of the case. In this form it is rather the enunciation of a principle than of a rule for practical application. In attempting to state the rule, courts have often used general and vague expressions. Thus it has been said that the court in applying a payment should exercise a sound discretion, or that the law will apply payments according to its notions of justice, or on equitable principles, and so as to effectuate justice,' and according to the intrinsic justice and equity of the case. If these expressions are to be accepted as criteria for judicial action the rule would become uncertain and varying and

would be opposed to all correct notions of judicial action. It is true that, where the parties have not made any specific application of payments, courts will make it according to the justice and equity of the case; but in doing so they are governed by certain general and established rules, and are not at liberty to adopt their own notions of what may be just and equitable in each particular case.10 In applying a payment the court is to be governed by the law of the jurisdiction where the contract was made.11 It is for the jury to apply a payment under the evidence before them and the direction of the court. 12

墨

105. Intention of Parties.-When the intention of the parties can be determined with reasonable certainty, the court will apply an undirected payment accordingly.13 No doubt the justice, of each case will best be promoted by carrying out the intention of the parties. In case an expressed intention cannot be found, one may be implied from the circumstances of the case. Every presumption and rule which the courts have adopted in furtherance of their purpose to discover the "justice of each case" is subordinate to this rule of intention.14 It will be noticed that the two rules hereinafter discussed 15 are based on the supposed intention of the debtor.

106. Debtor Favored.-An examination of the decided cases bearing on the rule which should control a court in making an appropriation when the parties have made none discloses the fact that the definite principles which should guide a court are few and subject to many qualifications. The artificial rules of the civil law have sometimes been applied by American and English courts, but not with such uniformity as to furnish a safe rule of decision.16 The Roman law favored the debtor, and applied a general payment in a manner most beneficial to him.17 The civil law has been followed in England and in several jurisdictions in the United States, and the debtor is favored in every way.18 In these jurisdictions the courts hold

9. Hersey v. Bennett, 28 Minn. 86, 86 Conn. 234, 85 Atl. 583, Ann. Cas. 9 N. W. 590, 41 Am. Rep. 271. 1913E 889.

Note: 96 A. S. R. 55.

10. Miller v. Miller, 23 Me. 22, 39 Am. Dec. 597; Hersey v. Bennett, 28 Minn, 86, 9 N. W. 590, 41 Am. Rep. 271; Pardee v. Markle, 111 Pa. St. 548, 5 Atl. 36, 56 Am. Rep. 299.

Note: 96 A. S. R. 55.

11. American Woolen Co. v. Maaget, 86 Conn. 234, 85 Atl. 583, Ann. Cas. 1913E 889. .

12. Note: 96 A. S. R. 62.

13. Becker v. Hooper, 22 Wyo. 237, 138 Pac. 179, Ann. Cas. 1916D 1041. Note: 96 A. S. R. 58.

14. American Woolen Co. v. Maaget,

15. See infra, par. 106, 107.

16. Nashville First Nat. Bank v. National Surety Co., 130 Fed. 401, 64 C. C. A. 601, 66 L.R.A. 777.

17. Orleans County Nat. Bank v. Moore, 112 N. Y. 543, 20 N. E. 357, 8 A. S. R. 775, 3 L.R.A. 302; Smith v. Loyd, 11 Leigh. (Va.) 512, 37 Am. Dec. 621.

Note: 96 A. S. R. 59.

18. Backhouse v. Patton, 5 Pet. 160, 8 U. S. (L. ed.) 82; Snyder v. Robinson, 35 Ind. 311, 9 Am. Rep. 738; Orleans County Nat. Bank v. Moore, 112 N. Y. 543, 20 N. E. 357, 8 A. S.

that the law should make an application of payment in accordance with the presumed intention of the debtor, and that it must be presumed that the debtor intended to apply it to the debt that would be most beneficial to himself.19 Accordingly it has been held that where one is indebted to another on a mortgage or on a judgment, and on an open account or note, and makes a payment generally, and there has been no appropriation of such payment by the creditor, the law will apply it to the most burdensome debt; that is to say, to the mortgage or judgment, in preference to the note or open account. 20 Where, however, the interest of the debtor would not be promoted by any particular appropriation, there is no ground for a presumption of any intention on his part, and the law then raises a presumption, for the same reason, that the payment was actually received in the way that was most to the advantage of the creditor. A general payment made by one on both a joint and a several debt the law will apply on the individual obligation. A general payment is always to be referred to a debt due by the payor absolutely, and as principal, rather than to one due contingently and collaterally, or held as collateral security. Although one debt may be more burdensome to the debtor than another, if it is not due the rule does not apply, and payment will be appropriated only to the debt actually due at the time. If there is an express agreement between the parties, or a course of business from which an agreement may be implied, that another rule shall control, the debtor cannot invoke the principle that a payment must be applied most beneficially to him.*

107. Creditor Favored.-The rule that the court in applying a general payment should make the application in the manner most beneficial to the debtor has not met with universal approval. On the contrary there are a great many jurisdictions in which the doctrine prevails that the court in applying a general payment will do so in a manner most beneficial to the creditor. This rule is based on

R. 775, 3 L.R.A. 302; Harker v. Conrad, 12 Serg. & R. (Pa.) 301, 14 Am. Dec. 691; Devaynes v. Noble, 1 Meriv. 530, 15 Rev. Rep. 151, 3 Eng. Rul. Cas. 329 and note.

Note: 96 A. S. R. 57, 59.

19. Stewart First Nat. Bank v. Hollinsworth, 78 Ia. 575, 43 N. W. 536, 6 L.R.A. 92; Phillips v. Herndon, 78 Tex. 378, 14 S. W. 857, 22 A. S. R. 59.

Bank, 114 N. Y. 28, 20 N. E. 632, 11
A. S. R. 612.

Note: 96 A. S. R. 53.

3. Snyder v. Robinson, 35 Ind. 311, 9 Am. Rep. 738.

Note: 96 A. S. R. 57.

4. Note: 96 A. S. R. 60.

5. Central Trust Co. v. Richmond, etc., R. Co., 68 Fed. 90, 31 U. S. App. 675, 15 C. C. A. 273, 41 L.R.A. 458; Bell v. Bell, 174 Ala. 446, 56 So. 926,

20. Frazier v. Lanahan, 71 Md. 131, 37 L.R.A. (N.S.) 1203; Haas Electric, 17 Atl. 940, 17 A. S. R. 516.

1. Harker v. Conrad, 12 Serg. & R. (Pa.) 301, 14 Am. Dec. 691:

2. National Park Bank v. Seaboard

etc., Co. v. Springfield Amusement Park Co., 236 Ill. 452, 86 N, E. 248, 127 A. S. R. 297, 23 L.R.A.(N.S.) 620; Morrison v. Citizens' Nat. Bank,

the assumption that the debtor would desire to pay all his debts, and this disposition of the credit most nearly accomplishes that result, or, in other words, the law pursues this course, as it intends that all men shall be honest and fully perform their just obligations, and adopts this method as the one which an honest man would unselfishly choose, if left to himself to act in the premises. It simply does what the debtor should have done if prompted by just motives. Accordingly if neither debtor nor creditor applies a payment, the law will apply it to an unsecured in preference to a secured debt, or to the one for which the creditor's security is most precarious; 8 and under this rule a payment should be applied on a debt for which the debtor has given surety rather than to those he owes singly. But it has been held that a credit on a bill for the items of which a mechanic's lien is claimed, for the price of material returned, will not be regarded as a general payment, which a court of equity will credit on nonlienable items so as to uphold a lien for the contract price of those which are lienable, which does not exceed in amount the sum unpaid. on the contract.10 And payments made after suit begun and attachment made ought not to be credited on the items of the account sued on, since this would unfairly prejudice the rights of the plaintiff already secured in his suit.11 The rule that the creditor is to be favored on the appropriation of undirected payments has been held to prevail over the rule that a payment will be applied to the older items first; but it will not be applied to the prejudice of a surety who has the right to insist on a payment being applied to the older items first.12 The rule in some jurisdictions is that the application of indefinite payments need not be exclusively in accordance with

65 N. H. 253, 20 Atl. 300, 23 A. S. R. 926, 37 L.R.A.(N.S.) 1203; Stone Co. 39, 9 L.R.A. 282.

Note: 96 A. S. R. 56, 60.

6. Stone Co. v. Rich, 160 N. C. 161, 75 S. E. 1077, Ann. Cas. 1914C 244. Note: 96 A. S. R. 60.

v. Rich, 160 N. C. 161, 75 S. E. 1077,
Ann. Cas. 1914C 244; Pardee v.
Markle, 111 Pa. St. 548, 5 Atl. 36, 56
Am. Rep. 299; Wardlaw v. Troy Oil
Mill, 74 S. C. 368, 54 S. E. 658, 114
A. S. R. 1004; Putnam v. Russell, 17
Vt. 54, 42 Am. Dec. 478.

Notes: 14 Am. Dec. 694; 12 L.R.A.

712.

9. Note: 96 A. S. R. 56.

10. Haas Electric, etc., Co. V. Springfield Amusement Park Co., 236 II. 452, 86 N. E. 248, 127 A. S. R. 297, 23 L.R.A.(N.S.) 620.

7. Field v. Holland, 6 Cranch 8, 3 U. S. (L. ed.) 136; Bell v. Bell, 174 Ala. 446, 56 So. 926, 37 L.R.A. (N.S.) 1203; Cain v. Vogt, 138 Ia. 631, 116 N. W. 786, 128 A. S. R. 216; State v. United States Fidelity, etc., Co., 81 Kan. 660, 106 Pac. 1040, 26 L.R.A. (N.S.) 865; Burks v. Albert, 4 J. J. Marsh. (Ky.) 97, 20 Am. Dec. 209; Stone Co. v. Rich, 160 N. C. 161, 75 S. E. 1077, Ann. Cas. 1914C 244; Wardlaw v. Troy Oil Mill, 74 S. C. 368, 54 S. E. 658, 114 A. S. R. 1004. Note: 96 A. S. R. 56, 59. 8. Bell v. Bell, 174 Ala. 446, 56 So. infra, par. 109.

11. American Woolen Co. v. Maaget, 86 Conn. 234, 85 Atl. 583, Ann. Cas. 1913E 889.

12. Pardee v. Markle, 111 Pa. St. 548, 5 Atl. 36, 56 Am. Rep. 299. See

the interests of either party, but may be such as is just and equitable under all the circumstances of the case,18 and that a court of equity will always feel at liberty so to control their application asto prevent manifest injustice to either party.14

1 1

108. Illegal or Unenforceable Claims.-The application of a payment not having been directed, the law will as between a legal and illegal debt apply it on the legal debt.15 So the principle of law which applies such unappropriated payments first to discharge the interest due, and then reduce the principal, cannot operate in the case of usurious interest, for all interest is forfeited, eo instanti, by an agreement to pay interest at an illegal rate, and payments will not be applied by operation of law to the discharge of unlawful obligations in preference to debts justly due.16 If a part of the interest is usurious, but, although it was contracted for at an illegal rate, legal interest is still recoverable, the payment is applied first to the extinguishment of so much of the interest as is legal, and then to the principal; the usury being retained in the debt to the last, no matter how many renewals are made.17 While courts will not apply a payment to an illegal demand, as a general rule, such is not always the case when the debt is merely unenforceable as by the statute of limitations, and if equity requires it, such payment will be imputed to the barred indebtedness.18 Accordingly where one was owing another on an individual and also on a partnership account and made. a general payment without any application, without protestation against further liability, and the payments amounted to more than the individual account, it was held that the court would apply the balance on the partnership account to remove the bar of the statute of limitations, although the creditor without definite knowledge of the standing of the two accounts gave the debtor credit for all payments on his individual account.19

13. Smith v. Loyd, 11 Leigh (Va.) 512, 37 Am. Dec. 621.

Notes: 96 A. S. R. 61; 12 L.R.A. 712.

And as between an indebtedness

Bank, 48 Fed. 271, 3 U. S. App. 7, 1
C. C. A. 62, 17 L.R.A. 622; Citizens'
Nat. Bank v. Forman, 111 Ky. 206,
63 S. W. 454, 757, 56 L.R.A. 673;

14. Cain v. Vogt, 138 Ia. 631, 116 Knox v. Williams, 24 Neb. 630, 39 N. W. 786, 128 A. S. R. 216.

15. Citizens' Nat. Bank v. Forman, 111 Ky. 206, 63 S. W. 454, 757, 56 L.R.A. 673; Knox v. Williams, 24 Neb. 630, 39 N. W. 786, 8 A. S. R. 220; National Park Bank v. Seaboard Bank, 114 N. Y. 28, 20 N. E. 632, 11 A. S. R. 612; Backman v. Wright, 27 Vt. 187, 65 Am. Dec. 187 and note. Note: 96 A. S. R. 66.

16. Danforth V. National

N. W. 786, 8 A. S. R. 220; Cadiz Bank v. Slemmons, 34 Ohio St. 142, 32 Am. Rep. 364.

Notes: 8 A. S. R. 223; 56 L.R.A.

701.

17. Citizens' Nat. Bank v. Forman, 111 Ky. 206, 63 S. W. 454, 757, 56 L.R.A. 673.

18. Note: 96 A. S. R. 68.

19. Robie v. Briggs, 59 Vt. 443, 9 State Atl. 593, 59 Am. Rep. 737.