§ 554.3206 — Restrictive endorsement

Iowa § 554.3206

• Jurisdiction: Iowa
• Title XIII: COMMERCE
• Ch. 554: UNIFORM COMMERCIAL CODE

Text

1. An endorsement limiting payment to a particular person or otherwise prohibiting
further transfer or negotiation of the instrument is not effective to prevent further transfer
or negotiation of the instrument.
2. Anendorsementstatingaconditiontotherightoftheendorseetoreceivepaymentdoes
not affect the right of the endorsee to enforce the instrument. A person paying the instrument
or taking it for value or collection may disregard the condition, and the rights and liabilities
of that person are not affected by whether the condition has been fulfilled.
3. If an instrument bears an endorsement described in section 554.4201, subsection 2, or
in blank or to a particular bank using the words “for deposit,” “for collection,” or other words

indicating a purpose of having the instrument collected by a bank for the endorser or for a
particular account, the following rules apply:
a. A person, other than a bank, who purchases the instrument when so endorsed converts
the instrument unless the amount paid for the instrument is received by the endorser or
applied consistently with the endorsement.
b. A depositary bank that purchases the instrument or takes it for collection when so
endorsed converts the instrument unless the amount paid by the bank with respect to the
instrument is received by the endorser or applied consistently with the endorsement.
c. Apayorbankthatisalsothedepositarybankorthattakestheinstrumentforimmediate
payment over the counter from a person other than a collecting bank converts the instrument
unless the proceeds of the instrument are received by the endorser or applied consistently
with the endorsement.
d. Except as otherwise provided in paragraph “c”, a payor bank or intermediary bank may
disregard the endorsement and is not liable if the proceeds of the instrument are not received
by the endorser or applied consistently with the endorsement.
4. Except for an endorsement covered by subsection 3, if an instrument bears an
endorsement using words to the effect that payment is to be made to the endorsee as agent,
trustee, or other fiduciary for the benefit of the endorser or another person, the following
rules apply:
a. Unless there is notice of breach of fiduciary duty as provided in section 554.3307, a
person who purchases the instrument from the endorsee or takes the instrument from the
endorsee for collection or payment may pay the proceeds of payment or the value given for
the instrument to the endorsee without regard to whether the endorsee violates a fiduciary
duty to the endorser.
b. Asubsequenttransfereeoftheinstrumentorpersonwhopaystheinstrumentisneither
givennoticenorotherwiseaffectedbytherestrictionintheendorsementunlessthetransferee
or payor knows that the fiduciary dealt with the instrument or its proceeds in breach of
fiduciary duty.
5. Thepresenceonaninstrumentofanendorsementtowhichthissectionappliesdoesnot
preventapurchaseroftheinstrumentfrombecomingaholderinduecourseoftheinstrument
unless the purchaser is a converter under subsection 3 or has notice or knowledge of breach
of fiduciary duty as stated in subsection 4.
6. In an action to enforce the obligation of a party to pay the instrument, the obligor has
a defense if payment would violate an endorsement to which this section applies and the
payment is not permitted by this section.