§ 30-2-4-4 — Transfer of negotiable instrument 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.
Formerly: Acts 1927, c.17, s.4.