Nevada § 104.3206 - Restrictive endorsement

§ 104.3206. 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

transfer or 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 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. 3. If an instrument bears an endorsement described in subsection 2 of NRS 104.4201 or 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: (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

or applied 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 the instrument 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 instrument unless the proceeds of the instrument are received by the endorser

or applied consistently with 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 received by 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 benefit of the endorser or another person, the following

rules apply: (a) Unless there is notice of breach of fiduciary duty as provided in NRS 104.3307 , 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. (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 transferee or payor knows that the fiduciary dealt with the instrument

or its proceeds in breach of fiduciary duty. 5. The presence of 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 3 or has notice

or knowledge of breach of 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 the payment is not permitted by this section.