PARRIS N. GLENDENING, Governor                               Ch. 91

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), 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), 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 § 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) OR HAS NOTICE OR
KNOWLEDGE OF BREACH OF FIDUCIARY DUTY AS STATED IN SUBSECTION (D).

(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.

3-207.

REACQUISITION OF AN INSTRUMENT OCCURS IF IT IS TRANSFERRED TO A
FORMER HOLDER, BY NEGOTIATION OR OTHERWISE. A FORMER HOLDER WHO
REACQUIRES THE INSTRUMENT MAY CANCEL INDORSEMENTS MADE AFTER THE
REACQUIRER FIRST BECAME A HOLDER OF THE INSTRUMENT. IF THE
CANCELLATION CAUSES THE INSTRUMENT TO BE PAYABLE TO THE REACQUIRER

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