If a check or other bill of exchange is drawn by a fiduciary as such or in the name of his principal by a fiduciary empowered to draw such instrument in the name of his principal, the payee is not bound to inquire whether the fiduciary is committing a breach of his obligations as fiduciary in drawing 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 payable to a personal creditor of the fiduciary and delivered to the creditor in payment of or as security for a personal debt of the fiduciary to the actual knowledge of the creditor or is drawn and delivered in any transaction known by the payee to be for the personal benefit of the fiduciary, the creditor or other payee is liable to the principal if the fiduciary in fact commits a breach of his obligation as fiduciary in drawing or delivering the instrument.
Source: L. 23: p. 175, § 5. CSA: C. 67, § 5. CRS 53: § 57-1-5. C.R.S. 1963: § 57-1-4.
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