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