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.
Source: L. 23: p. 174, § 4. CSA: C. 67, § 4. CRS 53: § 57-1-4. C.R.S. 1963: § 57-1-3.
Structure Colorado Code
Title 15 - Probate, Trusts, and Fiduciaries
§ 15-1-102. Legislative Declaration
§ 15-1-104. Prior Transactions
§ 15-1-105. Application of Payments to Fiduciary
§ 15-1-106. Transfer of Negotiable Instruments by Fiduciary
§ 15-1-107. Check Drawn by Fiduciary Payable to Third Person, Effect
§ 15-1-108. Check Drawn by and Payable to Fiduciary, Effect
§ 15-1-109. Deposit in Name of Fiduciary
§ 15-1-110. Check Drawn Upon Account of Principal by Fiduciary
§ 15-1-111. Deposits in Personal Account of Fiduciary
§ 15-1-112. Deposits in Name of Two or More Trustees
§ 15-1-112.5. Liability of a Fiduciary for Acts of Predecessor Fiduciary