41-03-33. (3-307) Notice of breach of fiduciary duty.
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/nd/title-41/chapter-41-03-negotiable-instruments/41-03-33·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
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. In the case of an instrument payable to the represented person of the fiduciary, as
such, the taker has notice of the breach of fiduciary duty if the instrument is taken in
payment of or as security for a debt known by the taker to be the personal debt of the
fiduciary, taken in a transaction known by the taker to be for the personal benefit of the
fiduciary, or deposited to an account other than an account of the fiduciary, as such or
an account of the represented person.
3. If an instrument is issued by the represented person or the fiduciary, as such, and
made payable to the fiduciary personally, the taker does not have notice of the breach
of fiduciary duty unless the taker knows of the breach of fiduciary duty.
4. If the instrument is issued by the represented person or the fiduciary, as such, to the
taker as payee, the taker has notice of the breach of fiduciary duty if the instrument is
taken in payment of or as security for a debt known by the taker to be the personal
debt of the fiduciary, taken in a transaction known by the taker to be for the personal
benefit of the fiduciary, or deposited to an account other than an account of the
fiduciary, as such, or an account of the represented person.
41-03-34. (3-308) Proof of signatures and status as holder in due course. 1. In an action with respect to an instrument, the authenticity of and authority to make
each signature on the instrument is admitted unless specifically denied in the
pleadings. If the validity of a signature is denied in the pleadings, the burden of
establishing validity is on the person claiming validity, but the signature is presumed to
be authentic and authorized unless the action is to enforce the liability of the purported
signer and the signer is dead or incompetent at the time of trial of the issue of validity
of the signature. If an action to enforce the instrument is brought against a person as
the undisclosed principal of a person who signed the instrument as a party to the
instrument, the plaintiff has the burden of establishing that the defendant is liable on
the instrument as a represented person pursuant to subsection 1 of section 41-03-39. 2. If the validity of signatures is admitted or proved and there is compliance with
subsection 1, a plaintiff producing the instrument is entitled to payment if the plaintiff
proves entitlement to enforce the instrument under section 41-03-27, unless the
defendant proves a defense or claim in recoupment. If a defense or claim in
recoupment is proved, the right to payment of the plaintiff is subject to the defense or
claim except to the extent the plaintiff proves that the plaintiff has rights of a holder in
due course which are not subject to the defense or claim.
41-03-35. (3-309) Enforcement of lost, destroyed, or stolen instrument. 1. A person not in possession of an instrument is entitled to enforce the instrument if that
person was in rightful possession of the instrument and entitled to enforce it when loss
of possession occurred; the loss of possession was not the result of a transfer by that
person or a lawful seizure; and that person cannot reasonably obtain possession of
the instrument because the instrument was destroyed, its whereabouts cannot be
determined, or it is in the wrongful possession of an unknown person or a person that
cannot be found or is not amenable to service of process. 2. A person seeking enforcement of an instrument pursuant to subsection 1 must prove
the terms of the instrument and the person's right to enforce the instrument. If that
proof is made, section 41-03-34 applies to the case as though the person seeking
enforcement had produced the instrument. The court may not enter judgment in favor
of the person seeking enforcement unless it finds that the person required to pay the
instrument is adequately protected against loss that might occur by reason of a claim
by another person to enforce the instrument. Adequate protection may be provided by
any reasonable means.
41-03-36. (3-310) Effect of instrument on obligation for which taken. 1. Unless otherwise agreed, if a certified check, cashier's check, or teller's check is taken
for an obligation, the obligation is discharged to the same extent discharge would
result if an amount of money equal to the amount of the instrument were taken in
payment of the obligation. Discharge of the obligation does not affect any liability that
the obligor may have as an endorser of the instrument. 2. Unless otherwise agreed and except as provided in subsection 1, if a note or an
uncertified check is taken for an obligation, the obligation is suspended to the same
extent the obligation would be discharged if an amount of money equal to the amount
of the instrument were taken.
a. In the case of an uncertified check, suspension of the obligation continues until
dishonor of the check or until it is paid or certified. Payment or certification of the
check results in discharge of the obligation to the extent of the amount of the
check.
b. In the case of a note, suspension of the obligation continues until dishonor of the
note or until it is paid. Payment of the note results in discharge of the obligation to
the extent of the payment.
c. Except as provided in subdivision d, if the check or note is dishonored and the
obligee of the obligation for which the instrument was taken is the person entitled
to enforce the instrument, the obligee may enforce either the instrument or the
obligation. In the case of an instrument of a third person which is negotiated to
the obligee by the obligor, discharge of the obligor on the instrument also
discharges the obligation.
d. If the person entitled to enforce the instrument taken for an obligation is a person
other than the obligee, the obligee may not enforce the obligation to the extent
the obligation is suspended. If the obligee is the person entitled to enforce the
instrument but no longer has possession of it because it was lost, stolen, or
destroyed, the obligation may not be enforced to the extent of the amount
payable on the instrument, and to that extent the obligee's rights against the
obligor are limited to enforcement of the instrument.
3. If an instrument other than one described in subsection 1 or 2 is taken for an
obligation, the effect is that stated in subsection 1 if the instrument is one on which a
bank is liable as maker or acceptor or that stated in subsection 2 in any other case.