§ 21.1707

Deposit in name of principal; check drawn thereon by fiduciary; check payable to drawee bank. If a check is drawn upon a bank account of his principal by a fiduciary who is empowered to draw checks upon his principal’s account, the bank is authorized to pay the checks without being liable to the principal, unless the bank pays the check with actual knowledge that the fiduciary is committing a breach of his obligation as fiduciary in drawing the check, or with knowledge of facts that its action in paying the check amounts to bad faith. If, however, the check is payable to the drawee bank and is delivered to it in payment of or as security for a personal debt of the fiduciary to it, the bank is liable to the principal if the fiduciary in fact commits a breach of his obligation as fiduciary in drawing or delivering the check. (Sept. 14, 1965, 79 Stat. 777, Pub. L. 89-183, § 1.) Prior Codifications 1981 Ed., § 21-1707. 1973 Ed., § 21-1707. Editor's Notes Uniform Law: This section is based upon § 8 of the Uniform Fiduciaries Act.