Case Name: John Brown versus The President, Directors, and Company of The Penobscot Bank
Court: Massachusetts Supreme Judicial Court
Jurisdiction: Massachusetts
Decision Date: 1812-03
Citations: 7 Tyng 445
Docket Number: 
Parties: John Brown versus The President, Directors, and Company of The Penobscot Bank.
Judges: 
Reporter: Massachusetts Reports
Volume: 8
Pages: 369–373

Head Matter:
John Brown versus The President, Directors, and Company of The Penobscot Bank.
The act of 1809, c. 37, § 1, imposing a penalty of two per cent, per month on the amount of bills of any bank, of which payment is by such bank refused, militates with no principle of the constitution, either of the United States or of this commonwealth.
The declaration, which was in case, contained the following count: — “ And also for that, at said Buckstown, to wit, at the said Boston, on the fifteenth day of January last past, the plaintiff was the lawful possessor and bearer of sundry bank notes of the said corporation, whereby said corporation had promised the bearers of said notes respectively to pay them the sum of money in the same notes respectively mentioned, and all of which sums amounted, as the plaintiff avers, to 6160 dollars ; and being so the possessor and bearer of said notes, the plaintiff then and there presented the same to the said corporation, at their place of discount and deposit at said Buckstown, and derhanded payment thereof; but the said corporation did then and there utterly refuse so to do; — whereby, and by force of the statute in such case made and provided, the said corporation became liable to pay to the plaintiff, beside the said principal sum after the rate of two per cent, per month thereon, by way of additional damages for the non-payment of said sum, from the time of said demand until the same should * be paid ; and being so liable, the said corporation promised the plaintiff to pay him the same sum accordingly ; yet, though requested,” &c.
The declaration also contained two special counts on the bill of exchange or draft hereafter mentioned, and a count for 10,000 dollars, money had and received.
The cause came before the Court on the following agreed statement of facts, viz.: —
“ On the 5th of September, 1809, the plaintiff held in his possession, and was the proper bearer of bills of said bank, to the amount of 6160 dollars, which he duly presented to said bank, and demanded payment of the same. The cashier of the said bank, having no specie on hand, drew his bill or draft on John Crosby, Esq., president of said bank, in the words and figures following; —
“6160 Dolls.-At sixty days’ date, pay to John Brown ox
order six thousand one hundred and sixty dollars, and interest until paid, on his delivering to you the original sum in Penobscot bank bills in Boston.
Jahaziah Shaw, j <^&£**~*
John Crosby, Esq., at Boston.
“ Which bill or draft, with the original bills of said bank to the amount thereof, was presented at the last and usual place of abode of the said Crosby in Boston, on the sixth of November, 1809, for acceptance, and not being accepted, was duly protested for non-acceptance, and due notice thereof given to said bank. On the 15th of January, 1810, the plaintiff again presented the said first-mentioned bills to the said bank, and demanded payment thereof, which was refused, the bank not having specie for the payment thereof. Afterwards, on the same day, this action was commenced on the said bills, and on the said draft. — The said parties further agree, L that the special count declaring on said bills shall be considered as good and sufficient, as if each bill had been separately declared on. 2. That if the Court shall be of opinion that the act, on which the plaintiff* claims two per cent, a month on the amount of said bills, as declared for in this suit, is constitutional, judgment shall be rendered for the plaintiff for 6160 dollars, and interest at two per cent, a month from the said 15th of January, 1810; unless the receiving of the said draft, and the holding of the said bank bills, as above, shall, in the opinion of the Court, exempt said bank from such penalty or interest. 3. That if the Court shall be of opinion, that such penalty or interest at two per cent, a month is not recoverable, then judgment shall be rendered for 6160 dollars, with six per cent, interest from Septem ber 5th, 1809, if the Court are of opinion that a bank is under a legal obligation to pay interest at all on its bills not paid when presented for payment. 4. That if the Court are of opinion that the said bank is not holden to pay any interest, judgment shall be rendered for the said sum of 6160 dollars, with costs. 5. That the said bills shall be considered as filed in Court, and be delivered to the defendants, or their agents, on the satisfaction of said judgment. It was also agreed that the bank bills above mentioned were dated and issued before the passing of the act above referred to.”
The cause was argued at the last March term in this county by Prescott and Crane for the plaintiff, and by the attorney general, Morton, for the defendants.
Crane, for the plaintiff,
stated his demand on these facts to be the principal sum of 6160 dollars, with interest at six per cent, per annum from the 5th of September, 1809, the time of the first demand, to the 15th of January, 1810 ; and from that time he claimed additional damages at the rate of two per cent, per month. For the latter claim he relied on the statute of 1809, c. 37, § 1, by which it is enacted, “ that from and after the first day of January, 1810, if any incorporated bank within this commonwealth shall refuse or neglect to pay on demand any bill or bills by such bank issued, such bank shall be liable to pay to the holder of such bill or bills after the rate of two per cent, per month, on the amount thereof from and after * the time of such neglect or refusal; to be recovered as additional damages, in any action against said bank for the recovery of said bill or bills.”
Morton, [attorney general,] for the defendants,
argued that the act cited was unconstitutional, as being ex post facto, and in its operation highly penal. But if this objection did not strictly apply, still it was void as impairing the obligation of a contract, which he considered to have been made by the legislature with the defendants in the act incorporating them, [sta<. 1805, c. 112.] By that act the government granted to the corporation the privilege of issuing. their bills to a certain amount, with the implied condition only that if they should neglect to pay them on demand, they should 're holden to pay lawful interest thereafter on the amount so unpaid. And by the sixth section of the act, there is a further condition that the incorporation shall be declared forfeited and void, if the corporation shall exceed its legitimate powers, or fail to comply with the fundamental rules prescribed for its conduct. The legislature were not authorized thus to single out a portion of the citizens, and subject them to a severe penalty for their neglect of punctuality in fulfilling their engagements, from which all other classes of citizens are exempted. They might as well have imposed the penalty on citizens of a particular trade or profession. Such an act would only have exhibited the same principle in a light somewhat stronger.
Prescott, for the plaintiff, in reply,
considered the notion of a contract between the government and corporation as too fanciful to need any observation. This is to be considered as establishing a rule or measure of damages, applied to certain bodies politic, who received their existence from the legislature, which being wholly prospective in its operation, violates no principle of the constitution. The inconvenience, which this statute was intended to cure, is well known to have been excessive. So .far from this beinga measure tending to impair the obligation of contracts, * its whole effect is to strengthen and enforce the obligation. It is essential to the existence of a banking institution, that their bills be paid at sight; and it was the right, not less than the duty, of the legislature, by all means in their power, to compel punctuality in every instance. For this end, the provision of this statute is much less severe than a repeal of the charter, which is agreed to be within the authority of government, when the corporation shall fail to conform to its duties.

Opinion:
The action stood continued for advisemént to this term; and now
The Court
observed that if the act, upon which the plaintiff relied in this case, was unconstitutional, and therefore void, it must be by force of some specific provision in the constitution of the United States, or in that of this commonwealth. But none such had been cited at the bar, nor was any such known to exist. The incorporation of a banking company was a privilege conferred by the legislature on the members. Punctuality and promptness in meeting every demand made on such an institution is essential to its very existence ; and a failure in this respect, now that bank bills form almost exclusively the circulating medium of the country, is a public inconvenience of great extent, and introductive of much mischief. It was therefore a duty highly incumbent on the legislature, by all means within its constitutional authority, to prevent and punish such a mischief, and this the rather as these corporations derived all their powers from legislative grants. The provision made by the act under consideration was equitable and wise ; and the community is probably indebted to it for the correction of an evil, which at the time of passing the law had increased to an alarming degree. As it had no retrospective effect, there was no ground of complaint on the part of the banks, nor did it militate against any known and sound principle of legislation.
The plaintiff is entitled to the benefit of the rule of damages prescribed, from the 15th of January, 1810, the day of * the first demand after the act went into operation, which was on the first of that month. Regularly he would be entitled to these damages from the demand of payment to the entering of judgment; but as in this case the action has been continued since the last law term for the convenience of the Court, it would be a hardship on the defendants to hold them liable to the extra damages during that term.
Upon the whole, the plaintiff is entitled to judgment for the amount of the bills, on which payment was refused, with additional damages at two per cent, per month from the time of the demand and refusal to the last March term, and interest on the original sum at the rate of six per cent, per annum from that time to the present.