SOME PROBLEMS ARISING OUT OF DEPOSITS TO PAY PRINCIPAL AND INTEREST ON BONDS

Authors

Paul P. Lipton, Member of the Wisconsin bar; United States Bureau of Internal Revenue

Abstract

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 were to be used in making payments to bond and coupon holders, has brought to the forefront the very important problem of determining where the loss occasioned by the insolvency of the trustee must fall. Until recently, however, it was the insolvency of the corporation or other depositor that gave rise to difficulty, a controversy generally arising when a receiver attempted to claim for the benefit of all the creditors of the depositor the moneys on deposit. Analysis of the rights of the parties in this situation is essential to a proper understanding of the rights arising on the insolvency of the trustee and will therefore be attacked first.

Recommended Citation

Paul P. Lipton, SOME PROBLEMS ARISING OUT OF DEPOSITS TO PAY PRINCIPAL AND INTEREST ON BONDS, 39 Mich. L. Rev. 59 (1940).
Available at: https://repository.law.umich.edu/mlr/vol39/iss1/4