KRS 386.140: Checks drawn by a fiduciary payable to third person or to himself.

(1) 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 the 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 the

breach or wit h knowledge of such facts that his action in taking the instrument

amounts to bad faith.

(2) 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 the instrument in the name o f his

principal, payable to the fiduciary personally, or payable to a third person and by

him transferred to the fiduciary, and is thereafter transferred by the fiduciary,

whether in payment of a personal debt of the fiduciary or otherwise, the transferee is

not bound to inquire whether the fiduciary is committing a breach of his obligation

as fiduciary in transferring the instrument, and is not chargeable with notice that the

fiduciary is committing a breach of his obligation as fiduciary unless he takes t he

instrument with actual knowledge of the breach or with knowledge of such facts

that his action in taking the instrument amounts to bad faith.