Banking and Finance Law Commons^™

The Expanding Jurisdiction Of The Securities And Exchange Commission: Variable Annuities And Bank Collective Investment Funds, John W. Erickson

Michigan Law Review

The Securities and Exchange Commission is presently attempting to assert jurisdiction over certain aspects of two industries traditionally exempt from federal securities regulation-insurance and banking. The SEC claims that two recently developed investment vehicles-variable annuities in the insurance field and pooled funds of managing agency accounts in the banking field-are virtually the same as mutual funds, which are subject to SEC regulation under the Investment Company Act of 1940. (A mutual fund is essentially a fund (usually in corporate form), the participants' contributions to which are collectively invested in a portfolio of securities, each participation representing a pro rata interest …

Usury-Applicability Of State Usury Laws To Installment Sales, John H. Blish

Michigan Law Review

Plaintiff sued a vendor and a finance company to cancel a conditional sales contract and note, for return of payments made, and to obtain an unencumbered certificate of title to a house trailer. The trailer's cash price was 5,000 dollars and plaintiff had paid 1,250 dollars down. Charges of 1,569 dollars were added, making the total time-price 6,569 dollars and leaving a time-balance of 5,319 dollars, payable in sixty monthly installments. The contract and note were immediately assigned to the finance company. Plaintiff based his claim on Nebraska's Installment Loan Act, alleging that the difference between the cash price and …

Taxation-Federal Tax Liens-Section 6321 Of The Internal Revenue Code As Basis For Injunction Binding Assets Of Foreign Branch Of American Bank, Gerald J. Laba

Michigan Law Review

The Commissioner of Internal Revenue issued jeopardy assessments against the taxpayer, Omar, S.A., a Uruguayan corporation. To avoid payment, Omar began to liquidate its American-held assets by transferring receipts out of the country. Pursuant to its statutory right, under section 6321 of the Internal Revenue Code of 1954, to impose a lien upon all property of a delinquent taxpayer, the United States brought suit against Omar and various New York banks in the domestic and foreign branches of which Omar's funds were deposited. The district court granted a preliminary injunction restraining certain of the banks from transferring any property whether …

Government Regulation Of Bank Mergers: The Revolving Door OfPhiladelphia Bank, Alexander E. Bennett

Michigan Law Review

On November 15, 1960, the second and third largest Philadelphia banks, the Philadelphia National Bank-its assets 1.09 billion dollars, its deposits 603 million dollars-and the Girard Trust Com Exchange Bank-its assets 757 million dollars, its deposits 560 million dollars-applied to the Comptroller of the Currency for approval to merge. The application stated the intention of the Philadelphia National (PNB) to acquire the Girard, including all its assets, deposits, capital, and retained earnings, thereupon to disgorge stock in a resulting bank to Girard shareholders at a ratio of 1.2875 to 1. Both Girard and PNB had a history of merger and …

Uniform Commercial Code Article 9 Filing Procedures For Railroad, Utility, And Other Corporate Debtors: Some Suggestions, Daniel R. Elliott Jr.

Michigan Law Review

After a brief discussion of the provisions of Article 9 peculiarly applicable to the long-term mortgage, a portion of this comment will review the relevant statutes and case authority in force prior to the effective date of the Code in various states and still applicable in others. More specifically, it will examine the special treatment accorded certain types of corporate indentures, particularly those securing the debt of railroads and other public utilities. Second, an attempt will be made to explain the probable solutions to the problems raised by the filing requirements of Article 9 as promulgated in each jurisdiction and …

Foreign Investment Protection: A Reasoned Approach, Earl Snyder

Michigan Law Review

The main purpose in protecting private foreign investment is to encourage capital to move to newly developing nations in spite of serious, existing non-business risks. These risks are (1) the political risk (outright and "creeping" expropriation), (2) the transfer risk ( currency controls and inconvertibility of funds), and (3) the calamity risk (insurrection, revolution, war, etc.). But why encourage this? Why should an affluent, powerful nation seek, in effect, to transport overseas some of its affluence and power? Why--in the case of the United States-should encouragement be given to that which may, according to some, tend to tip still more …

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 …