This text of Indiana § 26-1-3.1-206 (Restrictive endorsement) is published on Counsel Stack Legal Research, covering Indiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
(a)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.
(b)An endorsement stating a condition to the right of the endorsee
to receive payment does 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.
(c)If an instrument bears an endorsement (i) described in IC 26-1-4-201(b), or (ii) in blank or to a particular bank using the words
"for deposit", "for collection", or other words indicating a purpose of
having the instrumen
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(a) 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.
(b) An endorsement stating a condition to the right of the endorsee
to receive payment does 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.
(c) If an instrument bears an endorsement (i) described in IC 26-1-4-201(b), or (ii) 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:
(1) 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.
(2) 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.
(3) A payor bank that is also the depositary bank or that takes the
instrument for immediate 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.
(4) Except as otherwise provided in subdivision (3), 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.
(d) Except for an endorsement covered by subsection (c), 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:
(1) Unless there is notice of breach of fiduciary duty as provided
in IC 26-1-3.1-307, 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.
(2) A subsequent transferee of the instrument or person who pays
the instrument is neither given notice nor otherwise affected by
the restriction in the endorsement unless the transferee or payor
knows that the fiduciary dealt with the instrument or its proceeds
in breach of fiduciary duty.
(e) The presence on an instrument of an endorsement to which this
section applies does not prevent a purchaser of the instrument from
becoming a holder in due course of the instrument unless the purchaser
is a converter under subsection (c) or has notice or knowledge of
breach of fiduciary duty as stated in subsection (d).
(f) 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.