CO Code § 4-3-205 (2021)
2021 Colorado Code|Title 4 - Uniform Commercial Code|Article 3 - Negotiable Instruments|Part 2 - Negotiation, Transfer, and Indorsement|§ 4-3-205. Special Indorsement; Blank Indorsement; Anomalous Indorsement

  If an indorsement is made by the holder of an instrument, whether payable to an identified person or payable to bearer, and the indorsement identifies a person to whom it makes the instrument payable, it is a “special indorsement.” When specially indorsed, an instrument becomes payable to the identified person and may be negotiated only by the indorsement of that person. The principles stated in section 4-3-110 apply to special indorsements.    If an indorsement is made by the holder of an instrument and it is not a special indorsement, it is a “blank indorsement.” When indorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially indorsed.    The holder may convert a blank indorsement that consists only of a signature into a special indorsement by writing, above the signature of the indorser, words identifying the person to whom the instrument is made payable.    “Anomalous indorsement” means an indorsement made by a person who is not the holder of the instrument. An anomalous indorsement does not affect the manner in which the instrument may be negotiated.     History. Source: L. 94: Entire article R&RE, p. 851, § 1, effective January 1, 1995.    Editor's note:   This section is similar to former § 4-3-204 as it existed prior to 1994.   OFFICIAL COMMENT   1. Subsection (a) is based on subsection (1) of former Section 3-204. It states the test of a special indorsement to be whether the indorsement identifies a person to whom the instrument is payable. Section 3-110 states rules for identifying the payee of an instrument. Section 3-205(a) incorporates the principles stated in Section 3-110 in identifying an indorsee. The language of Section 3-110 refers to language used by the issuer of the instrument. When that section is used with respect to an indorsement, Section 3-110 must be read as referring to the language used by the indorser.   2. Subsection (b) is based on subsection (2) of former Section 3-204. An indorsement made by the holder is either a special or blank indorsement. If the indorsement is made by a holder and is not a special indorsement, it is a blank indorsement. For example, the holder of an instrument, intending to make a special indorsement, writes the words “Pay to the order of” without completing the indorsement by writing the name of the indorsee. The holder's signature appears under the quoted words. The indorsement is not a special indorsement because it does not identify a person to whom it makes the instrument payable. Since it is not a special indorsement it is a blank indorsement and the instrument is payable to bearer. The result is analogous to that of a check in which the name of the payee is left blank by the drawer. In that case the check is payable to bearer. See the last paragraphs of Comment 2 to Section 3-115.   A blank indorsement is usually the signature of the indorser on the back of the instrument without other words. Subsection (c) is based on subsection (3) of former Section 3-204. A “restrictive indorsement” described in Section 3-206 can be either a blank indorsement or a special indorsement. “Pay to T, in trust for B” is a restrictive indorsement. It is also a special indorsement because it identifies T as the person to whom the instrument is payable. “For deposit only” followed by the signature of the payee of a check is a restrictive indorsement. It is also a blank indorsement because it does not identify the person to whom the instrument is payable.   3. The only effect of an “anomalous indorsement,” defined in subsection (d), is to make the signer liable on the instrument as an indorser. Such an indorsement is normally made by an accommodation party. Section 3-419.   ANNOTATION   Annotator's note. The following annotations include cases decided under former provisions similar to this section.   Where an agent who receives checks is authorized to indorse them in blank and deposit them to his principal's credit in the principal's bank and the bank has no knowledge of limitation upon the authority of the agent to indorse the checks only when deposited for the principal's credit, and the agent indorses and cashes a number of these checks for his own use appropriating the money, which checks the bank also pays, the bank is not liable to the principal for the checks thus appropriated by his agent. And that the fact that such checks are indorsed by other persons in blank following the indorsement by the agent for the principal while the checks deposited in bank to the principal's credit are indorsed only by the agent would not charge the bank with notice of the limitation upon the agent's authority. Wedge Mines Co. v. Denver Nat'l Bank, 19 Colo. App. 182, 73 P. 873.   The legal effect of a blank indorsement on a promissory note cannot be varied by parol evidence, and all testimony in regard to a parol agreement between the indorser and indorsee contemporaneous with such indorsement is incompetent. Torbert v. Montague, 38 Colo. 325 , 87 P. 1145 (1906).   Addition by holder of the words “deposit only” to indorser's blank indorsement neither changed blank indorsement into a special indorsement, nor altered the effect of the blank indorsement, but was in fact a restrictive indorsement by holder which imposed a duty upon depository bank to honor holder's restrictive indorsement. La Junta State Bank v. Travis, 727 P.2d 48 (Colo. 1986).