Vermont § 206 - § 3—206.

§ 206. § 3—206.

• Restrictive indorsement (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 (i) described in section 4—201(b) of this title, 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 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 this subsection, 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 section 3—307 of this title, 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. (Added 1993, No. 158 (Adj. Sess.), § 12, eff. Jan. 1, 1995.)