Banking and Finance Law Commons^™

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, …

Wills-Advancements-Joint Bank Deposit As Advancement To Child, James F. Gordy S.Ed.

Michigan Law Review

Decedent opened a joint bank account in the name of himself and his daughter. Only two deposits were made, both by him, and solely from his funds. Decedent died intestate before any withdrawals had been made. The administratrix of his estate contended that the funds remaining in the joint bank account constituted an advancement to the daughter, and sought to have them brought into hotchpot in determining the distributive shares of the other heirs. A Colorado statute provided, inter alia, that when such a joint deposit is made, it may be paid to any one· of the joint depositors whether …

Bankruptcy-Set-Off-Bank Deposits, A. E. Anderson S.Ed.

Michigan Law Review

Endorsers of a corporation's notes caused the corporation to make deposits in the payee bank in the regular course of business, knowing the corporation to be insolvent, and the bank took over the deposits within four months of adjudication in bankruptcy. It was contended that under the amended definition of "transfer" as set out in section 1 (30) of the Bankruptcy Act of 1938, this transaction resulted in a voidable preference to the endorsers under section 60. The trial court rejected this contention. On appeal, held, affirmed. Although the 1938 amendment gave a broader significance to the term "transfer" …

Bills And Notes-Imposters In The Law Of Bills And Notes, Ralph W. Aigler

Michigan Law Review

Two crooks, Baron and Brasch, now apparently residents of the New Jersey penitentiary, yielded to the temptation to acquire money by supposedly easy means. They selected as their victim a Miss Russell, a retired school teacher with more cash than is usual in the cases of people with her background. She seems to have had a strong leaning towards charitable contributions, and it was this trait which commended her to Baron and Brasch.

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 …

Chattel Mortgage--Validity Of Recorded Chattel Mortgage As Against Ordinary Purchaser--Possession Entrusted To Mortgagor-Dealer Regularly Engaged In Sale Of Similar Articles, Edwin F. Uhl S.Ed.

Michigan Law Review

Plaintiffs purchased from a retail dealer, in the ordinary course of trade, automobiles which were subject to properly recorded mortgages given by the dealer to defendant finance company. The certificates of title which the mortgage-dealer had been permitted to retain indicated that the vehicles were free from lien. Claiming default in payments by the dealer, the defendant seized the automobiles. Plaintiffs brought actions seeking repossession and damages. As the evidence clearly disclosed, defendant anticipated that the dealer would make no disclosure of the encumbrance at the time of sale, but rather expected that the lien would subsequently be discharged with …

Bills And Notes-Reacquisition And Reissue By A Prior Party-Liability Of Intermediate Indorser To Subsequent Holder In Due Course, James R. Bliss S.Ed.

Michigan Law Review

The payee of a negotiable note indorsed to X, who later indorsed back to the payee, who before maturity indorsed to a holder in due course. All indorsements were special. On default, the holder brought suit to enforce the secondary liability of the payee and X, the intermediate indorser. Both defendants appealed from a judgment for the holder. Held, reversed as to X. The reacquisition of a note by a payee terminates the contractual liability of an intermediate indorser as to a holder subsequent to the payee. Denniston's Admr. v. Jackson, 304 Ky. 261, 200 …

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 …

Gifts--Banking--Gift Of Joint Savings Bank Deposits, Ira M. Price, Ii

Michigan Law Review

A, the mother of B, transferred three savings bank deposits from her sole account to the account of "A or B-either or survivor." Two of the depositors' signature cards contained this language: ''We hereby certify that this account and all moneys to be credited to it belong to us as joint tenants, and will be the absolute property of the survivor of us." There was evidence that one of the reasons for A's transferring her deposits to the joint account was to enable B to draw money therefrom for A while A was in the …

Banks And Banking-Night Depository-Relation Created Between Bank And Depositor, Irving Slifkin

Michigan Law Review

By payment of a nominal charge, the plaintiff became entitled to use the night depository service offered to its customers by the defendant bank. On Christmas day, 1942, plaintiff made use of this service by depositing some currency, coins, and a check which were placed in a canvas bag supplied by the defendant bank for this purpose. Plaintiff never received credit for this deposit. Defendant bank was unable to find the bag which the plaintiff had deposited, and plaintiff sued to recover the value of its contents, obtaining a judgment in the trial court. Defendant bank appealed. Held, judgment …

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) …

Agency-Implied Agency-Effect Of Principal's Acquiescence In Agent's Collection Where Such Authority Is Denied, Shubrick T. Kothe S.Ed.

Michigan Law Review

Defendant's predecessor gave a promissory note in payment for goods delivered to him by a local merchant, who advertised himself as plaintiff's dealer. The note was payable at plaintiff's home office, and the conditional sale contract also provided that the payments were to be made at that office. The first two payments were made to the dealer, and subsequently accepted by the plaintiff. The third and final payment was also made to the dealer but not received by the company. Suit was instituted for the amount of the final payment. Judgment rendered on demurrer for the plaintiff. Held, the …

Contracts-Tender-Check As Tender, George A. Rinker

Michigan Law Review

Plaintiff had paid $300 as down payment on a restaurant under contract of purchase from defendant. On the day specified in the contract for payment of the balance, plaintiff tendered to defendant a check drawn on the local bank and bearing the notation "OK G. R. P ." Defendant refused the check, saying he did not have to accept a check in payment, and that he did not know what the notation meant, even though plaintiff had told him it was placed there by the president of the local: bank, and meant that the check was good. Plaintiff recovered damages …

Bills And Notes--Holder In Due Course-Purchasing Installment After Maturity, John E. Grosboll

Michigan Law Review

Three installment notes were pledged to the plaintiffs by the payee as security. At the time plaintiffs took the notes, the first installment of each was overdue and unpaid. In an action by plaintiffs against the makers, the latter pleaded in defense failure of consideration and fraud on the part of the payee. Held, plaintiffs were not holders in due course and consequently took the notes subject to the defense of the makers. Bliss v. California Co-op. Producers, (Cal. 1946) 172 P. (2d) 62.

Banks-Fiduciary Duty-Guilty Participation In A Breach Of Trust, Robert O. Hancox

Michigan Law Review

The fiduciary relation which "involves a duty on the part of the fiduciary to act for the benefit of the other party to the relation as to matters within the scope of the relation" is of broad scope, including not only the more strictly defined relations such as those involving trustees, guardians, and executors, but also the more loosely knit relations such as found in the corporate field; i.e., directors and stockholders, promoters and subscribers to stock and the like. In contrast to the confidential relation, where to set aside a transaction between the parties there must be shown fraud, …

Principal And Surety -Application Of Payments By Creditor When Source Of Funds Is Known, William H. Buchanan S.Ed.

Michigan Law Review

X, contractor on a housing project, sublet the painting work to Y. Y purchased paints from Z and also borrowed money from Z to pay his laborers until payments began to come in. Pursuant to an agreement between Y and Z, Y turned over checks received from X to Z, and these checks were applied against the debt owing for the money loaned to Y by Z. Z, as materialman and as beneficiary of an ordinary bond to pay labor and materials, sued X and the surety on the bond. Held, Z was …

New Legislation Affecting Non-Notification Financing Of Accounts Receivable, Maximilian Koessler

Michigan Law Review

Not less than sixteen new statutes affecting the assignment of accounts receivable have been enacted in this country since the writer's completion of an essay in which he attempted to draw an all-round picture of the legal situation in this recently so much debated field. It is one of the purposes of the present follow-up study to discuss those new legislative developments. This will be done in part II of this article, where the analysis is subdivided into a contemplation of the new validation statutes on the one hand, and the new recording acts, on the other.

Waiver Of Protest: A Comparative Study, Raúl Olivera Y Borges

Michigan Law Review

Parallel to the study of protest, it is pertinent to consider the nature and legal effects of exempting clauses which, while not essential, may be found in bills of exchange. Waiver of protest appears to have been introduced by the practice in France during the first third of the nineteenth century. It is generally used to moderate the consequences of non-payment, by a drawer who lacks confidence in the solvency of the drawee, or who fears that he may not be able to provide the necessary funds before maturity. The drawer can thus spare the susceptibilities of a drawee who …

Promissory Notes In The Legislations Of The Americas, Juan Octavio Díaz Lewis

Michigan Law Review

It has rightly been said that the promissory note is the Cinderella of negotiable paper. It is indeed strange that this instrument, widely used in most countries, is accorded only a few words in the legal textbooks and a few sections in the respective statutes. The purpose of the present study is not to rescue promissory notes from their present position of obscurity, but rather to present a unified classification of the specific provisions relating thereto, which are in force at the present time in the legislations of the American continent.

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.

Acceptance By Intervention In Bills Of Exchange, Salvador Ltriago

Michigan Law Review

Intervention is an act whereby a person becomes a party to a negotiable instrument, whether by accepting the bill or by paying the sum indicated thereon, in order to relieve one of the obligors on the bill from the action of recourse that the holder could assert against him in consequence of default of acceptance or payment by the drawee.

The complexity of the material to be discussed renders it necessary, in order to clarify the development of the exposition, for us to advance several concepts, which will later be considered more fully at the proper places.

Creditors' Rights-Garnishment-Contents Of Safety Deposit Box Rented To Judgment Debtor Reached By Garnishing Lessor, Craig E. Davids S.Ed.

Michigan Law Review

Execution against the judgment debtors having been returned unsatisfied, plaintiff secured a writ of garnishment from the municipal court against the defendant bank in November 1935. The garnishee's disclosure indicated that it held a small amount of cash with other collateral as security for loans made to the judgment debtors and the unknown contents of a safety deposit box. The box was rented by the judgment debtors in the usual manner and access to it could be gained only by simultaneous use of two keys-a master key retained by the bank and another key issued to the customer. The garnishee …

Sales-Automobile Dealer Financing And The Bona Fide Purchaser, Robert M. Barton S. Ed.

Michigan Law Review

With the prospect of increased manufacture of automobiles for civilian use, the problem of financing the dealer and his customers will again loom large. In the past the burden has largely been assumed not by banks, whose credit practices and collection machinery are better adapted to short term, single payment credits, but by the finance or acceptance companies. These organizations mushroomed into prominence after World War I as retail installment selling became more and more prevalent, and with the "easy payment plan" offered by the dealer to the retail buyer, there was produced a corresponding need by the dealer himself …

Capacity Under The Negotiable Instruments Laws Of The Americas: A Comparative Study, Luis M. Ramirez B.

Michigan Law Review

Closely related to the legal rules that regulate the different aspects and effects of endorsement is the question of capacity to endorse bills of exchange. This forms part of negotiatory capacity in general, which, in a broad sense, may be defined as the faculty of a person to acquire rights and to assume obligations on negotiable instruments.

Auditing Standards And Procedures In The Light Of Court Decisions, Frederick K. Rabel

Michigan Law Review

Ever since the Securities and Exchange Commission announced its amended rule 2-02 and required the accountant's certificate to include a statement as to compliance with generally accepted auditing standards, the accounting profession has been confronted with the problem of how to state those heretofore undefined standards. In the meantime, the committee on auditing procedure of the American Institute of Accountants requested the assistance of all practicing certified public accountants and all state accounting societies in taking prompt action toward defining auditing standards, and two members of the profession have since gone on record by courageously submitting tentative lists of proposed …

Attorneys-Practice Of Law-Preparation Of Tax Returns By Laymen, Benjamin M. Quigg, Jr. S.Ed.

Michigan Law Review

The members of Lowell Bar Association brought a suit in equity to restrain respondents, who are not members of the bar, from holding themselves out as qualified to practice law, and from giving legal advice in respect to liability to pay income taxes and to enjoin the preparation and execution of income tax returns. The facts showed that respondents had advertised, by newspaper and placards, an income tax-service for individuals, including preparation of tax return and "counsel in handling income tax matters should any develop after the official audit by the U.S. Tax Department." The lower court enjoined respondents from …

Banks And Banking - Guaranty Of Indorsements - Recovery By Payer

Michigan Law Review

Relying on fraudulently prepared documents purporting to authorize the president to borrow money, P Bank loaned $100,000, taking the promissory note of the state university executed by such president. The amount of the loan was advanced by means of a cashier's check payable to the order of the university. This check, indorsed by the president without authority, was taken by D Bank , and the amount thereof added to the credit balance of the university in a checking account carried in that bank. Through the clearing house P Bank paid D Bank the amount of the check, which bore the …

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 …

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 …

Constltutional Law - Labor Unions - Injunction

Michigan Law Review

Complainants owned and operated a small cafeteria conducting the business without the aid of any employees. Defendants, a labor union and its president, picketed the cafeteria in an attempt "to organize it." The picketing was carried on by parade of one person at a time in front of the premises, at all times in an "orderly and peaceful" manner. Signs were carried which tended to give the impression that the complainants were "unfair" to organized labor and that the pickets "had been previously employed in the cafeteria." These representations were knowingly false in that there had been no employees in …