ALBERT C. RITCHIE, GOVERNOR. 1381

SEC. 4, (Transfer of Negotiable Instrument by Fiduciary. )
If any negotiable instrument payable or indorsed to a fiduciary
as such is indorsed by the fiduciary, or if any negotiable instru-
ment payable or indorsed to his principal is indorsed by a fidu-
ciary 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 pay-
ment 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 bene-
fit 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.

SEC. 5. (Check Drawn by Fiduciary Payable to Third Person. )
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 obligation as fiduciary in drawing or delivering
the instrument, and is not chargeable with notice that the fidu-
ciary 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 com-
mits a breach of his obligation as fiduciary in drawing or deliv-
ering the instrument.

SEC. 6. (Check Drawn by and Payable to Fiduciary. ) If a
check or other bill of exchange is drawn by a fiduciary as such
or in the name of Ms principal by a fiduciary empowered to
draw such instrument in the name of his principal, payable
to the fiduciary personally, or payable to a third person and by
him transferred to the fiduciary, and is thereafter transferred
by the fiduciary, whether in payment of a personal debt of the
fiduciary or otherwise, the transferee is not bound to inquire