Academic journal article ABA Banking Journal

Cashing Business Checks

Academic journal article ABA Banking Journal

Cashing Business Checks

Article excerpt

Q. A person has a personal account at o bank. The same person has a business account at another bank. The person brings checks payable to the business to the bank where the personae account is maintained and presents them to be cashed. Is this proper?

A. No. The Uniform Commercial Code (UCC) at 3-307 states: "(a) In this section:(1) 'Fiduciary' means an agent, trustee, partner, corporate officer or director, or other representative owing a fiduciary duty with respect to an instrument.

"(2) 'Represented person' means the principal, beneficiary, partnership, corporation, or other person to whom the duty stated in paragraph (1) is owed.

"(b) If (i) an instrument is taken from a fiduciary for payment or collection or for value, (ii) the taker has knowledge of the fiduciary status of the fiduciary, and (iii) the represented person makes a claim to the instrument or its proceeds on the basis that the transaction of the fiduciary is a breach of fiduciary duty, the following rules apply:

"(1) Notice of breach of fiduciary duty by the fiduciary is notice of the claim of the represented person.

"(2) In the case of an instrument payable to the represented person or the fiduciary as such, the taker has notice of the breach of fiduciary duty if the instrument is (i) taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary, (ii) taken in a transaction known by the taker to be for the personal benefit of the fiduciary, or (iii) deposited to an account other than an account of the fiduciary, as such, or an account of the represented person. …

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