KRS 355.3-404: 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 indorsement of the instrument by any person in the name of the

payee is effective as the indorsement of the payee in favor of a person who, in good

faith, pays the instrument or takes it for value or for collection.

(2) (a) If:

1. A person whose intent determines to whom an instrument is payable

(KRS 355.3-110(1) or (2)) does not intend the person identified as payee

to have any interest in the instrument; or

2. The person identified as payee of an instrument is a fictitious person,

the rules set out in paragraph (b) of this subsection apply until the instrument

is negotiated by special indorsement.

(b) 1. Any person in possession of the instrument is its holder.

2. An indorsement by any person in the name of the payee stated in the

instrument is effective as the indorsement of the payee in favor of a

person who, in good faith, pays the instrument or takes it for value or for

collection.

(3) Under subsection (1) or (2) of this section, an indorsement is made in the name of a

payee if:

(a) It is made in a name substantially similar to that of the payee; or

(b) The instrument, whether or not indorsed, is 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) of this section 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.