14-7504

14-7504. Check drawn by fiduciary payable to
third person

If a check or other bill of exchange is drawn by a fiduciary as such, or in the name
of his principal by a fiduciary empowered to draw such instrument in the name of his
principal, the payee is not bound to inquire whether the fiduciary is committing a breach
of his obligation as a fiduciary in drawing 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 payable to a personal creditor of the fiduciary
and delivered to the creditor in payment of or as security for a personal debt of the
fiduciary to the actual knowledge of the creditor or is drawn and delivered in any
transaction known by the payee to be for the personal benefit of the fiduciary, the
creditor or other payee is liable to the principal if the fiduciary in fact commits a
breach of his obligation as fiduciary in drawing or delivering the instrument.