Sec. 206. (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.
As added by P.L.222-1993, SEC.5.
Structure Indiana Code
Article 1. Uniform Commercial Code
Chapter 3.1. Negotiable Instruments
26-1-3.1-104. Negotiable Instrument
26-1-3.1-105. Issue of Instrument
26-1-3.1-106. Unconditional Promise or Order
26-1-3.1-107. Instrument Payable in Foreign Money
26-1-3.1-108. Payable on Demand or at Definite Time
26-1-3.1-109. Payable to Bearer or to Order
26-1-3.1-110. Identification of Person to Whom Instrument Is Payable
26-1-3.1-111. Place of Payment
26-1-3.1-113. Date of Instrument
26-1-3.1-114. Contradictory Terms of Instrument
26-1-3.1-115. Incomplete Instrument
26-1-3.1-116. Joint and Several Liability; Contribution
26-1-3.1-117. Other Agreements Affecting Instrument
26-1-3.1-118. Statute of Limitations
26-1-3.1-119. Notice of Right to Defend Action
26-1-3.1-202. Negotiation Subject to Rescission
26-1-3.1-203. Transfer of Instrument; Rights Acquired by Transfer
26-1-3.1-205. Special Endorsement; Blank Endorsement; Anomalous Endorsement
26-1-3.1-206. Restrictive Endorsement
26-1-3.1-301. Person Entitled to Enforce Instrument
26-1-3.1-302. Holder in Due Course
26-1-3.1-303. Value and Consideration
26-1-3.1-304. Overdue Instrument
26-1-3.1-305. Defenses and Claims in Recoupment
26-1-3.1-306. Claims to an Instrument
26-1-3.1-307. Notice of Breach of Fiduciary Duty
26-1-3.1-308. Proof of Signatures and Status as Holder in Due Course
26-1-3.1-309. Enforcement of Lost, Destroyed, or Stolen Instrument
26-1-3.1-310. Effect of Instrument on Obligation for Which Taken
26-1-3.1-311. Accord and Satisfaction by Use of Instrument
26-1-3.1-312. Lost Check; Assertion of Claim to Obligated Bank
26-1-3.1-402. Signature by Representative
26-1-3.1-403. Unauthorized Signature
26-1-3.1-404. Impostors; Fictitious Payees
26-1-3.1-405. Employer's Responsibility for Fraudulent Endorsement by Employee
26-1-3.1-406. Negligence Contributing to Forged Signature or Alteration of Instrument
26-1-3.1-408. Drawee Not Liable on Unaccepted Draft
26-1-3.1-409. Acceptance of Draft; Certified Check
26-1-3.1-410. Acceptance Varying Draft
26-1-3.1-411. Refusal to Pay Cashier's Checks, Teller's Checks, and Certified Checks
26-1-3.1-412. Obligation of Issuer of Note or Cashier's Check
26-1-3.1-413. Obligation of Acceptor
26-1-3.1-414. Obligation of Drawer
26-1-3.1-415. Obligation of Endorser
26-1-3.1-416. Transfer Warranties
26-1-3.1-417. Presentment Warranties
26-1-3.1-418. Payment or Acceptance by Mistake
26-1-3.1-419. Instruments Signed for Accommodation
26-1-3.1-420. Conversion of Instrument
26-1-3.1-502.5. Surcharge After Dishonor
26-1-3.1-503. Notice of Dishonor
26-1-3.1-504. Excused Presentment and Notice of Dishonor
26-1-3.1-505. Evidence of Dishonor
26-1-3.1-601. Discharge and Effect of Discharge
26-1-3.1-603. Tender of Payment
26-1-3.1-604. Discharge by Cancellation or Renunciation
26-1-3.1-605. Release or Extension of an Obligor's Obligation