Law Commons^™

Bills And Notes-Payees By Impersonation And By Assumption Of A Name-Drawer's Intent And Commercial Policy, Stuart S. Gunckel S. Ed.

Michigan Law Review

Consider the following scheme for fraudulently obtaining money: A, a stranger to D, personally appears before D, represents himself as B and requests a loan. There is an existing person named B. For D's security a mortgage is produced in the name of B, but it has actually been penned by A. A check of the land records by D verifies that the land described in the mortgage is in fact owned by B. D, having satisfied himself as to the existence of B, draws a check payable to the …

Bills And Notes - Indorsements - Liability Of Drawee Bank On Forged Indorsement, John P. Williams S.Ed.

Michigan Law Review

H applied to the plaintiff credit corporation for a loan to finance a new auto dealership. In exchange for a note and contract purportedly signed by H and his wife W, plaintiff issued a check payable to H and W. The check, after being indorsed, was paid by defendant, the drawee bank. The proceeds of the loan were used as planned, but the business subsequently failed at which time it was discovered that H had forged W's signature on the note, the contract and the check. Plaintiff sued to compel restoration of the amount of the check …

Bills And Notes-Discharge-Intentional Destruction Due To Mistake As A Discharge, Richard S. Weinstein S.Ed.

Michigan Law Review

The holder of sixteen bonds issued by defendant destroyed the bonds believing them to be worthless after they had been in default as to both principal and interest for six years. Ten years later the defendant went into bankruptcy for reorganization and the holder learned that under the plan of reorganization the bonds were exchangeable for $400 in cash and $600 in preferred stock. When defendant refused to recognize the indebtedness even though the holder tendered an indemnity bond against wrongful payment, the holder instituted suit to recover the value of the bonds. The lower court denied relief to the …

Bills And Notes - Ficticious Indorsee - Immaterial Alteration, Lawrence N. Ravick S.Ed.

Michigan Law Review

Thomas and Betty Gallegos asked defendant bank for a loan to purchase an automobile from Schneider Motors. Defendant gave them a cashier's check for $1,000 payable "To the order of Betty J. and Thomas Gallegos." To assure itself that the check would be used to purchase the car, the bank, before delivering the check to the payees, had them indorse it "to the order of Schneider Motors," signed "Betty J. and Thomas Gallegos." The Gallegoses then went to Schneider Motors, but a partner of that firm refused to accept the check and returned it to Thomas Gallegos. Having taken it …

Bills And Notes-Right Of Maker Of Promissory Note To Set-Off In An Action By A Post-Maturity Transferee, Harold S. Lentz S.Ed.

Michigan Law Review

In an action upon a promissory note by a holder who was a transferee after maturity, the maker sought to set-off collateral claims which he held against the holder's transferor. Section 58 of the Negotiable Instruments Law provides: ''In the hands of any holder other than a holder in due course a negotiable instrument is subject to the same defenses as if it were non-negotiable." Another statute of the jurisdiction allowed set-off of collateral claims against third persons in actions on negotiable instruments. The lower court refused to allow the set-off. On appeal, held, reversed. Section 58 of the …

Bills And Notes-Indorsee Taking An Incomplete Instrument As A Holder In Due Course, Cleaveland J. Rice S.Ed.

Michigan Law Review

Plaintiff purchased from the payee defendant's note which was blank as to amount, date, and provisions for installment payments. Plaintiff immediately filled up the blanks in accordance with actual authority given by defendant. Held, plaintiff took free of an agreement between defendant and payee that the note was not to be negotiated until completion of work for which note was given, plaintiff having no knowledge of such agreement. First National Bank of Springfield v. Di Taranto, (N.J. Super. Ct., App. Div. 1950) 75 A. (2d) 907.

Bills And Notes-Limitation Of Actions-Running Of The Statute Of Limitations Against The Holder Of A Check, Gordon I. Ginsberg

Michigan Law Review

Defendant issued a check to plaintiff's intestate on July 1, 1942 for services rendered. On April 21, 1943, the payee deposited the check in her bank, but it was returned to her uncollected because the bank on which it was drawn refused to make payment on account of its "stale" date. Nothing further was done to enforce payment of the check during the payee's lifetime, and she died on September 20, 1948. This action on the check was brought by her administrator on July 28, 1949. On appeal from a judgment for plaintiff, held, the action is barred by …

Negotiable Instruments Under The Uniform Commercial Code, George E. Palmer

Michigan Law Review

The ambitious undertaking of the American Law Institute and the National Conference of Commissioners on Uniform State Laws to draft a "Uniform Commercial Code" includes a proposed revision of the Negotiable Instruments Law. This is not merely an attempt to patch up the present statute. It is virtually a complete rewriting. It includes many changes and additions in substance as well as a radical reorganization and rephrasing of language where no change in substance is designed. · It includes the much needed separation of the provisions relating to investment instruments such as corporate bonds from those relating to bills, checks, …

Contracts-Bills And Notes-Precedent Debt As Consideration In The Law Of Contracts And Negotiable Instruments, Shubrick T. Kothe S.Ed.

Michigan Law Review

Today, there is little left of the sixteenth century rule that a precedent debt is consideration sufficient to ground an action of assumpsit. Modern cases, such as those where a debt is barred by the Statute of Limitations or discharged in bankruptcy, where it is historically applicable, generally do not rest upon that theory. As a practical matter, it makes little difference. These cases achieve a just result, and have been confined to standard fact situations. The doctrine seems clearly at variance with the rule that consideration cannot be past, and serves no useful purpose today. Cases where this problem …

Bills And Notes-Indorsement In Blank Followed By Special Indorsement, J. R. Swenson

Michigan Law Review

Plaintiff purchased a cashier's check from X Bank payable to himself. He indorsed the check in blank and immediately below stamped it, "Pay to the order of Bank of America, National Savings and Trust Association, S. & R. Produce Co." Plaintiff then gave the check to one R with whom he had agreed to enter into business under the name of the S. & R. Produce Company. R took the check to Y Bank which at his request blocked out the special indorsement without the knowledge or consent of plaintiff. R then indorsed the check and deposited it to his …

Bills And Notes-Assent By Indorser To Release Of Maker As Undertaking By Former To Continue Liable-Section 120, N.I.L., Bruce L. Moore

Michigan Law Review

The indorser on the note in suit gave his assent to the holder's release of the insolvent maker in return for a deed to certain real estate given by the maker. In reply to demands of the holder for the balance remaining due after sale of the real estate, the indorser stated he would pay the note, but asked for time. On failure of the indorser to pay, this suit was brought. Held, for the plaintiff. Consent of the indorser to release of the maker is not equivalent to an express reservation of rights as required by section 120(5) …

Bills And Notes--Irregular Indorsers--Parol Evidence

Michigan Law Review

Defendant signed a note otherwise than as maker. Held, error to exclude evidence that he was a co-maker. Glick v. Lieb, (App. Div. N.Y., 1944) 53 N.Y. Supp. (2d) 80.

Banks And Banking-Bank Deposits And The N.I.L.

Michigan Law Review

Plaintiff sued H and W and a writ of garnishment was issued against B who filed a disclosure of an indebtedness owing to H and W as joint creditors. W was later dropped from the case by a voluntary non-suit. Shortly after such dismissal, W applied to B for payment of the debt, but payment was refused because of the outstanding garnishment. B, however, expressed to W an intention, perhaps even an assurance, to honor such application when freed of the garnishment. That garnishment was dismissed several days later, but in the meantime another writ of garnishment in the …

Bills And Notes -Acceleration Provision As Affecting Negotiability

Michigan Law Review

In an action against the maker of a promissory note by an indorsee thereof, claiming to be a holder in due course, the question was the negotiability of the note. It contained a provision that "If the maker or anyone of the makers hereof shall fail to furnish additional security upon the demand of said company, said company is authorized to declare all indebtedness owed to it by the maker or makers hereof immediately due and payable without giving notice of said declaration." Held, the quoted language rendered the note nonnegotiable. American Finance Corp. v. Bourne, 190 Okla. …

Bills And Notes - Effect Of Unreasonable Delay In Presentment For Payment Of Demand Notes And Bills Of Exchange, Lloyd M. Forster

Michigan Law Review

The Negotiable Instruments Law, section 71, provides: "Where [the instrument] is payable on demand, presentment must be made within a reasonable time after its issue, except that in the case of a bill of exchange, presentment for payment will be sufficient if made within a reasonable time after the last negotiation thereof." This section raises some extremely complex problems: (1) Can the discharge of the contractual liability of the drawer and all indorsers of a demand bill of exchange be indefinitely postponed by successive negotiations, each within a reasonable time after the last? (2) Can the liability of the drawer …

Bills And Notes - Effect On Negotiability Of Recital Of Transaction Giving Rise To Note, Michigan Law Review

Michigan Law Review

For Mighty King #14468 Saddle Horse was inscribed on the face of the note upon which the plaintiff, the holder of the note, brought suit against the maker. At the trial it was discovered that the payee of the note still held title to the horse, and the sale for which the note was given was a conditional one depending on whether or not one hoof of Mighty King healed. The plaintiff had been given no notice of this condition. Held, the mere statement of the consideration giving rise to the note did not serve as notice of the …

Banks And Banking - Liability Of Bank Upon Payment Of The Check Of An Insane Depositor Without Notice Of The Insanity, William L. Howland

Michigan Law Review

The plaintiff, as trustee for a depositor, sought in this action to charge the defendant bank with the amount of a check drawn by the depositor while insane. On the ground that the depositor was an inmate of the state hospital for the insane, the plaintiff had been appointed his trustee. Subsequent to this appointment, the depositor drew the check in question, and the defendant paid the amount of the check to the payee. Held, in the absence of actual or constructive knowledge of the insanity, a payment by a bank of the check of an insane depositor is …

Bills And Notes - Effect On Negotiability Of Provision For Confession Of Judgment, Michigan Law Review

Michigan Law Review

A note was made providing for eighteen monthly payments, and on default of any payment, the whole amount to become due; a clause was inserted in the note authorizing confession of judgment on the note in favor of the holder "at any time hereafter . . . for such amount as may appear to be unpaid thereon, together with costs and attorney's fees." Held, the provision for confession of judgment did not destroy the negotiability of the note, since it authorized confession of judgment only after default in one of the installments due. United States v. Nagorney, (D. …

Bills And Notes - Holder In Due Course - Burden Of Proof Where There Is A Want Of Consideration Between Immediate Parties, James A. Lee

Michigan Law Review

Plaintiff, transferee of a promissory note and a conditional sale contract, brought suit on the negotiable promissory note, and alleged that he was a holder in due course. Defendant answered that there was no consideration for the note. Held, that the burden of proof was on the plaintiff to show that he was a holder in due course by section 59 of the Negotiable Instruments Law which provides: "Every holder is deemed prima facie to be a holder in due course; but when it is shown that the title of any person who has negotiated the instrument was defective, …

Bills And Notes - Accommodation Paper - Defenses Which Can Be Asserted Dy Maker Against One Not A Holder In Due Course, Robert A. Solomon

Michigan Law Review

The defendant, at the request of her husband, signed a blank promissory note. After making the note payable to himself, the husband discounted the note before maturity at the plaintiff bank. In an action by the bank against the wife, the accommodation maker claimed that the bank took in bad faith and that the negotiation to the bank was a diversion from the intended purpose of the accommodation. The plaintiff bank sought to recover upon the ground that the defendant was liable to it as a holder for value irrespective of whether it was a holder in due course. Held …

Bills And Notes - Effect Of Statute Of Limitations On Demand Certificates Of Deposit And Certified Checks, Michigan Law Review

Michigan Law Review

Plaintiff sued on a certificate of deposit and a certified check, the former being issued by the defendant bank in 1905 and the latter being certified in 1919. Both were negotiated in 1937 and presented for payment the next day. Defendant pleaded the ten year statute of limitations as a bar. Held, at common law the statute of limitations did not operate on demand certificates of deposit until demand had been made, and section 70 of the Negotiable Instrument Law does not alter this common-law requirement. This applies also to certified checks, for they are substantially the same as …

Bills And Notes - Indorser - Language Showing Other Intent, William K. Jackson

Michigan Law Review

Defendants were accommodation parties on a note, signing in the following manner: "For value received we hereby guarantee the payment of the within note at maturity or at any time thereafter with interest at the rate of seven per cent per annum until paid, and agree to pay all cost or expenses paid or incurred in collecting the same, waiving demand of payment, protest and notice of protest." Held, the signers, having written out their contract in some detail, expressed a sufficient intention to be bound as guarantors and not an indorsers, notwithstanding the additional words "waiving demand of …

The Maturity Of Certificates Of Deposit And Promissory Notes Payable On Demand, Orrin B. Evans

Michigan Law Review

In one form or another a dozen cynics have voiced the sentiment that "speech exists to conceal thoughts." Perhaps because language is too intimately integrated with their livelihood, the lawyers have not generally admitted the assertion. However, in the interpretation of written instruments their brethren on the bench have at times so far disregarded the literal meaning of the words under consideration that one must suspect they secretly approve.

Promissory notes "payable on demand" furnish an illustration. Many cases testify that the true intention of the maker is to create an obligation due immediately and that an action to collect …

Bills And Notes - Signing In Representative Capacity - Personal Liability, Erwin B. Ellmann

Michigan Law Review

Defendant, while acting as trustee of the Catholic Diocese of Cleveland, an unincorporated religious association, executed to the plaintiff negotiable promissory notes in the following forms: (1) "Ninety days after date, for value received for The Calvary Cemetery . . . we promise to pay . . . [Signed] Joseph Schrembs, Bishop of Cleveland. Calvary Cemetery Association, By: J. T. B., Treas." (2) "Six months after date, for value received for Sacred Heart of Mary Church . . . we promise to pay . . . [Signed] Councilmen: A. S.; L. F.; V. J. H.; H. S. Z.; Joseph Schrembs, …

Bills And Notes - Qualified Indorsement - By Assignment Of "Right, Title And Interest'', Michigan Law Review

Michigan Law Review

Defendant, payee of a promissory note, transferred it by writing on the back, "For value received, I hereby assign all my rights, title and interest to the within note .... " Held, defendant's indorsement was qualified, and she was not liable for its payment. Fecko v. Tarczynski,. 281 Mich. 590,275 N. W. 502 (1937).

Bills And Notes - Execution By Uauthorized Representative - Effect Of Knowledge By Payee, Erwin B. Ellmann

Michigan Law Review

Payee accepted defendant's promissory note, executed as guardian, and agreed not to hold him personally accountable. Though familiar with all material facts, the parties mutually mistook defendant's authority to bind the estate of his ward, and when such lack of authority was discovered, plaintiff sued on the instrument for personal judgment. Held, the maker is not liable, since Section 20 of the Negotiable Instruments Law will not be allowed to override the intention of the parties declared at the time of issuance of the instrument.Annis v. Pfeiffer, 278 Mich. 692, 271 N. W. 568 (1937).

Bills And Notes-Negotiability Of Bonds Issued By Massachusetts Trust

Michigan Law Review

In a replevin action to recover stolen bonds, held that the exclusion of the personal liability of the issuing trustees rendered the instruments nonnegotiable, Lorimer v. McGreevy, (Mo. APP. 1935) 84 S. W. (2d) 667.

Bills And Notes--Conditions-Negotiable Despite Reference To Trust Agreement

Michigan Law Review

Bonds, stolen from the owner, were subsequently acquired by a bona fide purchaser who received payment from the obligor. The owner sued the obligor on the ground that the bonds were non-negotiable. The first paragraph in each bond contained an unconditional promise to pay. The second and third paragraphs contained the following clauses: "This bond is one of a series . . . executed and delivered in accordance with and subject to the provisions of the Trust Mortgage hereinafter referred to and in pursuance of resolutions of stockholders. . . . The payment of this bond and of the coupons …

Bills And Notes -"Massachusetts" Trust- Liability Of Trustee Under Section 20 Of The N. I. L

Michigan Law Review

Plaintiff sued the trustee of a realty business trust in his personal capacity on three notes signed by him as follows: "Robert J. Smith, Trustee of Fair Haven Estates." The notes were given in payment of the purchase price of certain land sold by the plaintiff to the defendant, which was secured by a purchase money mortgage. The indenture of trust under which the business was carried on, and which was recorded, provided that all persons who did business with the organization should look only to the trust funds for reimbursement, and neither the trustee nor the shareholders should be …

Bills And Notes - Bad Faith On Part Of Pledgee Taking Bonds

Michigan Law Review

Defendant, a Wisconsin firm, issued certain bearer bonds secured by a mortgage held by the T corporation, as trustee. A provision in the mortgage defining the duties of the trustee in the disposition of bonds delivered to it was incorporated into the bonds by reference. The trustee being insolvent, plaintiff bank, as pledgee of some of the bonds taken to secure personal loans to the trustee, petitioned the referee in bankruptcy for permission to sell them, claiming to be a bona fide pledgee for value. Held, since federal courts are bound to follow state decisions interpreting state statutes declaratory …