First National Bank of Montgomery vs Jerome Daly
Encyclopedia
First National Bank of Montgomery v. Jerome Daly, Dec. 9, 1968 (Justice Court, Credit River Township, Scott County, Minnesota
), also known as the Credit River Case, was a case tried before a Justice of the Peace
in Minnesota
in 1968. The decision in that case is sometimes cited by opponents of the United States banking system
.
Daly based his defense on the argument that the bank had not actually loaned him any money but had simply created credit on its books. Daly argued that the bank had thus not given him anything of value and was not entitled to the property that secured the loan. The jury and the justice of the peace, Martin V. Mahoney
, agreed with this argument. The jury returned a verdict for the defendant, and the Justice of the Peace declared that the mortgage was “null and void” and that the bank was not entitled to possession of the property. The Justice admitted in his order that his decision might run counter to provisions in the Minnesota Constitution and some Minnesota statutes, but contended that such provisions were “repugnant” to the Constitution of the United States and the Bill of Rights in the Minnesota Constitution
.
This nullfied case and its reasoning have nevertheless been cited by groups opposing the Federal Reserve System
and, in particular, the practice of fractional-reserve banking
. Such groups argue the case demonstrates that the Federal Reserve System is unconstitutional. Because the Credit River decision was nullified, the case has no value as precedent. 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."
He was convicted of willfully failing to file federal income tax returns for the years 1967 and 1968. In rejecting his appeal, the United States Court of Appeals for the Eighth Circuit noted: "Defendant's fourth contention involves his seemingly incessant attack against the federal reserve and monetary system of the United States. His apparent thesis is that the only 'Legal Tender Dollars' are those which contain a mixture of gold and silver and that only those dollars may be constitutionally taxed. This contention is clearly frivolous."
Daly had been an attorney, but was later disbarred
by a decision of the Minnesota Supreme Court in a case similar to the Credit River case, involving the same justice of the peace, in which disbarment proceeding the Court stated that Daly had:
Scott County, Minnesota
Scott County is a county located in the U.S. state of Minnesota. It was organized in 1853 and named in honor of General Winfield Scott. As of 2010, the population was 129,928. Its county seat is Shakopee...
), also known as the Credit River Case, was a case tried before a Justice of the Peace
Justice of the Peace
A justice of the peace is a puisne judicial officer elected or appointed by means of a commission to keep the peace. Depending on the jurisdiction, they might dispense summary justice or merely deal with local administrative applications in common law jurisdictions...
in Minnesota
Minnesota
Minnesota is a U.S. state located in the Midwestern United States. The twelfth largest state of the U.S., it is the twenty-first most populous, with 5.3 million residents. Minnesota was carved out of the eastern half of the Minnesota Territory and admitted to the Union as the thirty-second state...
in 1968. The decision in that case is sometimes cited by opponents of the United States banking system
Federal Reserve System
The Federal Reserve System is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907...
.
The trial
An attorney named Jerome Daly was a defendant in a civil case in Credit River Township, Scott County, Minnesota, heard on December 9, 1968. The plaintiff was the First National Bank of Montgomery, which had foreclosed on Daly's property for nonpayment of the mortgage, and was seeking to evict him from the property.Daly based his defense on the argument that the bank had not actually loaned him any money but had simply created credit on its books. Daly argued that the bank had thus not given him anything of value and was not entitled to the property that secured the loan. The jury and the justice of the peace, Martin V. Mahoney
Martin Mahoney
Martin Vincent Mahoney was a Scott County, Minnesota justice of the peace who presided over the initial trial in the case of First National Bank of Montgomery vs Jerome Daly, Dec. 9, 1968 , also known as the Credit River case...
, agreed with this argument. The jury returned a verdict for the defendant, and the Justice of the Peace declared that the mortgage was “null and void” and that the bank was not entitled to possession of the property. The Justice admitted in his order that his decision might run counter to provisions in the Minnesota Constitution and some Minnesota statutes, but contended that such provisions were “repugnant” to the Constitution of the United States and the Bill of Rights in the Minnesota Constitution
Minnesota Constitution
The Constitution of the State of Minnesota, USA was initially approved by the residents of Minnesota Territory in a special election held on October 13, 1857, and was ratified by the United States Senate on May 11, 1858, marking the admittance of Minnesota to the Union...
.
The result
The immediate effect of the decision was that Daly did not have to repay the mortgage or relinquish the property. 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.This nullfied case and its reasoning have nevertheless been cited by groups opposing the Federal Reserve System
Federal Reserve System
The Federal Reserve System is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907...
and, in particular, the practice of fractional-reserve banking
Fractional-reserve banking
Fractional-reserve banking is a form of banking where banks maintain reserves that are only a fraction of the customer's deposits. Funds deposited into a bank are mostly lent out, and a bank keeps only a fraction of the quantity of deposits as reserves...
. Such groups argue the case demonstrates that the Federal Reserve System is unconstitutional. Because the Credit River decision was nullified, the case has no value as precedent. 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."
Jerome Daly's disbarment and criminal conviction
The defendant, Jerome Daly, was a longtime tax protesterTax protester (United States)
A tax protester is someone who refuses to pay a tax on constitutional or legal grounds, typically because he or she believes that the tax laws are unconstitutional or otherwise invalid...
He was convicted of willfully failing to file federal income tax returns for the years 1967 and 1968. In rejecting his appeal, the United States Court of Appeals for the Eighth Circuit noted: "Defendant's fourth contention involves his seemingly incessant attack against the federal reserve and monetary system of the United States. His apparent thesis is that the only 'Legal Tender Dollars' are those which contain a mixture of gold and silver and that only those dollars may be constitutionally taxed. This contention is clearly frivolous."
Daly had been an attorney, but was later disbarred
Disbarment
Disbarment is the removal of a lawyer from a bar association or the practice of law, thus revoking his or her law license or admission to practice law...
by a decision of the Minnesota Supreme Court in a case similar to the Credit River case, involving the same justice of the peace, in which disbarment proceeding the Court stated that Daly had:
-
- without justifiable explanation or excuse, intentionally and defiantly disregarded an order of this court prohibiting him and a justice of the peace from further proceedings in a declaratory judgment action, then pending before the justice of the peace, which was obviously, and for numerous reasons outlined in our decision, beyond the limits of jurisdiction of a justice of the peace.
Additional sources
- http://www.lawlibrary.state.mn.us/CreditRiver/CreditRiver.html (all original documents)