Code of Alabama

Ala. Code § 7-3-307 (2026)

Notice of Breach of Fiduciary Duty.

✓ official Alabama Legislature (ALISON) text, current July 2026

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(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 subdivision (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, or (ii) taken in a transaction known by the taker to be for the personal benefit of the fiduciary.

(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 an 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 (i) taken in payment of or as security for a debt known by the taker to be the personal debt of the fiduciary, or (ii) taken in a transaction known by the taker to be for the personal benefit of the fiduciary.

(Acts 1995, No. 95-668, p. 1381, §1.)

Notes of Decisions

Cited in 5 cases, 1981–2012 · leading case: Southland Health Servs., Inc. v. Bank of Vernon, 887 F. Supp. 2d 1158 (N.D. Ala. 2012).

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Southland Health Servs., Inc. v. Bank of Vernon, 887 F. Supp. 2d 1158 (N.D. Ala. 2012). · cites it 12× “Count Four: Ala.Code § 7-3-307 Count Four alleges violations of § 7-3-307.”

Brooks ex rel. Vickers v. First Fed. Sav. & Loan Ass'n of Sylacauga, 726 So. 2d 640 (Ala. 1998). · cites it 5× “Furthermore, § 7-3-307, entitled “Notice of breach of fiduciary duty,” does not apply.”

First Alabama Bank of Guntersville v. Hunt, 402 So. 2d 992 (Ala. Civ. App. 1981). “Suffice it to say that Hunt, through uncontroverted evidence, established a defense which would bar recovery on the note unless First Alabama Bank was a holder in due course.”

Brooks v. First Fed. Sav. & Loan Ass'n, 726 So. 2d 640 (Ala. 1998). · cites it 5× “Furthermore, § 7-3-307, entitled "Notice of breach of fiduciary duty," does not apply.”

Gen. Am. Life Ins. v. AmSouth Bank, 100 F.3d 893 (1996). · cites it 3× “See Ala. Code § 7-3-307 (l)(a) (1993). 1 AmSouth failed to present evidence that General American gave Land authority or that insurers customarily allow their general agents to indorse checks payable to the insurer.”

— Ala. Code § 7-3-307(3) — 1 case

— Ala. Code § 7-3-307(l)(b) — 1 case

Gen. Am. Life Ins. v. AmSouth Bank, 100 F.3d 893 (1996). “See Ala. Code § 7-3-307 (l)(a) (1993). 1 AmSouth failed to present evidence that General American gave Land authority or that insurers customarily allow their general agents to indorse checks payable to the insurer.”

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