EFFECT OF TAX EXEMPTION AND TAX REFUNDING PROVISIONS ON THE NEGOTIABILITY OF CORPORATE BONDS

Authors

Abstract

The Connecticut court in a series of recent cases has cast considerable doubt on the negotiability of bonds containing provisions for payment without deduction for taxes and for refunding of personal property taxes paid by the holder on account of the instrument. In Mechanic's Bank v. Johnson it held a promissory note containing a promise to pay taxes assessed against the instrument non-negotiable on the ground that the amount was uncertain. In Mazurkiewicz v. Dowholonek it held unconstitutional an act, passed after the earlier decision, establishing the negotiability of such instruments already in circulation, on the ground that it impaired the obligations of a contract. If these holdings are applicable to bonds they are in serious conflict with business practice, as it has been the almost invariable custom for some years to include such provisions in corporate securities, instruments which are designed to be negotiable and are currently treated as negotiable." The decisions indicate not only that they are not negotiable, but also that those now in circulation can not be made negotiable by statute.

Recommended Citation

EFFECT OF TAX EXEMPTION AND TAX REFUNDING PROVISIONS ON THE NEGOTIABILITY OF CORPORATE BONDS, 29 Mich. L. Rev. 77 (1930).
Available at: https://repository.law.umich.edu/mlr/vol29/iss1/7