Effect of guaranteeing signature, indorsement or instruction

84-8-306. Effect of guaranteeing signature, indorsement or instruction. (a) A person who guarantees a signature of an indorser of a security certificate warrants that at the time of signing: (1) The signature was genuine; (2) the signer was an appropriate person to indorse, or if the signature is by an agent, the agent had actual authority to act on behalf of the appropriate person; and (3) the signer had legal capacity to sign. (b) A person who guarantees a signature of the originator of an instruction warrants that at the time of signing: (1) The signature was genuine; (2) the signer was an appropriate person to originate the instruction, or if the signature is by an agent, the agent had actual authority to act on behalf of the appropriate person, if the person specified in the instruction as the registered owner was, in fact, the registered owner, as to which fact the signature guarantor does not make a warranty; and (3) the signer had legal capacity to sign. (c) A person who specially guarantees the signature of an originator of an instruction makes the warranties of a signature guarantor under subsection (b) and also warrants that at the time the instruction is presented to the issuer: (1) The person specified in the instruction as the registered owner of the uncertificated security will be the registered owner; and (2) the transfer of the uncertificated security requested in the instruction will be registered by the issuer free from all liens, security interests, restrictions and claims other than those specified in the instruction. (d) A guarantor under subsections (a) and (b) or a special guarantor under subsection (c) does not otherwise warrant the rightfulness of the transfer. (e) A person who guarantees an indorsement of a security certificate makes the warranties of a signature guarantor under subsection (a) and also warrants the rightfulness of the transfer in all respects. (f) A person who guarantees an instruction requesting the transfer of an uncertificated security makes the warranties of a special signature guarantor under subsection (c) and also warrants the rightfulness of the transfer in all respects. (g) An issuer may not require a special guaranty of signature, a guaranty of indorsement or a guaranty of instruction as a condition to registration of transfer. (h) The warranties under this section are made to a person taking or dealing with the security in reliance on the guaranty, and the guarantor is liable to the person for loss resulting from their breach. An indorser or originator of an instruction whose signature, indorsement or instruction has been guaranteed is liable to a guarantor for any loss suffered by the guarantor as a result of breach of the warranties of the guarantor. History: L. 1996, ch. 202, § 59; July 1. KANSAS COMMENT, 1996 This section is derived from the former 84-8-312 and has been rewritten. The section is identical to the 1995 Official Text. This section distinguishes between a guarantee of a signature of an indorser and a guarantee of a signature of an originator of an instruction. Both warranties relate to the facts at the time of the signing. Under subsection (a), a person who guarantees the signature of an indorser of a security certificate warrants the signature was genuine and by an appropriate person and the signer had legal capacity. Under subsection (b), a person guaranteeing a signature of an originator warrants similar facts regarding the originator and the instruction but does not warrant that the appropriate person is the registered owner. A person who "specially" guarantees the signature of an originator under subsection (c), in addition, warrants certain facts at the time the instruction is presented to the issuer. These additional warranties are that the person is the registered owner and that the registration will be free from all claims unless specifically noted. Subsections (e) and (f) address the additional warranties of those who guarantee the indorsements and the instructions (as opposed to the signatures, discussed above). These additional warranties include the rightfulness of the transfer in all respects. Subsection (g) provides the issuer may not require the additional guarantees in subsections (c), (e) and (f). Subsection (h) provides the guarantor is liable to all subsequent persons taking or dealing with the security in reliance on the guarantee, and the indorser or originator is liable to the guarantor for any loss. For an illustration, see Pless v. CPC International, Inc., 82 F.R.D. 105 (W.D. Pa. 1979). Revisor's Note: Former section 84-8-306 was repealed by L. 1996, ch. 202, § 91 and the number reassigned to the current text.