Case Name: The President, Directors, and Company, of the Northampton Bank, versus Matthew Allen
Court: Massachusetts Supreme Judicial Court
Jurisdiction: Massachusetts
Decision Date: 1813-09
Citations: 9 Tyng 284
Docket Number: 
Parties: The President, Directors, and Company, of the Northampton Bank, versus Matthew Allen.
Judges: 
Reporter: Massachusetts Reports
Volume: 10
Pages: 283–286

Head Matter:
The President, Directors, and Company, of the Northampton Bank, versus Matthew Allen.
An incorporated banking company loaned a sum of money at a discount of six per cent, with an agreement, on the part of the borrower, to redeem the identical bank notes received by him on the loan, if they should be returned to the bank during the continuance of the loan, with specie, and also to purchase of the company, with specie, during the loan, a certain amount of other bank notes not current at par— this was held to be a lawful agreement, and the note given to secure the loan not usurious.
Assumpsit by thé plaintiffs, as endorsees, against the defendant, as endorser of a promissory note given by Matthew Coffin, dated June 10, 1809, for 7000 dollars, payable to the defendant, or his order, at the Northampton Bank, in six months from the date, “ in the notes of said bank, or such other bank notes as are received at said bank at that time without a discount,” and by the defendant endorsed to the plaintiffs.
The general issue being joined, the same was tried April term, 1811, before the late Judge Sedgwick, and a verdict taken for the plaintiffs, subject to the opinion of the Court upon the judge’s report of the evidence at the trial.
From that report it appears that the only evidence offered in support of the action was the note in writing, subscribed and endorsed as declared on. At the foot of the note was the following memorandum : “ Five thousand dollars * of the [ * 285 ] above sum are in Northampton Bank bills, numbered from one to two hundred, dated July 1, 1809; which bills I engage to redeem, whenever they return to the bank for specie, by paying the same according to a former contract with me.—Matthew Coffin.” Before the maturity of the note, the plaintiffs, as a banking company, stopped payment, and have never done business since. The signatures to the paper were proved, as were also the necessary demand and notice.
By the testimony of Levi Lyman, who had been the cashier of the bank, it was proved that, some time previous to the transaction, which was the ground of this action, the bank had loaned to Matthew Coffin 14,000 dollars, for twelve months, and that, at the time of that loan, a promise was made, in writing, in substance like the writing on which this action is brought, which had the guaranty of S. Hinldey, Esq. Coffin, at the time of that loan, made an agreement with the officers of the bank, which was reduced to writing, and subscribed by him, (but which at the time of the trial was either-lost or mislaid;) the purport of which was, that., if any of the Northampton Bank bills, which were received from the bank by him, and which were distinguished by marks put upon them, should be returned during the term for which the loan was made, he, Coffin, would, on notice within ten days, receive them from the bank, and pay specie for such of them as had been by the bank redeemed by specie; and that, at the end of every three months, he would receive one thousand dollars from the bank in certain paper described as foreign bills, which were circulating, and which were generally received for purchases and in payments at par, but were in the market, when exchanged for specie, at a discount of about two per cent.; and that he would pay for them at their nominal amount in specie. In order to ascertain the market discount on foreign bills, all inquiries were confined to the market of Boston ; and no evidence was given, or offered, or proposed, of any other market. Lyman further testified that, at the time of the loan on which this action was brought, [ * 2S6 ] besides * the written memorandum on the note, it was agreed by Coffin that he would, every ninety days during the loan, receive 500 dollars in those foreign bills, and pay for them an equal amount in specie, and that there might have been a writing to that effect, which, however, he could not find. Lyman also swore that the consideration, paid to Coffin for his note, was 5000 dollars, in bills of the Northampton Bank, 1000 dollars in foreign bills, and a draft on the agent of the plaintiffs in Boston for 1000 dollars, in the last-mentioned bills ; that Coffin was a broker, and well acquainted with the value of bills in Boston and in the country; and that there were no bills not issued in Boston which were receiver there in exchange for specie without a discount.
It appeared in evidence that there was deducted from the money loaned, at the time of the loan, a discount at the rate of six per cent, per annum.
Coffin, upon being released by the defendant, was admitted as a witness, although objected to by the plaintiffs. He testified that the second loan of 7000 dollars was made upon the same principles ns the first of 14,000 dollars.
On this evidence it was agreed that the jury, after ascertaining the damages, should find a verdict for the plaintiffs, subject to the opinion of the Court upon any question of law upon the facts ; and the verdict was to be altered or amended conformably to law.
Ashmun, for the defendant,
contended that the corporation had no authority to make the contract declared on and proved in the case. Corporations are mere creatures of statute; and any contract, not made by virtue of some authority thus derived, or made in violation of any statutory provision, cannot support an action. This corporation are authorized “ to loan and negotiate their moneys and effects upon banking principles.” This is their only authority respecting loans; and this Court have said, in the case of The Maine Bank vs. Butts, that the expression hanking principles, used in statutes of this kind, is but an authority to deduct the interest at the commencement of loans. But the loans must be * such as are to be repaid in cash, not in specific arti- [ * 287 ] cíes and services, as in the case at bar. The notes of banking corporations should be the representatives of specie, and to secure this they are restricted from issuing more, than a limited number of notes. But this security is lost, and the principal object in the creation of banks, the accommodation of the citizens, fails, if contracts like the one disclosed in the present case are held valid. By their act of incorporation, the plaintiffs are prohibited from using meir moneys in trade or commerce. But here is, in substance, a trading not only in foreign bills, but in their own notes.
The contract was also usurious, and banking companies are equally restrained by the statute against usury with individuals. Here were certain benefits reserved to the plaintiffs over and above the discount of six per cent, per annum.
L. Strong for the plaintiffs.
9 Mass. Rep. 54.

Opinion:
Per Curiam.
The arrangements made by the plaintiffs, in order to secure themselves against what is commonly called a run upon them, they had a right to make. This was not such a use of their moneys and effects as is prohibited by their act of incorporation; nor was the contract usurious, Judgment on the verdicL
ADDITIONAL NOTE.
[See, as to usury, State, &c., vs. Hunter, 1 Dev. 100.—Nashville, &c., vs. Hays, 1 Yerg. 243. — Lawrence vs. Morrison, 1 Yerg. 444.— The President, &c., vs. Ozoens, 2 Pet. 527.
The giving of a certificate of deposit payable in futuro, does not avoid a bill of exchange (discounted by a bank) for usury, where the certificate is granted at the request and for She accommodation of the party obtaining the discount, and there is no intention to take usury. — Knox vs. Goodwin, 25 Wend. 643.
Action by a country bank against the indorsers of a bill, mentioning no place of payment. The bill was discounted by the plaintiffs for the acceptors; the drawer, indorser, and acceptors lived in Nezo York ; the business was conducted by the plaintiffs through their cashier while in Nezo York; the avails of the bill were paid in drafts on New York, equal in value to city funds; and the amount thus paid was the face of the bill, deducting the difference of exchange between city and country funds, in addition to the usual discount. Held, the bill was not usurious.— The Cayuga, &c., vs. Hunt, 2 Hill, 635.
Otherwise, had more than the usual difference of exchange been deducted, or the avails of the bill paid in drafts having a long time to run. —Ibid. —F. H.]
[The writing set forth in the declaration is not a promissory note, within th
statute of Anne, and, by the rules of pleading, should be treated like any other parol promise or agreement not implying a consideration. Our courts have held that such notes are not negotiable, because not within the statute, (Clark vs. King, 2 Mass. Rep. 524 —Jones vs. Fales, 4 Mass. Rep. 245.—Cooledge vs. Ruggles, 15 Mass. Rep. 387.—Mozory vs. Todd, 12 Mass. Rep. 387. — Springfield Bank vs. Merrick, 14 Mass. Rep. 322;) and that no action can be maintained by the endorsee against the maker. And yet they have held that an action may be maintained by the endorsee against the endorser, (Sanger vs. Stimson, 8 Mass. Rep. 260. — Jones vs. Fales, 4 Mass. Rep. 245;) or by the promisee against the maker, (Springfield Bank vs. Merrick, ubi sup. — Tones vs. Fales, ubi sup.,) upon a declaration in like form, as in case of notes negotiable within the statute. Thus, without any obvious reason, anomalies in the law ol* bills and notes, and in pleading, have been introduced, so that the same contract between some parties is to be considered as within the adopted statute, to which all the law of bills and notes is to be applied ; and between others is to be viewed as wholly unprotected by the statute, or any part of it which has been adopted.
As to the question of usury, see White vs. Wright, 5 Dowl. & Ryl. 110 —3 B, & C. 273. — Davis vs. Hardacre, 2 Camp. 375. — Lowe vs. Waller, 2 Doug. 736. — Pratt vs. Willey, 1 Esp. 40. — Parr vs. Eliason, 1 East, 92. — Davidson vs. Barnard, 1 Esp. 11.—Bedo vs. Sanderson, Cro. Jac. 440.— Wright vs. Wheeler, 1 Camp. 165. — Doe vs. Metcalf, Holt, N. P. C. 295. — Barnard vs. Young, 17 Ves. 44. — Forest vs. Elwes 4 Ves. 492.— Clark vs. Giraud, 1 Mad. 511. — Ed.]