§ 32-6. Check drawn by fiduciary payable to third person. - North Carolina Statutes

§32‑6.  Check drawn by fiduciary payable to third person.

If a check or other bill ofexchange is drawn by a fiduciary as such, or in the name of his principal by afiduciary empowered to draw such instrument in the name of his principal, thepayee is not bound to inquire whether the fiduciary is committing a breach ofhis obligation as fiduciary in drawing or delivering the instrument, and is notchargeable 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 payable to apersonal creditor of the fiduciary and delivered to the creditor in payment ofor as security for a personal debt of the fiduciary to the actual knowledge ofthe creditor, or is drawn and delivered in any transaction known by the payeeto be for the personal benefit of the fiduciary, the creditor or other payee isliable to the principal if the fiduciary in fact commits a breach of hisobligation as fiduciary in drawing or delivering the instrument. (1923,c. 85, s. 5; C.S., s. 1864(i).)