14-7503. Transfer of negotiable instrument by
fiduciary
If any negotiable instrument payable or endorsed to a fiduciary as such is endorsed
by the fiduciary, or if any negotiable instrument payable or endorsed to his principal is
endorsed by a fiduciary empowered to endorse such instrument on behalf of his principal,
the endorsee is not bound to inquire whether the fiduciary is committing a breach of his
obligation as fiduciary in endorsing or delivering the instrument, and is not chargeable
with notice that the fiduciary is committing a breach of his obligation as fiduciary
unless he takes the instrument with actual knowledge of such breach or with knowledge of
such facts that his action in taking the instrument amounts to bad faith. If, however,
such instrument is transferred by the fiduciary in payment of or as security for a
personal debt of the fiduciary to the actual knowledge of the creditor or is transferred
in any transaction known by the transferee to be for the personal benefit of the
fiduciary, the creditor or other transferee is liable to the principal if the fiduciary
in fact commits a breach of his obligation as fiduciary in transferring the instrument.
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