Estates and Trusts Commons^™

Bankruptcy Proceedings For Insolvent Decedents' Estates, Richard V. Wellman

University of Michigan Journal of Law Reform

Under present law, bankruptcy proceedings cannot be instituted by or against insolvent decedents' estates. Creditors of insolvent decedents must look to state probate laws for satisfaction. But these laws are more concerned with the control of solvent estates than with the affairs of the impecunious. Also, transfers of wealth at death by nonprobate means are coming to be the rule rather than the exception, and it is frequently very difficult for creditors of decedents to obtain satisfaction of unsecured claims from nonprobate assets. This article advocates the extension of bankruptcy laws to insolvent decedents' estates and explores problems and solutions …

Executors And Administrators - Liability Of Original Lessee's Estate On Assigned Long - Term Lease, Charles G. Schwartz

Michigan Law Review

Defendant's testator had entered into a ninety-nine year lease with the plaintiff lessor, and shortly afterward, with the consent of the plaintiff, had assigned the lease to a corporation. The lease was renewable forever. Fourteen years later the original lessee died testate, leaving an estate of approximately $1,000,000. The lessor now seeks to have the court impound nearly all of the estate as security for future rent payments. At the time of suit there had been no default in rent installments. Held, plaintiff has no present cause of action. In the absence of any default in rent, mere privity …

Trusts - Tort Liability Of Trustee In His Representative Capacity, Reid J. Hatfield

Michigan Law Review

Plaintiff brought suit to recover damages for injuries allegedly sustained because of the unsafe condition of a hotel building owned and operated by the defendant trustee. The trustee was an insolvent bank and trust company in the hands of the state superintendent of banks, who was also joined as defendant. The prayer was for a "judgment against the defendants in their fiduciary capacity toward the trust." On appeal of the lower court's judgment sustaining defendants' demurrer, held, that the trustee could be sued in his representative capacity. Carey v. Squire, 63 Ohio App. 476, 27 N. E. (2d) …

Banks And Banking -Trusts - Right Of Bank To Sell Participating Trust Certificates In Self-Owned Property, Michigan Law Review

Michigan Law Review

In 1923 the trust company entered into a transaction with the land company by which the land company borrowed $130,000 with which it purchased a city property for slightly less than that amount and gave title to the trust company as security for the loan. Through a series of loans later negotiated the trust company came to have an investment of $150,000 in the property. In 1926 the trust company made an agreement with the land company pursuant to which the trust company declared itself trustee of the property at an appraised value almost fifty per cent above the purchase …

Some Problems Arising Out Of Deposits To Pay Principal And Interest On Bonds, Paul P. Lipton

Michigan Law Review

Since Lawrence v. Fox contracts students have been puzzled by the numerous and varying relations that may arise when A, the debtor, delivers money to B to pay C, his creditor. Equally puzzling and much more complicated are the rights and relations of the obligor, trustee and bondholders with respect to sums deposited with the trustee to pay principal and interest on bonds.

The insolvency during recent years of many large trust companies that had been named as trustees in indentures securing corporate bonds, having on hand at the time of their failure large sums of money which …

Powers - Liability Of Appointed Property For Debts Of Donee - Validity Of Attempted Restriction Of Liability By The Donor, Ward P. Allen

Michigan Law Review

By the terms of the donor's will a spendthrift trust was set up for her three grandchildren for life, giving them a general testamentary power of appointment over that portion of the corpus from which their share of the income had been derived, "but in no event shall any part of said trust funds be liable for, or be paid or appropriated to or for any debts or liabilities of such grandchildren . . . . " There was a gift over to the issue of the donees in default of appointment. By will one of the donees exercised the …

Trusts - Tentative Trusts - Right Of Settlor To Set-Off Against Insolvent Bank, Ralph Winkler

Michigan Law Review

Plaintiff brought this bill in equity to compel the receiver of an insolvent bank to set off a deposit against the plaintiff's liability as an indorser on a note, the maker of which was unable to discharge the debt. The account was opened by the plaintiff as "trustee" for his minor son. He had exercised complete control over the account and had made numerous withdrawals for his own purposes. Held, set-off denied. The deposit created a tentative trust; and until revocation the son was the equitable owner thereof. Since the right of set-off is determined by the state of …

Executors And Administrators -- Quasi-Contract Liability Of Decedent's Estate -- Administrative Expenses As A Prior Charge On The Estate, Ralph Winkler

Michigan Law Review

After the supply of feed for the decedent's livestock had been depleted and before the appointment of an administrator, the plaintiff furnished some grain at the request of the decedent's daughter and son-in-law, no other parties attempting to assist in any way. It was understood that the plaintiff would look to the estate for payment. In an action of contract against the administrator in his representative capacity for the value of the grain the court held that the plaintiff had a valid claim in quasi-contract against the estate, basing the decision upon "broad considerations of policy." Since the estate was …

Trusts -Tracing Principles Applicable Where Funds Of Two Or More Cestuis Are Wrongfully Commingled, Michigan Law Review

Michigan Law Review

Public funds of a school district, of the village of Vassar, and of ten other municipalities were deposited in defendant bank without securing the deposit bond required by statute. After defendant bank had been declared insolvent, the school district intervened and sought to have the amount of its deposit impressed upon the cash assets of the bank as a trust, on the ground that the bank became a trustee ex maleficio. The total of the illegal deposits was greater than the cash on hand and the credits established in solvent correspondent banks at the time the receiver took over the …

Trusts-"Swelling Of Assets" Theory In Tracing Misapplied Funds

Michigan Law Review

Plaintiff's husband gave certain bonds to a college, to be held in trust until the death of the donor and his wife, and then to be added to the endowment funds of the college. The college was also to pay an annuity to the donor while he lived, and to his wife for life if she survived him. The cestui was given a right to revoke the trust and take back the bonds if the annuity was not paid. The college, without notice to the cestui, sold the bonds and used the funds to install a heating plant in its …

Trusts - Constructive Trust As Device To Permit Tracing Of Plaintiff's Property In Action Of Rescission For Breach Of Warranty

Michigan Law Review

Defendant, in order to finance the purchase of a tract of land adjoining his farm, arranged to sell the oil and gas lease in the new tract to the plaintiff for $750. He took a conveyance of the new tract, giving a check to the vendor for $1,200, the entire purchase price. A few hours later he executed an oil and gas lease to the plaintiff who paid him $750, which defendant then deposited in his bank account together with $650 he had borrowed from the bank, thus covering the $1,200 check. Both parties understood that the money paid by …

Fraudulent Conveyances - Change Of Beneficiary Of Life Insurance Policy Formerly Payable To Insured's Estate

Michigan Law Review

An insurance company filed a bill of interpleader to determine disposition of the proceeds of a term policy on the life of one Fitzpatrick, now deceased. Claimants are the administrator, representing creditors, and the deceased's two sons. The policy had been issued payable to insured's estate, but reserved the right to change the beneficiary. A few days before his death (by suicide) deceased sent the company an application for change of beneficiary to his two minor sons. He was then hopelessly insolvent, and the administrator claims that the change of beneficiary was a fraudulent conveyance within the terms of the …

Trusts - Mortgage Participations As Trust Investments -Effect Of Invalidity

Michigan Law Review

The Commercial Savings Bank and Trust Company of Toledo, Ohio, in March 1931, executed an instrument called a Declaration of Trust, in which it recited that it had transferred to its trust department certain notes and mortgages for the purpose of issuing certificates of participation therein. The notes alone were physically transferred to the trust department, the mortgages being retained by the real estate loan department of the bank. The real estate loan department also collected the interest and principal on the notes transferred to the trust department. The Declaration of Trust expressly authorized the trust department to make substitutions …

Wills - Statute Of Nonclaim As Bar To Contingent Claim

Michigan Law Review

Plaintiff, the receiver of an insolvent state bank, filed a claim against the estate of deceased who had been a stockholder in the bank. The estate had been closed for twelve years when the claim was filed, the bank not having become insolvent until eight years after the decedent's death. The state constitution provided double liability for the stockholders of the bank to its creditors. Defendant urged that the claim was barred by the statute of nonclaim. Held, the claim is not barred, for the constitutional liability was not a "claim or demand, contingent or absolute," against the stockholder's …

Banks And Banking -Trust Funds - Deposits For A Special Purpose

Michigan Law Review

Plaintiff had an arrangement with defendant bank whereby receipts of certain of plaintiff's branch stores were to be deposited daily with defendant, and the latter was to transmit each day by draft to a bank in Pittsburgh for plaintiff's credit all sums in excess of a dormant balance of $2,000. Drafts covering two days' deposits were in process of transmission to the Pittsburgh bank when defendant bank was taken over by the Comptroller of the Currency. The deposits represented by these drafts were made at a time when defendant's officers and directors knew the bank to be insolvent, though negotiations …

Executors And Administrators - Administration Without Probate

Michigan Law Review

The plaintiff is the only heir of the decedent who died intestate. The defendant was in possession of certain assets of the deceased which had formerly been deposited with a bank, now insolvent. Plaintiff brought a bill in her own name to compel the defendant to turn over to her such assets. The Illinois statute providing for administration adds, "Provided, That when the heirs are residents of this State and the estate is solvent and without minor heirs and it is desired by the parties in interest. to settle the estate without administration this law shall not apply." Held, …

Trusts - Tracing Of Assets - Preference

Michigan Law Review

Public funds were unlawfully deposited in the insolvent bank. At the time the bank closed the cash in its own vault was less than the amount of public funds deposited but it did have, at the time of closing and at all times before, deposits in correspondent banks which, taken with the cash in its own vault, exceeded the amount of the public funds unlawfully deposited. Held, that the unlawful deposit of the public funds, the bank knowing them to be public funds, created a trust of those funds in the hands of the bank, which trust was impressed …

Trusts -- Self-Dealing Of The Trustee -- Right To Look Through The Corporate Entity

Michigan Law Review

One Northrop was appointed by the court as guardian, receiving $2,500 which he deposited in defendant bank of which he was the president, the general manager, and of which he was in complete control. Subsequently he exchanged this deposit for a mortgage owned by the bank. The bank became insolvent, and plaintiff, as substituted trustee, brought this action to have a preference adjudged out of the bank's assets in favor of the ward. Held, plaintiff could ignore the mortgage transaction but could only claim as a general creditor of the bank. Ottawa Banking and Trust Co. v. Crookston State …

Trusts -Tracing Of Assets - Preference

Michigan Law Review

In State ex rel Sorenson v. Farmers' State Bank of Polk (Lindquist, Intervenor) the beneficiary of a trust fund converted by the bank, subsequently becoming insolvent, was allowed to resort to equity and recover the trust fund as a preferred claim against the general assets of the bank. The beneficiary deposited a promissory note in the sum of $4,500 in the bank for a special purpose and the bank, without authority, indistinguishably mingled the proceeds of this note with the general mass of bank assets. The amount of actual cash on hand when the insolvent bank was taken over by …

Failed Banks, Collection Items, And Trust Preferences, George Gleason Bogert

Michigan Law Review

About 1,200 banks failed in the United States during the year 1930, and failures for the years 1921-1929 averaged over 600 a year. Each of these bank failures doubtless involved several problems regarding collection items. In each case it was almost inevitable that there should be found among the assets in the hands of the defunct bank several items held for collection but not yet collected, and also that a number of items should have been collected but no effective remittance made on account of such collection. There thus arose a series of controversies between the banks or individuals which …