GA Code § 11-3-203 (2021)
2021 Georgia Code|Title 11 - Commercial Code|Article 3 - Negotiable Instruments|Part 2 - Negotiation, Transfer, and Indorsement|§ 11-3-203. Transfer of Instrument; Rights Acquired by Transfer

  An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.   Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument, including any right as a holder in due course, but the transferee cannot acquire the rights of a holder in due course by a transfer, directly or indirectly, from a holder in due course if the transferee engaged in fraud or illegality affecting the instrument.   Unless otherwise agreed, if an instrument is transferred for value and the transferee does not become a holder because of lack of indorsement by the transferor, the transferee has a specifically enforceable right to the unqualified indorsement of the transferor, but negotiation of the instrument does not occur until the indorsement is made.   If a transferor purports to transfer less than the entire instrument, negotiation of the instrument does not occur. The transferee obtains no rights under this article and has only the rights of a partial assignee.     (Code 1981, §11-3-203, enacted by Ga. L. 1996, p. 1306, § 3.)   Law reviews.   - For article discussing judicial activism in cases involving claims and defenses under the Uniform Commercial Code, see 17 Ga. L. Rev. 569 (1983). For note, "The Law of Evidence in the Uniform Commercial Code," see 1 Ga. L. Rev. 44 (1966).   JUDICIAL DECISIONS   Editor's notes.   - In light of the similarity of the issues dealt with under the provisions, decisions under former Code 1910, § 4535, former Code 1933, §§ 14-223, 14-420, and 14-505, and former Code Section 11-3-201 are included in the annotations for this section.   Methods of transfer.    - There are two methods for transfer of negotiable instruments - negotiation and assignment. Bank of Danielsville v. Seagraves, 167 Ga. App. 135, 305 S.E.2d 790 (1983) (decided under former Code Section11-3-201).   "Holder" transferee.    - Only a negotiation, not an assignment, can make a transferee a "holder" of a negotiable instrument. Bank of Danielsville v. Seagraves, 167 Ga. App. 135, 305 S.E.2d 790 (1983) (decided under former Code Section11-3-201).   Delivery.    - Delivery is an essential element of negotiation in the case of order paper. Bank of Danielsville v. Seagraves, 167 Ga. App. 135, 305 S.E.2d 790 (1983) (decided under former Code Section11-3-201).   Sufficiency of constructive delivery.    - Where there is no actual delivery of order paper, constructive delivery may be sufficient to effect negotiation where there is delivery of a written assignment without delivery of the negotiable instrument and it is the clear intent of the parties to effect such delivery and to transfer title to the negotiable instrument. Bank of Danielsville v. Seagraves, 167 Ga. App. 135, 305 S.E.2d 790 (1983) (decided under former Code Section11-3-201).   Delivery not a transfer.    - Issuer of the check was debtor and therefore delivery of the checks to the law firms was not a transfer for purposes of O.C.G.A. § 11-3-203. In re Georgetown Square II LLC, Bankr. (Bankr. N.D. Ga. Dec. 19, 2012).   Bankruptcy.   - Mere delivery of a check by the check's issuer to a payee of that check is not a transfer of an interest in property of the issuer other than as to the paper or other object on which the check was written because the delivery of the check, apart from any intrinsic value the check might have, does not reduce the issuer's net worth or give the holder of the check any claim on the property of the issuer other than the right to enforce the check. But if a check, whenever delivered, is honored when the issuer is a debtor in bankruptcy, the payment of the check is, in the parlance of 11 U.S.C. § 549, a "transfer of property of the estate." In re Georgetown Square II LLC, Bankr. (Bankr. N.D. Ga. Dec. 19, 2012).   Presumptive evidence of title.    - Possession of a negotiable instrument is presumptive evidence of title. Dawson v. General Disct. Corp., 82 Ga. App. 29, 60 S.E.2d 653 (1950) (decided under prior law).   Rights of transferee.    - Transferee acquires same rights as its transferor had. Northside Bldg. & Inv. Co. v. Finance Co. of Am., 119 Ga. App. 131, 166 S.E.2d 608 (1969) (decided under former Code Section11-3-201).   Bank as holder in due course.    - There is no compelling reason that a bank cannot be holder or holder in due course of instrument drawn on it if it meets all qualifications of the status, e.g., by taking instrument from transferor who is a holder in due course. FDIC v. West, 244 Ga. 396, 260 S.E.2d 89 (1979) (decided under former Code Section11-3-201).   Repurchase by prior holder.    - A sale under a power does not technically come within former Code section § 11-3-302(3)(a), but under this section prior holder with notice of defense or claim against instrument cannot improve position by repurchase. Northside Bldg. & Inv. Co. v. Finance Co. of Am., 119 Ga. App. 131, 166 S.E.2d 608 (1969) (decided under former Code Section11-3-201).   Purchase at judicial sale.    - Status of one against whom defense might have been urged in prior capacity will not improve by interposing a holder in due course, but in the same vein one with rights of a holder in due course, and who has not otherwise lost such rights, does not diminish status by purchasing at a judicial sale although that person may not by virtue of such purchase alone become a due course holder. Finance Co. of Am. v. Wilson, 115 Ga. App. 280, 154 S.E.2d 459 (1967) (decided under former Code Section11-3-201).    Petition based upon promissory note payable to order of third party is subject to general demurrer where it does not affirmatively appear that note has been transferred to plaintiff by written endorsement or for value without endorsement. Atlas Fin. Co. v. McDonald, 110 Ga. App. 32, 137 S.E.2d 762 (1964) (decided under former Code Section11-3-201).    To sustain action on promissory note payable to order of third party it must be affirmatively shown that note has been transferred to plaintiff by written endorsement or for value without endorsement. Hemphill v. Simmons, 120 Ga. App. 823, 172 S.E.2d 178 (1969) (decided under former Code Section11-3-201).    Transfer and assignment of a purchase money note and security agreement to a third party  did not destroy the purchase money character of the security interest, where the assignment did not refinance, renew, or modify the debtor's purchase money debt. Brooks v. First Franklin Fin. Corp., 74 Bankr. 418 (Bankr. N.D. Ga. 1987) (decided under former Code Section 11-3-201).   Right to sue on instrument despite failure to obtain proper endorsement.    - Where plaintiff establishes without dispute that plaintiff obtained possession of note by purchasing it for value from named payee, plaintiff acquires title to instrument and is entitled to sue to collect it, even if plaintiff failed to obtain a proper endorsement. Hazel v. Tharpe & Brooks, Inc., 159 Ga. App. 415, 283 S.E.2d 653 (1981) (decided under former Code Section11-3-201).   Transfer without endorsement.    - Where holder of instrument payable to holder's order transfers it for value without endorsing it, transfer vests in transferee such title as transferor had therein, and transferee acquires, in addition, the right to have endorsement of transferor, although such transfer not effective to render transferee a holder in due course. Folsom v. Continental Adjustment Corp., 48 Ga. App. 435, 172 S.E. 833 (1934) (decided under former Ga. L. 1924, p. 126, § 49, subsequently codified as former Code 1933, § 14-420).    Delivery for value unaccompanied by written endorsement constitutes transfer, but not negotiation, of note within negotiable instruments law. Robbins v. Welfare Fin. Corp., 95 Ga. App. 90, 96 S.E.2d 892 (1957) (decided under former Code 1933, § 14-420).    Where it appears from allegations of petition that promisor executed negotiable note and that holder, who holds note without written endorsement, financed note and contract and is transferee of the note and its holder in due course, petition is not subject to general demurrer upon ground that holder may not bring suit on note in its own name. Stone v. Colonial Credit Co., 93 Ga. App. 348, 91 S.E.2d 835 (1956) (decided under former Code 1933, § 14-420).    A transfer without endorsement, vesting transferee with legal title, although not effective to render transferee a holder in due course, permits transferee to bring suit in own name. Robbins v. Welfare Fin. Corp., 95 Ga. App. 90, 96 S.E.2d 892 (1957) (decided under former Code 1933, § 14-420).    Transfer for value, without endorsement, vests in the transferee such title as transferor had, and transferee may bring suit thereon in own name. Northeast Factor & Disct. Co. v. Mortgage Invs., Inc., 107 Ga. App. 705, 131 S.E.2d 221 (1963) (decided under prior law).    Holder of note who is not payee may recover on it even though no transfer or endorsement appears thereon and holder's right, title and interest may be proved by parol. Associates Disct. Corp. v. Brantley, 102 Ga. App. 751, 117 S.E.2d 916 (1960) (decided under prior law).    A transferee receives all of the title of transferor to a negotiable instrument and is entitled to sue thereon in transferee's own name, but, without endorsement, the instrument has not been negotiated and takes subject to all equities between maker or drawer and transferor. Jett v. Atlanta Fed. Sav. & Loan Ass'n, 104 Ga. App. 688, 123 S.E.2d 27 (1961) (decided under prior law).   Defense against transferee with notice of equities.    - In suit by holder against maker of negotiable note, where it appeared that plaintiff acquired note after maturity from one who had acquired it before maturity and without notice of any defect, it was error to charge jury that defense pleaded by maker would be good as against plaintiff, whether or not person who transferred it to plaintiff was a bona fide holder for value and without notice. Houston v. Lundy, 45 Ga. App. 122, 163 S.E. 328 (1932) (decided under former Code 1910, § 4535).    Purchaser of a negotiable note, although with notice, either express or constructive, of equities and defenses as between maker and original payee, is protected in title and may recover on it if purchased, even without recourse, from one who took it, bona fide and without notice, from original payee. Houston v. Lundy, 45 Ga. App. 122, 163 S.E. 328 (1932) (decided under former Code 1910, § 4535).   Defense that transfer not genuine.    - Payment of promissory note to supposed transferee, holding it by virtue of forged endorsement, will not protect maker or one who has assumed the debt, against payment to true owner; and consequently, in suit by such an alleged transferee to enforce liability against such parties, the assumer may utilize defense that alleged transfer by payee was not genuine. Austell Bank v. National Bondholders Corp., 188 Ga. 757, 4 S.E.2d 913 (1939) (decided under former Code 1933, § 14-223).   Inquiry into holder's title.    - In suit instituted by person claiming to be owner and holder of promissory note, for the purpose of recovering thereon against maker and another person alleged to have assumed the debt, it is permissible for the latter to inquire into plaintiff's title to note, if necessary either for protection or to let in any valid defense which that person seeks to make. Austell Bank v. National Bondholders Corp., 188 Ga. 757, 4 S.E.2d 913 (1939) (decided under former Code 1933, § 14-505).   Holder entitled to full amount regardless of amount paid or amounts received from others.    - Holder of a promissory note was entitled to enforce the note according to the note's terms, meaning for the full amount due and payable under the note, regardless of how much the holder paid for the note or whether the holder received other monies from third parties as a result of losses suffered due to the debtor's default as provided by O.C.G.A. § 11-3-203(b). First Citizens Bank & Trust Co. v. River Walk Farm, L.P., 591 Fed. Appx. 590 (11th Cir. 2015)(Unpublished).   RESEARCH REFERENCES   Am. Jur. 2d.   - 11 Am. Jur. 2d, Bills and Notes, §§ 207, 214, 236, 253 et seq., 389. 12 Am. Jur. 2d, Bills and Notes, §§ 525, 628, 660. 68A Am. Jur. 2d, Secured Transactions, § 14.   C.J.S.   - 10 C.J.S., Bills and Notes, §§ 159 et seq., 189.   U.L.A.   - Uniform Commercial Code (U.L.A.) § 3-203.   ALR.    - Endorsement of bank check as carrying the title or rights incident to the original claim for which the check was given, 1 A.L.R. 454.    Transfer of notes as carrying the original claim for which note was given, 11 A.L.R. 449.    Estoppel of maker of nonnegotiable paper to set up against transferee defense good against payee, 17 A.L.R. 862.    Right of transferee of postdated check, 21 A.L.R. 234.    Endorsement of bill or note in form of guaranty of payment, 21 A.L.R. 1375; 33 A.L.R. 97; 46 A.L.R. 1516.    Admissibility of parol evidence to vary or explain the contract implied from the regular endorsement of a bill or note, 22 A.L.R. 527; 35 A.L.R. 1120; 54 A.L.R. 999; 92 A.L.R. 721.    Necessity of endorsement by all payees before maturity to make a transferee a bona fide holder, 25 A.L.R. 163.    Estoppel by delay, after knowledge, in disclosing forgery of commercial paper, 25 A.L.R. 177; 50 A.L.R. 1374.    Presumption from possession of ownership of unendorsed note payable to order on issue between rival claimants, 30 A.L.R. 1492.    Effect of assignment endorsed on back of commercial paper, 44 A.L.R. 1353.    Payment to, or endorsement by, indicated beneficiary of check purporting to be payable or endorsed to one person "for another," 61 A.L.R. 272.    When transfer of accounts or other choses in action is deemed a sale rather than a pledge as security for a loan, and vice versa, 95 A.L.R. 1197.   Authority of agent to endorse and transfer commercial paper, 37 A.L.R.2d 453.