UNITED STATES Bankruptcy Court

For Eastern District of Texas

Plano Division
____________________________________________

DENA!"#E !EE CANN"N $
#"SE ANN %""PE# cannon& plaintiffs
'S
TE(AS INDEPENDENT BAN)& Defen*ants
Case No +,-./-0.1-D#S
A*versary Procee*in2 No A-+,-. /.1-D#S
____________________________________________

Plaintiff3s 4e5oran*u5 of !a6
"N C#EDIT !"ANS AND '"ID C"NT#ACTS


To the Honorable Judge of Said Court:

This Memorandum with authorities, law and cases in support, will establish the following facts:
1) Defendant and priatel! owned ban"s are ma"ing loans of credit with the intended purpose of
#creating$ credit as #mone!%$ &) other financial institutions and indiiduals ma! #launder$ ban"
credit that the! receie directl! or indirectl! from priatel! owned ban"s% ') this collectie
actiit! is unconstitutional, unlawful, in iolation of common law, () S) Code and the principles
of e*uit!% +) such actiit! and underl!ing contracts hae long been held oid b! State Courts,
,ederal Courts and the () S) Supreme Court)

This Memorandum will show through authorities and established common law that credit #mone!
creation$ b! priatel! owned ban" corporations is not reall! #mone! creation$ at all, but the trade
specialt! and artful illusion of law merchants who use old-time trade secrets of the .oldsmiths to
entrap the borrower and un/ustl! enrich the lender through usur! and other unlawful techni*ues)
0ssues based on law and the principles of e*uit!, which are within the /urisdiction of this Court,
will be addressed)

H0ST123 1, M1453 64D 764804.

TH5 .19DSM0THS

0n his boo", Money and Banking :;
th
5dition, 1<;+), =rofessor Daid 2) 8amerschen writes on
pages >?-?': #The first ban"ers in the modern sense were the goldsmiths, who fre*uentl!
accepted bullion and coins for storage ) ) ) 1ne result was that the goldsmiths temporaril! could
lend part of the gold left with them ) ) ) These loans of their customers@ gold were soon replaced
b! a reolutionar! techni*ue ) ) ) Ahen people brought in gold, the goldsmith gae them notes
promising to pa! that amount of gold on demand) The notes, first made pa!able to the order of
the indiidual, were later changed to bearer obligations) 0n the preious form, a note pa!able to
the order of =err! 2eees would be paid to no one else unless 2eees had first endorsed the note )
) ) 7ut notes were soon being used in an unforeseen wa!) The note holders found that, when the!
wanted to bu! something, the! could use the note itself in pa!ment more conenientl! and let the
other person go after the gold, which the person rarel! did ) ) ) The specie, then tendered to
remain in the goldsmiths@ aults ) ) ) The goldsmiths began to realiBe that the! might profit
handsomel! b! issuing somewhat more notes than the amount of specie the! held)

#These additional notes would cost the goldsmiths nothing eCcept the negligible cost of printing
them, !et the notes proided the goldsmiths with funds to lend at interest ) ) ) 6nd the! were to
find that the profitabilit! of their lending operations would eCceed the profit from their original
trade) The goldsmiths became ban"ers as their interest in manufacture of gold items to sell was
replaced b! their concern with credit policies and lending actiities)

#The! discoered earl! that, although an unlimited note issue would be unwise, the! could issue
notes up to seeral times the amount of specie the! held) The "e! to the whole operation la! in
the public@s willingness to leae gold and siler in the ban"@s aults and use the ban"@s notes)
This discoer! is the basis of modern ban"ing)$

1n page D+, =rofessor 8amerschen further eCplains the eolution of the credit s!stem: #9ater the
goldsmiths learned a more efficient wa! to put their credit mone! into circulation) The! lent b!
issuing additional notes rather than b! pa!ing out in gold, in eCchange for the interest bearing
note receied from their customer :in effect, the loan contract), the! gae their own non-interest
bearing note) 5ach was actuall! borrowing from the other ) ) ) The adantage of the later
procedure of lending notes rather than gold was that ) ) ) more notes could be issued if the gold
remained in the aults ) ) ) Thus, through the principle of ban" note issuance ban"s learned to
create mone! in the form of their own liabilit!)$

6nother publication that eCplains modern ban"ing as learned from the .oldsmiths is Modern
Money Mechanics :>
th
edition 1<<&), published b! the ,ederal 2esere 7an" of Chicago, that
states beginning on page ': #0t started with the goldsmiths ) ) )$ 6t one time, ban"ers were
merel! middlemen) The! made a profit b! accepting gold and coins brought to them for
safe"eeping and lending the gold and coins to borrowers) 7ut the goldsmiths soon found that the
receipts the! issued to depositors were being used as a means of pa!ment) #Then ban"ers
discoered that the! could ma"e loans merel! b! giing borrowers their promises to pa!, or ban"
notes ) ) ) 0n this wa!, ban"s began to create mone! ) ) ) Demand deposits are the modern
counterpart of ban" notes) ) ) 0t was a small step from printing notes to ma"ing boo" entries to the
credit of borrowers that the borrowers, in turn, could Espend@ b! writing chec"s, thereb! printing
their own mone!)$

M1D524 M1453 64D 764804.

H1A 7648S C256T5 M1453

0n the modern sense, ban"s create mone! b! creating #demand deposits)$ Demand deposits are
merel! #boo" entries$ that reflect how much lawful mone! the ban" owes its customers) Thus,
all deposits are called demand deposits and are the ban"@s liabilities) The ban"@s assets are the
ault cash plus all the #01(s$ or promissor! notes that borrowers sign when the! borrow either
mone! or credit) Ahen a ban" lends its cash :legal mone!), it loans its assets, but when a ban"
lends credit, it lends its liabilities) The lending of credit is, therefore, the eCact opposite of the
lending of cash :legal mone!))

6t this point, we need to define the meaning of certain words li"e #lawful mone!,$ #legal tender,$
#other mone!$ and #dollars)$

The terms #Mone!$ and #Tender$ had their origins in 6rticle 0, Sec) ; and 6rticle 0, Sec) 1F of
the Constitution of the (nited States) Title 1& ()S)C) 1>& refers to #gold and siler coin as lawful
mone! of the united States$ and was repealed in 1<<+) The term #legal tender$ was originall!
cited in '1 ()S)C)6) '<& and is now re-codified in '1 ()S)C)6) >1F' that states: #united States
coins and currenc! ) ) ) are legal tender for all debts, public charges, taCes, and dues)$ The
common denominator in both #lawful mone!$ and #legal tender mone!$ is that both are issued b!
the (nited States .oernment)

Aith 7an"ers, howeer, we find that there are two forms of mone! G one is goernment-issued
and the other is issued b! priatel! owned ban"s such as Defendant, TeCas 0ndependent 7an")
6s we hae alread! discussed goernment-issued forms of mone!, we need to loo" at priatel!-
issued forms of mone!)

6ll priatel! issued forms of mone! toda! are based upon the liabilities of the issuer) There are
three common terms used to describe this priatel! created mone!) The! are #credit,$ #demand
deposits$ and #chec"boo" mone!)$ 0n the ,ifth edition of Blacks Law Dictionary, p)''1, under
the term #Credit,$ the term #7an" credit$ is described as: #Mone! ban" owes or will lend
indiidual or person)$ 0t is clear from this definition that #7an" credit$ which is the #mone! ban"
owes$ is the ban"@s liabilit!) The term #chec"boo" mone!$ is described in the boo" I Bet You
Thought, published b! the priatel! owned ,ederal 2esere 7an" of 4ew 3or", as follows:
#Commercial ban"s create chec"boo" mone! wheneer the! grant a loan, simpl! b! adding
deposit dollars to accounts on their boo"s to eCchange for the borrower@s 01( ) ) )$

The word #deposit$ and #demand deposit$ both mean the same thing in ban" terminolog! and
refer to the ban"@s liabilities) ,or eCample, the Chicago ,ederal 2esere@s boo", Modern Money
Mechanics sa!s: #Deposits are merel! boo" entries ) ) ) 7an"s can build up deposits b!
increasing loans ) ) ) Demand deposits are the modern counterpart of ban" notes) 0t was a small
step from printing notes to ma"ing boo" entries to the credit of borrowers which the borrowers, in
turn, could Espend@ b! writing chec"s)$ Thus, it is demonstrated in Modern Money Mechanics
how, under the practice of fractional resere ban"ing, a deposit of H>,FFF in cash could result in a
loan of creditIchec"boo" mone!Idemand deposits of H1FF,FFF if resere ratios set b! the ,ederal
2esere are >J :instead of 1FJ))

0n a practical application, here is how it wor"s) 0f a ban" has ten people who each deposit H>,FFF
:totaling H>F,FFF) in cash :legal mone!) and the ban"@s resere ratio is >J, then the ban" will
lend twent! times this amount, or H1,FFF,FFF in #credit$ mone!) Ahat the ban" has actuall!
done, howeer, is to write a chec" or loan its credit with the intended purpose of circulating credit
as #mone!)$ 7an"s "now that if all the people, who receie a chec" or credit loan, were to come
to the ban" and demand cash, the ban" would hae to close its doors because it doesn@t hae the
cash to ban" up its chec" or loan) The ban"@s chec" or loan will, howeer, pass as mone! as long
as people hae confidence in the illusion and don@t demand cash) =anics are created when people
line up at the ban" and demand cash :legal mone!), causing ban"s to fold as histor! records in
seeral time periods)

The process of passing chec"s or credit as mone! is done *uite simpl!) 6 deposit of H>,FFF in
cash b! one person results in a loan of H1FF,FFF to another person at >J reseres) The person
receiing the chec" or loan of credit for H1FF,FFF usuall! deposits it in the same ban" or another
ban" in the ,ederal 2esere s!stem) The chec" or loan is sent to the boo""eeping department of
the lending ban" where a boo" entr! of H1FF,FFF is credited to the borrower@s account) The
lending ban"@s chec" that created the borrower@s loan is then stamped #=aid$ when the account of
the borrower is credited a #dollar$ amount) The borrower ma! then #spend$ these boo" entries
:demand deposits) b! writing chec"s to others, who in turn deposit their chec"s and hae boo"
entries transferred to their account from the borrower@s chec"ing account)

Howeer, two highl! *uestionable and unlawful acts hae now occurred) The first was when the
ban" wrote the chec" or made the loan with insufficient funds to bac" them up) The second is
when the ban" stamps its own 4S, chec" #paid$ or posts a loan b! merel! crediting the
borrower@s account with boo" entries the ban" calls #dollars)$ 0ronicall!, the chec" or loan seems
good and passes as mone! G unless an emergenc! occurs ia demands for cash G or a Court
challenge G and the artful illusion bubble bursts)

D0,,5254T 804DS 1, M1453

The boo" I Bet You Thought, published b! the ,ederal 2esere 7an" of 4ew 3or" sa!s:

#Mone! is an! generall! accepted medium of eCchange, not simpl! coin and currenc!) 4oney
*oesn3t 7ave to 8e intrinsically valua8le& 8e issue* 8y a 2overn5ent or 8e in any special
for59 K5mphasis added)L Thus, we see that priatel! issued forms of mone! onl! re*uire
public confidence in order to pass as mone!) Counterfeit mone! also passes as mone! as long as
nobod! discoers it is counterfeit) 9i"ewise, #bad$ chec"s and #credit$ loans pass as mone! as
long as no one finds out the! are unlawful) 3et, once the fraud is discoered, the alue of such
#ban" mone!,$ li"e bad chec"s, ceases to eCist) There are, therefore, two "inds of mone! G
goernment-issued legal mone! and priatel!-issued unlawful mone!)

D0,,5254T 804DS 1, D19962S

The dollar once represented something intrinsicall! aluable made from gold or siler) ,or
eCample, in 1D<& Congress defined the siler dollar as a siler coin containing 'D1)&> grains of
pure siler) The legal dollar is now "nown as #(nited States coins and currenc!)$ Howeer, the
7an"er@s dollar has become a unit of measure of a different "ind of mone!) Therefore, with
7an"ers there is a #dollar$ of coins and a #dollar$ of cash :legal mone!), a #dollar$ of debt, a
#dollar$ of credit, a #dollar$ of chec"boo" mone! or a #dollar$ of chec"s) Ahen one refers to a
dollar spent or a dollar loaned, he should now indicate what "ind of #dollar$ he is tal"ing about,
since 7an"ers hae created so man! different "inds)

6 dollar of ban" #credit mone!$ is the eCact opposite of a dollar of #legal mone!)$ The former is
a liabilit! while the latter is an asset) Thus, it can be seen from the earlier statement *uoted from
I Bet You Thought, that mone! can be priatel! issued as: #Mone! doesn@t hae to ) ) ) be issued
b! a goernment or be in an! special form)$ 0t should be carefull! noted that ban"s that issue and
lend priatel! created mone!, demand to be paid with goernment issued mone!) Howeer,
pa!ment in li"e "ind under natural e*uit! would seem to indicate that a debt created b! a loan of
priatel! created mone! can be paid with other priatel! created mone!, without regard for #an!
special form$ as there are no statutor! laws to dictate how either priate citiBens or ban"s ma!
create mone!)

73 AH6T 6(TH120T3MM

7! what authorit! do state and national ban"s, as priatel! owned corporations, create mone! b!
lending their credit G or more simpl! put, b! writing and passing #bad$ chec"s and #credit$ loans
as #mone!$M 4owhere can a law be found that gies ban"s the authorit! to create mone! b!
lending their liabilities)

Therefore, the neCt *uestion is: 0f ban"s are creating mone! b! passing bad chec"s and lending
their credit, where is their authorit! to do soM ,rom their literature, ban"s claim these techni*ues
were learned from the trade secrets of the .oldsmiths) 0t is eident, howeer, that mone!
creation b! priate ban"s is not the result of powers conferred upon them b! goernment, but
rather the artful use of long held #trade secrets)$ Thus, unlawful mone! creation is not being
done b! ban"s as corporations, but unlawfull! b! ban"ers)

6rticle 0, Section 1F, para) 1 of the Constitution of the (nited States specificall! states that no
state shall ) ) ) coin 5oney& e5it 8ills of cre*it& 5ake any T7in2 8ut 2ol* an* silver coin a
Ten*er in Pay5ent of De8ts& pass an! 7ill of 6ttainder, eC post facto 9aw, or 9aw impairing
the 1bligations of Contracts ) ) )$ K5mphasis added)L The states that grant the Charters of state
ban"s also prohibit the emitting of bills of credit b! not granting such authorit! in ban" charters)

0t is obious that #Ae the people$ neer delegated to Congress, state goernment, or agencies of
the state, the power to create and issue mone! in the form of chec"s, credit, or other #bills of
credits)$ The ,ederal .oernment toda! does not authoriBe ban"s to emit, write, create, issue and
pass chec"s and credit as mone!, but ban"s do, and get awa! with it) 7an"s assign their priatel!
created mone! more misleading names, li"e #credit,$ #demand deposits,$ or #chec"boo" mone!)$
Howeer, the true nature of #credit mone!$ and #chec"s$ does not change regardless of the
deceptie terminolog! used to describe them) Such mone! in common use b! priatel! owned
ban"s is illegal under 6rticle 0, Sec) 1F, para) 1 of the Constitution of the (nited States as well as
unlawful under the laws of the (nited States)

N10D #(9T26 N025S$ C14T26CTS

Blacks Law Dictionary defines the 9atin term #eCtra ires$ to mean be!ond powers) Blacks
Law Dictionary eCplains the term #ultra ires$ embraces #KaLn act performed without an!
authorit! to act on sub/ect) Haslund v. City o !eattle, ;? Aash)&d ?FD, >+D =)&d 1&&1, 1&'F)
6cts be!ond the scope of the powers of a corporation, as defined b! its charter or laws of state of
incorporation) !tate e" rel. v. Holston Trust Col, 1?; Tenn) >+?, D< S)A)&d 1F1&, 1F1?) The
term has a broad application and includes not onl! acts prohibited b! the charter, but acts which
are in eCcess of powers granted and not prohibited, and generall! applied either when a
corporation has no power whateer to do an act, or when the corporation has the power, but
eCercises it irregularl!) #eo$le e" rel. Barrett v. Bank o #eoria, &<> 0ll)6pp) >+', 1> 4)5)&d
''', ''>) 6ct is ultra ires when corporation is without authorit! to perform it under an!
circumstances or for an! purpose) 7! doctrine of ultra ires a contract made b! a corporation
be!ond the scope of its corporate powers is unlawful) Co%%unity &ederal !av. ' Loan (ssn o
Inde$endence, Mo. v. &ields, C.C.(., Mo., 1&; ,)&d DF>, DF;)$ Blacks ?
th
5dition, p) 1>&&)

The courts hae long held that when a corporation eCecutes a contract be!ond the scope of its
charter or granted corporate powers, the contract is oid or #ultra ires$) See infra, #ull%an v.
Central Trans$. Co., 1'< ()S) ?&, 11 S)Ct) +D;, '> 9)5d) >>)

TH5 O(5ST014 1, 96A,(9 C14S0D526T014

The issue of whether the lender, who writes and passes a #bad$ chec" or ma"es a #credit$ loan,
has a claim for relief against the borrower is eas! to answer, proiding the lender can proe that
he gae a lawful consideration based upon lawful acts, but did the lender gie a lawful
considerationM To gie a lawful consideration, the lender must proe that he gae the borrower
lawful mone! such as coins or currenc!) ,ailing that, he can hae no claim for relief in a court at
law against the borrower as the lender@s actions were (ltra ires or oid from the beginning of
the transaction)

0t can be argued that #bad$ chec"s or #credit$ loans, that pass as mone!, are aluable, but so are
counterfeit coins and currenc! that pass as mone!) 0t seems unconscionable that a ban" would
as" homeowners to put up a homestead as collateral for a #credit loan$ that the ban" created out
of thin air) Aould a court of law or e*uit! allow a counterfeiter to foreclose against a person@s
home because the borrower was late in pa!ments on an unlawful loanM 0f the court were to do so,
it would be contrar! to all principles of law)

The *uestion of aluable consideration does not depend on an! alue imparted b! the lender, but
b! false confidence instilled in the #bad$ chec" or #credit$ loan b! the lender) 0n a court at law or
e*uit!, the lender has no claim for relief) The argument that the lender has a claim for relief
because the borrower receied propert! for the lender@s #bad$ chec" or #credit$ loan, is not alid
unless the lender can proe that he gae lawful alue) The claim for relief lies with the seller,
who ma! be holding the #bad$ chec" or #credit$ loan, against the lender or the borrower, or both)

71221A52 25905,

Since we hae established that the lender of unlawful or counterfeit mone! has no claim for relief
under a oid contract, the last *uestion is, does the borrower hae a claim for relief against the
lenderM

,irst, if it is established that the borrower has made no pa!ments to the lender, then the borrower
has no claim for relief against the lender for mone! damages, but the borrower has a claim for
relief to oid the debt he owes the lender for notes or obligations unlawfull! created b! an (ltra
ires contract for lending #credit$ mone!)

The borrower, the Courts hae long held, has a claim for relief against the lender to hae the note,
securit! agreement, or mortgage note the borrower signed, declared null and oid)
The borrower ma! also hae claims for relief for breach of contract b! the lender for not lending
#lawful mone!$ and for usur! for charging an interest rate seeral times greater than the amount
agreed to in the contract for an! lawful mone! actuall! ris"ed b! the lender) ,or eCample, if on a
H1FF,FFF loan it can be established that the lender actuall! ris"ed onl! H>,FFF :>J ,ederal
2esere ratio) with a current interest rate of 1FJ, the lender has then loaned H<>,FFF of #credit$
and H>,FFF of #lawful mone!$ while charging 1FJ interest :H1F,FFF) on the entire H1FF,FFF)
The true interest rate on the H>,FFF of #lawful mone!$ actuall! ris"ed b! the lender is &FFJ,
which iolates (sur! laws) 0f no #lawful mone!$ was loaned, then the interest rate is an infinite
percentage) Such techni*ues, the ban"ers sa!, were learned from the trade secrets of the
.oldsmiths)

The Courts sa! that such contracts with borrowers are wholl! oid from the beginning of the
transaction because ban"s are not granted powers to enter into such contracts b! either state or
national charters)

6DD0T01469 71221A52 25905,

0n District Court, the borrower ma! hae additional claims for relief under #Ciil 20C1$ ,ederal
2ac"eteering laws :Title 1; ()S)C) 1<?+) as the lender ma! hae established a #pattern of
rac"eteering actiit!$ b! using the ()S) Mail more than twice to collect an unlawful debt and the
lender ma! be in iolation of Title 1; ()S)C) 1'+1, 1'+', 1<?1 and 1<?&) The borrower ma!
hae other claims for relief if he can proe there was or is a conspirac! to deprie him of propert!
without due process of law under Title +& ()S)C) 1<;' :Constitutional in/ur!), 1<;> :Conspirac!)
and 1<;? :#8nowledge$ and #4eglect to =reent$ a ()S) Constitutional Arong)) (nder Title 1;
()S)C)6) &+1 :Conspirac!), iolators #shall be fined not more than H1F,FFF or imprisoned not
more than ten :1F) !ears or both)$

C6S5 C0T5S 04 S(==12T

(9T26 N025S C14T26CTS

1) #6 contract is ultra ires being unlawful and oid, not because it is in itself immoral, but
because the corporation, b! the law of its creation, is incapable of ma"ing it) The courts, while
refusing to maintain an! action upon the unlawful contract, hae alwa!s strien to do /ustice
between the parties, so far as could be done consistentl! with adherence to law, b! permitting
propert! or mone!, parted with on the faith of the unlawful contract, to be recoered bac", or
compensation to be made for it) 0n such case, howeer, the action is not maintained upon the
unlawful contract, nor according to its terms% but on an implied contract of the defendant to
return, or failing to do that, to ma"e compensation for, propert! or mone! which it has no right to
retain) To maintain such an action is not to affirm, but to disaffirm the unlawful contract)$
#ull%an v. Central Trans$. Co., 1'< ()S) ?&, 11 S)Ct) +D;, '> 9)5d) >>

&) #Ahen a contract is once declared ultra ires, the fact that it is eCecuted does not alidate it,
nor can it be ratified, so as to ma"e it the basis of suit or action, nor does the doctrine of estoppel
appl!)$ &'#) v. )ich%ond, 1'' S5 ;<;% 1>1 Na) 1<>)

') #6 national ban" ) ) ) cannot lend its credit to another b! becoming suret!, indorser or
guarantor for him, such an act is ultra ires ) ) )$ Merchants Bank v. Baird, 1?F , ?+&)

9164 1, C25D0T

+) #0n the federal courts, it is well established that a national ban" has not power to lend its credit
to another b! becoming suret!, endorser, or guarantor for him)$ &ar%ers and Miners Bank v.
Blueield *atl Bank, 11 ,)&d ;', &D1 ()S) ??<)
>) #6 national ban" has no power to lend its credit to an! person or corporation)$ Bowen v.
*eedles *at. Bank, <+ ,) <&>% '? CC6 >>', certiorari denied 0n &F S)Ct) 1F&+, 1D? (S ?;&, ++
9)5d ?'D)

?) #Mr) Justice Marshall said: EThe doctrine of ultra ires is a most powerful weapon to "eep
priate corporations within their legitimate spheres and to punish them for iolations of their
corporate charters, and it probabl! is not ino"ed too often ) ) )@$ +inc Car,onate Co. v. &irst
*ational Bank, 1F' Ais) 1&>, D< 4A &&<, (%erican -"$ress Co. v. Citi.ens !tate Bank, 1<+ 4A
+'F)

D) #6 ban" ma! not lend its credit to another, een though such a transaction turns out to hae
been of benefit to the ban", and in support of this a list of cases might be cited, which would loo"
li"e a catalog of ships)$ *orton /rocery Co. v. #eo$les *at. Bank, 1++ S5 >F>, 1>1 Na 1<>)

;) #0t has been settled be!ond controers! that a national ban", under federal law being limited in
its powers and capacit!, cannot lend its credit b! guaranteeing the debts of another) 6ll such
contracts entered into b! its officers are ultra ires) ) )$ Howard ' &oster Co. v. Citi.ens *atl
Bank o 0nion, 1'' SC &F&, 1'F S5 D>< :1<&?))

<) #) ) ) chec"s, drafts, mone! orders and ban" notes are not lawful mone! of the (nited
States ) ) )$ !tate v. *eilon, D' =ac) '&+, +' 1re) 1?;)

1F) #4either, as included in its powers, nor incidental to them, is it a part of a ban"@s business to
lend its credit) 0f a ban" could lend its credit as well as its mone!, it might, if it receied
compensation and was careful to put its name onl! to solid paper, ma"e a great deal more than
an! lawful interest on its mone! would amount to) 0f not careful, the power would be the mother
of panics ) ) ) 0ndeed, lending credit is the eCact opposite of lending mone! which is the real
business of a ban", for while the latter creates a liabilit! in faor of the ban", the former gies rise
to a liabilit! of the ban" to another)$ 1 Morse, Banks and Banking, >
th
5d) Sec) ?>% Magee, Banks
and Banking, '
rd
5d) Sec) &+;)$ (%erican -"$ress Co. v. Citi.ens !tate Bank, 1<+ 4A +&<)

11) #0t is not within those statutor! powers for a national ban", een though solent, to lend its
credit to another in an! of the arious wa!s in which that might be done)$ &ederal Inter%ediate
Credit Bank v. L. Herrison, '' ,)&d ;+1, ;+& :1<&<))

1&) #There is no doubt but what the law is that a national ban" cannot lend its credit or become
an accommodation endorser)$ *ational Bank o Co%%erce v. (tkinson, >? ,) +D1)

1') #6 ban" can lend its mone!, but not its credit)$ &irst *atl Bank o Talla$oosa v. Monroe,
1'> .a ?1+, ?< ,) 11&+, '& 926 :4S) >>F)

1+) #) ) ) the ban" is allowed to lend mone! upon personal securit!, but it must be mone! that it
loans, not its credit)$ !ellg%an v. Charlottesville *at. Bank, ' Hughes ?+D, ,ed) Case 4o) 1&,
?+&, 1F'<)

9164S 1, M1453

1>) #6 loan ma! be defined as the delier! b! one part! to, and the receipt b! another part! of, a
sum of mone! upon an agreement eCpress or implied, to repa! the sum with or without interest)$
#arsons v. &o",1D< .a ?F>, 1D? S5 ?++) 6lso see 8ir"land v. Bailey, 1>> S5 &d DF1, and 0nited
!tates v. *eiert 1hite Co., &+D ,ed)Supp) ;D;, ;D<)


#The word Emone!@ in its usual and ordinar! acceptation means gold, siler, or paper mone! used
as a circulating medium of eCchange) ) )$ e)) )ailey &;F 8! '1<, 1'' SA&d D>)

=21M0S5 T1 =63 41T 5O(0N6954T T1 =63M54T

1?) #6 promise to pa! cannot, b! argument, howeer ingenious, be made the e*uialent of actual
pa!ment ) ) )$ Christensen v. Bee,e, <1 = 1'', '& (tah +F?)

1D) #6 chec" is merel! an order on a ban" to pa! mone!)$ Young v. He%,ree, D' =&d '<')

H19D52 04 D(5 C1(2S5

1;) #6 ban" is not the holder in due course upon merel! crediting the depositor@s account)$
Bankers Trust v. *agler, &&< 43S&d 1+&, 1+')

,26(D 64D M0S25=25S54T6T014

1<) #6n! false representation of material facts made with "nowledge of falsit! and with intent
that it shall be acted on b! another in entering into contract, and which is so acted upon,
constitutes Efraud,@ and entitles part! deceied to aoid contract or recoer damages)$ Barnsdall
)eining Cor$. v. Bi%arn 1ood 2il Co., <& ,)&d S1D)

&F) #6n! conduct capable of being turned into a statement of fact is representation) There is no
distinction between misrepresentations effected b! words and misrepresentations effected b!
other acts)$ Leonard v. !$ringer, 1<D 0ll >'&, ?+ 45 'F1)

&1) #0t is not necessar! for recision of a contract that the part! ma"ing the misrepresentation
should hae "nown that it was false, but recoer! is allowed een though misrepresentation is
innocentl! made, because it would be un/ust to allow one who made false representations een
innocentl! to retain the fruits of a bargain induced b! such representations)$ 1hi$$ v. Iverson, +'
Ais)&d 1??)

C14S0D526T014

&&) #0f an! part of the consideration for a promise be illegal, or if there are seeral considerations
for an unseerable promise, one of which is illegal, the promise, whether written or oral, is
wholl! oid, as it is impossible to sa! what part or which one of the considerations induced the
promise)$ Meno%inee )iver Co. v. (ugustus !$ies L'C Co., 1+D Ais >><, >D&% 1'& 4A 11&&)

#The contract is oid if it is onl! in part connected with the illegal transaction and the promise
single or entire)$ /uardian (gency v. /uardian Mut. !avings Bank, &&D Ais) >>F, &D< 4A ;')

20C1

&') 0n a Debtor@s 20C1 action against its creditor, alleging that the creditor had collected an
unlawful debt, an interest rate :where all loan charges were added together) that eCceeded, in the
language of the 20C1 Statute, #twice the enforceable rate,$ the Court found no reason to impose
a re*uirement that the =laintiff show that the Defendant had been conicted of collecting an
unlawful debt, running a #loan shar"ing$ operation) The debt included the fact that eCaction of a
usurious interest rate rendered the debt unlawful and that is all that is necessar! to support the
Ciil 20C1 action) Durante Bros. ' !ons, Inc. v. &lushing *at. Bank, D>> ,)&d &'<, cert) denied,
+D' (S <F? :1<;>))

&+) The Supreme Court found that the =laintiff in a ciil 20C1 action need establish onl! a
criminal #iolation$ and not a criminal coniction) ,urther, the Court held that the Defendant
need onl! hae caused harm to the =laintiff b! the commission of a predicate offense in such a
wa! as to constitute a #pattern of 2ac"eteering actiit!)$ That is, the =laintiff need not
demonstrate that the Defendant is an organiBed crime figure, a mobster in the popular sense, or
that the =laintiff has suffered some t!pe of special 2ac"eteering in/ur!% all that the =laintiff must
show is what the Statute specificall! re*uires) The 20C1 Statute and the ciil remedies for its
iolation are to be liberall! construed to effect the Congressional purpose as broadl! formulated
in the statute) !edi%a, !#)L v. I%re" Co., +D' (S +D< :1<;>)

,5D5269 25S52N5 7648

&>) #5ach ,ederal 2esere ban" is a separate corporation owned b! commercial ban"s in its
region ) ) )$ Lewis v. 0nited !tates, ?;F ,)&d 1&'< :1<;&))

2espectfull! submitted,