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94 HASKINS & SELLS July THE successful practice of accountancy appears, with increasing insistence, to depend upon a knowledge of law. Business relationships, and even routine transactions apparently with nothing more than commonplace significance, frequently force their way into prominence, because they have their foundation in some legal instrument which confers on the parties at interest certain obligations as well as certain privileges. The accountant with increasing frequency finds himself under the necessity of reading and interpreting long and involved documents, before he can review intelligently financial transactions to which his client has been a party. The following case, of which the substance only is given, illustrates the extreme care with which legal documents should be read, and the caution with which performance under an agreement should be verified. Fortunately, the case in question does not involve accountants in any way, but it has a lesson from which they may profit. It serves further to emphasize the need, at times, under circumstances of complicated legal situations, of obtaining legal advice before rendering certified statements without qualification. The New York Court of Appeals, reversing the Appellate Division of the New York Supreme Court, and the Trial Term, rendered, under date of May 6, 1930, a decision adverse to the defendants, in the matter of John A. Doyle, appellant, v. The Chatham and Phenix National Bank of the City of New York, respondent. (New York Law Journal, May 23, 1930.) The Bank was trustee under an indenture covering an issue of collateral trust gold bonds. The Bank certified certain bonds as being of the series covered by the indenture. The plaintiff bought some of these bonds. The bonds proved uncollectible. The plaintiff brought an action against the Bank, alleging that the negligence of the Bank was the proximate cause of his loss. The lower courts decided the case in favor of the Bank. The Court of Appeals reversed the lower courts and granted a new trial. The meat of the trouble is found in the simple wording of the certificates printed on the bonds, which were signed by the Bank. The certificate read: "This bond is one of the series of bonds described in the Collateral Trust Indenture mentioned therein." From this it appears that all of the provisions of the trust indenture should have been satisfied before the Bank could be justified in signing any certificate. The trust indenture provided, among other things, that the collateral deposited with the trustee should be equal to 110% of the face of the bonds to be issued; that the collateral should be trade acceptances or notes of dealers guaranteed by Motor Guaranty Corporation, cash or notes of purchasers in part payment for motor vehicles, or other first-lien mortgages, such purchasers' notes being indorsed by dealers and guaranteed by the Motor Guaranty Corporation. The Bank was authorized to authenticate bonds, that is, to sign the certificate in question, without further inquiry and with Negligence
Object Description
Title |
Negligence |
Author |
Anonymous |
Subject |
Bonds Negligence -- United States Liability (Law) -- United States |
Citation |
Haskins & Sells Bulletin, Vol. 13, no. 03 (1930 July), p. 094-096 |
Date-Issued | 1930 |
Source | Originally published by: Haskins & Sells |
Type | Text |
Collection | Deloitte Digital Collection |
Digital Publisher | University of Mississippi Libraries. Accounting Collection |
Date-Digitally Created | 2009 |
Identifier | hs bulletin 13-p94 |