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wards trusted D. with a further sum of money (m). So where a promissory note was given by S., as surety, for flour to be delivered to D. by C., who was a dealer in flour, and at the time the note was given, it was stipulated that it should operate as a security for such goods as should afterwards be delivered, and not for a debt which then existed, and flour had been subsequently delivered, and sums had been paid by the person supplied, and the question was, whether the sums which had been paid, were to be considered as paid in liquidation of the old, or new account: it appeared in evidence, that the usual term of credit upon sales of flour was three months, and that discount was allowed for earlier payments, that in some instances the payments made by D. were immediate, and corresponding with the exact amount of the goods supplied, and that in others, payments were made before the time of credit had expired, and that discount had been accordingly allowed; and it was held upon this evidence, that a sufficient inference had been afforded, in the absence of proof to the contrary, that the payments were made in relief of the surety (n). However, it seems, that in a case where a person is indebted on his individual security, and that a simple contract security, and where he is also indebted to the same creditor by bond, in which S. joins as a surety, and a payment is made generally by such debtor, it would not, without some circumstance to show it was intended to be made in discharge of the bond, be so applied, even in favour of the surety, and though it was manifestly for the advantage of the debtor himself, that the payment should be so applied (0).
(m) Hammersley v. Knowlys, 2 Esp. 665.
(n) Marryatts v. White, 2 Stark.
(0) Manning v. Westerne, 2
Vern. 606; S. C. Eq. Ca. Ab. 147, pl. 2; and see Peters v. Anderson, 5 Taunt. 596; Plomer v. Long, 1 Stark. 153; Tyson v. Cox, T. & Russ. 395; but see Heyward v.
2. Of the application or appropriation by the creditor.
If no application or appropriation, either express or implied, be made by the debtor at the time of payment, the creditor is at liberty to make the appropriation in the way he thinks proper (p): he may ascribe his receipt to the discharge of an equitable debt, though a legal debt may be due to him (q); or he may apply the payment in discharge of his debtor's separate debt, leaving the security of the principal and his surety untouched (r):-or, where one has become responsible for his principal for monies received by him not exceeding a certain sum, and the creditor gives credit to the principal beyond that sum, the creditor may apply a payment made by the principal in discharge of the excess, over and above what the surety was answerable for (s)-or, where the creditor has an open cash account with the principal as his banker, the balance of which account is in the principal's favour, and the creditor advances to the principal a sum of
Lomax, 1 Vern. 24; S. C. 1 Eq.
(p) Per Sir James Mansfield, C. J., in Hutchinson v. Bell, 1 Taunt. 558; and see Anon. 8 Mod. 236; Hall v. Wood, 14 East, 243 n.; Goddard v. Cox, 2 Stra. 1194; Tyson v. Cox, T. & Russ. 395; Peters v. Anderson, 5 Taunt. 596; Bosanquet v. Wray, 6 Taunt. 597; S. C. 2 Marsh. 319; Williams v. Rawlinson, 3 Bing. 71; S. C. 1 Ry. & M. 233; S. C.
10 J. B. Moo. 362; Manning v. Westerne, 2 Vern. 606; S. C. Eq. Ca. Ab. 147, pl. 2; Cruikshanks v. Rose, 1 M. & Rob. 100; Philpott v. Jones, 2 Ad. & Ell. 41.
(q) Bosanquet v. Wray, 6 Taunt. 597; S. C. 2 Marsh. 319.
(r) See the judgment in Tyson v. Cox, T. & Russ. 395; and see Hall v. Wood, supra; and Peters v. Anderson, 5 Taunt. 596.
(s) The London Assurance Company v. Buckle, 4 J. B. Moo. 153.
(7) In Heyward v. Lomax it is stated, that where a man owes money on a mortgage, and other monies to the same person on account, for which he is not to pay any interest, and he makes a general payment, without mentioning it to be in discharge of the mortgage, or of the monies due upon the account, it shall be taken to have been paid towards discharge of the money due on the mortgage; because it is natural to suppose that a man would rather elect to pay off the money for which interest was to be paid, than the money due on the account for which no interest is payable.
money on the security of his bond, in which S. joins as his surety, and the principal from time to time makes payments to the creditor, the creditor is not compelled (in the absence of any express, or implied appropriation), to apply those payments in discharge of the bond, but may carry them to the principal's account current, although at the time the payments are made, the balance of the principal's account is then in his favour (t):—or, where a surety guarantees the creditor in respect of monies to be advanced to the principal, and at the time the guarantee is given, the principal, unknown to the surety, is indebted to his creditor, the creditor may, nevertheless, apply all subsequent payments made by the principal to the extinction of the old account, and charge the new advances upon the guarantee (u), even though the debt, in satisfaction of which the payments are applied, is barred by the Statute of Limitations (v).
Nor is the creditor bound to make the application at the time the payment is made by the debtor, it is sufficient if he does so, before an account is settled between them, or action brought (w) (8): and even if a creditor enters the payments made to him by the debtor, in books which he keeps for his own private purposes, to one account, he has still the option of applying those payments to another ac
(t) See the judgment in Tyson v. Cox, T. & Russ. 395.
(u) Kirby v. The Duke of Marlborough, 2 M. & Sel. 18.
(v) Mills v. Fowkes, 5 Bing. N. C. 455.
(w) Simson v. Ingham, 2 B. &
Cress. 65; S. C. 2 Dowl. & Ry. 219; Wilkinson v. Sterne, 9 Mod. 427; Philpott v. Jones, 2 Ad. & Ell. 41; and see the judgment in Mills v. Fowkes, 5 Bing. N. C.
(8) By the civil law, the creditor, as well as the debtor, was bound to make his election at the time of payment; failing to do so, the law applied the payment in discharge of the debt, which it was most for the interest of the debtor to discharge, and if all the debts were equally burdensome, then in discharge of that which had been first contracted.
The reader is referred to the able judgment of Sir Wm. Grant, M. R. in Clayton's Case (1 Meriv. 604), for information on this point.
count, provided those entries have not been communicated to the party to be affected by them (r): but if the accounts as originally made out, had been settled between the parties (y), or if the entries had been made in a book kept for the common use of both the creditor and the debtor, as a pass-book, and that had been communicated to the opposite party (z), then, it seems that the creditor will be considered to have made his election, and will be held precluded from making any other appropria
3. Where no application or appropriation is made by either party.
If no application or appropriation is made by either party, the law applies the money to the discharge of the several items of the account in the order of their priority, the first item on the debit side of the account being the item discharged or reduced, by the first item on the credit side (a); therefore, where S. engages to be answerable for all advances made to P. by C., until the happening of a particular event, and the event happens which puts an end to the surety's engagement, at which time there is due to C., on balance of accounts between him and P., a certain sum of money (b); or if P. being indebted to C., S., as P.'s surety, joins him in a bond to C., conditioned for the payment of that sum of money and interest, at a time specified, or upon demand (c), and C. subsequently continues to carry on his dealings with P. in the same manner as he used to do, and as if nothing had happened, and makes no rest or distinction in the accounts, and receives from P. in the course of such & Cress. 65; S. C. 2 Dowl. & Ry. 219.
(x) Simson v. Ingham, 2 B. & Cress. 65; S. C. 2 Dowl. & Ry. 219.
(y) Bodenham v. Purchas, 2 B. & Ald. 39.
(z) See the observation of Bayley, J., in Simson v. Ingham, 2 B.
(a) Clayton's Case, 1 Meriv. 572. (b) See supra.
(c) Walker v. Hardman, 11 Bli. N. S. 229.
dealings any payments, those payments, if unappropriated by the debtor or creditor, are, in the first instance, to be applied in reduction of the balance due to C. for which the surety was liable, although it may have happened that Č. had advanced to P., sums to a greater amount than those he subsequently received from him (d). If, however, there are demands recognised by law, and others arising on matters forbidden by law, the law appropriates the payments to the demands which it acknowledges, and not to those which it prohibits (e) and it seems that if there is a legal debt, and a demand which can be recovered only by having recourse to a Court of Equity, and no appropriation is made by either party, a court of law will apply the payment to the existing legal demand (ƒ).
2ndly. Of acts done by the creditor, which will wholly, or in part, discharge the surety.
Any agreement entered into between the creditor and principal, without the sanction of the surety, which alters the latter's rights or situation, discharges the surety and if the surety has been once discharged, any agreement subsequently entered into between him and the creditor, in ignorance of that fact, unless such agreement is founded upon some new and good consideration, will be null and void (g).
(d) Clayton's Case, 1 Meriv. 572; Bodenham v. Purchas, 2 B. & Ald. 39; Brooke v. Enderby, 2 Brod. & B. 70; Strange v. Lee, 3 East, 484; Bellairs v. Ebsworth, 3 Camp. 53; Simson v. Cooke, 1 Bing. 452; S. C. 8 J. B. Moo. 588; Pemberton v. Oakes, 4 Russ. 154; see the judgment of Lord Kenyon in Dawe v. Holdsworth, Pea. 64; and Williams v. Rawlinson, 3 Bing. 71; S. C. 1 Ry. & M. 233; S. C 10 J. B. Moo. 362; ex parte Randleson, 2 Deac. & Ch. 534.
(e) Wright v. Laing, 3 B. & Cress. 165; S. C. 4 Dowl. & Ry. 783; ex parte Randleson, 2 Deac. & Ch. 534.
(f) Birch v. Tebbutt, 2 Stark. 74; Goddard v. Hodges, 1 Cr. & Mees. 33; and see the judgment of Erskine, J., in Mills v. Fowkes, 5 Bing. N. C. 455.
(g) West v. Ashdown, 1 Bing. 164; S. C. 7 J. B. Moo. 566; and see Cartwright v. Williams, 2 Stark. 340; Goodall v. Dolley, 1 T. R. 712; Hammon v. Roll, March, 202.