554.3206 Restrictive endorsement. 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 transferor negotiation of the instrument. 2. 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 instrumentor taking it for value or collection may disregard the condition, and the rights and liabilitiesof 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 wordsindicating a purpose of having the instrument collected by a bank for the endorser or for aparticular 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 orapplied consistently with the endorsement. b. han a bank, who purchases the instrument when so endorsed converts the instrument unless the amount paid for the instrument is received by the endorser orapplied 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 theinstrument is received by the endorser or applied consistently with the endorsement. c. 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 instrumentunless the proceeds of the instrument are received by the endorser or applied consistentlywith 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 receivedby 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 ept 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 followingrules 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 theendorsee for collection or payment may pay the proceeds of payment or the value given forthe instrument to the endorsee without regard to whether the endorsee violates a fiduciaryduty to the endorser. b. 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 transfereeor payor knows that the fiduciary dealt with the instrument or its proceeds in breach offiduciary duty. 5. 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 instrumentunless the purchaser is a converter under subsection 3 or has notice or knowledge section applies does not prevent a purchaser of the instrument from becoming a holder in due course of the instrumentunless the purchaser is a converter under subsection 3 or has notice or knowledge of breachof 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 thepayment is not permitted by this section. 94 Acts, ch 1167, §34, 121, 122; 2013 Acts, ch 30, §261Referred to in §554.4203 Sat Dec 23 01:56:00 2023 Iowa Code 2024, Section 554.3206 (25, 0)
Iowa Legal Code