Case Name: Shober versus Accommodation Saving Fund
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1860
Citations: 3 Grant 297
Docket Number: 
Parties: Shober versus Accommodation Saving Fund.
Judges: 
Reporter: Reports of cases argued and adjudged in the Supreme Court of Pennsylvania (Grant)
Volume: 3
Pages: 297–299

Head Matter:
Shober versus Accommodation Saving Fund.
1. The payment of the discount on a loan in advance is not illegal, and a saving fund may loan money on a mortgage, and receive in advance the premium bid therefor by a member, and its doing so will not be considered a discount within the meaning of the constitutional prohibition of the 25th Section of iftticle 1st of the amended constitution of 1838.
2. Where the owner of stock transfers it for a valuable consideration, he cannot destroy it in the hands of his assignee.
Error to the District Court of Philadelphia.

Opinion:
Opinion by '
Strong, j.
The case of the defendant below, now plaintiff in error, is most dishonest and repulsive, but, if it be legal, it must prevail.
His plea was that the loan association was a body corporate; that it had loaned to him the sum-of $2,080 00, for which loan he had executed and delivered his bond and mortgage, conditioned for the payment of $2,600 within one year; that he was a member of the corporation, and-bad bid and offered for said loan the difference between it and the sum of $2,600 00 as a premium, whereby the bond and mortgage were discounted by the corporation and were therefore void.
The defence intended to be set up by the plea is that such a loan as it described, is a " discount" within the meaning of the 25th section of Article 1st of the amended Constitution of 1838, and, therefore, that the plaintiffs below were not privileged to make it. The constitutional inhibition is as follows: "No corporation shall hereafter be created, renewed or extended with banking or discounting privileges without six months' previous public notice of the intended application for the same, in such . a manner as shall be prescribed by law." On the first of January, 1839, the legislature prescribed the manner of giving the notice. Though the plea does not make the averment, it is assumed that the plaintiffs below were incorporated since the first of June, 1839; and that they were incorporated without having given six months' notice of their intended application for a charter.
Was the transaction a discount within the meaning of the constitutional prohibition ? — for if it was not the plea is bad. Then the loan was not illegal, and the bond and mortgage are not void.
Upon the question we can entertain no doubt. It is nothing to the purpose that the word discount, ardong its many signifi-, cations, has one which would include this transaction. The inquiry is, how was it understood by the framers of the consti tution? Did they contemplate a prohibition of anything which had been called a discount, or which makes up any of the definitions of the word to be found in our dictionaries ? Did they intend to prevent a corporation from selling any of its property and throwing off a portion of the price for present payment ? Yet such a transaction is discounting in one sense of the term. Did they intend to prevent a corporation from making a deduction from a sum due by a debtor, in consideration of his paying the remainder before it became due? — This, too, is in one sense discounting. It is too evident to admit of a doubt, that the constitutional provision had in view the banking or discounting which were customary at the time it was framed. The framers used the word discounting in its banking sense.— It was then, as it is now, a well known fact that bank discounting in this country has always been conducted by the deduction of the interest at the time the money is loaned, and has been confined to dealing .in promissory notes, bills of exchange or other negotiable paper. It has always been the, buying of bills of exchange, promissory notes, or other negotiable paper for less than its face. It was such a business as that, (it being usually coupled with the privilege of issuing notes as a circulating medium,) that the constitution intended to restrain by interposing obstacles to the creation of corporations with power to engage in it. With such views- of the meaning of the constitutional provision we hold that there was no error in giving judgment against the defendant below upon the demurrer to his plea.
Nor are the other errors assigned to this record any better sustained, or any more creditable to the honesty of the plaintiff in error. They may be considered together, for they present the same question. Shober, besides the money obtained upon his bond and mortgage, was indebted to the loan association in the sum of $1,400 00 for which they held his promissory note. This note was paid by Louis E. Eackler, and in consideration thereof Shober transferred to him fourteen shares of stock which ' he held in the association upon which he paid $1,170 00. Eackler took it subject to a previous assignment to the mortgagees as a collateral security to the mortgage. The court below received the evidence of these facts, and instructed the jury to disallow the instalments paid by Shober on' the stock, and to give a verdict for the sum originally advanced with interest, crediting all that had been paid as interest. The complaint now is that the mortgagor was not allowed to have a credit on his mortgage for the $1,170 paid by him to meet the instalments due upon his stock. In'other words, after having transferred his stock for value received by him, he seeks to destroy it in the hands of his assignee. The case of Rupfort v. The Gutenberg Building Association will not sustain him in such an attempt. There the borrower had not severed his interest before application vto the payment of his mortgage. Here he has done it by a solemn assignment over his/hand and seal. It is not for him now to say that his stock should have been applied to the partial payment of his mortgage when he had received its value in another way, and had given to it a different direction.
Judgment affirmed.