Colorado § 4-3-403 - Unauthorized signature.

§ 4-3-403. Unauthorized signature.

(a) Unless otherwise provided in this article or article 4 of this title, an unauthorized signature is ineffective except as the signature of the unauthorized signer in favor of a person who in good faith pays the instrument or takes it for value. An unauthorized signature may be ratified for all purposes of this article.

(b) If the signature of more than one person is required to constitute the authorized signature of an organization, the signature of the organization is unauthorized if one of the required signatures is lacking.

(c) The civil or criminal liability of a person who makes an unauthorized signature is not affected by any provision of this article which makes the unauthorized signature effective for the purposes of this article.

Source: L. 94: Entire article R&RE, p. 863, § 1, effective January 1, 1995.

Editor's note: This section is similar to former § 4-3-404 as it existed prior to 1994.

ANNOTATION

Law reviews. For article, "Payee v. Depository Bank: What is the UCC Defense to Handling Checks Bearing Forged Indorsements?", see 45 U. Colo. L. Rev. 281 (1974). For article, "Commercial Law", which discusses a Tenth Circuit decision dealing with bank liability on forged commercial paper, see 62 Den. U. L. Rev. 84 (1985). For article, "Civil Liability for Check Forgeries in Colorado", see 16 Colo. Law. 959 (1987).

Annotator's note. The following annotations include cases decided under former provisions similar to this section.

Where the officers of a corporation are given full power and authority to negotiate and execute loans for and on behalf of the corporation for its declared purpose and benefit and the corporation has benefited materially as a result of their activity, then under such circumstances, it would be wholly inequitable to permit it to be absolved of its just obligations. Sec. Sav. & Loan Ass'n v. Colo. Real Estate Dev., Inc., 163 Colo. 155, 429 P.2d 288 (1967).

Want of authority may not be asserted. A corporation may not give its officers "carte blanche" authority to borrow money for its authorized business purpose and then assert want of authority when the venture turns unprofitable; even if loans were not originally authorized, they are ratified by acceptance of the benefits. Sec. Sav. & Loan Ass'n v. Colo. Real Estate Dev., Inc., 163 Colo. 155, 429 P.2d 288 (1967).

It is error to require lender to show express authority. A court errs when it rules that the lender must show, through the corporation's articles, bylaws, or minutes, express authority for such loans from the corporation or its board, inasmuch as the application of the doctrine of estoppel has kept pace with the rapid development of corporate enterprise, so that, while ancient rules regarding limits upon powers of officers of corporations have not been abrogated, they are conclusively presumed to have been complied with or compliance to have been waived by the corporation where justice so requires. Sec. Sav. & Loan Ass'n v. Colo. Real Estate Dev., Inc., 163 Colo. 155, 429 P.2d 288 (1967).

A forged or unauthorized signature of one of two joint payees destroys the negotiability of a check, and the holder of the check acquires only as an assignee of a nonnegotiable chose in action the interest of the payee who did indorse, and, as such an assignee, his interest in the proceeds of the check is to be determined. Am. Nat'l Bank v. First Nat'l Bank, 130 Colo. 557, 277 P.2d 951 (1954); Skinner v. Mortgage Inv. Co., 165 Colo. 241, 438 P.2d 504 (1968).

A payee whose signature has been forged, or whose check has been cashed without indorsement, can treat the entire transaction as a nullity and may demand payment of the debt from the drawer of the check, his debtor. Since the check was never delivered to the payee and was not negotiated by him, it cannot be legally binding and thus the debt owed by the drawer to the payee continues outstanding. United States Portland Cement Co. v. United States Nat'l Bank, 61 Colo. 334, 157 P. 202 (1916); Denver Elec. & Neon Serv. Corp. v. Gerald H. Phipps, Inc., 143 Colo. 530, 354 P.2d 618 (1960).

A payee can sue the collecting bank directly, but the legal effect of his doing this constitutes adoption and ratification of the collection and payment of the check, notwithstanding that it was not indorsed, and the legal consequence of no indorsement is considered to be the same as a forgery for such purpose. United States Portland Cement Co. v. United States Nat'l Bank, 61 Colo. 334, 157 P. 202 (1916); Denver Elec. & Neon Serv. Corp. v. Gerald H. Phipps, Inc., 143 Colo. 530, 354 P.2d 618 (1960).

Institution of an action for conversion against bank for wrongfully paying corporate funds into the personal account of the treasurer is not a ratification of the actions of the collecting bank, but rather an election not to sue the drawee bank. Cent. Inc. v. Cache Nat'l Bank, 748 P.2d 351 (Colo. App. 1987).

On theory that it collected and misappropriated check proceeds. The payee of a check whose indorsement had been forged by a fraudulent agent can ratify payment by the drawee bank and maintain an action against the collecting bank on the theory that it collected and misappropriated the proceeds of the check and is thereby accountable to the payee for the proceeds. United States Portland Cement Co. v. United States Nat'l Bank. 61 Colo.; Denver Elec. & Neon Serv. Corp. v. Gerald H. Phipps, Inc., 143 Colo. 530, 354 P.2d 618 (1960). 334, 157 P. 202 (1916).

By ratifying such payment the payee releases the drawer and drawee of the check. United States Portland Cement Co. v. United States Nat'l Bank, 61 Colo. 334, 157 P. 202 (1916); Denver Elec. & Neon Serv. Corp. v. Gerald H. Phipps, Inc., 143 Colo. 530, 354 P.2d 618 (1960).

Assignee need not sue maker. In an action against indorsers of a note where one of the makers' names has been forged, an assignee is not precluded by failing to sue the makers. Cannon v. Serrel, 15 Colo. App. 99, 61 P. 187 (1900).