§490:3-206  Restrictive indorsement. 
(a)  An indorsement 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 indorsement stating a condition to the
right of the indorsee to receive payment does not affect the right of the
indorsee 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 indorsement (i)
described in section 490:4-201(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
indorser or for a particular account, the following rules apply:



(1)  A person, other than a bank, who purchases the
instrument when so indorsed converts the instrument unless the amount paid for
the instrument is received by the indorser or applied consistently with the
indorsement.



(2)  A depositary bank that purchases the instrument
or takes it for collection when so indorsed converts the instrument unless the
amount paid by the bank with respect to the instrument is received by the
indorser or applied consistently with the indorsement.



(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 indorser or applied consistently with the
indorsement.



(4)  Except as otherwise provided in paragraph (3), a
payor bank or intermediary bank may disregard the indorsement and is not liable
if the proceeds of the instrument are not received by the indorser or applied
consistently with the indorsement.



(d)  Except for an indorsement covered by
subsection (c), if an instrument bears an indorsement using words to the effect
that payment is to be made to the indorsee as agent, trustee, or other
fiduciary for the benefit of the indorser or another person, the following
rules apply:



(1)  Unless there is notice of breach of fiduciary duty
as provided in section 490:3-307, a person who purchases the instrument from
the indorsee or takes the instrument from the indorsee for collection or
payment may pay the proceeds of payment or the value given for the instrument
to the indorsee without regard to whether the indorsee violates a fiduciary
duty to the indorser.



(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 indorsement 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
indorsement 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 indorsement to which this section applies and the payment is not
permitted by this section. [L 1991, c 118, pt of §1]