the debt for which he is liable. When an agent or trustee receives money generally, and he holds claims of different persons, to each of whom he is under the same obligations, he should apply the money ratably to the discharge of all the claims, and this obligation would be in no way affected by the circumstance that if the debts were all his own, he would have the undoubted right to apply the money to either of them at his election. Where an agent receives money from his principal for the purpose of paying a debt, and uses it for the purpose of paying a debt of his own due to the creditor, it is said that the application of the payment is binding on the principal in the absence of knowledge on the part of the creditor that the money belongs to the principal, though there is also authority to the contrary. 115. Surety Generally.-While the authorities are not entirely in accord third persons, such as guarantors, sureties, indorsers, and the like, secondarily liable on one of several debts, cannot control the application which either the debtor or the creditor makes of a payment, and neither the debtor nor the creditor need apply the payment in the manner most beneficial to such persons." This rule applies as well to a corporation engaged in the business of writing surety bonds for a compensation as to an ordinary accommodation surety. Accordingly it has been held that where a creditor has several demands against the same debtor, one of which is secured by an indorsement, and he has procured attachments to be issued and levied on all the demands, he has the right to apply the proceeds of the attachment to the satisfaction of the demands not secured by the indorsement, and then seek satisfaction, if necessary, from the indorser. Still where there is a guaranty of a limited part of a debt, any payments made by the debtor must be applied to discharge that portion. The rule is otherwise, however, where the guaranty is for the unpaid balance of a debt.8 2. Farmer's Sav. Bank v. Jameson, Bross v. McNicholas, 66 Ore. 42, 133 175 Ia. 676, 157 N. W. 460, L.R.A. Pac. 782, Ann. Cas. 1915B 1272; 1916E 362. 3. Richmond, etc., Constr. Co. v. Richmond, etc., R. Co., 68 Fed. 105, 31 U. S. App. 704, 15 C. C. A. 289, 34 L.R.A. 625; McLeod v. Despain, 49 Ore. 536, 90 Pac. 492, 92 Pac. 1088, 124 A. S. R. 1066, 19 L.R.A.(N.S.) 276. Notes: 96 A. S. R. 52; Ann. Cas. 1917C 584. 4. Note: Ann. Cas. 1917C 584. 5. Cain v. Vogt, 138 Ia. 631, 116 N. W. 786, 128 A. S. R. 216; Wyandotte Coal, etc., Co. v. Wyandotte Pav., etc., Co., 97 Kan. 203, 154 Pac. 1012, Ann. Cas. 1917C 580 and note: Pardee v. Markle, 111 Pa. St. 648, 5 Note: 96 A. S. R. 52, 74. 6. Wyandotte Coal, etc., Co. v. Wyandotte Pav., etc., Co., 97 Kan. 203, 154 Pac. 1012, Ann. Cas. 1917C 580. 7. Morrison v. Citizens' Nat. Bank, 65 N. H. 253, 20 Atl. 300, 23 A. S. R. 39, 9 L.R.A. 282. 8. United States v. Giles, 9 Cranch 212, 3 U. S. (L. ed.) 708. Note: Ann. Cas. 1917C 587. 116. Source of Funds as Material. The general rule that a surety cannot control the application of a payment is applicable solely in those cases where the principal makes the payment from funds which are his own and are free from any equity in favor of the surety to have the money applied in payment of the debt for which the surety is liable, but where the specific money paid, or property delivered to the creditor, is the identical money or property for the payment or delivery of which the debtor and his sureties have obligated themselves by the contract and undertaking, the surety is not bound by an application thereof to some other debt for which the surety is not liable. He is entitled to have the money or property applied to the payment of the debt for which he is liable.10 While the decisions recognize the right of a surety to have a payment made from funds in which it has an equity applied to the debt for which it is surety, the great weight of authority qualifies the surety's rights in this regard to the extent of confining the exercise or claim of such right to the time of the making of the payment, as the right of the original debtor is so confined, where the creditor receives the payment from his debtor without knowledge of the source of the money or of the surety's equity therein, and in good faith exercises his right of applying the payment to any one of the debts owing to him by the one making the payment. And want of knowledge or failure of direction secures to the creditor, even as against the claims of sureties, the right to have his application of the payment which he has made, in the absence of such knowledge and in good faith, remain undisturbed.11 117. Sureties on Bonds.-In instances of official bonds executed by the principal at different times, with separate and distinct sets of sureties, the responsibility of the separate sets of sureties must have reference to, and be limited by, the periods for which they respectively undertake by their contract, and neither the misfeasance or nonfeasance of the principal, nor any cause of responsibility occurring within the period for which one set of sureties have undertaken, can be transferred to the period for which alone another set have made themselves answerable.12 From this it follows that moneys collected and paid over during a second term and under a different set of sureties cannot be applied to extinguish obligations arising in the prior term and thereby relieve the sureties under the first bond at the expense of the sureties under the second; 18 and the government cannot by the mere fact of keeping an account current in which debts and credits are entered as they occur, and without any express appropriation of payments, affect the rights of sureties. 14 These rules are not to be regarded as resting on any particular public policy, nor as applicable only to the bonds given by public officers, but extend to fidelity bonds generally. The fundamental idea is that the rights and interests of independent sets of sureties for distinct periods of time would be unjustly sacrificed by applying payments arbitrarily to the oldest debt.15 However, it has been held that it is only when the law makes the application of the payments that a particular set of securities is entitled to credit for the sums that may be shown to have been received under their bond; 16 and when an official has held several successive terms under bonds with different sets of sureties, he may apply the revenue arising in one term to the payment of å balance due under a former term, and thus exonerate one set of sureties at the expense of another. Although there may have been no application of the payment when made, yet the law, in making the application between two sets of sureties, will not presume that all the revenue received after the date of the last bond, was received in discharge of the liability incurred by reason of such bond, and inflexibly appropriate it accordingly. The circumstances under which a payment is made may show the year for which the money was received with which the payment was made. If, after an officer is properly chargeable with money for a term, he makes a payment, it may be presumed that it was on account of the indebtedness for that term; yet it may be shown to be otherwise, and the circumstances under which it was made may indicate the source whence the money was obtained.18 The rule is somewhat different, however, where there is only one bond and one surety. In such a case, although the account of the principal is balanced at stated intervals and the debtor is charged or credited with the balance, as may be, on the next interval, still as the whole transaction represents but one continuous account, 13. United States v. January, 7 16. State v. Smith, 26 Mo. 226, 72 Cranch 572, 3 U. S. (L. ed.) 443; Am. Dec. 204. United States v. Irving, 1 How. 250, 11 U. S. (L. ed.) 120. Note: 96 A. S. R. 73. 17. Nashville First Nat. Bank v. National Surety Co., 130 Fed. 401, 64 C. C. A. 601, 66 L.R.A. 777 (stating 14. United States v. Irving, 1 How. rule); State v. Smith, 26 Mo. 226, 72 250, 11 U. S. (L. ed.) 120. 15. Nashville First Nat. Bank v. National Surety Co., 130 Fed. 401, 64 C. C. A. 601, 66 L.R.A. 77. Am. Dec. 204. 18. State v. Smith, 26 Mo. 226, 72 Am. Dec. 204; St. Joseph v. Merlatt, 26 Mo. 233, 72 Am. Dec. 207 the rule is that the payments will be applied to extinguish the debts according to priority of time.19 118. Sureties on Building Contracts.-There are two views as to the right of a materialman or subcontractor to apply money which the contractor has received on account of a particular contract, as bearing on the liability of a surety. One view is that a surety is not released of his liability to a materialman or subcontractor where the latter applied payments made to him by the contractor from moneys received of the owner of the building to another claim, where no application was made by the contractor, and the materialman had no knowledge of the source of the money,20 But a creditor with knowledge of the source of money cannot apply it to a debt other than that secured by the bond so long as the bond remains unsatisfied. The other line of authorities holds that the payment must be applied to the extinguishment of the liability of the surety on the on contract on which it is received. " 119. Owner of Building as to Payments by Contractor to Subcontractor. In general a building contractor at the time of making a payment to a subcontractor or materialman may direct the application thereof, and the owner of the property has no right to object thereto on the ground that it leaves the property subject to mechanics' liens, whereas a different application would relieve it Where it appears that money paid by an owner is by the contractor-paid to the subcontractor or materialman, the cases are divided as to the right of the subcontractor or materialman to apply the payment as desired, in the absence of application, by the contractor. The general rule applicable to payments by a debtor to his creditor is applied by some courts, and it is held that the materialman has a right to make the application to other debts and retain his lien.5. The distribution among subcontractors of the original contract price, which is the limit of aggregate liens, should be made on the basis of the entire lienable claim of each subcontractor, and payments by the owner to each of them must be applied thereon up to the amount of his share when made in the progress of the work, although no lien therefor had been perfected. The other line of authorities lays down the 19. Jones v. United States, 7 How. 82 Wash. 445, 144 Pac. 698, Ann. Cas. 681, 12 U. S. (L. ed.) 870. 1916A 767. 20. Chicago Lumber Co. v. Douglas, 89 Kan. 308, 131 Pac. 563, 44 L.R.A. (N.S.) 843; Sturtevant v. Fidelity, etc., Co., 92 Wash. 52, 158 Pac. 740, L.R.A.1917C 630 and note. 2. Note: L.R.A.1917C 638. 3. Note: L.R.A.1916D 1255. 4. Sheppard v. Steele, 43 N. Y. 52, 3 Am. Rep. 660. Notes: L.R.A.1916D 1256; Ann. Cas. 1917C 588. 5. Notes: L.R.A.1916D 1256; Ann. Cas. 1917C 588. Note: Ann. Cas. 1917C 587. 1. Sturtevant Co. v. Fidelity, etc., Co., 92 Wash. 52, 158 Pac. 740, L.R.A. 1917C 630, criticising and limiting 6. Central Trust Co. v. Richmond. Puget Sound State Bank v. Gallucci, etc., R. Co., 68 Fed. 90, 31 U. S. rule that a creditor has the right, in the absence of direction by his debtor, to apply a payment on account, and that this is a rule between creditor and debtor, and does not apply where the money is received by the debtor from a third person whose property will be liable for the debt in case the money is not applied on the third person's liability." Accordingly it is held that a materialman cannot, by applying money paid him by a building contractor, who had received it on a particular job, on accounts against the contractor, arising out of other jobs, retain a lien against the building on account of which the money was paid, although he acts in ignorance of the source of the money, and by his application of payment releases his lien on the property on account of which the application is made. Evidence of Application 』,*** 120. By Debtor Generally.-A direction by the debtor as to the application of payments may be shown by an express agreement with the creditor, or it may appear by express designation of the debtor,10 or if the debtor's intention as to the application appears from the facts and circumstances connected with the payment and his purpose can be fairly implied therefrom by the creditor, that is enough."1 It is not, however, always necessary that the debtor should expressly state his purpose as to the application of the payment. A payment may be attended by circumstances which demonstrate its application as completely as words could demonstrate it. Thus where a creditor claims that his debtor owes him on two separate demands, one of which is admitted and the other disputed, if the debtor, under such circumstances, makes a payment to his creditor, it will be presumed, in the absence of evidence to the contrary, that the payment is made App. 675, 15 C. C. A. 273, 41 L.R.A. 458. 7. Sioux City Foundry, etc., Co. v. Merten, 174 Ia. 332, 156 N. W. 367, L.R.A.1916D 1247 and note. Note: Ann. Cas. 1917C 588. 9. Stone Co. v. Rich, 160 N. C. 161, 75 S. E. 1077, Ann. Cas. 1914C 244. Note: 96 A. S. R. 77. 10. Tayloe v. Sandiford, 7 Wheat. 13, 5 U S. (L. ed.) 384; American Woolen Co. v. Maaget, 86 Conn. 234, 85 Atl. 583, Ann. Cas. 1913E 889; Grasser, etc., Brewing Co. v. Rogers, 112 Mich. 112, 70 N. W. 445, 67. A. S. R. 389; Stone Co. 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. 11. Tayloe v. Sandiford, 7 Wheat 13, 5 U. S. (L. ed.) 384; Cavanaugh v. Marble, 80 Conn. 389, 68 Atl. 853, 15 L.R.A. (N.S.) 127: American Woolen Co. v. Maaget, 86 Conn. 234, 85 Atl. 583, Ann. Cas. 1913E 889; Grasser, etc., Brewing Co. v. Rogers, 112 Mich. 112, 70 N. W. 445, 67 A. S. R. 389; Stone Co. v. Rich, 160 N, C. 161, 75 S. E. 1077, Ann. Cas, 19140 244; Pardee v. Markle, 111 Pa. St. 548, 5 Atl, 36, 56 Am. Rep. 299... / Notes: 96 A. S. R. 77; 3 U. S. (L. ed.) 136. -, 16, 1 |