22-1-5 - Checks -- Drawn by fiduciaries, payable to third persons.
22-1-5. Checks -- Drawn by fiduciaries, payable to third persons.
If a check or other bill of exchange is drawn by a fiduciary as such, or in the name of hisprincipal by a fiduciary empowered to draw such instrument in the name of his principal, thepayee is not bound to inquire whether the fiduciary is committing a breach of his obligation asfiduciary in drawing or delivering the instrument, and is not chargeable with notice that thefiduciary is committing a breach of his obligation as fiduciary, unless he takes the instrument withactual knowledge of such breach or with knowledge of such facts that his action in taking theinstrument amounts to bad faith. If, however, such instrument is payable to a personal creditor ofthe fiduciary and delivered to the creditor in payment of, or as security for, a personal debt of thefiduciary to the actual knowledge of the creditor, or is drawn and delivered in any transactionknown by the payee to be for the personal benefit of the fiduciary, the creditor or other payee isliable to the principal, if the fiduciary in fact commits a breach of his obligation as fiduciary indrawing or delivering the instrument.
No Change Since 1953