First National Bank of McAlester v. Mann, 410 P.2d 74 (Okla. 1965), in which the payor bank was solely liable for forgeries over a period of several years by a depositor's bookkeeper.
This Section also covers more broadly those cases where an indorsement is made in the name of the payee of an instrument issued by the employer, when the name has been supplied by a responsible employee who intends the payee to have no interest in the instrument. As in the case of imposter fictitious fictitious under Section 3-404 , this Section does not require the indorsement to strictly conform to the payee's name in order to place the loss on the employer.
Notably, under subsection (b), the payor or person taking the instrument for value or collection may share in the loss under the new comparative fault standard if such party is negligent.
See the Oklahoma Comments to Sections 3-404 and 3-406 , and the detailed examples contained in the Official Comments to Sections 3-404 , 3-405 and 3-406 .