§ 32-5. Transfer of negotiable instrument by fiduciary. - North Carolina Statutes

§32‑5.  Transfer of negotiable instrument by fiduciary.

If any negotiable instrumentpayable or indorsed to a fiduciary as such is indorsed by a fiduciary, or ifany negotiable instrument payable or indorsed to his principal is indorsed by afiduciary empowered to indorse such instrument on behalf of his principal, theindorsee is not bound to inquire whether the fiduciary is committing a breachof his obligation as fiduciary in indorsing or delivering the instrument, andis not chargeable with notice that the fiduciary is committing a breach of hisobligation as fiduciary unless he takes the instrument with actual knowledge ofsuch breach or with knowledge of such facts that his action in taking theinstrument amounts to bad faith. If, however, such instrument is transferred bythe 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 anytransaction known by the transferee to be for the personal benefit of thefiduciary, the creditor or other transferee is liable to the principal if thefiduciary in fact commits a breach of his obligation as fiduciary intransferring the instrument. (1923, c. 85, s. 4; C.S., s.1864(h).)