If any negotiable instrument payable or indorsed to a fiduciary is indorsed by the
fiduciary, or if any negotiable instrument payable or indorsed to his or her principal
is indorsed by a fiduciary empowered to indorse the instrument on behalf of his or
her principal, the indorsee is not bound to inquire whether the fiduciary is committing
a breach of his or her obligation as fiduciary in indorsing or delivering the instrument,
and is not chargeable with notice that the fiduciary is committing a breach of his
or her obligation as fiduciary, unless he or she takes the instrument with actual
knowledge of the breach, or with knowledge of any facts that his or her action in
taking the instrument amounts to bad faith. If, however, the 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 or her obligation as fiduciary in
transferring the instrument.
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