HRS §556-3
When a trustee signs a check, who is protected
This section says that when a person who manages money for someone else (a fiduciary) signs a negotiable instrument like a check, the person who receives it does not have to check if the fiduciary is doing something wrong. The receiver is only responsible if they actually knew about the wrongdoing or acted in bad faith. But if the fiduciary uses the instrument to pay a personal debt or for personal benefit, and the receiver knew that, the receiver can be held liable to the principal.
creditorsdebtorsfinancial institutions
The statute, as written — Transfer of negotiable instrument by fiduciary
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 the fiduciary's principal is indorsed by a fiduciary empowered to indorse such instrument on behalf of the fiduciary's principal, the indorsee is not bound to inquire whether the fiduciary is committing a breach of the fiduciary's obligation as fiduciary in indorsing or delivering the instrument and is not chargeable with notice that the fiduciary is committing a breach of the fiduciary's obligation as fiduciary unless the indorsee takes the instrument with actual knowledge of such breach or with knowledge of such facts that the indorsee's 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 the fiduciary's obligation as fiduciary in transferring the instrument.
LawTrove is not legal advice. The summary above is a computer-generated restatement — the authoritative text is the official version linked above.