Dissenting.
I dissent. The trial court improperly entered summary judgment in favor of Union Federal and INB because a genuine issue of material fact exists. -
The general rule is that a bank which pays on a forged endorsement is liable for conversion. See Ind. Code 26-1-3-419 [repealed; see now I.C. 26-1-3-420]. By enacting Ind. Code 26-1-8-405(1)(c), the legislature created a defense to a conversion action when "an agent or employee of the maker or drawer has supplied him with the name of the payee intending the latter to have no such interest" in the instrument. The endorsement on such an instrument is deemed effective, ie. not forged, as against the payor bank. Official comment 1 to this section states: "The words fictitious or nonexisting person' have been eliminated as misleading, since the existence or nonexistence of the named payee is not decisive and is important only as it may bear on the intent that he shall have mo interest in the instrument." (Emphasis added).
In Snug Harbor Realty Co. v. First National Bank of Toms River, New Jersey (1969), 105 N.J.Super. 572, 253 A.2d 581 and Danje Fabrics Division of Kingspoint International Corp. v. Morgan Guaranty Trust Co. (1978), 96 Misc.2d 746, 409 N.Y.S.2d 565, the courts determined as a matter of law that UCC section 3-405(1)(c) did not apply because the payees were bona fide creditors. I do not agree that evidence that the payees were bona fide creditors makes 3-405(1)(c) inapplicable. I believe that evidence that the payees were bona fide creditors, like the existence or nonexistence of the named payee, merely goes to the question of the employee's intent in supplying the names. Thus, evidence that the payees were bona fide creditors might lead the fact-finder to conclude that the employee did not supply the payee's names with the intention that the named payee would have no interest in the instrument. Here, there is evidence that the named payees were bona fide creditors and there is evidence that Rix supplied the names *36with no intention that the named payees would have an interest in the instruments. A question of fact must be resolved to determine the applicability of LC. 26-1-3-405(1)(c).
The majority affirms the trial court judgment because "Hartford did not designate any evidence showing that the payees of the checks had submitted invoices, requested payment, or knew that any payment was due and owing from Wells." Maj. op. at 35. Hartford did designate evidence that the payees were bona fide customers who were owed the money represented by the checks endorsed by Rix. I believe that is sufficient to create a question of fact as to Rix's intent in supplying the names of the payees to Wells. Consequently, the trial court erred in granting summary judgment.