§ 2-3-205 — Liability of bank; when check drawn on principal by fiduciary

If a check is drawn upon the account of his principal in a bank
by a fiduciary who is empowered to draw checks upon his
principal's account, the bank is authorized to pay the check
without being liable to the principal, unless the bank pays the
check with actual knowledge that the fiduciary is committing a
breach of his obligation as fiduciary in drawing the check, or
with knowledge that its action in paying the check amounts to
bad faith. If a check is payable to the drawee bank and is
delivered to it in payment of or as security for a personal debt
of the fiduciary to it, the bank is liable to the principal if
the fiduciary in fact commits a breach of his obligation as
fiduciary in drawing or delivering the check.