400.3-206. Restrictive endorsement.

MISSOURI STATUTES AND CODES

400.3-206. Restrictive endorsement.

Restrictive endorsement.

400.3-206. (a) An endorsement limiting payment to aparticular person or otherwise prohibiting further transfer ornegotiation of the instrument is not effective to prevent furthertransfer or negotiation of the instrument.

(b) An endorsement stating a condition to the right of theendorsee to receive payment does not affect the right of theendorsee to enforce the instrument. A person paying theinstrument or taking it for value or collection may disregard thecondition, and the rights and liabilities of that person are notaffected by whether the condition has been fulfilled.

(c) If an instrument bears an endorsement (i) described inSection 400.4-201(b), or (ii) in blank or to a particular bankusing the words "for deposit," "for collection," or other wordsindicating a purpose of having the instrument collected by a bankfor the endorser or for a particular account, the following rulesapply:

(1) A person, other than a bank, who purchases theinstrument when so endorsed converts the instrument unless theamount paid for the instrument is received by the endorser orapplied consistently with the endorsement.

(2) A depositary bank that purchases the instrument ortakes it for collection when so endorsed converts the instrumentunless the amount paid by the bank with respect to the instrumentis received by the endorser or applied consistently with theendorsement.

(3) A payor bank that is also the depositary bank or thattakes the instrument for immediate payment over the counter froma person other than a collecting bank converts the instrumentunless the proceeds of the instrument are received by theendorser or applied consistently with the endorsement.

(4) Except as otherwise provided in paragraph (3), a payorbank or intermediary bank may disregard the endorsement and isnot liable if the proceeds of the instrument are not received bythe endorser or applied consistently with the endorsement.

(d) Except for an endorsement covered by subsection (c), ifan instrument bears an endorsement using words to the effect thatpayment is to be made to the endorsee as agent, trustee, or otherfiduciary for the benefit of the endorser or another person, thefollowing rules apply:

(1) Unless there is notice of breach of fiduciary duty asprovided in Section 400.3-307, a person who purchases theinstrument from the endorsee or takes the instrument from theendorsee for collection or payment may pay the proceeds ofpayment or the value given for the instrument to the endorseewithout regard to whether the endorsee violates a fiduciary dutyto the endorser.

(2) A subsequent transferee of the instrument or person whopays the instrument is neither given notice nor otherwiseaffected by the restriction in the endorsement unless thetransferee or payor knows that the fiduciary dealt with theinstrument or its proceeds in breach of fiduciary duty.

(e) The presence on an instrument of an endorsement towhich this section applies does not prevent a purchaser of theinstrument from becoming a holder in due course of the instrumentunless the purchaser is a converter under subsection (c) or hasnotice or knowledge of breach of fiduciary duty as stated insubsection (d).

(f) In an action to enforce the obligation of a party topay the instrument, the obligor has a defense if payment wouldviolate an endorsement to which this section applies and thepayment is not permitted by this section.