J. MILLARD TAWES, Governor                        865

(1) Each customer or collecting bank who obtains payment or
acceptance of an item and each prior customer and collecting bank
warrants to the payor bank or other payor who in good faith pays
or accepts the item that

(a)  he has a good title to the item or is authorized to obtain pay-
ment or acceptance on behalf of one who has a good title; and

(b)  he has no knowledge that the signature of the maker or drawer
is unauthorized, except that this warranty is not given by any cus-
tomer or collecting bank that is a holder in due course and acts in
good faith

(i) to a maker with respect to the maker's own signature; or

(ii) to a drawer with respect to the drawer's own signature,
whether or not the drawer is also the drawee; or

(iii) to an acceptor of an item if the holder in due course took the
item after the acceptance or obtained the acceptance without knowl-
edge that the drawer's signature was unauthorized; and

(c)   the item has not been materially altered, except that this
warranty is not given by any customer or collecting bank that is a
holder in due course and acts in good faith

(i)  to the maker of a note; or

(ii) to the drawer of a draft whether or not the drawer is also
the drawee; or

(iii) to the acceptor of an item with respect to an alteration made
prior to the acceptance if the holder in due course took the item after
the acceptance, even though the acceptance provided "payable as
originally drawn" or equivalent terms; or

(iv) to the acceptor of an item with respect to an alteration made
after the acceptance.

(2)  Each customer and collecting bank who transfers an item and
receives a settlement or other consideration for it warrants to his
transferee and to any subsequent collecting bank who takes the item
in good faith that

(a)  he has a good title to the item or is authorized to obtain pay-
ment or acceptance on behalf of one who has a good title and the
transfer is otherwise rightful; and

(b)  all signatures are genuine or authorized; and

(c)  the item has not been materially altered; and

(d)  no defense of any party is good against him; and

(e)  he has no knowledge of any insolvency proceeding instituted
with respect to the maker or acceptor or the drawer of an unaccepted
item.

In addition each customer and collecting bank so transferring an
item and receiving a settlement or other consideration engages that
upon dishonor and any necessary notice of dishonor and protest he
will take up the item.

(3)   The warranties and the engagement to honor set forth in the
two preceding sub-section arise notwithstanding the absence of in-