[69 e] acknowledgment of the other, with a payment of the sum due on the latter, would demonstrate its application as completely as any express declaration. 7 Wheat. 21, Tayloe v. Sandiford. Again, where the plaintiff having dealt for a long time with two partners, not knowing that they had a third partner, furnished them goods and received money on account generally, continuing the same course of dealing after the secret dissolution of the tripartnership, after which some bills, paid during the tripartnership, were dishonored and delivered up on new good bills being paid, in lieu of them; it was holden that such delivery up of old dishonored bills upon receiving the new good bills was evinence of a particular appropriation of such new bills in payment of the old debt, of which the secret partner might avail himself in an action for goods sold and delivered brought against him jointly with the other two partners. 14 East 239, Newmarch v. Clay. So where a person keeping cash with a banker, placed in the banker's hands the note of a third person, informing the banker that it was made for his accommodation, and afterwards paid in money generally, and then new credit was given by the banker; it was held that the money so paid must be applied towards the discharge of the debt then existing, and the banker could not recover against the maker more than the balance remaining due after deducting the amount so paid in. 2 Esp. Ca. 665, Hammersly v. Knowlys. So where 4. having large demands against B. upon bill transactions with himself, and also as agent for several persons to whom B. had granted annuities secured by C., caused an attorney to make application to B. and C. on behalf of those annuitants, and B., in consequence of that application and the remonstrances of C., the surety, paid to A. certain ums of money without making any specific appropriation of them at the time of payment; it was held that . 1. must be considered as having received them on account of the annuitants, and could not apply them in discharge of his own personal demand. 4 B. & C. 715, Shaw v. Picton. 2. The second general rule is, that if the debtor, at the time of payment, makes no specific appropriation, the creditor may apply it as he pleases. Str. 24, Hawkshaw v. Rawlings. 1 Taunt. 564, Hutchinson v. Ball. 6 Esp. Ca. 21, Dawson v. Remnant. Thus where 4. owed a debt as excentrix, and then contracted a further delt on her own account, and married B. who afterwards contracted a debt with the same creditor, and then made several payments generally, it was held, in an action against B. alone, that B., being equally liable for the debt of his wife before coverture, and for his own debt during the coverture, the plaintiff might apply the payments in discharge of the wife's personal debt, though he could not apply it to the debt due from her as executrix. 2 Str. 1194, Goddard v. Cox. So where the plaintiff served the defendant three years under an indenture, and the more under a simple contract, and during both periods payments were made to him generally on account of wages, the whole of which payments would, if applied to the demand for the first term of service, be more than sufficient to satisfy it, but which were all blended in one account; and he afterwards brought two actions, one in covenant, the other in assumpsit, un which the defendant attempted to appropriate so much of the pay as were sufficient to satisfy the first account to the action of covenant; the court ruled that the plaintiff had his election to ascribe to the second debt, for which he had the worst security, the money received during the second period, and might therefore recover in both actions. 5 Taunton 596, Peters v. Anderson. See 1lso 6 Cranh, Field r. 1folland. By the rules of the civil law, it seems that if the debtor neglected to make the application at the time of payment, the election then devolved pon the creditor; but it was incumbent on him to make the application at the time; otherwise it would be applied to that debt which the debtor had, at the time, most interest to discharge; and that the application would be made rather to the debt for which the debtor had given surety than to those which he owed alone. See 2 Poth. on Obligations 15, 1. 1 Domat 287, cited in argument 4 Cranch 319. See also Chyton's case, 1 Merivale 604. This doctrine seems also to have been recognized in some cases in the U. States. Thus in Hill v. Sutherland. ! Wasu. 133, the court say, 'If the debtor neglect to make the application at the time of payment, the election is then cast upon the creditor, yet it is incumbent on the latter, in such case, to make a recent application by entries in his books or papers, and not to keep parties and sureties in suspense, changing their situation, from time to time, as his interest governed by events, may dictate.' So in the case of Gwinn v. Waic dzer, I Har. & Johns. 754, it is said by the court, that if a person is indebted on mortgage or bond, or simple contract, and makes a payment, without particularly applying it, the law will make the application in the way most beneficial to the debtor. See also 1 Bibb 331, Bacon v. Brown But the rules of the civil law, and the principles stated in the ast last cited, do not appear to be generally adopted, to their full extent, by the common law. Thus from a review of the cases decided in the United States and England, generally, it does not appear that any par ticular time is limited within which the creditor Lust make the application. In the case of the Mayor &c. of Alexandria v. Patten, 4 Cranch. 319, which was an action of debt against Patten and his sureties, on a bond given for the performance of his duties as a vendue mister, the object of the suit was to recover a sum of money alleged to rerun in his hands as vendue muster on account of one Ladd. Patten was al- indebted to Ladd for goods sold by him to Patten, who gave in evidence payments which exceeded the amount due on the latter acecic, and which, if wholly applied to the former account, would nearly discharge that debt. Marshall C. J., in delivering the opinion of the court, says, No principle is recollected which obliges a creditor on take his eloctiti immediately.' 'In declaring that the election which devolved oa he creditor, if the application of the money was Lot time by the parties, was lost if not immediately ess below erred. See also 6 Taunt. 597, Bosanquet v. Wray. No it secins that an entry by the creditor in his books, is not conclusive appropriation of the payment, until it is co i od to the party to be affected by it. A bond was given by country bankers to the [69 ƒ] [69 g] ments to the old account, and that the London bankers were still entitled to apply the payments received subsequently to the death of the deceased partner to the debt of the new firm. 2 B. & C. 65, Simpson v. Ingham. But where one of several partners dies, and the partnership is in debt, and the surviving partners continue their dealings with a particular creditor, and the latter joins the transactions of the old and new firm in one entire account, which is communicated to the surviving partners, then the payments made, from time to time by the surviving partners, must be applied to the old account. 2 B. & A. 39, Bodenham v. Purchas. 1 Mer. 572, Clayton's case. And after the creditor has once completely made the appropriation, he is bound by it. 4 Cranch 320, Mayor, &c. v. Patten. 1 Mason 338, Cremer v. Higginson. Simpson v. Ingham, ub. sup. The fact that a surety of the debtor is interested in the discharge of one of the debts, does not, in general, affect the right of the creditor to appropriate general payments at his discretion. Thus in the case of Plomer v. Long, 1 Starkie's Ca. 153, it was ruled that a payment by the obligor of a bond to the obligee to whom the obligor is also otherwise indebted, cannot, without some circumstances to show that it was intended to be made in discharge of the bond, be so applied in favor of the surety of the obligor, in an action on the bond under a plea of payment. So in the case of Kirby v. The Duke of Marlborough, 2 M. & S. 18. the action was brought against the principal and surety on a bond conditioned for payment of future advances to be made by the plaintiff to the principal defendant. It appeared that the plaintiff had advanced money to the principal defendant upon the security of the bond, and that the principal defendant had subsequently made general payments to the plaintiff. It was held that the plaintiff might apply these payments in liquidation of a balance existing in his favor against the principal defendant before the execution of the bond, and that the surety could not insist upon their being applied in exoneration of his liability on the bond, although at the time of entering into it he had no notice that any balance was then existing against the principal. See also Williams v. Rawlinson, 3 Bing. 71. S. P. So where A. by indenture leased a house for one year to B. as principal and C. and D. as sureties, and B. entered and continued to occupy after the term had expired, and paid money after that time, without appropriating it; it was held that the lessor might apply the money to the rent which accrued after the expiration of the term, and recover against the sureties the rents which accrued for the first year. 1 Pick. 332, Brewer v. Knapp. See also Mayor &c. of Alexandria v. Patten, ub. sup. The interests of a surety are, however, sometimes and under certain circumstances, relied upon as controling the creditor's power to apply general payments. In the case of Carroll v. Goold, 1 ,Bing. 190, it is said by Dallas C. J. that a surety is favored in equity and in law, though perhaps when he enters into a contract with his eyes open, there is no very good ground for the favor shown him; the distinction however, (between the principal and surety,) has been repeatedly recognized.' Accordingly where an annuity being in arrear, and the rents of an estate on which it was secured being unpaid, the trustee of the estate, who had negociated the annuity between the grantor and grantee, having advanced a sum to the grantee in anticipation of the coming rents, and having received from the grantee, on this advance, the commission which he usually received on annuity payments, the court set aside an execution which (the rents proving insufficient) was afterwards issued for this sum, in the name of the grantee, against one who, as surety for the payment of the annuity, had given a warrant to confess judgment. 1 Bing. 171, Williamson v. Goold. The court, in delivering their opinion in this case seem to rely much on the fact that the applica tion was made on behalf of a surety, and therefore entitled to the favorable consideration of the court. But in the case of Carroll v. Goold above cited, which was subsequently tried at the same term and before the same court, and in which the facts were substantially like the preceding, except that the latter was not the case of a surety, the court held that this distinction made no difference. Sed vide 4 B. & C. 715, Shaw v. Picton. 2 Starkie's Ca. 101, Marryatts v. White, and 7 Cranch 572, U. States v. January, where the distinction is recognized. A creditor receiving money from his debtor without any specific appropriation, may also be permitted, in a court of law, to ascribe the payment to a debt purely equitable, and to sue his debtor at law for his legal debt. Thus though the partners in one house of trade cannot maintain an action at law against the partners in another house of trade, of which one of the partners in the plaintiff's house is also a member, for transactions which took place while he was partner in both houses; yet if, after the death of the partner in both houses, the surviving partners in the plaintiff's house make further advances, and the surviving partners in the defendant's house make payments generally, the surviving partners in the plaintiff's house may apply those payments to the discharge of the debts accrued during the life of the partner in both houses, and sue the surviving partners in the defendant's hous for the subsequent advances. 6 Taunt. 597, Bosanquet v. Wray. But where A. having a legal claim against B. on bills of exchange accepted by B. and having also possession of a deed of mortgage, executed by B. to a third person, not actually assigned, but of which A. might compel an assignment in equity, demands of B. the amount both of the bills and of the mortgage, and B. pays money to A. on account, without prejudice to his claim on any securities; the law applies the payment to the legal demand on the bills of exchange. 2 Starkie's Ca. 74, Birch v. Tibbutt. And where money is paid generally, the creditor cannot apply it to the discharge of an illegal demand. Thus in the case of Ribbans v. Crickett, 1 B. & P. 264, a part of the plaintiff's demand was legal and a part illegal. The defendant paid money into court generally, sufficient to cover the legal demand, and the plaintiff contended that he might apply this payment to the discharge of that part of his claim which was illegal and recover for the residue; but the court held that such payment was only an admission of a legal demand and could not be applied to an illegal account. But where parties having cross demands, settled their accounts and struck the balance, it was held by Sir J. Mansfield C. J. that such settlement, though part of the plaintiff's demand was illegal and for which no action could be maintained, should bind the defendant, so that he should not set up that defence; but the plaintiff might apply the defendant's account to the payment of any part of his demand and recover the balance so struck. 6 Esp. Ca. 24, Dawson v. Remnant. 3. In some cases when a payment is made generally, the law will apply it according to the intrinsic justice and equity of the case. 1 Mason 338, Cremer v. Higginson. Thus where a broker sold goods of A. and also goods of B. to C., and the latter made a payment generally on account, insufficient to discharge both debts, but more than sufficient to discharge either one, and then became insolvent, it was held that the money so paid must be applied in proportion to both debts respectively. 11 East 36, Favenc v. Bennett. So if an agent, having blended a demand due to his principal with a demand due to himself, receives a general remittance from the debtor, it must be applied towards the discharge of both debts in proportion. 2 Pick. 123, Barrett v. Lewis. So where a mortgagee of two parcels of land released one of them to an assignee of the mortgagor, she was held to apply the money paid in consideration of such release, in discharge of so much of the sum due on the mortgage, although the mort 69 h] [69 i] gagor was indebted to her on other accounts. 11 Mass. 300, Hicks v. Bingham. So where partial payments are made on notes, bonds, &c. bearing interest, every payment is to be first applied to keep down the interest, and the surplus, if any, to the payment of the principal. The rule, in such cases, is to compute the interest on the principal sum from the time when the interest commenced, to the time when a payment was made which exceeds, either alone or in conjunction with preceding payments, if any, the interest at that time due; add that interest to the principal, and from the sum subtract the payment made at that time together with the preceding payments, if any; and the remainder forms a new principal. 17 Mass. 417, Dean v. Williams. See also Gwinn v. Whitaker, 1 Har. & Johns. 754. North v. Mallett, 2 Hayw. 151. Tracy v. Wickoff, I Dal. 154, and Fay v. Bradley, 1 Pick. 194. So where there is a subsisting demand between two parties, and the debtor makes a payment generally, it must be taken as a payment of the subsisting demand, and cannot be taken as a deposit, unless the parties agree that it should be so. 2 Esp. Ca. 666, Hammersley v. Knowlys. Where the power of applying a payment is not exercised either by the debtor or the creditor, it devolves upon the court, and in its performance a sound discretion is to be exercised. In the exercise of this discretion, the court will apply the payment, not to that debt which the debtor had, at the time, most interest to discharge, but to that for which the security is most precarious. Thus in the case of Field v. Holland, 6 Cranch 8, it was contended that if the payment had not been applied either by the creditor or the debtor, it ought to be applied by the court in the manner most advantageous to the debtor, because it must be presumed that such was his intention; but the contrary doctrine was held by the court, who say, 'the correctness of this conclusion cannot be conceded. When a debtor fails to avail himself of the power which he possesses, in consequence of which that power devolves on the creditor, it does not appear unreasonable to suppose that he is content with the manner in which the creditor will exercise it. If neither party avails himself of this power, in consequence of which it devolves on the court, it would seem reasonable that an equitable application should be made. It being equitable that all the debts should be paid, it cannot be inequitable to extinguish first those debts for which the security is most precarious. That course has been pursued in the present case. See also 5 Taunt. 596, Peters v. Anderson. So where a creditor had received of his debtor certain bills for which a receipt was given to be credited when paid,' the court permitted the payments subsequently made on account of those bills to be applied to the discharge of a debt contracted after the receipt of the bills and before they were paid. Field v. Holland, ub. sup. Sed vide 1 Har. & Johns. 754, Gwinn v. Whitaker. 1 Bibb 334, Bacon v. Brown. The general rule that the debtor may direct the application of payments at the time of making them, is not applicable to a public officer, e. g. a collector of the revenue, who has given two bonds for his official conduct, at different periods, and with different sureties. In such case, monies arising due and collected subsequently to the execution of the second bond, cannot be applied to the discharge of the first bond, and a promise of the supervisor of the revenue so to apply them does not bind the United States, and does not amount to an appropriation of the payments to the first bond. 7 Cranch 572, United States v. January. |