Bills and Notes – Holders in Due Course – Payment to an Impostor

Drawer bank drew a check on the plaintiff bank payable to a depositor on the faith of a withdrawal order purportedly signed by the depositor but actually forged by an impostor. The impostor forged the indorsement and cashed the check at defendant bank which received payment from plaintiff-drawee bank. Two years later, upon the death of the impostor, the fraud was discovered. Plaintiff-drawee bank voluntarily reinstated the drawer bank’s account and, standing in the drawer’s shoes, it won a judgment to have its account with the defendant reinstated. On appeal, held, reversed. The policy in favor of the free circulation of commercial paper is sufficient basis in the ordinary case for placing the loss on the drawer as the first victim of the impostor’s swindle. The majority rule that the impostor’s indorsement in the payee’s name passes title to a holder in due course is adopted without subscribing to all of the reasons advanced in its favor. Dartmouth National Bank of Hanover v. Keene National Bank, 99 N.H. 458, 115 A. (2d) 316 (1955).