1. (1) If a fiduciary draws a check upon the account of the fiduciary's principal in a bank that is authorized to draw checks upon the principal's account and the bank is authorized to pay the check, the bank is not liable to the principal unless:

   1. (a) the bank pays the check with actual knowledge that the fiduciary is committing a breach of the fiduciary's obligation in drawing the check; or
   2. (b) the bank knows that paying the check amounts to bad faith.

2. (2) Notwithstanding Subsection (1), the bank is liable to a principal if:

   1. (a) the principal's fiduciary deposits a check in the name of the principal as payment to the bank for payment of, or as security for, a personal debt of the fiduciary; and
   2. (b) the fiduciary commits a breach of the fiduciary's obligation in drawing or delivering the check to the bank.

Renumbered and Amended by Chapter 364, 2024 General Session