§ 15-1-106 — Transfer of negotiable instruments by fiduciary

If any negotiable
instrument payable or indorsed to a fiduciary as such is indorsed by the fiduciary, or
if any negotiable instrument payable or indorsed to his principal is indorsed by a
fiduciary empowered to indorse such instrument on behalf of his principal, the
indorsee is not bound to inquire whether the fiduciary is committing a breach of his
obligation as fiduciary in indorsing 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.

Legislative History

Source: L. 23: p. 174, � 4. CSA: C. 67, � 4. CRS 53: � 57-1-4. C.R.S. 1963: � 57-1-3.