55-7-11 Negotiable instrument transferred by fiduciary.
Negotiable instrument transferred by fiduciary.
If any negotiable instrument payable
or endorsed to a fiduciary as such is endorsed by the fiduciary, or if any negotiable instrument
payable or endorsed to his principal is endorsed by a fiduciary empowered to endorse such
instrument on behalf of his principal, the endorsee is not bound to inquire whether the fiduciary is
committing a breach of his obligation as fiduciary in endorsing 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.
Source: SL 1943, ch 19, § 4; SDC Supp 1960, § 6.0704.