N.Y. Uniform Commercial Code Law § 3-603: Payment or Satisfaction

Section 3--603. Payment or Satisfaction.

(1) The liability of any party is discharged to the extent of his

payment or satisfaction to the holder even though it is made with

knowledge of a claim of another person to the instrument unless prior to

such payment or satisfaction the person making the claim either supplies

indemnity deemed adequate by the party seeking the discharge or enjoins

payment or satisfaction by order of a court of competent jurisdiction in

an action in which the adverse claimant and the holder are parties. This

subsection does not, however, result in the discharge of the liability

(a) of a party who in bad faith pays or satisfies a holder who

acquired the instrument by theft or who (unless having the

rights of a holder in due course) holds through one who so

acquired it; or

(b) of a party (other than an intermediary bank or a payor bank

which is not a depositary bank) who pays or satisfies the

holder of an instrument which has been restrictively indorsed

in a manner not consistent with the terms of such restrictive

indorsement.

(2) Payment or satisfaction may be made with the consent of the holder

by any person including a stranger to the instrument. Surrender of the

instrument to such a person gives him the rights of a transferee

(Section 3--201).