
    Auburn Savings Bank v. Jacob Brinkerhoff.
    
      (Supreme Court, General Term, Fifth Department,
    
    
      Filed March, 1887.)
    
    1. Savings banks—Loans by—Laws 1875, chap. 371, § 30, and Laws 1882, chap. 409, § 260—What does not invalidate.
    Savings banks are by Laws 1875, chap. 371, § 30, and Laws 1882, chap. 409, § 260, prohibited from making loans on notes, bills of exchange or other personal securities. Held, That being authorized to loan money upon bond and mortgage, a loan made by a savings bank as security for which notes were taken in addition to bond and mortgage, was valid. 3. Same—Laws 1849, chap. 93, § 7; Laws 1875, chap. 371, § 36, sued 5; Laws 1883, chap. 409, § 360, shed. 5—Borrowers can not set up as defense irregularities in making loans.
    The plaintiff’s charter (Laws 1849, chap. 93, § 7) provided that its funds might be loaned on improved, unincumbered real estate, in this state, worth, exclusive of buildings thereon, at least double the amount to be secured thereby; and the general statutes relating to savings banks (Laws 1875, chap. 37, § 36, -subd. 5; Laws 1883, chap. 409, § 360, subd. 5) require that the real estate upon which loans are made shall be unincumbered. Held, That these provisions were for the benefit of the depositors, and that the fact that the rule requiring the real estate upon which the mortgage rested, which was given as security for a loan, was not observed in making the loan, would not be matter of defense in an action against the borrower
    3. Evidence—What incompetent under Code Civ. Pro., § 839.
    
      Held, That questions relating to personal transactions had by the defendant with one of the assignors of the plaintiff, subsequently deceased, were incompetent under the provisions of the Code Civ Pro., § 839.
    4. Evidence—Declarations of a party not competent in his own BEHALF.
    
      Held, That the defendant’s declarations were not competent as testimony in his own behalf.
    5. Stipulation—Oral, when binding.
    A stipulation made before trial, and not questioned upon the trial, binds the parties to it, although not in writing
    Motion by plaintiff for new trial on exceptions taken at the Cayuga circuit, and ordered to be heard at general term in first instance.
    
      W. E. & F. E. Hughitt, for pl’ff; Woodin & Warren, for deft.
   Smith, P. J.

Action on a bond executed by the defendant to David Brinkerhoff and Albert H. Goss, on or about 16th December, 1873, and by them assigned to the plaintiff, conditioned for the payment of the sum of $3,400, on the first day of June, 1875, with interest, semi-annually.

It appears that the bond was accompanied by a mortgage on real estate, of even date with the bond and collateral thereto, executed by the obligor to the obligees, and that the bond and mortgage were transferred by the obligees to the plaintiff as security for the payment. of two promissory notes made by the assignors to the order of the defendant, and endorsed by him—one for $1,000, dated 1st December, 1873; the other for $2,400, dated 20th December, 1873—each payable 1st June, 1875, with interest, semiannually.

The notes and the bond and mortgage were transferred and delivered to the plaintiff, in consideration of the sum of $3,400, in money, made by the plaintiff, and as security for the repayment thereof. The'- assignment of the bond and mortgage to the plaintiff contained a covenant that there was then to become due thereon the sum of $3,400, with interest, from their date. The plaintiff is a savings bank, incorporated under chapter 92, Laws of 1849.

The defenses set up in the answer and relied upon at the trial are, first, that defendant executed the bond and mortgage and endorsed the notes without consideration and for the accommodation of Goss and David Brinkerhoff, and that the" notes were discounted by the plaintiff, a savings bank, in violation of the statute, and,' consequently, the notes and the boiid and mortgage which were assigned to the bank, solely as collateral security for the payment of the notes, are void; and, secondly, that the defendant was a mere surety of Goss and David Brinkerhoff, to the knowledge of the plaintiff, and the plaintiff neglected to collect of them while it could, after request by the defendant, and the principal debtors thereafter became insolvent.

In support of the first defense, it is contended by the defendant’s counsel that the transaction on the part of the savings bank was a discounting of the notes, which, by the provisions of the restraining act (1 R. S., 600, § 4; id., 712, | 3), it was prohibited from doing. But it does not appear that the notes were discounted. Discounting of a note by a bank has been held to mean lending money upon the note and deducting the interest or premium in advance. City Bank of Columbus v. Bruce, 17 N. Y., 507, 575; Borne Savings Bank v. Kramer, 32 Hun, 270, 272. It appears by the uncontradicted testimony of the plaintiff’s treasurer that the full face of the notes was advanced by the bank and nothing was reserved.

The defendant’s counsel also contends that the loan made by the plaintiff was a violation of the statutes prohibiting savings banks from making loans on notes, bills of exchange or other personal securities. Laws 1875, chap. 371, § 30; Laws 1882, chap. 409, § 260. That position is untenable, for the reason that it appears without contradiction that the loan was made upon the three securities, the notes, the bond and the mortgage. The plaintiff was authorized to lend on bond and mortgage, and if the loan was in other respects valid, it was not vitiated by the fact that notes were taken in addition to the bond and mortgage.

Upon this branch of the case, another question arises: The charter of the plaintiff provides that its funds or deposits may be loaned * * * on improved, unincumbered real estate, in this state, worth, exclusive of buildings thereon, at least double the amount to be secured thereby. Laws 1849, chap. 92, § 7. The general statutes relating to savings banks also require that the real estate upon which loans might be made, should be “unincumbered.” Laws 1875, chap. 371, § 26, subd. 5; Laws 1882, chap. 409, § 260, . subd. 5. It is proved that the mortgage in this case was upon real estate which was covered by eight prior mortgages; and it is not shown that there was a compliance with the statutory requirement that no investment in bond and mortgage shall be made by a savings bank except upon the report of a committee, etc., who shall certify to the value of the premises mortgaged. Id. But are these facts available to the debtor as a defense to an action upon his bond ? The bank has power, as we have seen, to make loans upon bond and mortgage. The provisions requiring the mortgage to be a first lien, and the value of the mortgaged premises to be certified, are intended for the protection of depositors and others whose funds are held and managed by the bank as a trustee. The statute does not declare that non-compliance with those provisions shall render the bond and mortgage void. Nor is there anything in the statute to indicate that a result so hostile to the interests of cestius que trust and creditors of the bank was intended.

In Davis Sewing Machine Co. v. Best (30 Hun, 638), it was held that a security taken by a trust company, contrary to an implied prohibition in its charter, upon a loan made by it", could be enforced for the benefit of the depositors of the company, notwithstanding the prohibition. In Gold Mining Company, etc., v. The Rocky Mountain National Bank, etc. (96 U. S. R., 640), it was held that a person who has borrowed money from a bank and failed to pay it, cannot make the defense when sued for it, that the bank had no right to loan the money. See, also, National Bank v. Matthews, 98 U. S. R., 621; National Bank v. Whitney, 103 id., 99. We think the irregularities above pointed out, do not furnish a defense to the bond.

In regard to the other defense, we do not think it is - shown that the defendant executed the bond as the surety of the obligees. On the contrary, the inference to be drawn from that instrument is that he was their debtor. If the form of the note raises the presumption of surety-ship, it is not conclusive, and is overcome by other evidence in the cas,e. The defendant admitted on the stand that he was not a surety for David Brinkerhoff. And David testified that he never had a penny of the loan, and was surety for the defendant. He, also, testified that he signed the $2,400 note at the request of the defendant, who stated that he was in need of money, and asked David to go security with Gross for $3,400, and promised to give them a bond and mortgage. David consented, and in pursuance of that arrangement, the papers were drawn and executed. That testimony was not controverted by the defendant, although he was put upon the stand after it was given.

Upon the question whether the defendant was surety-for Goss, the only oral testimony is that of the defendant. Its admissibility is questioned by the plaintiff’s counsel. It was proved that Goss was dead. Subsequently, the following questions were put to the defendant as a witness in his own behalf, to wit: “At the time you indorsed that note, or at the time you executed the bond and mortgage did you receive anything for it?” “Did you ever receive any money upon this note, or mortgage, or bond, from anybody ? ” Each question was objected to as incompetent under section 829 of the Code, the objection was overruled, an exception was taken, and the witness answered: “No.” The only legitimate tendency of the testimony thus elicited was to show that the defendant was not a principal debtor, and was a surety, in the transaction. The questions being general, embraced, of course, his dealings with Goss, in respect to this transaction. To that extent, it seems to us they were within the prohibition of the section. The testimony related to a personal transaction between the defendant and Goss, then deceased, who was one of the assignors of the plaintiff, and its reception was error.

The learned counsel for the defendant invoke the rule declared in Comstock v. Hier (73 N. Y., 280), and Kale v. Elliott (18 Hun, 198), that the death of one of one of two persons jointly interested does not render a party incompetent to testify to transactions with the decedent, at which the survivor was present, or to transactions with the sursurvivor. The questions objected to went beyond that rule, they being so broad as to cover transactions with Goss, at which no third person was -present, and the defendant, by his answers to them, was permitted to say, in effect, that he never received any consideration for signing the papers from Goss, either alone or jointly with David Brinkerhoff.

It is also contended by the defendant’s counsel that the plaintiff is not an assignee, within the meaning of section 829. Comstock v. Hier (supra), is cited as authority for that position also. It was there said that a maker of a note, or acceptor of a bill, negotiating his own paper, or procuring it to be discounted, is not an assignor of the note or bill, but, by the transaction, assumes the ordinary obligations of a party to negotiable paper, as maker of a note or acceptor of a bill. If this action were upon the notes, and it appeared that they had their inception when they were delivered to the bank, the rule referred to would be applicable. The action is on the bond, which, for aught that appears in the case by legitimate evidence, is presumed to have been a valid instrument in the hands of the obligees therein named, and which is admitted by the defendant, in Ins answer, to have been executed and delivered to said obligees and to have been assigned and transferred to the plaintiff.

As the testimony above considered was improperly received, there is no legitimate evidence in the case that the defendant was the surety of Goss, and as the defendant admitted on the stand that he was not the surety of David Brinkerhoff, the defense founded on the alleged suretyship fails.

The declarations made by the defendant to the treasurer of the plaintiff, orally and in writing, as. to his relations to the debt, are not competent in his behalf to show that he was a surety.

If it be assumed that the defendant was a surety, yet, as in view of his admission already referred to, he is to be regarded as the surety of Goss only, his defense fails for an ■ other reason. The printed case shows that during the progress of the. trial the plaintiff’s counsel stated to the court that Mr. Cox, one of the counsel for the defendant, had stipulated orally, before the trial was begun, that, at. the time when the request to prosecute was made, Goss was insolvent, and that consequently he (the plaintiff’s counsel, was not prepared with evidence upon that question, to which Mr. Cox assented. The case proceeds to .state that consequently no further evidence was given on the subject of Goss’ insolvency. If this statement in the case has any practical significance (and it is be presumed that if it had none it would have been struck out), it is equivalent to saying that, before the trial, the defendant’s counsel stipulated orally that Goss was insolvent when the request was made, and that the plaintiff’s counsel, relying on the stipulation, omitted to produce evidence of the fact which was within his reach, or went to trial supposing that the fact would not be questioned. And it does not appear that the fact was questioned by the defendant’s counsel. In those circumstances we think the defendant was bound by the stipulation, although it was not in writing (People v. Stephens, 52 N. Y., 306), and that, for the present purpose,, the fact is to be assumed to be as stipulated. In that view of the case the defendant suffered no harm from the plaintiff’s omission to sue..

For these reasons we think a new trial should be ordered, costs to abide event.

Haight and Bradley, JJ., concur; Barker, J., not voting.  