Case ID: sc-eq_8/html/0430-01.html
Source: Caselaw Access Project
Author: {"author": "Harper, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

James Heilbron v. J. H. Bissell, and Joseph Warner.
    If the debtor, at the time of making a payment, does not direct to which, of several accounts, on which he is indebted, the payment shall be applied, (he creditor is intitled to make the application, and is not limited as to the time within which he may do so. vide Stewart v. Cochran, ante, p. 380.
    The direction, by the party paying, as to the application of the payment, must be made to the party receiving; and it is not sufficient, that the party making the payment credits it to a particular account in his own book, of which the other party has no notice.
    A party being indebted by judgment and execution, and also by simple contract, to the same creditor, made several payments, without directing their application; and the creditor subsequently applied them to the simple contract debt. The debtor, in the mean time, assigned his estate in trust to pay, first, the judgment, and then a bond due to another creditor. Held, that his being ignorant how the payments were applied, at the time of the assignment, was not such a mistake, as would furnish a ground for setting aside the assignment; even if the Court could, by doing so, relieve, either against the lien of the judgment and execution, or the creditor’s right to apply the payments made to the simple contract debt.
    This was a bill for an account, and was heard at Charleston, in May, 1830, by Harper, Chancellor, from whose decree the case will be fully understood.
    Harper, Ch. William P. Bason, of Charleston, being considerably indebted to Benjamin .Warner, deceased, of Philadelphia, after the death of the latter, to wit, on the 8th November, 1822, gave to his executor, the defendant Joseph Warner, his three notes, each in the sum of $4,470, payable in one, two, and three years ; and as a collateral security, entered into a bond conditioned for the payment of $13,412.22, and on the same day confessed a judgment on the bond. This was for the debt contracted in the life time of Benjamin Warner. After Benjamin Warner’s death, Bason had considerable dealings with the executor, who continued the business, carried on by his testator in his life time, for the benefit of his estate, and became indebted to him for books and stationary, the property of the estate. These transactions were the subject of a running account between them. On the 23d August, 1825, Bason executed a bond to the complainant, James Heilbron, conditioned for the payment of $6,250.50; and afterwards assigned all his estate and effects to the defendants, Joseph Warner, and J. H. Bis-sell, in trust, after paying the judgment before mentioned, to the executor of Benjamin Warner, to pay the amount ot the complain. ant’s bond. The defendant, J. H. Bissell, alone acted as assignee. In the months of April, May, and June, 1825, the defendant, Joseph Warner, drew several drafts on Bason, for the aggregate amount of $4,545, signed by him as executor of Benjamin Warner, and directing Bason, to charge the amount to the estate of Benjamin Warner; and the question made in the case, related to the application of this amount: whether it should be applied towards the satisfaction of the judgment, thus leaving a greater portion of the assets of Bason applicable to complainant’s demand ; or to the running account, in which case, the judgment still remains to be first satisfied,
    On the part of the complainant, it was contended : First, that the rule, in relation to the application of payments, is, that the party paying, has the right, where there are demands of different natures against him, to apply them to either demand he thinks proper; and that Bason in this instance did make the application of his payments to the judgment. Secondly, that if the party paying, fails to make the appropriation, although the party receiving may do so at the time of payment, yet if he neglects it, the Court will make the application to the demand which it is most for the debtor’s in. terest to extinguish ; to one that has a lien, rather than to one that has not; to one that carries interest, rather than to one that does not: and therefore the application, in the present case, ought to be made to the judgment.
    To shew that the money was appropriated by Bason to the judgment, he himself was examined as a witness. He produced his books, in which he had opened an account with the judgment, and on which, when he paid the drafts, he entered the amount to the credit of the judgment. This testimony of, itself, would not do. The cases sufficiently shew, that the direction to appropriate, by the party paying, must be made to the payee. Manning v. Westerned Vern. 60(5. Indeed all the cases take this for granted, when they speak of the application of the money being expressed, at the time of payment. It cannot mean a private signification of his intention, known only to the party himself.
    The subject of the application of payments, where no appropriation is made by the debtor at the time of payment, is much considered by the Master of the Rolls, in Devaynesv. Noble, (Clayton’s Case,) 1 Meriv. 570. He adverts to the rules of the civil law on the subject, from which he supposes those of the common law to ^ave keen borrowed. “ The leading rule, with regard to the optrCro given, in the first place to the debtor, and to the creditor in the second, we have taken literally from thence. But according to that-^aw’ l^e eIect'on was to be made at the time of payment, as well in' the case of the creditor, as that of the debtor, ‘in re preesenti; hocest statim atgue solutum est: — ccelerum, postea non permittitur’ If neither applied the payment, the law made the appropriation, ac~ cording to certain rules of presumption, depending on the nature of the debts, or the priority in which they were incurred. And as it was the actual intention of the debtor that would, in the first in« stance, have governed ; so it was his presumable intention that was first resorted to, as the rule by which the application was to be determined. In the absence, therefore, of any express declaration by either, the inquiry was, what application would be most beneficial to the debtor. The payment was consequently applied to the most burthensome debt, — to one that carried interest, rather than to that which carried none, — to one secured by a penalty, rather than to that which rested on a simple stipulation ; — and if the debts were equal, then to that which had been first contracted.” 1 Meriv. 605.
    He goes on to observe, “ But it is contended, that in this respect, our Courts have entirely reversed the principle of decision, and that, in the absence of express appropriation by either party, it is the presumed intention of the creditor that is to govern ; or at least, that the creditor may, at any time, elect how' the payments made to him shall retrospectively receive their application. There is certainly a great deal of authority for this doctrine. With some shades of distinction, it is sanctioned by the case of Goddard v. Cox, (2 Str. 1194,) by Wilkinson v. Sterne, (9 Mod¿ 427,) by the ruling of the Lord Chief Baron in Newmarch v: Clay, (14 East, 239,) and by Peters v. Anderson in the Common Pleas, (5 Taunt. 596.) From these cases Í should collect, that a proposition which, in one sense of it, is indisputably true, — namely, that, if the debtor does not apply the payment, the creditor may make the application to what debt he pleases, — has been extended much beyond its original meaning, so as, in general, to authorize the creditor to make his election when he thinks fit, instead of confining it to the period of payment, and allowing the rules of law to operate, where no express declaration is then made.” 1 Meriv. 606, 7.
    The Master of the Rolls proceeds, “ There are other cases, however, which are irreconcileable with this indefinite right of election in the creditor, and which seem, on the contrary, to imply a recognition of the civil law principle of decision. Such, in particular, are the cases of Meggot v. Mills, (1 Ld. Raym. 286,) and Dawe v. Holdsworth, (Peake’s N. P. C. 64.) The creditor, in each of these cases, elected, ex post facto, to apply the payment to the last debt. It was, in each case, held incompetent for him to .do so. There are but two grounds, on which these decisions could proceed; either that the application was to be made to the oldest debt, or that it was to be made, to the debt which it was most for the interest of the debtor to discharge. Either way, the decision would agree with the rule of the civil law, which is, that if the debts are equal, the payment is to be applied to the first in point of time ; — if one be more burthensome, or more penal, than another, it is to that the payment should be first imputed. A debt, on which a man could be made a bankrupt, would undoubtedly fall within this rule.” 1 Meriv. 607.
    The extracts I have made state, very precisely, the question presented in this case, as well as that which may be made on the construction of the various cases referred to. I have already said that the debtor, Bason, made no appropriation of the payments at the time when he made them. Nor in a legal point of view, did the creditor, Joseph Warner, at the time when he received them; that is to say, when he drew his drafts, or was advised that they were accepted, and paid. It is true, he files an account with his answer, to shew, that he did appropriate these amounts to the credit of the running account between himself and Bason. But th¡3 is not evidence ; even if such an appropriation, of which Bason was not advised, were sufficient. He claims by his answer, however, to appropriate the payments to the running account; and the question is, whether he can thus make the application : whether the creditor can apply payments, at any time, when the debtor has failed to make the application at the time of payment.
    The Master of the Rolls, in the opinion I have quoted, comes to no conclusion of his own ; but it seems to me, that his leaning is in favour of adherence to the rule of the civil law. With the respect due to so great an authority, I have examined the cases referred to, and some others on the same subject; and my conclusion is, on the preponderance of authority, that the creditor has that unlimited right to appropriate, when the debtor has made no appropriation at the time of payment.
    One of the earliest cases, that of Heyward v. Lomax, 1 Vern. 24, seems to be in conformity to the civil law rule. Where the party was indebted by a security carrying interest, and by simple contract, the payment was applied to the demand bearing interest, as ^e'nS most ^01’ 4^e advantage of the debtor. But in Perris «. Roberts, 1 Yern. 34, where there was a debt on mortgage, and one by simple contract, the payment was decreed to be apportioned.
    Manning v. Westerne, 2 Yern. 606, a party indebted, both by specialty, and simple contract, made payments, and entered them in his book, as made on account of the specialty debt. This was held not a sufficient appropriation, and that the creditor might apply the payments. The creditor’s right does not appear to have been restricted to the time of payment, but to have been regarded as indefinite.
    In Goddard v. Cox, 2 Str. 1194, a widow, executrix of her de. ceased husband, was indebted, as executrix, and on her own account. She married again, and her second husband became indebted to the same person. He made payments, but directed no appropriation of them at the time. It was held that the husband might have appropriated at the time of payment; but neglecting to do so, the creditor might appropriate, either to the debt due by the wife, personally, before marriage, or to the husband’s debt. No. thing is said of the creditor’s right being limited to the time of payment.
    In Peters v. Anderson, 5 Taunt. 596, a party had served three years, as a surgeon, under indentures, and then about three years, under a simple contract. The question was respecting payments made during the last three years; and it was held, that although the party making payments may appropriate them as he pleases, or the appropriation may be inferred from circumstances, yet if he fails-to do so, the creditor may appropriate afterwards. The same doctrine is recognized in Newmarch v. Clay, 14 East, 239; and in Kirby v. the Duke of Marlborough, 2 Maulé & Selw. 18. It is observed with respect to these cases, in Devaynes v. Noble, (supra,) correctly, so far as I can perceive, that in none of them does the appropriation appear to have been made by the creditor, until after the matter came into question.
    In addition to these is the case of Plomer v. Long, 1 Starkie, 122, where the question was made by a surety to a bond. His principal had been indebted, both by the bond, and by simple contract, and having made payments, it was held, that these could not, in favour of the surety, be presumed to have been appropriated to the bond, but that the creditor might appropriate.
    The doctrine is also laid down, expressly, by Chief Justice Marshall, in the case of the Mayor of Alexandria v. Patten, 4 Cranch, 317, that, although the debtor may apply his payments, at the time when they are made, yet if he neglect to do so, the creditor may, at any time afterwards, apply them.
    Against these authorities, the cases of Meggot «. Mills, 1 Ld. Raym. 286, and Dawe v. Holdsworth, Peake’s N. P. C. 64, are supposed to be opposed. These cases are almost exactly similar in circumstances. In the former, A., while a trader, was indebted to B., £100: after he ceased to be a trader, he became indebted £100, more; and paid £100, generally on account. Lord Holt held, that the payment should be applied to the debt of £100, contracted while he was a trader; for “ it would be too rigorous, to permit B. to sue a commission of bankrupt, for the old debt of £100. But to this point he said he would not give an absolute opinion.” 1 Ld. Raym. 287. The case of Dawe v. Holdsworth, was a similar case of bankruptcy ; though the reasoning of Lord Kenyon seems to be founded on the rule, of applying payments as may be most beneficial to the debtor. But in Peters v. Anderson, (supra,) Lord C. J. Gibbes, referring to these cases, says, that they go on the ground of the grievous disability to which the party would be subject, by remaining liable to be made a bankrupt. “ It is an exception, and founded on the circumstance of bankruptcy.” 5 Taunt. 602.
    Apart from these cases, and that of Heyward v. Lomax, (supra,) I have found no authority for the Court’s applying payments, on a presumed intention, as may be most beneficial to the debtor; nor any dictum recognizing the civil law rule. Heyward v, Lomax, has been often overruled, and the other cases are regarded as exceptions ; and I must therefore conclude in favour of the defendant, Joseph Warner’s, right to appropriate the payments in question.
    There is another class of cases, in which the appropriation of payments has been determined by circumstances, indicating, or presumed to indicate, the intention of the parties ; which, so far as 1 perceive, have no application in the present case. Such is the case of Newmarch v. Clay, 14 East, 239, where the creditor having various demands, and among the rest, certain bills of exchange, upon receiving a payment to about an equal amount, gave up the bills; and this was held to be a special application of the payments. So in Hammersly v. Knowlys, 2 Esp. N. P. Rep. 666, where a party having deposited with his bankers, an accommodation note, known to the bankers to be such, as a security for money advanced, and afterwards received further advances, and made payments; the payments, in favour of the maker of the note, were applied to the debt, for which the note was security.
    
      Another ■ point was made in this case, which, however, did not seem to be insisted on in argument. It was, that the assignment of Bason was made under a mistake, and that the mistake should re^evec* against. He himself stated, in his testimony, that he made the assignment under the impression, that the amount of the drafts in question had been applied to the judgment; and that, but for that impression, he would not have made it. If the mistake were admitted, it is plain, that no relief could be given. If the as. signment were set aside, the judgment would still be intitled to priority; execution on it having been lodged. Or, if the assignment had given a priority to complainant’s demand, it would have been' so far inoperative. The assignment has provided for these debts, in the same order of precedence, that the law would have done without it.
    But I cannot regard this as a mistake, in the legal sense of the word. Bason accepted, and paid the drafts, without directing how they should be applied, or being informed by Warner how they were to be applied. He had no ground to conclude, or believe, any thing about the application ; although he might conjecture, or surmise. He was ignorant how the payments were applied ; but this was not mistake. It was argued, that the form of the drafts was calculated to mislead Bason. They direct him to charge the amount to the estate of Benjamin Warner; and it was,contended, that the debt for articles purchased of the executor, Joseph Warner, was Joseph Warner’s personal debt, although the articles were part of his testator’s estate. But, in strictness, the notes, and the bond, taken by Joseph Warner, were also his personal debt, though for a debt due to the testator in his life time. We know that, popularly, dealings with an executor, in relation to the estate, are termed dealings with the estate. It is probable, that Bason regarded the running account as much a debt to the estate, as the judgment ; nor did he say to the contrary in his testimony, or that he was mis. led by the terms of the drafts.
    It is therefore ordered, and decreed, that the defendant, J. H. Bissell, as assignee of William P. Bason, account before the mas. ter, or commissioner; and that he pay over the funds in his hands to the'creditors of the said William P. Bason, in the order of pri. ority specified in the assignment: and that the amount of the several drafts before mentioned, be credited to the running account between the defendant Joseph Warner, and the said William P. Ba-son. The costs of suit to be paid by complainant.
    
      Axson, for the motion.
    Petigru, contra.
    
   Harper, J.

Johnson, J., and O’Neall, J., concurred.

From this decree the complainant appealed ; sed per Curiam, The decree of the Chancellor is affirmed, for the von. sons given, and the motion to reverse it is dismissed.

Decree affirmed.