Warranty where negotiation is by delivery

Sec.  65.  Warranty  where  negotiation  by  delivery  and  so  forth.  — Every  person  negotiating  an  instrument  by  delivery  or  by  a qualified indorsement warrants:
 
      (a)  That  the  instrument  is  genuine  and  in  all  respects  what  it purports to be;
        
      (b) That he has a good title to it;
        
      (c) That all prior parties had capacity to contract;
        
      (d)  That he has no knowledge of  any fact which would impair the validity of the instrument or render it valueless.  
 
But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee.
 
The provisions of subdivision (c) of this section  do  not apply  to a person negotiating public or corporation securities other than bills and notes.
 

APPLICATION OF SECTION 65

1.    A person negotiating by mere delivery
2.    A person negotiating by qualified indorsement 

LIABILITY OF PERSON NEGOTIATING BY DELIVERY 

•      A  person  negotiating  by  mere  delivery  becomes  liable  to  the  holder only when the holder cannot obtain payment by reason of the fact that any  of  the  warranties  of  the  person  negotiating  by  delivery  is  or becomes false