In a promissory note scenario where the maker is M, the note is payable to P's order; X steals and forges P's indorsement to A, and A indorses to B "Pay to B sans recourse," who may be liable to B?

• A. X only
• B. X and M
• C. X and A
• D. X and M and A

Answer: (C)

The key idea is how forged indorsements affect who bears liability on a negotiable instrument. When someone forges the payee’s indorsement, that forged transfer breaks the valid chain of title. The person who forged the endorsement (the forger) is responsible to the holder for any losses caused by the forgery, so X is clearly liable to B.

But the chain also matters for the endorser who follows in the line of endorsements. A endorsed to B “Pay to B sans recourse.” Even though the endorsement says without recourse, the fact that the prior indorsement to A was forged means the transfer through A can still expose A to liability to the holder in the chain that leads to B. In other words, B stands in the shoes of the holder who relied on the endorsements in the chain, and A’s endorsement can be seen as creating liability in the current holder if something in the chain taints title. Therefore, A may also be liable to B.

The maker, M, typically would be liable if the instrument were properly negotiated to B, but because the transfer chain begins with a forged indorsement, the holder’s rights against M are not triggered here. Hence the correct answer points to X and A as potentially liable to B.