§ 4-3-307 — Notice of breach of fiduciary duty

(a) In this section:

(1) Fiduciary means an agent, trustee, partner, corporate officer or director,
or other representative owing a fiduciary duty with respect to an instrument.

(2) Represented person means the principal, beneficiary, partnership,
corporation, or other person to whom the duty stated in paragraph (1) of this
subsection (a) is owed.

(b) If (i) an instrument is taken from a fiduciary for payment or collection or
for value, (ii) the taker has knowledge of the fiduciary status of the fiduciary, and
(iii) the represented person makes a claim to the instrument or its proceeds on the
basis that the transaction of the fiduciary is a breach of fiduciary duty, the following
rules apply:

(1) Notice of breach of fiduciary duty by the fiduciary is notice of the claim of
the represented person.

(2) In the case of an instrument payable to the represented person or the
fiduciary as such, the taker has notice of the breach of fiduciary duty if the
instrument is (i) taken in payment of or as security for a debt known by the taker to
be the personal debt of the fiduciary or (ii) taken in a transaction known by the taker
to be for the personal benefit of the fiduciary.

(3) If an instrument is issued by the represented person or the fiduciary as
such, and made payable to the fiduciary personally, the taker does not have notice
of the breach of fiduciary duty unless the taker knows of the breach of fiduciary
duty.

(4) If an instrument is issued by the represented person or the fiduciary as
such, to the taker as payee, the taker has notice of the breach of fiduciary duty if
the instrument is (i) taken in payment of or as security for a debt known by the taker
to be the personal debt of the fiduciary, (ii) taken in a transaction known by the
taker to be for the personal benefit of the fiduciary, or (iii) deposited to an account
other than an account of the fiduciary, as such, or an account of the represented
person.

Legislative History

Source: L. 94: Entire article R&RE, p. 857, � 1, effective January 1, 1995. L. 2000: (b)(2) amended, p. 1173, � 3, effective May 26.