Indiana Code - Trusts and Fiduciaries - Title 30, Section 30-2-4-5

Check drawn by fiduciary payable to third person

Sec. 5. 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 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.
(Formerly: Acts 1927, c.17, s.5.)

Last modified: May 27, 2006