Case Name: First National Bank of Pensacola, Respondent, v. Kathleen B. Anderson, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1900-12
Citations: 55 A.D. 570
Docket Number: 
Parties: First National Bank of Pensacola, Respondent, v. Kathleen B. Anderson, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 55
Pages: 570–575

Head Matter:
First National Bank of Pensacola, Respondent, v. Kathleen B. Anderson, Appellant.
Motion to postpone a trial — what knowledge of a defendant is necessary to sustain it — exaction of usury by a national bank — penalty therefor under the National Banking Act — it gives a right of action, not a defense.
An affidavit which does not show that the sole defendant in an action has personal knowledge of any of the facts material to. the issues in the action, or that she took part in any of the transactions or negotiations connected with the subject of the action, except that she Was an accommodation indorser of the promissory note upon which the action was brought, a fact which was not disputed,is insufficient, to sustain a motion to postpone the trial of the action.
The exaction of usury by a national bank in discounting a note does not involve a forfeiture of the debt; at’most -the transaction is only void as to the usurious excess.
The penalty imposed by the National Banking Act for the exaction of usury in such a case can only be recovered in an action of debt and is not available as a defense to an action Upon the note.
Appeal by the defendant, Kathleen B. Anderson, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the - clerk of the county of Rew York on the 31st day of January, 1900, upon the verdict of a jury rendered by direction of the court; also from an order entered in said clerk’s office on the . 18th day of January, 1900, denying the defendant’s motion for a new trial made upon the minutes, and also from an -order entered in said clerk’s office on the 18th day of January,-1900, denying the •defendant’s motion to postpone the trial of the action.
Hector M. Hitchings, for the appellant. ■ -
Charles H Hushmore, for the respondent.

Opinion:
Patterson, J.:
Upon the trial of this action and at the close of all the proofs, a verdict was directed for the plaintiff. From the judgment entered upon that verdict and from an order denying a motion for a new trial, appeal is taken. There is also brought up for review an intermediate-order, denying a motion made by the defendant (Kathleen B. Anderson) to postpone the trial. That intermediate order must be affirmed. The affidavit upon which the motion was made was insufficient. It did not show that the defendant was a.material and necessary witness in her own behalf, for it was not made to appear that she had personal knowledge of any of the facts material to the issues or that she took part in any of the transactions or negotiations •connected with the subject of the action, except that she was an accommodation indorser of the promissory note upon which the action was brought, a fact which was not disputed.
The jilaintiff, a national bank located and doing business in the State of Florida, brought this action originally against one Wood-bury, the maker of a promissory note for $25,000, and against Kathleen B. Anderson and Malcolm C. Anderson, as indorsers of that note. The complaint contains the usual and appropriate allegations to charge each of the defendants. The action was discontinued as against Woodbury and judgment was entered upon a stipulation against Malcolm C. Anderson. The action being severed, was continued against Kathleen B. Anderson. The case was tried upon issues framed upon her separate answer, the only substantial defenses interposed by her being that she was an accommodation indorser; that the transaction in which the plaintiff took the note was tainted with usury, and that only $6,000 was advanced on the note by the plaintiff. The averment of her answer is that the usury was taken by the plaintiff. The issue as to usury is by the pleading limited exclusively to the plaintiff in its acquisition of .the .note. The affirmative defense of Mrs. Anderson, stated more fully, is that one Woodbury made his promissory note payable to her order for $25,000 at six per cent interest and delivered the same to Malcolm O. Anderson, her husband, who requested her to indorse the note, which she did for the accommodation of Mr. Anderson; that thereafter Mr. Anderson requested the plaintiff through its officers to discount the note for him and to. make a loan of money thereon and that thereupon the plaintiff exacted usury of Malcolm O. Anderson, and entered with him into the unlawful agreement that it would discount the note and make a loan of money thereon and would deliver the proceeds thereof to him on condition that he pay .the sum of $2,500 as a bonus for the discount and also interest at the rate of ten per cent in addition, and that, in pursuance of the agreement, Malcolm C. Anderson delivered to the plaintiff the promissory note and the plaintiff received and took out of the amount of the loan a bonus of $2,500 and ten per cent, and that the plaintiff failed, neglected and. refused to deliver to Malcolm C. Anderson the balance .of the proceeds of the note, but only delivered to him the sum of $6,000 and no more. She further sets forth in her answer that all of the transactions relating -to the discount of the- note were had!, with one Knowles, the vice-president of the plaintiff, and that in said transaction, as she is informed and believes, Knowles was acting for the jdai-ntiff, and that the moneys paid over to Malcolm O.. Anderson by Knowles were its moneys, and that plaintiff was fully advised and aware of the said transaction in all its details, and that it received said promissory note with such knowledge, and that it is-not an innocent holder for value before maturity of the note sued upon.
Considering the defense of usury under the issues as framed by the pleadings, it would be sufficient to say that that defense is not open to Mrs. Anderson by way of defeating the plaintiffs right of recovery. Under the provisions of the National Banking Act (13 U.S. Stat. at Large, 99,108, § 30) taking usury by a national bank does-not involve a forfeiture of the debt either as a penalty or otherwise. The most that could be claimed would be that the- contract would be good for what might be lawfully taken and void only as to the excess. (Farmers' National Bank v. Dearing, 91 U. S. 35.) By. the act of Congress referred to there is a penalty imposed for taking usury by national banks, but it can only be recovered in an action of debt. We had occasion to consider that subject in Caponigri v. Altieri (29 App. Div. 306). On the trial of this .cause it was not suggested to the court that there rvas a limitation upon the amount of interest the plaintiff was entitled to recover, and not having been raised below, we cannot consider the point now even if it were otherwise material in -the situation of the proof.
There is no real dispute of fact as to the amount advanced by the plaintiff upon this note. Undoubtedly Mrs. Anderson indorsed it for the accommodation of her husband, and if, as -alleged in the. answer, it were proven that the plaintiff knew that fact and the amount advanced was only $6,000 or a sum less, than the. face of the note, the question might arise whether the recovery should have been limited to the sum- actually advanced. . But such a question does not arise, for the evidence is conclusive that the amount advanced when the bank acquired absolute title to the,note was.the, full sum of $25,000. -
It is claimed by the defendant that, notwithstanding the condition of the pleadings, the whole history of this note was open to investigation, and that it was made to appear that it had its inception in a usurious transaction anterior to the date at which the plaintiff claimed to have become its owner by discounting it. That anterior transaction was between Mr. Anderson and one Knowles, the saíne person referred to in the defendant's answer as being the vice-president of the plaintiff. We cannot disregard the issue and pass beyond it to inquire into the connection of Knowles with the paper prior to its discount by the plaintiff, except so far as relates to his being the agent of the plaintiff in taking the note from Mr. Anderson, and that he was not its agent the evidence abundantly shows.
The history of the note, as disclosed by the record, from the time at whi.ch it was indorsed by Mrs. Anderson and delivered to her husband, is substantially the following: An effort was made in October, 1895, by Mr. Anderson to raise money upon the note. He telegraphed to Knowles (then in Florida), a person with whom he had had many antecedent transactions, asking if Knowles could discount the note, and stating that he would be paid $5,000 on account (of an indebtedness of Mr. Anderson to Knowles) if done at once, and give to Knowles " part assured profit, " adding that, if Knowles accepted, Anderson would deposit the note with the Rational Park Bank, Rew York, and requesting Knowles to authorize his, Anderson's, draft, at three days' sight, for $5,000. Knowles answered that the best he could do was $2,500 profit then to be deducted, and if that would be agreeable, he would accept the draft for $5,000, three days' sight, the remaining $12,500 within thirty days, the indorsed note as offered to be lodged with the First Rational Bank of Pensacola until Knowles' acceptance was paid. Mr. Anderson accepted that proposition, drew a draft for $5,000, which was paid by a remittance made through the plaintiff to a bank in Rew York, from which latter bank Mr. Anderson received the money. Mr. Anderson deposited the $25,000 note with a Rew York bank, and it was forwarded to Florida, indorsed, " pay to the order of Knowles Bros., Malcolm C. Anderson," and Mr. Knowles pledged it to Mr. Brent as security for the $5,000 remitted, as mentioned, to Mr. Anderson. Subsequently differences arose respecting the terms upon which Knowles would advance the money. Mr. Brent was the president of the plaintiff, but he individually advanced the $5,000, which was remitted to Mr. Anderson, and took the $25,000' note as security for that loan.
The evidence establishes that whatever the original agreement may have been between Knowles and Malcolm- C. Anderson, it was. never carried out; but the transaction contemplated by" that agreement failed, and, until the 4th of February, 1896, the note was. merely held as collateral security by Mr. Brent individually for a loan of $5,000, and constituted in Mr. Brent's hands a pledge only to the extent of $5,000. There was no usury in that transaction. Five thousand dollars was advanced on the note; it was received by Anderson; no deduction was made, and the note was not enforcible beyond the $5,000 advanced. But, on February 4, 1896,. the relations of the j)arties to the note were entirely changed. On that day Mr. Anderson and Knowles met in the city of New York and a settlement took place between them of their antecedent business transactions, and at that time ah adjustment of their accounts was made, Anderson being discharged fpom his indebtedness, and in consideration of the settlement- Anderson agreed that the $25,000- note should be the property of Knowles. The -indebtedness and other items of consideration for the nóte aggregated something more than $25,000, for Anderson gave in addition to the $25,000 note his other and individual note for $165.32. When this settlement was made, and on the same day, Mr. Anderson wrote to-Mr. Brent and the First National Bank of Pensacola the following letter: " I beg to advise that I have to-day sold to Mr. Wm, Knowles the $25,000 note made by R. W. Woodbury on October 10, 1895y and endorsed by Kathleen B. Anderson, and myself, and w-hich note belongs to me. Mr. Knowles will satisfy you for such amounts as you. may hold against the same at the present time." This letter recognizes the fact that the $25,000 note was held as security, and is an assurance to Mr. Brent or to the plaintiff that it was then sold, to-Mr. Knowles. On March 14, 1896, the plaintiff discounted the note for the firm of which Mr. Knowles was a member.. Its avails, being its face value, minus eight per cent interest (that being less than-the legal rate of interest in Florida), were passed to'the credit of Knowles Brothers, and were used in taking up paper upon which that firm was liable to the bank for $23,672.29, and the balance being in cash, $1,321.71. This transaction of the discount of the note on March 14, 1896, is the first transaction in which the plaintiff was directly interested in the note. It paid full value for it.
It is urged, however, that it appears in the record by the testimony of Mr. Anderson that when the note was sold to Knowles on the 4th of February, 1896, part of the consideration was a bonus of $2,500. That statement, whether it may have been competent for any other purpose or not, was incompetent to establish usury in the inception of the note, because it was not set up in the answer. It was not pleaded as a defense, and cannot .be given effect to, even though it came into the case without objection. The effort was made to show that Knowles was an agent of the plaintiff, and to confine the plaintiff's recovery to the amount actually advanced on the note. On the whole proof, it is quite clear the agency was not established, and the statement of Mr. Anderson concerning the items included in the settlement with Knowles cannot be used as evidence of a defense which was not before the court.
It is further claimed that Knowles, at the time of the settlement made in Mew York with Mr. Anderson, agreed that the note should not be enforced against Woodbury or Mrs. Anderson. That is not pleaded as a defense, but such an agreement, even if made, could not defeat the plaintiff's right. Knowles, not being the agent of the bank, could not bind it by such a stipulation, and Anderson's assurance to the plaintiff was that he had sold the note as indorsed to Knowles. The bank was entitled to buy it upon that assurance, which was a statement affecting the whole note, and not any particular party to .it. As the indorsement of Mrs. Anderson was intended for the accommodation of her husband, the bank taking it in good faith cannot, as a bona fide holder, be prejudiced by the declaration of Knowles testified to by Mr. Anderson.
The judgment and order appealed from should be affirmed, with costs. -
Van Brunt, P. J., Rumsey, Ingraham and Hatch, JJ., concurred.
Judgment and order affirmed, with costs.