Law Commons^™

Warrants In Bond-Warrant Units: A Survey And Assessment, Henry B. Reiling

Michigan Law Review

This Article surveys the warrant in the context of a bond-warrant unit (the typical medium of issuance), and in four main subdivisions assesses (I) the warrant's role in corporate finance, and several major implications and features of its use today for (II) shareholders of the prospective issuer, (III) warrant holder, and (IV) issuer. The present status of the warrant as a highly significant mode of financing requires that particular attention be given to the justification for the issuance of warrants in the light of earlier authoritative criticism, and to the tax consequences and concepts now attending their use. Fortunately, several …

Some Problems In Special Assessment District Obligations, Irvin Long

Michigan Law Review

The question of the jurisdiction of a board or officer authorized to construct a local improvement and levy special assessments therefor has always been troublesome, and is particularly so when bonds or other obligations are issued in anticipation of the collection of such assessments. A vast amount of litigation has occurred in Michigan in recent years over drain district assessments, and bonds which such districts have issued. While this is of primary interest to Michigan lawyers and investors in public securities, many of the questions involved seem to be of such a general nature, so far as special assessment procedure …

Trusts-Participation By Banks In Diversion Of Trust Funds

Michigan Law Review

That fiduciaries who misappropriate or divert trust funds from their proper purpose are bound to make good is familiar doctrine. It is equally clear that those who guiltily participate in such. diversions by faithless fiduciaries are also liable. The point of chief difficulty is the determination of what participations are properly classified as guilty, for innocent participators clearly are not bound to make good. For example, a fiduciary with power to sell things held in trust may wish to turn the subject matter into cash preliminary to a misappropriation. A bona fide purchaser who provides the cash no doubt stands …

Legal Aspects Of Renegotiation, Charles W. Steadman

Michigan Law Review

The Renegotiation Act which became effective April 28, 1942, was designed to eliminate and remove exorbitant profits from war contracts. No other recent statute has been the subject of so much controversy and misunderstanding. Since the beginning of renegotiation of contracts in the late summer and early fall of 1942, policies have been crystalizing and many interpretations of the act have been made, but many more questions as to its meaning must still be answered.

Principal And Surety - Right Of Surety To Subrogation To Claim Of Creditor Against Insolvent National Bank, William C. Whitehead

Michigan Law Review

At the closing of defendant bank the commonwealth of Pennsylvania had on deposit $135,000, which was secured by the bond of defendant with plaintiff as surety, and a pledge of bonds of $12,000 par value. The commonwealth received the first dividend, amounting to forty per cent, and plaintiff paid the balance, subtracting $12,441.44 obtained on the intermediate sale of the bonds. Plaintiff contends that it is entitled to subrogation on the basis of the full amount of the original claim of the commonwealth against defendant; and that dividends subsequent to the first should be paid on that claim, although not …

Bankruptcy- Municipal Reorganization - Fairness Of Plan, Kenneth J. Nordstrom

Michigan Law Review

A local government district, finding itself hopelessly in debt, filed a petition for relief under Chapter IX of the Bankruptcy Act as amended. The municipal debt composition plan provided that bondholders would receive eight cents on the dollar. The evidence showed that a considerable quantity of bonds were bought by local landowners at much more than eight cents on the dollar, evidently for the purpose of being used in getting the approval of some such plan as proposed, in the expectation of an increase in value of their lands by improvements to be made by the debtor through a loan …

Municipal Corporations - Bonds Redeemable At Option Of Municipality- Notice To Bondholders Necessary To Stop Running Of Interest, Michigan Law Review

Michigan Law Review

Defendant municipality issued bonds redeemable before maturity at defendant's option. There was no provision for registration, and neither the statute nor the bonds provided for notice of redemption. In May,1938, notice was published in newspapers of general circulation that the bonds were to be redeemed on June 1. Plaintiff, owner of the entire issue, did not know of the redemption until September 27. It sued for interest from June 1 to September 27. Held, notice by publication is sufficient to stop the running of interest, and plaintiff is therefore not entitled to recover. Philadelphia Savings Fund Society v. City …

Election Of Remedies- Contracts Induced By Fraud, Michigan Law Review

Michigan Law Review

In 1939, plaintiff brought an action alleging in his complaint that defendant became indebted to him on December 17, 1928, for $13,400, for money had and received by defendant to the use of plaintiff. In a bill of particulars plaintiff pointed out that the indebtedness arose from the purchase of certain bonds and the subsequent rescission of the contract of purchase prior to the commencement of this action, basing his right to rescind upon misrepresentations made by, and the fraud of, defendant in inducing the purchase of said bonds. When defendant moved for a summary judgment on the ground that …

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 …

Schools And School Districts - School Elections - Tax Limitations - Bond Issues - Qualifications Of Electors Under Michigan Constitution, John S. Pennell

Michigan Law Review

The plaintiff submitted to the school district electors two propositions: (1) that of increasing the tax limitation from 1.5 per cent to 1.802 per cent of the assessed valuation, and (2) that of bonding the school district in the amount of $182,600 for improvements. Both at the registration of voters, and at the election, the qualifications of the electors were tested by the school code. On the tax limitation question, all registered school electors were permitted to vote. On the question of the bond issue, only those registered electors who owned property assessed for school taxes in the district were …

Principal And Surety - Duty Of Obligee To Disclose To Surety - Surety's Right Of Subrogation, Julian Caplan

Michigan Law Review

Surety defended an action on the bond of the town treasurer on the ground that at the time the bond was entered into the treasurer, in violation of statute, had deposited in a local bank an amount exceeding thirty per cent of the total deposits of the bank and that the town selectmen, although well aware of the situation, failed to disclose the facts to the surety. Plaintiff contended that there was no duty to disclose these facts to the surety, especially since the treasurer's annual report showed that the amount of the deposits exceeded the legal limit. As an …

Municipal Corporations - Constitutional Limitations On Amount Of Debts - Obligations Of Other Public Corporations As Debts Of City, Michigan Law Review

Michigan Law Review

The city of Troy, New York, had obtained federal aid for a Public Works Administration project involving the erection of a new high school building, conditioned upon the city's supplying $786,000 as its share of the cost. The constitutional debt limitation did not permit the city to borrow this amount. The legislature came to the aid of the city and enacted a law providing that the bonds should be issued as "general obligations" of the city school district by the district's board of education. The act expressly stated that the bonds should not be considered as part of the debt …

Suretyship-Effect Of Death Of Surety On Rights Of Creditor, Jacob L. Keidan

Michigan Law Review

In a suit on a bond filed in accordance with statutory requirements by a depository designated by a court of bankruptcy, it was pleaded in defense that the surety died before any deposits were received by the designated bank. The circuit court of appeals held for the defendant, ruling that the bond was only a multiple offer and lapsed with the death of the surety. The Supreme Court reversed this decision on the ground that the bond was a single offer, and the designation of the bank as an official depository constituted an acceptance thereof. United States for the use …

Declaratory Judgments - Justiciable Controversy, Herman J. Bloom

Michigan Law Review

The governor of Wisconsin instituted a declaratory proceeding against the secretary of state. The governor wanted to determine his power to make ad interim appointments to allegedly vacant statutory offices and to positions incumbents were holding over. Prior to this action he had made no appointments to these offices, for the secretary of state had advised him that he would not honor the commissions, or audit and pay the expense account of such appointees. The governor claimed that the alleged conduct of the secretary of state prevented him from securing suitable persons to fill these offices. The court held that …

Collateral Liabilities Under Section 77b, Homer Kripke

Michigan Law Review

The passage of section 77B of the Bankruptcy Act in 1934 suggested to some lawyers the possibility of using the section as a means of modifying or eliminating the responsibility of persons collaterally liable on obligations for which the corporation to be reorganized or its property was also responsible. The question arose in two common types of situations: (1) guaranties of payment of dividends on capital stock; (2) liability for payment of the bonds or other indebtedness of corporations. In either of these situations, can the liability of persons other than the corporaticm be discharged or modified by reorganization of …

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 …

Banks And Banking - Changing Character Of Deposit To Establish Trust

Michigan Law Review

Respondent had a savings account with a local bank and, having arranged that the bank should purchase certain bonds for him, made an additional deposit therein. Four days later respondent was informed by an officer of the bank that the bonds had been purchased and was given a slip noting that his account had been charged with an amount equal to the purchase price. On its own books the bank charged the respondent's savings account with that amount and entered it as a "deposit" in its "bond account." Upon the insolvency of the bank it was found that no bonds …

Publicly Owned Utilities And The Problem Of Municipal Debt Limits, Lawrence L. Durisch

Michigan Law Review

The far-reaching contest being waged between the advocates of municipal ownership of public utilities and the private ownership group, between those who "want the government to get out of business" and those who desire to see an increase in its proprietary functions, has produced a number of sharp legal controversies. One of the most interesting of these, recently litigated in a number of state courts, is whether an obligation incurred for the purchase or repair of a municipally-owned utility is a "municipal debt" within the meaning of constitutional or statutory debt limits. Because of the wide-spread interest in, and the …

Contracts-Liability Of Purchaser At Forclosure Sale For Obligations Of Forclosed Railroad

Michigan Law Review

The BN Company executed a mortgage on certain railroad properties as security for a bond issue of the Company. Thereafter the Lehigh Company leased the mortgaged property for a term of 999 years. The lease stipulated that "all its covenants are to apply to the parties hereto, and to the several successors and assigns * * * of the parties or their properties." The lessee covenanted therein to indorse a guaranty of payment on the bonds of the BN Company. and did so indorse. Subsequently a mortgage executed by Lehigh prior to the lease with the BN Company, but which …