Banking and Finance Law Commons^™

Property-Joint Bank Accounts-The Donee's Inter Vivos Interest, David K. Kroll S.Ed.

Michigan Law Review

The use of joint bank accounts has become widespread throughout the United States in recent years and has been the source of considerable litigation and comment. The predominant importance of this type of account is that it allows funds remaining at the death of a co-depositor to pass to the survivor without the necessity of a will. This aspect of the account, causing it to be known sometimes as a "Poor Man's Will," has been the focal point of the attention given to the transaction; and today, after more than half a century of uneven treatment by the courts, all …

Banking-Disclosure Of Records-The Duty Of A Bank As To Customer Information, Robert B. Wessling S.Ed.

Michigan Law Review

The purpose of this comment, therefore, is to describe the scope of the banker's duty as to customer information as best it can be discerned in light of the increasing exchange of credit information and increasing resort to such information by government agencies-particularly the Internal Revenue Service. In the process, it is hoped that attention will be drawn to the uncertainty which exists in this area, perhaps prompting action by the states or the banks themselves to clarify the scope of the duty and to encourage uniform treatment of customer information in a manner consistent with this duty.

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 …

Banks And Banking- Housing And Home Finance - Scope Of Insurance Coverage Of Banks Under National Housing Act, Robert L. Mclaughlin

Michigan Law Review

Borrower executed a promissory note to dealer payee, who assigned it to defendant bank. After default by borrower, plaintiff United States paid to defendant the unpaid balance in accordance with the terms of their insurance contract under Title I of the National Housing Act. The note was then transferred to plaintiff for collection. In an action by the United States against the borrower for the amount due, it was held that the note could not be enforced because of fraudulent misrepresentation by the dealer in acquiring the note, of which the insured bank and transferee government had constructive knowledge. Plaintiff …

Taxation - Federal Estate Tax - Effect Of Presidential Freezing Orders On The Creation Of Excludable Bank Deposits For Nonresident Aliens, William Y. Webb

Michigan Law Review

Decedent, a citizen and resident of France, was the sole income beneficiary of a trust fund held in New York by the plaintiff as trustee. An executive order, issued pursuant to the Trading with the Enemy Act, prohibited remittance of trust income to the decedent from 1940 to the time of her death in 1946. As this income accrued, the plaintiff's trust department transferred it to the plaintiff's general banking department in its own name as trustee and subject to its order out of current banking funds. In an action by the executor of the decedent-beneficiary's estate to recover an …

Bills And Notes - Acceptance - Payment By Drawee Of Raised Check Precludes Recovery Under Section 62 Of The Uniform Negotiable Instruments Law, Louis A. Kwiker

Michigan Law Review

Defendant, collection bank and presenter, paid the face amount of a raised check, executed its unqualified indorsement thereon, transmitted the check through regular banking channels, and received payment from drawee bank. Upon discovery of the overpayment plaintiff, surety, reimbursed the drawee and sought recovery from the defendant. The trial court sustained defendant's demurrer. On appeal, held, affirmed. Under section 621 of the Uniform Negotiable Instruments Law, a drawee bank which pays a raised but otherwise genuine check to a non-negligent holder in due course cannot recover the amount by which the instrument was raised because payment constitutes an acceptance …

Banks And Banking - Bank's Right Of Set-Off-Deposit Of Funds By A Fiduciary, James Blanchard

Michigan Law Review

Plaintiff employed A as agent to sell plaintiff's tractor. A was to keep any amount received over $5,000. A sold the tractor, receiving a $6,120 check from the purchaser payable to A. A deposited the check in his personal checking account in defendant bank. Defendant took the deposit without knowledge of plaintiff's interests and applied it against a past due obligation of A. Plaintiff brought suit for $4,500, the amount of checks from A to plaintiff which defendant refused to pay. The trial court held for defendant. On writ of error, held, reversed, two judges dissenting. No equity …

Sales - Credit Sales - Application Of Usury Statute, Jerome S. Traum S.Ed.

Michigan Law Review

Plaintiff bought a tractor from defendant's agent for $2950 and received a trade-in allowance of $1180, leaving an unpaid balance of $1770. Defendant's agent agreed to arrange for a loan from defendant for the balance of the purchase price, without stating a time price for the tractor different from the cash price previously discussed. The loan was made, and plaintiff signed a note and chattel mortgage in the amount of $2161.84, payable in two annual installments. The $391.84 excess over the balance due exceeded the maximum legal rate of interest allowed by Nebraska's Installment Loan Act. Plaintiff later sued in …

Bonds - Income Bonds - Rights Of Bondholders And Deductibility Of Interest For Federal Income Tax Purposes, Guy B. Maxfield S.Ed., Michael M. Lyons S.Ed.

Michigan Law Review

An income bond is an obligation of a corporation on which interest is payable only out of earnings, as distinguished from the ordinary corporate bond on which interest is a fixed charge regardless of earnings. Long regarded as a hybrid security which is to be issued only as a last resort, income bonds have grown surprisingly in popularity over the past two decades. It is the purpose of this comment to consider the historical background of income bonds, to make a comparative analysis of the bond indentures as they affect investors' rights, and to consider the deductibility of income bond …

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 …

The Impact Of The 12% Reserve Income Tax Provivsion Upon The Banking Structure, Paul D. Lagomarcino

Michigan Law Review

Ordinarily, it is difficult, if not almost impossible, to measure with any degree of accuracy the impact of a tax provision upon an industry. This is often so even after years of experience under it. Moreover, with few exceptions, it is an unusual tax provision that shapes the fundamental ·practices and competitive relationships within an industry, unless it is purposely directed to that end as a matter of policy, and, even then, it may (and frequently does) fail of its objective. Section 593 of the Internal Revenue Code of 1954 is unique in all these respects; on its face-a provision …

Corporations - Liabilites - Inadequate Capitalization As Ground For Disregarding Corporate Entity, Lewis L. Clum

Michigan Law Review

Defendant Resnick, meeting minimum statutory incorporation requirements, organized a corporation and thereafter persuaded defendants Cowan to join him in operating a used car enterprise under the corporate name. No stock was issued, nor capital paid in, although a checking account was opened for use by the business. Car purchases were financed through loans made or guaranteed by the elder Cowan, who held title until resale. Proceeds from resale transactions were deposited in the checking account, from which defendant Resnick reimbursed Cowan for money advanced. Sales volume averaged from $100,000 to $150,000 monthly. Assured that the elder Cowan was "backing" the …

Creditor's Rights - Garnisment -Garnishment Of Branch Banks, Thomas S. Erickson S.Ed.

Michigan Law Review

Under traditional legal analysis, branch banks are regarded as mere agencies of the banking corporation. Service of process on their officers binds the corporate principal. With the principal thus having knowledge, ". . . that knowledge or notice communicated to the principal, which imposes a duty upon it, becomes by that circumstance, the knowledge of all its agents when acting in an official capacity." Garnishment at a branch bank would therefore seem to impose upon the bank corporation the duty of impounding funds of the principal debtor regardless of the particular branch in which they were located. If funds of …

Corporations - Liquidation Upon Deadlock In Closely-Held Corporation - Interpretion Of Wisconsin Statute, Strong V. Fromm Laboratories,, Paul Komives

Michigan Law Review

Plaintiff, as trustee of an estate, held fifty percent of the shares of a going corporation. An election to fill all four positions on the corporation's board of directors was held. Since a by-law required that directors be shareholders, plaintiff was the only member of his own faction for whom he could vote. The opposing faction, holding the remaining fifty percent of the shares, had four eligible candidates. Votes for each of the four were cast, with one receiving one vote less than the other three. Plaintiff voted all of his shares for himself and also cast a vote of …

Creditor's Rights - Fraudulent Conveyances - Security Assignment Of Contract Payments Void If Assignor Retains Control, John A. Beach S.Ed.

Michigan Law Review

An insolvent debtor, who owed some $3,500 on plaintiff's partially-collected judgment, executed an instrument assigning to another creditor, a bank, all moneys due and to become due to the debtor under an existing contract, expressly as security for payment of the debtor's present and future indebtedness to the bank. The contract obligor was notified of the assignment, and thereafter the bank collected the amounts periodically accruing under the contract. The bank applied part of these collected amounts to the balance that the debtor owed the bank. The rest was either handed over to the debtor or credited to his general …

Taxation - Income Tax - Accurabilty Of Dealer Reserves Withheld By Finance Company, A. Duncan Whitaker S.Ed.

Michigan Law Review

Petitioner, a dealer in new and used trailers, had agreements with several finance companies whereby they agreed to buy promissory notes he received on installment sales. The agreements permitted the finance company to withhold a portion of the unpaid balance on each note and credit such amount to the petitioner's "dealer reserve" account. The petitioner was liable for all notes in default and the finance company could charge the reserve with any unpaid balance. The reserve could also be charged with any debts of the petitioner to the company. Periodically, the dealer was to receive portions of the reserve in …

Corporations - Shareholders - Majority Liability For Improper Stock Redemption By Corporation And For Misrepresentations In Private Stock Purchases From Minority Holders, James M. Tobin

Michigan Law Review

In 1942 a seemingly innocuous suit was brought against the Axton-Fisher Tobacco Corporation to determine the propriety of the alteration of a stock redemption. In 1955 Judge Leahy of the Federal District Court for Delaware handed down an opinion on the damages and relief to be given in the case in what he hopefully termed was the final phase of this famous litigation. It is the purpose of this comment to appraise the basis of the recovery allowed by Judge Leahy. Two readily distinguishable problems will be treated: (1) the nature of relief from a stock redemption called by fiduciaries …

Bills And Notes - Holders In Due Course - Payment To An Impostor, Thomas S. Erickson

Michigan Law Review

Drawer bank drew a check on the plaintiff bank payable to a depositor on the faith of a withdrawal order purportedly signed by the depositor but actually forged by an impostor. The impostor forged the indorsement and cashed the check at defendant bank which received payment from plaintiff-drawee bank. Two years later, upon the death of the impostor, the fraud was discovered. Plaintiff-drawee bank voluntarily reinstated the drawer bank's account and, standing in the drawer's shoes, it won a judgment to have its account with the defendant reinstated. On appeal, held, reversed. The policy in favor of the free …

Corporations - Officers And Directors - Effect Of An Equitable Lien On Directors' Liability, Robert Steele

Michigan Law Review

Defendants, directors of a corporation, appealed from a judgment against them in favor of their company's creditor. The corporation had executed a note promising to repay plaintiff's loan out of the funds from a forthcoming stock issue. The board of directors passed a resolution ordering the officers to repay plaintiff in this manner. The money was then spent for other purposes, with the knowledge of the individual directors, after which the corporation became insolvent. On appeal, held, affirmed. The note and resolution imposed an equitable lien on the fund from the stock sale. The corporation's conversion of this interest …

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 …

Trusts - Life Insurance Trusts - Contingent Unfunded Life Insurance Trust As Testamentary Disposition, Jerome K. Walsh Jr.

Michigan Law Review

Settlor named defendant bank beneficiary of eight insurance policies on his life. At the same time he entered into a trust agreement with the bank under which the bank was to hold the policies until the death of the settlor and, upon his death, collect the proceeds and distribute them according to one of two alternate methods of distribution. If his wife elected to reject the provisions made for her in his will and insisted on her statutory share of his estate, then the insurance proceeds were to be divided info four equal parts and paid to his four daughters. …

Creation Of Joint Rights Between Husband And Wife In Personal Property: I, R. Bruce Townsend

Michigan Law Review

Joint ownership of personal property in recent years has become a common practice--one to which husband and wife are especially addicted. The topic is worthy of more than academic concern as demonstrated by the public use of joint titles in the acquisition of all kinds of personal assets, particularly investment securities. A casual conversation with almost any banker would disclose that a very high percentage of accounts owned by married people are held jointly with their spouses. The current popularity of dual ownership, for example, is reflected in the marketing policy of the United States Treasury in the sale of …

Some Abuses Of Antitrust Prosecution: The Investment Bankers Case, Ralph M. Carson

Michigan Law Review

The epochal decision of Judge Medina on October 14, 1953, in United States v. Morgan has already been the subject of adverse criticism by the losing Government counsel and defense by an opposing lawyer. Professor Steffen's grief at the ruin of his handiwork has led him into the impropriety of attacking with unwarranted epithet a thoroughly considered decision by one of the most eminent judges now sitting in our federal courts and into the more symptomatic fault of attributing to the new chief of the Antitrust Division political motivation in his decision not to appeal. He has the assurance to …

Rationale Of Valuation Of Foreign Money Obligations, Charles Evan

Michigan Law Review

What then should a creditor of a foreign money obligation collect where there was a delay in payment? When are damages for depreciation of foreign money recoverable? As of what time and in what currency are they to be computed? How is the value of a foreign money obligation to be measured where no damages may be had? The answers to these and other incidental questions require a thorough analysis of certain features peculiar to the law of money.

It is the purpose of this article to clarify these problems, to sum up the primary principles by which they are …

Partnerships - Valuation Of Assets On Death Of A Partner, John F. Dodge, Jr. S.Ed.

Michigan Law Review

There are three phases to the problem of arriving at a final dollar and cents valuation of a deceased partner's share in a partnership. In their proper chronological order they are: a determination of what the partnership assets are, a valuation of those assets once determined, and a division of the remainder (after liabilities have been subtracted) into the proper proportions according to the partnership agreement. Only the second phase is within the scope of this comment, the purpose of which is to examine various asset valuation methods both with respect to, and in the absence of, a valuation established …

Tax-Free Corporate Acquisitions - The Law And The Proposed Regulations, Robert L. Merritt

Michigan Law Review

The quest for interpretation is indeed an ancient one. Our life path is pervaded by a search for meanings.

It has been said of the law that it is sometimes better to have a bad rule than to have no rule. I suppose the rationale is that unsatisfactory certainties at least permit action, and are susceptible to a change for the better, the very badness of the rule serving to accelerate the equitable resolution. Being neither philosopher nor historian, I do not know whether that patience which awaits ultimate improvement is always a virtue.

Constitutional Law - Federal Immunity From State Taxation - Validity Of State Sales Tax Upon Purchases And Sales By National Banks, Julius B. Poppinga

Michigan Law Review

The 1949 revision of the Michigan Sales Tax Act changed the federal exemption provision so as to permit taxation of sales to corporations acting as agents or instrumentalities of the federal government but not wholly owned by the United States. Accordingly, defendant department of revenue took the position that sales to plaintiff, a national banking institution organized under the National Banking Act, are taxable. In the course of its operations, plaintiff purchases office equipment and other tangible personal property from Michigan. retailers. It also sells food and services to employees through its cafeteria, and sells repossessed merchandise to other parties. …

Corporations - Capital Reduction Surplus As A Source Of Divided Payments, John B. Huck

Michigan Law Review

At the beginning of 1936, plaintiff, a Wisconsin corporation, had an earned surplus deficit of $106,134.89, and a surplus of $685,642.89 created by a reduction of capital stock. Net earnings for 1936 were $121,515.96, none of which were distributed as dividends. An undistributed profits surtax was assessed on the entire current net earnings. Plaintiff sued for a partial refund under an amendment providing retroactive relief for corporations which were prohibited by law from paying dividends during the existence of a deficit in accumulated earnings at the time when the tax was paid. The district court denied relief. On appeal, held …

Sales - Conditional Sales - Punitive Damages For Forcible Repossession Of Chattel, William G. Cloon, Jr. S.Ed.

Michigan Law Review

Plaintiff purchased a truck under a conditional sales contract which was assigned to the defendant finance company. He drove the truck to the place of business of the defendant to adjust differences between the two parties, but when he attempted to leave after no agreement had been reached, he discovered that the keys had been removed from the truck. When informed that the truck had been repossessed, the plaintiff produced another set of keys but was unable to leave with the truck. The testimony of the plaintiff that an agent of the defendant seized his hand to prevent the unlocking …

Bills And Notes - Holder In Due Course - Notice Of Infirmity In Instrument To Finance Company Closely Connected To Dealer, William G. Cloon, Jr. S.Ed.

Michigan Law Review

The defendant purchased a car from a dealer who represented it to be a new demonstrator. In fact, the car was a used one. The defendant executed a negotiable note for the balance of the purchase price and a chattel mortgage on forms which were furnished the dealer by the plaintiff finance company. The dealer handled the paper, but the plaintiff was to finance the sale and the note was payable at the office of the plaintiff. Both the bill of sale and the chattel mortgage described the car as a new demonstrator. The note was indorsed in blank by …