#### Zachary Peck, plaintiff and appellant, *vs.*William Minot, Jr. *et al.*executors, &c. defendants and respondents.

1. The release of mortgaged premises from the lien of a mortgage, upon the ground of its payment, will not be enforced in an action brought by a grantee of the mortgagor against the assignee of the mortgagee, without evidence either of payments made expressly on account of the bond, to secure which such mortgage was given, or on account of the indebtedness of the mortgagor to the mortgagee generally, in such manner as by the rules of law governing appropriation of payments would render them first applicable to the extinguishment of such bond; or of some other agreement, express or implied, between the mortgagor and mortgagee to apply some indebtedness of the latter to the former, for the purpose of such satisfaction or some right of the grantees of such premises, as assignees of such indebtedness, to set it off against the claim of the mortgagee when seeking to enforce such mortgage against the land.

2. In the absence of such an agreement or payments, the mere co-existence of mutual, debts would not extinguish either of them, or compel either party to elect to sue upon his claim, or avail himself of it as a set-off. The necessity of such election in the case of actions brought in some inferior courts, created by statute, does not exist in any other case.

3. In the absence of any direct evidence of any express agreement between a mortgagor and mortgagees for the application of some indebtedness of the latter to the former, in satisfaction of the mortgage, the delivery by the mortgagor to the mortgagee, of foul- new obligations, payable with interest, for every six months' interest accrued on, the bond, to secure which such mortgage was given, dated on the day it became due, and a release by the *324mortgagees of part of the mortgaged premises from the lien of such mortgage, with a recital in the instrument of release that such mortgage should remain a lien on the residue of the premises, if unexplained, are conclusive evidence that both parties considered such mortgage unsatisfied, aind kept its lien alive at the time of giving such release and obligation.

4. Where a mortgagor and mortgagee had general dealings and accounts together for a series of years, the delivery by the former of Ms promissory note, in satisfaction of a balance found due by Mm on a statement of such accounts in one year, and the payment by Mm in cash in the following year of another balance found due on a second statement of accounts, followed by the delivery of the bond and mortgage in question in the third year, in settlement of a balance found due on a like statement, is strong evidence of such a course of dealing between the parties as to show an agreement to take the specific balances for which such specific obligations were given, out of the general accounts of the parties, until all dealings between them had ceased.

6. The rendition of accounts between parties having mutual dealings, and the absence of objections, has always been considered *prima fame,*and in some cases' conclusive, evidence of their correctness, *tw*Robeetson, Ch. J.

(Before Robeetson, Ch. J., and Babbots and Jones, JJ.)

Heard June 14,1866;

decided April 1, 1867.

This action was brought by the owner of certain mortgaged premises to procure their release from a mortgage thereon, or compel the holder of such mortgage, in case he had sold the same under it, to pay the proceeds of such sale to the plaintiff. The plaintiff was grantee of the mortgaged premises from the mortgagor, (W. J. Brown,) now deceased. A former defendant, also deceased, (William Sawyer,) was assignee of such mortgage from the mortgagees, (the defendants, G-. L. &■ E. Schuyler.) The defendant *Minot*and Mrs. *Bryant*were added as defendants upon the death of Sawyer, as executor and executrix of his last will and testsment.

The following were the allegations of the complaint: At the time of executing the mortgage, the mortgagor was part owner of one steamer, *{The Pacific,)*and complete owner of two others, *{Independence*and *Sea Bird.)*The mortgagees were agents of the last named, *{Sea Bird,)*and received all its earnings. The agent of the other two vessels, (0. Vanderbilt,) also by direction of the mortgagor, (Brown,) paid over to the mortgagees their earnings. There had also been mutual dealings for a long time before, and they continued a long time *325after the date of such mortgage, between the mortgagor and mortgagees. The former executed to the latter bills of sale of such vessels as security for any balance which might become due to them in such dealing. The mortgagees lost the purchase money of one half of one of such vessels ([Independence) after they had sold it, by failing to deliver her and running her until she was lost at sea. They also received the proceeds of the sale of another of such vessels, *(The Pacific,)*made by them, of the sale of one half of the third, *(Sea Bird,)*also the proceeds of a policy of insurancé, ($40,000,) on the vessel lost, *(The Independence.)*The mortgagor in June, 1851, (11th,) executed the bond and mortgage in question, which *bond*was before June, 1854, *“paid off*and satisfied.” It sets forth the proceedings in an action commenced by the defendant Sawyer, to foreclose such mortgage, but avers that “ *the amount*(if any) *due*upon the said bond and mortgage * * * cannot be ascertained until” the mortgagees (the Schiiylers) *iC shall have accounted*for the matters set forth ” therein. It then sets forth an assignment to the plaintiff by the mortgagor in Octo- _ ber previous (1855) of the mortgaged premises, and avers that such *“ mortgage*was *paid off*and satisfied *before”*the assignment before mentioned was delivered. It then contains a prayer for an account by the mortgagees, a satisfaction of the mortgage, or payment of the proceeds of the premises if sold. The answers of the defendants Sawyer and Gr. L. Schuyler, controvert most of the allegations in the complaint. The latter alleges that at the time of the assignment of the bond and mortgage in question, the mortgagor (Brown) was indebted to the defendants (the Schuylers) in a much larger sum, ($100,-000.) An order of reference was made of all the issues to be heard and determined by a single referee, now deceased, (the late Hon. William. Kent.) Certain proceedings were had and testimony taken before him in his life time. Upon his death all the issues were referred in like manner to a new referee (Hon. William Mitchell) to hear and determine the same. The evidence taken and rulings made by such first referee were ordered to be *deemed*as though taken and made by and before such *326last referee. Such last referee made his report, finding generally that no part of the bond and mortgage in controversy had ever been *paid off*or satisfied, and that at the time of the assignment to the defendant Sawyer, there was nothing due from the defendants (the Schuylers) to the mortgagor (Brown,) but on the contrary a large sum was due from him to them, and giving judgment for the defendants. Such referee also found in his report a series of facts leading to such general conclusions of facts and stated various principles of law applied by him. Such last mentioned facts were in substance as follows : The mortgagor (Brown) in June, 1851, executed the’ ' bond and mortgage in question for a balance of accounts be-, tween him and the mortgagees, which had then been settled and adjusted, he having once previously paid in cash a balance of account on a prior settlement and adjustment of previous transactions. Subsequently to the execution of such bond and mortgage, mutual dealings in lending obligations and money were carried on between the parties, for three years, until after . the assignment of the bond and mortgage in question to the defendant Sawyer. Shortly after the commencement of such dealings the mortgagor (Brown) transferred to the defendants, the Schuylers, his interest in the three steam vessels named in the complaint to *manage them as his agent.*The Schuylers afterwards paid out various sums for such mortgagor on account of the expenses of such vessels, the purchase of a further interest in them for the mortgagor (Brown,) the expenses of a sailing vessel owned by him, *(The America,)*and for mechanics' liens upon a fourth steam ship, *(The Daniel Webster,)*sold by Brown to a third person, (Vanderbilt,) against which they had agreed by the consent of the former to indemnify such purchaser. The Schuylers also received various sums during the same time on account of the vessels so in their charge, the items of which disbursements and receipts were stated in schedules annexed to such report. Such defendants (the Schuylers) rendered to the mortgagor (Brown) accounts containing the items of such disbursements, and he retained the same until after the grant to the plaintiff of the mortgaged *327premises without ever objecting to any of the same. Which accounts were introduced in evidence by the plaintiff to establish items of receipts by such defendants (the Schuylers.) There never was any application of or intention by either the Schuylers or Brown to apply any balance on such accounts, or any payments in favor of the latter, in satisfaction of such mortgage. Such referee stated as evidence of the absence of such intention various facts, in substance as follows : No accounts growing out of expenditures for the steamers before mentioned were kept separately from the general accounts between the parties. A release given by the mortgagees to the mortgagor, of part of the mortgaged premises, a few months before their assignment of such mortgage, recited, that the former were “ *to retain the residue of the mortgaged*lands, *as security for the money remaining due on the*said mortgage,” and declared such to be the intent of such release. On the day of the assignment of such mortgage, which was exactly two years from its date, to the defendant Sawyer, the mortgagor (Brown) executed and delivered to the mortgagees (the Schuylers) four promissory notes, each for the amount of half a year’s interest on such bond and .mortgage: They were dated respectively on the days on which such interest would have become due, and made payable with interest. From the same facts such referee inferred.that the mortgagor (Brown) on the day of the assignment of such bond and mortgage to Sawyer, and of giving such notes, treated it as still subsisting for the whole principal and interest.

Such referee found as matters of law: That the rendering of the accounts before mentioned to the mortgagor (Brown) and his retention of the same, for the time he so retained them, without objection, was *prima facie*evidence that they were correct. That a resort by the plaintiff to any one of such accounts for proof to sustain items claimed by him, made it evidence for the defendants. That no balance of accounts in favor of the mortgagor (Brown) without the expenditures of the mortgagees for the vessels before mentioned could be applied in satisfaction or reduction of the amount due on the *328bond and mortgage in question. That in contemplation of law they were given to “ remain as security *for the original loan,*so that subsequent moneys received should not be applied against the security, and that it might remain undiminished until a final settlement of all accounts," and their “ *object ”*was to enable the mortgagees more safely to make loans to the mortgagor, and apply sums received by him or loans to him afterwards, to loans made by him thereafter or subsequently to the receipt by, and loan to, him of such sums. That where, in a course of dealing of mutual loans between two parties for a large amount and a long time, a security is given by the largest borrower, it is not intended that any subsequent dealings should affect that security until that course of dealing is closed.

On the trial it was admitted that the mortgagor (Brown) made an assignment to the plaintiff for the benefit of his creditors of *all his real and personal estate,*including the mortgaged premises, to the plaintiff. Other facts appear in the opinion of the court.

Judgment was entered upon the referee’s report, according to its terms, and exceptions were duly filed to such report. An appeal was taken from the judgment, which was how heard.

*N. Dane Ellingioood,*for the appellants, defendants.

I. Where parties have had dealings together for many years in exchanging notes and lending money .for mutual accommodation ; and when it appears that they, from time to time, at short intervals, settled any differences which might arise in the course of such dealings, by a payment of, or security given for, the balance due from one to the other ; in the absence of any such settlement after a considerable lapse of time, the presumption is that the mutual dealings, in the interval, balanced each other, and that nothing was due thereupon from - one to the other.

II. The facts in the present case tend greatly to strengthen this presumption. For many years prior to the month of *329September, 1855, whenever it appeared that a balance, arising from the dealings of William H. Brown and R. & Gr. L. Schuyler in lending money and exchanging notes, existed in favor of the latter, a settlement was at once made either by payment or giving security. That subsequent to the 4th day of August, 1851, and until the time of failure of R. & Gr. L. Schuyler, in 1854, no settlement was made, nor is there any evidence that notice was given to Brown of any balance claimed to be due from him, notwithstanding R. *&*Gr. L. Schuyler were then in great pecuniary embarrassments, and at different times solicited from Brown loans which were made and returned. . These statements are sustained by the evidence.

1. A settlement was had between the parties on the 31st of December, 1849, and again on the 30 th of December, 1850; again, on the 11th of June, 1851, when Brown, to secure the balance due on that day, gave the bond and mortgage now in controversy. On the 5th of August, 1851, there was. another settlement. There was no subsequent settlement made between the parties.

2. " That R. *&*Gr. L. Schuyler were in great pecuniary embarrassments during the period, from the month of August, 1851, to the time of their failure appears from the letters set out in the case. It also appears from the fact that Robert Schuyler, one of the partners of the firm of R. *&*Gr. L. Schuyler issued certificates of stock of the Mew Haven Railroad Company to the firm, to which they were not entitled, for the purpose of raising money.

3. That Brown did make repeated loans to the firm during the interval in question, which were repaid, appears by the items of credit under the several dates of 1st February, 1853 ; 2d February, 1853 ; 5th March, 1853 ; 10th March, 1853 : 19th March, 1853 ; 24th March, 1853 ; 18th October, 1853, and 14th January, 1854, and the items of debit under the several dates of 5th February, 1853 ; 10th Maach, 1853 *\*16th March, 1853 ; 24th March, 1853 ; 31st March, 1853 ; 17th October, 1853, as shown in the general account.

III. Besides the peculiar circumstances, (already referred *330to,) in which R. & G. L. Schuyler were placed at the time when the loans and advances, as set out in fhe general account subsequent to the month of September, 1852, were alleged to have been made, the same account shows that on the third day of the same month, R. & G. L. Schuyler were indebted to Brown in the sum of $101,288.13, and that on the 13th day of January following, being a period of about three months, R. *&*G. L. Schuyler, whilst laboring under excessive pecuniary embarrassments, paid off that large amount of indebtedness, and that Brown was in their debt on the 13th of January, in the sum of $1,452.37. The correctness of that account, under all these circumstances, may well be questioned ; and *none but the most direct and, positive proof*should be held sufficient to sustain it. The evidence produced, however, was neither ; and on the contrary it was both loose and unsatisfactory.

IV. The defendants undertook to prove the correctness of the items contained in the general account, first, by the contents of certain envelopes which R. & G. L. Schuyler used in lieu of the customary books of *account;*and next, by evidence that Brown received a copy of the account in December, 1854, and made on objection to it.

1. Admitting that books of account may be evidence of money demands, a question arises, can the contents of these envelopes be entitled to the same credit as books of account, such as are usually kept by merchants and bankers. Mr. Hash swears they cannot. Three fourths of the items of the general account were proved, or attempted to be proved, by this evidence, in connection with the testimony of Mr. Alofsen.

2. The witness last named, who was the principal witness to prove the correctness of the contents of the envelopes, was the confidential clerk of R. & G. L. Schuyler, and it was he who kept the accounts of the firm with the Hew Haven Railroad Company, (which were kept in the same manner as the accounts of that firm with Brown,) and who knew at the time he so kept the accounts, that Robert Schuyler had issued certificates of stock of that company to his firm, to which they were not entitled, for the purpose of raising money.

*3313. Besides that the fact so last stated should have materially affected the credibility to be given to his testimony, Alofsen does not pretend to swear to the accuracy of the items of the general account, having previously refreshed his memory by an examination of the contents of the envelopes; but his evidence is confined to the statement that he believes the contents of the envelopes to be correct.

4. That Brown made no objection to the general account was considered by the referee evidence in some degree that it was correct; but does it, in fact, assist to sustain the slight, loose evidence afforded by the contents of the envelopes in connection with the testimony of Alofsen ?

Y. Again; there is no sufficient evidence to warrant the finding of the referee that R. & G. L. Schuyler paid out, for expenses incurred for the interest of Brown in the steamships “Pacific,” “Independence,” and “Sea Bird,” and for the purchase of an additional interest in his behalf, in the “ Pacific” or in the Pacific or “ Independence,” the sums mentioned in the accounts with the “ Pacific” and.“'Independence,” and in the account with the “ Sea Bird,” and that they also received, at the respective dates, on behalf of Brown, the sums mentioned on the credit side of these accounts. To the contrary, there is evidence adverse to such finding.

1. The accounts, it is, to be observed, do not purport on their face to be between R. & G. L. Schuyler and William H. Brown, but on the contrary, they purport to be between that firm and the owners of the “ Pacific,” “ Independence,” and “ Sea Bird.” This appears not only from the heading of the accounts, but also from some of the items of credit; (see account with “'Pacific” and “ Independence,” item of credit, dated 24th February, 1853, Exhibit 19, W., also the account with the “ Sea Bird,” items of debit under date of 2d April, 1853.)

2. The answer of G. L. Schuyler should be taken as explanatory of the steamer’s accounts, which are referred to in his answer, and be read in connection with them.

YI. The liability of Brown for the moneys advanced for *332the steamships can be established in one of two ways only; either by showing the ownership in him, or his undertaking to pay such advances, whether owner or not. It is not assumed that there exists any evidence to establish the latter alternative ; and whilst the referee does not find that Brown was such owner he does find, as a conclusion of law, on the whole case, that Brown was liable, whether he was the owner or not. This finding of the referee's cannot be sustained either as a finding of fact or conclusion of law, or of mixed fact and law.

VII. But whether this liability of Brown, as it regards the claims arising from the general accounts, or the steamship accounts, be sufficiently established or not; the referee clearly erred, in his conclusions of law, that there had been no application of payments to the balance due on the 11th day of June, 1851, or to the items composing such balance ; to secure the payments of which the bond and mortgage now in controversy in this suit were given. In the case of a running account, in the absence of any express agreement or understanding to the contrary, the first receipts of money are, in contemplation of law, to be applied to the first items of indebtedness, (see *Allen*v. Culver, 3 *Denio,*248; *and Truscott*v. *King,*2 *Seld.*185*;)*and R. *&*G. L. Schuyler, did in fact so apply them, as it appeai-s from the general account.

VIII. Again, the referee has laid some considerable stress on the fact that releases of a part only of the mortgaged premises, had been executed, and that Brown gave his notes for interest long after it was claimed that the mortgage was paid off. To this the appellants answer that the question of application of payments is one of law, and if the court shall determine, upon all the facts of the case, that the mortgage in question wras satisfied, neither the reservation contained in the releases, nor the notes can revive it. Brown kept no books or account of his transactions with R. *&.*G. L. Schuyler, and was ignorant of the state of the accounts between them, at the time he made the notes.

IX. The referee also ?erred in his conclusion of law, that the mortgage in question was in the nature of a continuing *333security; that is to say, that it was to be held not only as a security for the balance due on the 11th of June, 1851, but also as security for loans or advances subsequently made.

1. When the form of a security is silent as to the purpose or object for which it was given, parol evidence is admissible to show the object of it, as in the case of the *Bank of Utica*v. *Finch,*(3 *Barb. Ch.*294,) and *Truscott*v. *King,*(2 *Seld. 147;)*but it is otherwise where the purpose or object is expressly stated in the form of the security. *(Stoddard*v. *Hart,*23 *N. Y. Rep.*556.)

2. The purpose or object of the mortgage now in question is expressly stated in the form of that instrument, and no *written*agreement, varying its terms, was made between the parties. Under these circumstances, it would be contrary to all established rules of evidence to admit parol evidence to vary or contradict the mortgage.

*8. E. Lyon*and *Alex. Hamilton, Jr.*for the respondents.

The judgment should not be disturbed, because these facts establish not only that the mortgage for $16,000, on the 11th day of June, 1853, was a valid and. subsisting lien for the balance due the Schuylers, for which it was originally given, but that Brown on that day, in effect, declared it to be so, and from the fact that on the same day Schuyler assigned it to Sawyer, the inference, drawn by the referee, that Brown was informed by Schuyler of his intention to assign the same, is irresistible. Brown gave to Schuyler his note for the six months’ interest on the mortgage which fell due that day. The note given expressed upon its face that it was “ for six months’ interest due .on my (his) bond and mortgage for $16,000.” This written declaration, which was (in effect) that on that day there was the sum of $16,000 due on the mortgage in question, would seem to put an end to all argument whether or not that sum was then due. Can it be presumed, under any usual state of facts, that one who has paid off a mortgage, will, on a particular day subsequent to such payment, give his note for six months' interest on the mort*334gage, declaring, in the body of the note, that it is given for the interest on that particular mortgage ? The notes were all probably given on the same day, and the interest account was adjusted in that way by Brown, at Schuyler’s request, so that Schuyler might assign the mortgage to Sawyer for the principal amount.

But concede that Brown was not informed of Schuyler’s intention to assign the mortgage, and concede that Schuyler’s assignment of the mortgage to Sawyer carried with it all the equities existing against the mortgage in favor of Brown while in Schuyler’s hands, the plaintiff gets no nearer to a right to recover against Sawyer, because the mortgage confessedly was valid in its inception, having been taken as security for an ascertained balance due from Brown to the Schuylers at the time the mortgage bears date, and there is no pretense in the evidence that Brown ever paid any money to Schuyler, with the *intention*that it should be applied on the mortgage from the date of the mortgage to the time of the assignment of it to Sawyer. From the date of the mortgage till June, 1854, the same character of dealings continued between the parties, without there being any balancing or settling of accounts between them ; and when the accounts were balanced at the last mentioned date, in the language of the finding, there was *“*no balance due by the Schuylers to Brown on that day, but, on the contrary, a large balance was due by him to them.” There is not a shadow of proof that Brown ever intended that any of the sums received by the Schuylers from him, or on his account, after he gave the mortgage, should be applied to its extinguishment, but there is abundance of proof to show that he did intend that they should go to the extinguishment of the debts he was contracting almost daily with the Schuylers in the general account. So, also, there is no evidence that the Schuylers ever received any of the moneys credited by them in general account to Brown, under any agreement or understanding, express or implied, that they should be applied to the extinguishment of the mortgage, of in any other way than as a credit upon general account. But the case abounds in *335facts showing that the intention of the parties always was that the mortgage should continue as a subsisting security for its face.

On the 21st of January, 1853, more than eighteen months after the mortgage was given, and six months after it was due, and during which time large amounts had been credited by the Schuylers, Brown took from the Schuylers- a release of' the mortgage in question for three lots of ground, containing the clause that *“*the rest of the lands in said mortgage specified may remain *to the said parties of the first part as hereinbefore.”*Can language speak more plainly the intention of the parties, that none of the moneys which the Schuylers had received on account of Brown, up to the time he took that release, were to be applied to the payment of it, than the express declaration that certain lands contained in the instrument shall remain to the parties “ as heretofore ?”

If the mortgage had been paid, why did not Brown take a certificate of satisfaction P Why make the declaration, in the release, that the remainder of the lands should remain *“*to the parties of the first part as heretofore,” if the mortgage had been satisfied ? If it be pretended that this expression was intended to cover any balance that might, or might not, then be due on the mortgage, the subsequent acts of the parties put an end to that suggestion. On the. 11th of June, nearly six months after the release, Brown gave his note for $560, stating therein that it was for *“*six months interest due this day on my bond and mortgage to them for $16,000.” Did not this certify, in the clearest manner, that then, as well as on the day he took the release, the full sum of $16,000 was due on the mortgage ?

Assume, for the purpose of the argument, that before the day on which the release was given, and also before the day the note was given, at some particular period of time, had the accounts been balanced, there would have been found a larger sum than $16,000 to the credit of Brown on Schuyler’s books, still this balance could not be charged in extinguishment of the mortgage, even had there been no subsequent advances by *336the Schuylers, because the taking of the release, and the giving of the notes subsequently, would show conclusively that there was no intention between the parties to make such application, but, on the contrary, an express declaration that the mortgage was to remain intact. As, therefore, this was the state of facts on the day the mortgage was assigned to Sawyer, it went into his hands a good and valid mortgage, and it is not pretended that anything has taken place since then which could impeach it. But an examination of all the accounts grouped together show, that from the time the mortgage fell due till it was assigned, there never was a time when, had the accounts been balanced, there would not have been a balance due the Schuylers. The amount actually due in June, 1854, was $103,808.87.

In this connection it is to be observed that these accounts, in detail, were given to Brown in October of that year, and that he held them till his death, without objecting to them, or claiming that the mortgage had been at any time paid or satisfied, in whole or in part.

The theory of the appellant appears to be based upon the idea that there is some difference of liability arising from the steamer accounts and the general account, when, in fact, there is none, as has been found by the referee. The general account is an account, mainly, of moneys borrowed and lent between Brown and the Schuylers, and the steamer accounts are for moneys paid by the Schuylers for Brown, and received by them for him from these steamers, of which he was the owner, and for which they acted as his agents, and accounted to him. This relation between them is found as a fact by the *referee;*and Brown’s son, William H. Brown, testified on the trial, “that he (his father) transferred to Schuyler the Sea Bird, Pacific and Independence. They were on the Pacific Ocean at the time of the transfer. They were transferred to save trouble to my father, as being much safer in Schuyler’s hands than in my father’s.”

But the allegations in the complaint are conclusive on this head. It is set forth that, “in the year 1851, Wm. H. *337Brown, late of the city of New York, now deceased, was, as this plaintiff has been informed and believes, the owner of the steamship called the Independence, and of the steamship called the Sea Bird, and a part owner of the steamship called the Pacific.” The complaint then alleges that he sent these vessels to the Pacific, to ply between San Francisco and San Juan del Sud, and that Cornelius Vanderbilt was the agent thereof, and that said Vanderbilt paid, with the consent of said Brown, to the Schuylers, large sums of money, being a portion of the earnings of said steamships. Thus, by the complaint and proofs, it is clear that, as to the steamships, the dealings between Brown and the Schuylers were those of principal and agent, as found by the referee.

All the accounts, therefore, are between the same parties, and were kept separately for convenience. In order to determine, therefore, the question, (if it were important,) whether at any particular period of time during the running of the mortgage, there was ever any balance to the credit of Brown, the general account and steamer accounts must be blended, and the result of this is, as shown by the exhibits, to have been always against Brown.

It was contended, before the referee, that had there been a balance- upon the account, at any time, in Brown's favor, after the mortgage was given, *and before it fell due,*this balance should have been applied to the extinguishment of the mortgage. In other words, a creditor can be compelled to receive his money under a contract for a year, before the year expires. I decline to argue that proposition before this court.

The law governing the question of application of payments has but a few simple rules, and is quite familiar. Where there are different accounts between parties, which are over due, the debtor may designate the account to which a payment shall be applied ; and, if he do so designate it, and the creditor takes the money, he is bound to credit the account so designated by the debtor, and no other. So an agreement between the parties as to the particular debt to which a payment may be applied, is valid, and the parties will be held to it, *338even if the debt be not due; but, in the absence of any agreement between the parties, express or implied, or in the absence of any express direction by the debtor, where there are different classes of debts, the creditor may make such application as he pleases ; and if he does not make it, the law in the case of a running account will make it, and continue the debits and credits in the running account until balanced, and will not abstract particular payments from the running account, and apply them to the extinguishment of debts of a different class; as, for instance, debts under seal. Even in the absence of the principal facts in this case, the application of these familiar rules would settle the question in favor of the respondent; but the single fact, that on the day the mortgage was assigned, Mr. Brown delivered to Mr. Schuyler what was, in effect, a certificate in writing, that there was the full sum of $16,000 on that day due on the mortgage, will estop him and his estate from denying it as against Mr. Sawyer’s estate, and. makes it unnecessary to discuss any further suggestions that might arise on the subject of application.

By the Coubt,

Eobeetson, Oh. J.

The grounds upon which the plaintiff claimed, that the bond and mortgage in question had been satisfied, and ought to be discharged, do not clearly appear, either in the complaint or any other proceedings in the action. The complaint alleges the bond to have been long since *“paid off*and satisfied,” and the mortgage to have been *“paid off and satisfied*” before its assignment to Sawyer, and yet it makes the apparently inconsistent statement that “ the amount (if any) due thereon could only be ascertained through an accounting with (the defendants) the Schuylers.” There is no evidence in the case of any *payments*ever made as such on account of such bond and mortgage. Nor did it appear that the mortgagor ever delivered to the mortgagees any sums of money generally as *payments*of any prior indebtedness, so as to entitle them to be applied to such bond as the first debt, according to the established rule of appropriating payments, *(Allen*v. Culver, 3 *Denio,*284. *Truscott*v. *King,**3392 *Seld.*147.) He never became their creditor, except by their receipt of moneys collected as his agents, or special loans as specifically repaid. The like amount of moneys, and more, were afterwards advanced by such mortgagees as his agents, so that they could not be applied, or operate to extinguish such bond and mortgage, unless by his consent.

The plaintiff’s claim of a satisfaction of the mortgage rests, therefore, either on some supposed agreement, express or implied, by the parties, to apply some indebtedness of the mortgagees to the mortgagor for that purpose, or on some right of his as assignee of such indebtedness, to set it off against the claim of the assignee to enforce such mortgage against the land. For I am not aware of any principle which in the absence of such agreement could extinguish *ipso facto*mutual co-existing debts, or deprive either party of his right to elect either to sue upon his claim, or avail himself of it as a set-off at his pleasure. A statute has taken away such right in case only of an action brought in an inferior court, but has left it unimpaired in all other cases.

But there is no direct evidence in the case of any express agreement that any indebtedness of the mortgagees should be applied in satisfaction of such mortgage. On the contrary, the delivery by the mortgagor to the mortgagees, probably on the day of the date of the assignment of such bond and mortgage to the defendant Sawyer, of four new obligations, payable with interest, for each six months’ interest which had accrued on such bond and mortgage, and dated respectively on the days when such interest became due, and the receipt from the mortgagees a few months before, and before the conveyance to the plaintiff, of a release of part of the mortgaged premises from the lien of such mortgage, reciting that it should remain as security for the amount due on the residue of such premises, were evidence too plain to need discussion or explanation, that neither party considered such mortgage satisfied or impaired at the time of such assignment.

The effort to establish an implied agreement of the parties to apply a subsequent indebtedness of the mortgagees to the *340mortgagor in satisfaction of such bond and mortgage,- or rather to show, -that such_ bond and mortgage, were taken merely as securities, leaving the original debt to; continue as the subject of. a running account, rests at best upon very slight circumstances (if any) or doubtful presumptions. I say “ *taken as securities’’*because the bond itself, if the original.liability had been merged in.it, being a specialty, could not be discharged by a= mere, verbal agreement to accept in satisfaction some mere .future indebtedness of the mortgagees, arising out of some ‘ cause afterwards to be determined. Such an accord, even if executed, could not be a satisfaction. Upon the point of the purpose for which such bond and mortgage were given, the evidence is clear and uncontradicted, that- it was given for an exact, conceded balance of account, and being of a higher, nature must be presumed to have been given in satisfaction and payment, *(Lake*v. *Tysen,*6 *N.*Y. *Rep.*461,) and there ismo evidence to the contrary.

The delivery by the mortgagor (Brown) of his note .to the mortgagees in settlement of a balance of account, in 1849, with his subsequent payment of the same ; his payment, in cash, of a balance found due in 1850 ; his delivery of the bond and mortgage in question for the balance liquidated and ascertained to be due, about the time they were given, in connection with the delivery ; eighteen. months afterwards of his promissory notes for the interest accruing on it, with interest thereon, go far to show that such specific obligations for specific balances were intended not to enter into the general accounts of. the parties until all- dealings between them had ceased. Against this, there is no positive evidence of any agreement to carry the debts for which such obligations were given into the general account, or to apply any moneys received from, or for the mortgagor,, in satisfaction of the same. The plaintiff’s claim, therefore, must fail also, so far as it rests on such a supposition.

The only subject, therefore, remaining to be considered is the right of the plaintiff to set off any claims of the mortgagor upon the mortgagees and assigned to him, against the *341amount due on such mortgage. That right must depend upon the amount due by the mortgagees to the mortgagor, at the time of the assignment to the plaintiff. Such amount depends principally upon the correctness of accounts rendered by the mortgagees to the mortgagor and of items entered therein by a clerk of .the former, from memoranda made monthly on envelopes in which the obligations were put, of transactions between the parties and securites delivered, exchanged or paid. Such accounts were proved to have been received and retained without any objection, and such memoranda were proved by the person who made them to have been correct when made. He testified to the transactions after refreshing his memory thereby. Against the validity or accuracy of such accounts the plaintiff' claims ; that from the facts of no settlement having taken place and no obligation having been given and from the course of dealing between the parties, it must be presumed that all claims between them were balanced and settled, including such bond and mortgage; that such course of dealing consisted of settlements from time to time of the mutual claims of the parties, and the giving of specific obligations in satisfaction of balances found due ; and that such presumption is strengthened by the fact that the mortgagees, during such subsequent period, were straitened for means and never applied to the mortgagor for payment of any claim, but on the contrary borrowed money from him which they returned; that such account was not to be relied on because it showed a large indebtedness from the mortgagees to the mortgagor (over $100,000) in September, 1852, the discharge of such indebtedness and the accrual of a balance against the mortgagor in three months, notwithstanding the financial embarrassments of the latter; that the memoranda on the envelopes were made by a person who was privy to a fraud committed on others by the mortgagees; that such memoranda were not entitled to the same credit as entries in booksof account, that the witness only testified to *Ms belief*that they were correct, and not to the fact; that the omission of the mortgagor to object to the accounts rendered was no evidence of *342their correctness; and that the mortgagor was not liable for the moneys mentioned in such accounts as expended for the steamships mentioned in the complaint.

In answer to .such suggestions it may be said, that the course of dealing between the parties showed that on one occasion a balance found due was paid in cash ; on another by a note sparately paid, and lastly by a bond' and mortgage, for the interest on which, two years after it was executed, separate obligations, payable with interest, were given, after a release of part.of the mortgaged premises had been given, reserving the security of the rest six months previously. This establishes that no settlement up to that time, embracing such bond and mortgage, had been made. A lapse of two years without a settlement, also could hardly be considered part of a *habitual course of dealing ox*of one in which settlements had .been usually made at much shorter periods. The loans of .money by the mortgagor specifically repaid, and financial embarrassments of the mortgagees were not incompatible with the increase of the indebtedness of the mortgagor even if it had not arisen from the falling due of his prior liabilities, as it appears principally to have done. The same explanation may be given of the rapid change in three months of the condition of the mortgagees from being large debtors to being slightly creditors ($1400.) The credit due to the person who made the memoranda on the envelope was a matter solely for the referee’s consideration, as was the value of such memoranda. He alone was to judge what confidence was to be placed in them. The fprm of expression of the witness that he *believed*such memoranda to be correct, instead of saying they were so, was sufficient, unless it appeared that such belief was a deduction, and not a distinct recollection. Rendition of accounts between parties having mutual dealings, and the absence of objections, has always been considered *¡prima facie*and in some cases conclusive evidence of their correctness. The items of expenditures for the steamships were fully established by the fact of the agency of the mortgagees *343for the mortgagor, which was stated in the complaint, and of which there was no evidence in the case.

The plaintiff’s counsel has also urged incidentally that the bond and mortgage was not taken as *security*for future liabilities arising out of subsequent transactions. I do not understand the referee to have so held. On the contrary, his main position was, that it was taken for a balance of accounts, a debt liquidated and agreed to be due, and could not enter into the accounts, as a claim by the mortgagees, until their final settlement. He says explicitly, that in such a course of dealing for such a time, where a security is given by the largest borrower, neither party “intends that any subsequent dealings shall *affect*or diminish that security or be applied against it, until that course of dealing is closed.”. Both such instruments may perhaps be called *securities,*but not in a legal ' sense. The bond was a *chose -in action taken in payment of a precedent debt,*and the mortgage only was security for it. The plaintiff’s counsel may be right, perhaps, in supposing, that no parol evidence is admissible to show that such instruments were intended merely as a security for- some other indebtedness, *(Stoddard*v. *Hart, 23 N. Y. Rep.*556,) but the doctrine does not favor his views.

All the other objections to the report have already been disposed of.' The judgment must be affirmed, and the exceptions overruled, with costs, (a)

(a)

 The judgment in this case has since been affirmed in the Court of Appeals.