New Jersey § 12a:3-206

§ 12a:3-206.

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 described in subsection b. of 12A:4-201,

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 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) of subsection c. of this section,

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. of this section, 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 12A: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. of this section

or has notice or knowledge of breach of fiduciary duty as stated in subsection d.

of this section. 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.