Court Opinion

ID: 9628446
Source: CourtListenerOpinion
Date Created: 2023-08-22 09:20:32.915362+00
Date Added: 2024-06-11T18:07:05.485746
License: Public Domain

HOWE, Associate Chief Justice
(dissenting):
I dissent. I would reverse the judgment entered below.
Judgment was entered on a jury verdict against defendant John Clay & Company on July 8, 1980, in the sum of $191,463.40 general damages and $1 punitive damages. Seventy-five thousand dollars of that judgment was also entered against Aetna Casualty & Surety Company. No prejudgment interest and, of course, no postjudgment interest were included in the above amounts. The two defendants took an appeal of that judgment, and on August 11, 1980, a supersedeas bond on appeal was filed for $191,463.40 to secure payment of the July 8th judgment which was specifically referred to in the bond. In the judgment, the district court reserved for future determination whether plaintiff was entitled to prejudgment interest and attorney fees. Subsequently, on February 23, 1981, the district court entered an amended supplemental judgment wherein plaintiff was *815awarded only against Clay & Company prejudgment interest of $14,822.37; post-judgment interest of $9,087.21 from July 8, 1980, to January 25, 1981, together with further interest of $45.21 per day; and attorney fees of $21,400. No amendment or addition was made to the supersedeas bond which had been filed to cover these additional awards. Under rule 73(d), Utah Rules of Civil Procedure, in effect at that time, plaintiff could have required that the bond be adequate in amount to cover the principal amount of the judgment, plus prejudgment interest, postjudgment interest which would accrue pending the appeal, attorney fees, and court costs.
This Court on appeal affirmed the judgment, except we disallowed the $1 award of punitive damages and the award of attorney fees. On April 25,1983, Aetna sent its draft to the attorney for plaintiff for $191,-463.40, together with a letter in which Aet-na stated that the payment represented “the amount of the judgment on the verdict entered in this matter on July 8,1980.” On the face of Aetna’s check was the notation “for judgment on the verdict.” About a year later, Aetna tendered to the attorney for plaintiff a check for an additional $25,-097.30, representing postjudgment interest which had accrued between July 8, 1980, and April 25, 1983.
It is well settled that as a general rule, a debtor when paying money to his creditor has the primary and paramount right to direct the application of his money to such items or demands as he chooses. Utah State Bldg. Comm’n v. Great Am. Indem. Co., 105 Utah 11, 140 P.2d 763 (1943); Salt Lake City v. O’Connor, 68 Utah 233, 249 P. 810 (1926); 70 C.J.S. Payment § 38 (1987). This same rule applies when a surety for the debtor makes payment to the creditor. Wellington, Sears & Co. v. King, 157 Va. 767, 161 S.E. 889 (1932); Annotation, Application of Payments as Between Debts for Which a Surety or Guarantor is Bound and Those for Which He is Not, 57 A.L.R.2d 855, 872 (1958). This right of direction has been held to include the right of the debtor to apply the payment to principal instead of to interest. State v. Erie R.R., 23 N.J.Misc. 203, 42 A.2d 759 (1945); Monidah Trust v. Hruze, 62 Mont. 444, 449, 205 P. 232, 233-34 (1922). In the last-cited case, the Montana court explained:
The reason for the rule which confers upon the debtor the right primarily to direct the application of a payment voluntarily made by him is apparent. Until the money is actually paid over, it belongs to him, and he may do with it as he sees fit. If he makes a specific direction, the creditor must observe it or refuse to accept the payment. If he accepts and retains the money, the law will treat the payment as having been applied as directed.
The United States rule referred to in the majority opinion that partial payment must first be applied to satisfy accrued interest and then to satisfy principal does not apply when there is a designation by the debtor as to the application of his payment. 47 C.J.S. Interest and Usury § 74 (1982).
In the instant case, the supersedeas bond written by Aetna was in the exact amount of the principal of the judgment. The amount of the bond was insufficient to cover any prejudgment interest, post-judgment interest, or costs. Indeed, at the time the bond was written, the only amount owing by defendants was the $191,463.40 judgment of July 8th, all of which was principal. The trial court still had under advisement whether any prejudgment interest would be awarded. The amount of the bond was never increased to cover any interest. Following its appeal to this Court, Aetna made payment on the bond and by its transmittal letter and by the draft itself, specifically designated that it was in payment of the judgment entered on July 8, 1980. The amount of the draft was identical to the principal amount of the judgment, namely, $191,463.40. This identity of amount of debt and payment itself is evidence of Aetna’s direction. 60 Am.Jur. 2d Payment § 100 (1987). However, here, we additionally have Aetna’s transmittal letter in which it was recited that neither plaintiff nor Aetna was in agreement as to the balance of the interest and costs on appeal and that this issue would be heard *816and determined by the district court on May 11, 1983. It thus clearly appears to me that Aetna exercised its right to have its money applied on the principal amount of the judgment and that plaintiff, by accepting and endorsing Aetna’s check, was obligated to apply the funds accordingly. 70 C.J.S. Payment § 41 (1987).
It is of no consequence that Aetna was jointly and severally liable with plaintiff for $75,000 of the judgment and thereby bene-fitted by designating that its payment of $191,463.40 be applied on the principal amount of the judgment. A debtor or his surety may direct application of his payment as may be most advantageous to him. 60 Am.Jur.2d Payment §§ 95, 130 (1987). Clay & Company was severally liable for the full amount of the judgment, and when Aetna as surety paid the principal amount of the judgment and so designated its payment, it satisfied the entire principal amount of the judgment. Later, Aetna recognized that it was also jointly and severally liable for postjudgment interest on $75,-000 of the judgment. It thereupon paid plaintiff an additional $25,097.30, thereby fully discharging its obligation as a judgment debtor and as surety for John Clay & Company.
If plaintiff is unable to recover the balance owing him because of the bankruptcy of John Clay & Company, the blame must be assigned to him for his failure to demand an adequate supersedeas bond.