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336.3-206 MS 1990 [Repealed, 1992 c 565 s 114]
336.3-206 RESTRICTIVE ENDORSEMENT.
(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 section 336.4-201(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 paragraph (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 section 336.3-307, 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.
(g) Nothing in this section prohibits or limits the effectiveness of a restrictive endorsement
made under section 256.9831, subdivision 3.
History: 1992 c 565 s 27; 1996 c 465 art 3 s 41