§ 15-1-107 — Check drawn by fiduciary payable to third person, effect

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 obligations as 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.

Legislative History

Source: L. 23: p. 175, � 5. CSA: C. 67, � 5. CRS 53: � 57-1-5. C.R.S. 1963: � 57-1-4.