New Jersey § 3a:41-4

§ 3a:41-4.

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

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.