Interesting little court case i ran across....

[yesme]

wanted to see what you folks thought about it.

First National Bank of Montgomery vs. Daly (1969) was a courtroom drama worthy of a movie script.3 Defendant Jerome Daly opposed the bank's foreclosure on his $14,000 home mortgage loan on the ground that there was no consideration for the loan. "Consideration" ("the thing exchanged") is an essential element of a contract. Daly, an attorney representing himself, argued that the bank had put up no real money for his loan. The courtroom proceedings were recorded by Associate Justice Bill Drexler, whose chief role, he said, was to keep order in a highly charged courtroom where the attorneys were threatening a fist fight. Drexler hadn't given much credence to the theory of the defense, until Mr. Morgan, the bank's president, took the stand. To everyone's surprise, Morgan admitted that the bank routinely created money "out of thin air" for its loans, and that this was standard banking practice. "It sounds like fraud to me," intoned Presiding Justice Martin Mahoney amid nods from the jurors. In his court memorandum, Justice Mahoney stated:

Plaintiff admitted that it, in combination with the Federal Reserve Bank of Minneapolis, . . . did create the entire $14,000.00 in money and credit upon its own books by bookkeeping entry. That this was the consideration used to support the Note dated May 8, 1964 and the Mortgage of the same date. The money and credit first came into existence when they created it. Mr. Morgan admitted that no United States Law or Statute existed which gave him the right to do this. A lawful consideration must exist and be tendered to support the Note.

The court rejected the bank's claim for foreclosure, and the defendant kept his house. To Daly, the implications were enormous. If bankers were indeed extending credit without consideration – without backing their loans with money they actually had in their vaults and were entitled to lend – a decision declaring their loans void could topple the power base of the world. He wrote in a local news article:

This decision, which is legally sound, has the effect of declaring all private mortgages on real and personal property, and all U.S. and State bonds held by the Federal Reserve, National and State banks to be null and void. This amounts to an emancipation of this Nation from personal, national and state debt purportedly owed to this banking system. Every American owes it to himself . . . to study this decision very carefully . . . for upon it hangs the question of freedom or slavery.

Needless to say, however, the decision failed to change prevailing practice, although it was never overruled. It was heard in a Justice of the Peace Court, an autonomous court system dating back to those frontier days when defendants had trouble traveling to big cities to respond to summonses. In that system (which has now been phased out), judges and courts were pretty much on their own. Justice Mahoney, who was not dependent on campaign financing or hamstrung by precedent, went so far as to threaten to prosecute and expose the bank. He died less than six months after the trial, in a mysterious accident that appeared to involve poisoning

[Shpira]

Re: Interesting little court case i ran across....

knew about it for some time...it just shows how some of tyhe judges are out of touch with whats going on IMO

"The result

The immediate effect of the decision was that Daly did not have to repay the mortgage or relinquish the property. The case and its reasoning have subsequently been cited as nullifying the U.S. banking system and in particular the practice of fractional-reserve banking.
However, the bank appealed the next day, and the decision was ultimately nullified on the grounds that a Justice of the Peace did not have the power to make such a ruling.[3] The nullification did not address the case's merits.
Because the decision was nullified, the case has no value as precedent. However, it is still cited by groups who support a government owned central bank or oppose the Federal Reserve System; such groups argue the case demonstrates that the Federal Reserve System is unconstitutional. A U.S. District Court decision in Utah in 2008 mentioned half a dozen such citations, noting that similar arguments have "repeatedly been dismissed by the courts as baseless" and that "courts around the country have repeatedly dismissed efforts to void loans based on similar assertions."[4]"

[yesme]

Re: Interesting little court case i ran across....

i was thinking more along the lines of the banks createing money out of thin air.

Graham Towers, Governor of the Bank of Canada from 1935 to 1955, acknowledged:

Banks create money. That is what they are for. . . . The manufacturing process to make money consists of making an entry in a book. That is all. . . . Each and every time a Bank makes a loan . . . new Bank credit is created -- brand new money.7

Robert B. Anderson, Secretary of the Treasury under Eisenhower, said in an interview reported in the August 31, 1959 issue of U.S. News and World Report:

[W]hen a bank makes a loan, it simply adds to the borrower's deposit account in the bank by the amount of the loan. The money is not taken from anyone else's deposit; it was not previously paid in to the bank by anyone. It's new money, created by the bank for the use of the borrower.

[toasty]

Re: Interesting little court case i ran across....

wanted to see what you folks thought about it.

strikes me as an example of a blogger reading way to much into a single state court decision. I'm not even able to find a copy of the actual decision on LEXIS, which itself speaks volumes about how much weight it's given by the legal community.

Assume for a moment, purely for the purposes of argument, that this case was decided by a garden variety Minnesota State Court, not a Justice of the Peace Court. Also assume that it wasn't subsequently reversed. So what? No federal entity is bound by the decision, no bank in any other state is bound by the decision, other banks in Minnesota aren't bound by the decision, and not even the judge in the next courtroom over in Scott County is bound by the decision.

I think the title of the thread gets it right -- "interesting little court case," but really nothing more. I do get that for people that don't spend their day-to-day dealing with the court systems and understanding what does and does not constitute binding precedent, it's easy to attach more importance to it because, hey, it's an official court decision, but in actual practice, this has very little application beyond the case in which it was decided.

[yesme]

Re: Interesting little court case i ran across....

strikes me as an example of a blogger reading way to much into a single state court decision. I'm not even able to find a copy of the actual decision on LEXIS, which itself speaks volumes about how much weight it's given by the legal community.

Assume for a moment, purely for the purposes of argument, that this case was decided by a garden variety Minnesota State Court, not a Justice of the Peace Court. Also assume that it wasn't subsequently reversed. So what? No federal entity is bound by the decision, no bank in any other state is bound by the decision, other banks in Minnesota aren't bound by the decision, and not even the judge in the next courtroom over in Scott County is bound by the decision.

I think the title of the thread gets it right -- "interesting little court case," but really nothing more. I do get that for people that don't spend their day-to-day dealing with the court systems and understanding what does and does not constitute binding precedent, it's easy to attach more importance to it because, hey, it's an official court decision, but in actual practice, this has very little application beyond the case in which it was decided.

Could i use the no consideration for my defense?

also since you are a lawyer, i'm interested to see what your stance is on this issue.

No State shall make any Thing but gold and silver Coin a Tender in Payment of Debts

to me this says only gold and silver can be used in payments, since it is in the constitution, does there not have to be an amendment to allow states to accept legal tender/chickens/whatever else it wants?

[toasty]

Re: Interesting little court case i ran across....

Could i use the no consideration for my defense?

I don't think the argument he was trying to make would fly, no. When something fails for lack of consideration, it means that there was no actual exchange of value that occurred. A (very rudimentary, and overly simplistic) example:

-X agrees to give his bike to Y. If X later changes his mind, Y can't sue for breach of contract because there was no exchange of value, just an empty promise.

Similarly, if X were to agree to sell his bike to Y in exchange for a clump of grass, that agreement would also likely fail for lack of consideration because the clump of grass is effectively worthless, and is thus no consideration at all.

In the context of a home mortgage, regardless of whether or not the money given to pay for the home was backed by legal tender the bank had on hand at the time, provided the lender did, in fact, fund the loan, it's hard to say it didn't live up to its end of the bargain by exchanging something of value, which is what "consideration" is all about. It's a clever argument, but a loser IMO because it just flies in the face of the inescapable fact that the bank did, in fact, fund the loan.

also since you are a lawyer, i'm interested to see what your stance is on this issue.



to me this says only gold and silver can be used in payments, since it is in the constitution, does there not have to be an amendment to allow states to accept legal tender/chickens/whatever else it wants?

Actually, it says that states can't do that, because the ability to do that, coin money, etc. are powers reserved to the federal government. In other words, the drafters of the constitutional didn't want each state to have its own currency. Here's the whole clause:

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

If anything, this clause entrenches the familiar greenback as the currency of choice for most transactions, rather than mandating the use of gold and silver. I'm pretty OK with this, incidentally -- I don't even like carrying around change, let alone bars of gold and silver.

[yesme]

Re: Interesting little court case i ran across....

I don't think the argument he was trying to make would fly, no. When something fails for lack of consideration, it means that there was no actual exchange of value that occurred. A (very rudimentary, and overly simplistic) example:

-X agrees to give his bike to Y. If X later changes his mind, Y can't sue for breach of contract because there was no exchange of value, just an empty promise.

Similarly, if X were to agree to sell his bike to Y in exchange for a clump of grass, that agreement would also likely fail for lack of consideration because the clump of grass is effectively worthless, and is thus no consideration at all.

In the context of a home mortgage, regardless of whether or not the money given to pay for the home was backed by legal tender the bank had on hand at the time, provided the lender did, in fact, fund the loan, it's hard to say it didn't live up to its end of the bargain by exchanging something of value, which is what "consideration" is all about. It's a clever argument, but a loser IMO because it just flies in the face of the inescapable fact that the bank did, in fact, fund the loan.



Actually, it says that states can't do that, because the ability to do that, coin money, etc. are powers reserved to the federal government. In other words, the drafters of the constitutional didn't want each state to have its own currency. Here's the whole clause:



If anything, this clause entrenches the familiar greenback as the currency of choice for most transactions, rather than mandating the use of gold and silver. I'm pretty OK with this, incidentally -- I don't even like carrying around change, let alone bars of gold and silver.

but now read this...


quote]Furthermore we are faced with the fact that the Constitution forbids the states to make anything but gold and silver coin a tender in payment of debts. If we respect this mandate, how can we possibly believe that the federal government has the power to compel them to use anything else? To believe that the federal government has the right to compel the states to violate the Constitution is against all reason.

But if any further proof is needed that the Federal has no constitutional power to “emit bills of credit,” or print and circulate paper as money, it may be found in the debates of the Constitutional Convention. A proposal was made therein to give the Congress this very power and it was rejected by a vote of nine to two.

In a footnote explaining his vote in favor of denying the power, James Madison says:

This vote in the affirmative by Virginia was occasioned by the acquiescence of Mr. Madison, who became satisfied that striking out the words would not disable the government from the use of public notes, as far as they could be safe and proper; and would only cut off the pretext for a “paper currency,” and particularly for making the bills a “tender” either for public or private debts.” (Madison’s notes on the Federal Convention, Aug. 16, 1787)
[/quote]

It will be noted that three things had been established before the Constitution was adopted:

1.That the official money of the United States would be precious metals--silver and gold.

2.That the basic unit of value would be called a "dollar" and consist of 375 and 64/100s grains of fine silver.

3.All other coins, both foreign and domestic, would be evaluated in terms of this official silver dollar.

All of this was already part of the law of the land when the Constitution was adopted. Therefore, the Founders wrote the following provisions in the Constitution concerning money based on the above statutes which had previously been adopted as the official monetary system.

As indicated earlier, the original draft of the Constitution authorized Congress to "emit bills of credit." This had reference to debt money or currency which would be redeemed with gold or silver. After an extensive discussion the Founders decided they couldn't risk it. There would be no United States debt currency or bills of credit. As for fiat money, this was so abhorrent to the Founders they didn't even discuss it.

notice the bold part below?

The United States Constitution does not mention paper money by that name. Nor does it refer to paper currency or fiat money in those words. There is only one direct reference to the origins of what we, and they, usually call paper money. It is in the limitations on the power of the states in Article I, Section 10. It reads, “No State shall . . . emit Bills of Credit . . . .” Paper that was intended to circulate as money but was not redeemable in gold and silver was technically described as bills of credit at that time.

BAM

BILL OF CREDIT

It is provided by the Constitution of the United States, Art. I, Sec. X, that no state shall 'emit bills of credit, or make anything but gold and silver coin a tender in payment or debts.' Such bills of credit are declared to mean promissory notes or bills issued exclusively on the credit of the state, and for the payment of which the faith of the state only is pledged. The prohibition, therefore, does not apply to the notes of a state bank drawn on the credit of a particular fund set apart for the purpose. Bills of credit may be defined to be paper issued and intended to circulate through the community for its ordinary purposes as money redeemable at a future day.
"Bill Of Credit" Defined

http://www.lectlaw.com/def/b099.htm

The constitution does not allow the federal government to emit bills of credit, in fact, the original constitution did, but the founders removed it(feel free to look it up urself). since the power is not given to them, it falls to the state, where CLEARLY it states that the states can not emit bills of credit either.

And the PROOF is the aug 6 draft of the constitution, article 7 section 1(it's all not in order either)

August 6 Draft of the Constitution - The U.S. Constitution Online - USConstitution.net

http://www.usconstitution.net/draft_aug6.html

Article 7
Section 1. The Legislature of the United States shall have the power to lay and collect taxes, duties, imposts and excises;
To regulate commerce with foreign nations, and among the several States;
To establish an uniform rule of naturalization throughout the United States;
To coin money;
To regulate the value of foreign coin;
To fix the standard of weights and measures;
To establish Post-offices;
To borrow money, and emit bills on the credit of the United States;
To appoint a Treasurer by ballot;
To constitute tribunals inferior to the Supreme Court;
To make rules concerning captures on land and water;
To declare the law and punishment of piracies and felonies committed on the high seas, and the punishment of counterfeiting the coin of the United States, and of offenses against the law of nations;
To subdue a rebellion in any State, on the application of its legislature;
To make war;
To raise armies;
To build and equip fleets;
To call forth the aid of the militia, in order to execute the laws of the Union, enforce treaties, suppress insurrections, and repel invasions;
And to make all laws that shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested, by this Constitution, in the government of the United States, or in any department or officer thereof

so it was in the draft, and after discussing it more, it was decided to get pitched.............meaning it was then passed to the state, which CAN NOT emit bills of credit.

[toasty]

Re: Interesting little court case i ran across....

^^in a word, whatever.

For me, this falls into the category of "if there was something seriously wrong with the way we deal with money in this country, someone would have challenged it and won at some point." At a glance, it seems like someone is conflating a number of different concepts, but I honestly have neither the time nor the interest level to delve into it any further. There may be an interesting scholarly discussion in there somewhere, but I'm fighting a flu bug, and I've having a hard time keeping this on my radar screen long enough to type this message as it is.

Maybe later.