(760 ILCS 65/4) (from Ch. 17, par. 2004)
Sec. 4.
If any negotiable instrument payable or indorsed to a fiduciary
as such is indorsed by the fiduciary, or if any negotiable instrument
payable or indorsed to his principal is indorsed by a fiduciary 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 payment of or as a 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 benefit 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.
(Source: Laws 1931, p. 676.)
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