Bills and Notes-Payees by Impersonation and by Assumption of a Name-Drawer’s Intent and Commercial Policy
Consider the following scheme for fraudulently obtaining money: A, a stranger to D, personally appears before D, represents himself as B and requests a loan. There is an existing person named B. For D‘s security a mortgage is produced in the name of B, but it has actually been penned by A. A check of the land records by D verifies that the land described in the mortgage is in fact owned by B. D, having satisfied himself as to the existence of B, draws a check payable to the order of B and hands it to A, the person before him. Since by the time the fraud is discovered A has indorsed the name B on the check, collected the cash and departed, the loss will fall either on the drawer, the drawee, or the indorser. Disputes in determining who should bear the loss may take the form of a suit by the drawer against the drawee for reinstatement of his account, or by the drawer against an indorser upon a guarantee of prior indorsements, or by the drawee against the party he paid for restitution of payments made by mistake, or by the holder of the check against the drawer upon a contract of secondary liability, or by the holder against the drawee upon his certification. The dispute may appear in a suit by B for conversion of the instrument payable to him by the drawer, the drawee, or the indorser. It may also appear in a suit by a drawer against a notary public for a breach of a statutory duty of care in certifying A to be B. Further, the dispute may arise as a suit by the holder of a regular bill of exchange against the acceptor on his acceptance contract. Because this opening fact situation is typical, and because the ultimate issue is really the same regardless of the form of the suit, these facts will serve as a basis for initial discussion.