Court Opinion

ID: 9643429
Source: CourtListenerOpinion
Date Created: 2023-08-22 20:29:05.352791+00
Date Added: 2024-06-11T18:11:00.466894
License: Public Domain

HUTCHESON, Circuit Judge
(dissenting on rehearing).
When this case was first under consideration, I thought that the judgment should be affirmed as to Milcor, reversed as to Blackburn, and, in a memorandum to my brethren,1 said so. Whether the shrill and •strident clamancy of appellant’s frictional approach, calculated with its charges of fraud and perjury to generate more heat than light, was the stone of stumbling to me, or whether that master darkener of •counsel, my brother from Connecticut, with his firm footed statement of New York law, turned my feeble light to darkness, I cannot say. I only know that I turned aside from the sole and simple issue on which the •decision rightly turned, whether Blackburn was, under the Connecticut statute, “a party who * * * shall have furnished material or supplies * * * and who hcts not been paid therefor” (emphasis supplied), and, stumbling, lost my way. Then it happened to me, as it had to another and worthier Joseph, that my brethren “said one to another, ‘Behold, this dreamer cometh’ ”, and they stripped me out of my coat, my coat of many colors, my wondrous judgment intuitive,2 the feeling which is the triumphant precursor of the just judgment, and cast me into a pit, a pit empty and full of darkness. But convinced against my will, I was of the same opinion still, and, reflecting on the admitted facts that “all of the deliveries by Blackburn to the Newtown job were made between July 19, 1939, and January 9, 1940, that the moneys paid by Sherman to Blackburn during that period were sufficient to cover Sherman’s indebtedness on that job”, and that the Coxsackie job on which Blackburn and Sherman attempted to reapply the payments did not come into existence until January 24, 1940,1 wondered why my original impression, that Blackburn was not a supplier whose claim was unpaid, was not right, and, wondering, moved groping toward the light. When then appellant, still on the Orlando furioso side,3 but this time concentrating on the accepted fact that the critical payments to Blackburn discharged the Newtown indebtedness before the Coxsackie indebtedness came into being, filed its petition for rehearing, my darkness became light, and I saw face to face what before I had .seen through a glass darkly, that “the principle of allocation or appropriation of payments' invoked by this court simply does not exist”. As appellant in the petition for rehearing very *309well states, “A creditor who receives a payment from his debtor, without direction, at a time when only one debt exists, has no choice, no right to allocate, no power td elect. He must apply it upon the existing debt, and the law will do so even if he does not. By that application of law, the debt is instantly dischargd upon the creditor’s receipt of the payment”. Having been discharged, the debt could not be revived so as to make Blackburn, under the Connecticut statute, a supplier whose debt had not been paid.4 The error in the approach of the district judge and of the majority lies in the fact that they have assumed, contrary to the undisputed proof, that, when the critical payments were made by Sherman to Blackburn, there was in existence a running account of more than one debt, and so assuming, have held that Blackburn, having an option to apply the payment to one or the other of those debts, could exercise it in a reasonable time. I agree with the district judge, and with the majority, that the contract between Black-bum and Sherman was a New York contract, that the payments were made in New York, and that the law of New York determines whether or not Blackburn was a supplier whose debt had not been paid. I think it perfectly clear, though, that under the law of New York, as declared both in the Connecticut5 and the New York6 decisions, and as is the rule generally elsewhere,7 there being only one debt to which the payments could be applied when they were received by Blackburn, it was thereby discharged. Having thus been fully paid, Blackburn could not, by an arrangement between him and the debtor, again become, for the purpose of asserting a statutory liability against the surety, a person whose debt had not been paid.8 Looked at as the undisputed facts require it to be seen, this is a case where the debtor having fully paid the creditor, creditor and debtor, in order to assert a statutory liability against a surety, have undertaken to cancel the payment and revive the debt. So looked at, the case presents no difficulty either in law or in morals. The fallacy in the majority opinion lies, I think, in its failure to recognize the force of the admitted facts shown by plaintiffs exhibit 22, “Sales made by Blackburn to Sherman Plastering Co.”, that from June 29, 1939, to Jan. 24, 1940, when the Coxsackie job commenced, the moneys Sherman had paid in had completely discharged the debts then due, and that the Sherman-Blackburn arrangement was not an allocation of payments, not yet applied, which, under New York law they could have made, but a cancellation of payments made in discharge of the Newtown debt, and their application to a debt created after that discharge. This, as between themselves, of course they could do, but they cannot do it as to the surety.9 I think it clear that the petition for rehearing as to Blackburn should be granted and the judgment in his favor reversed.

 “As to the Blackburn claim, I believe MeGraw and the surety are right. Normally, of course, it is nobody else’s business how debtor and creditor apply payments. The general rules of law with regard to the right of the debtor first, the creditor second, and then of the law to apply to the oldest debt, arise normally in situations where debtor and creditor alone .are concerned. Here, where other persons are involved derivatively, that is through the bond required by statute, it seems unreasonable to me to say under this record, that Blackburn was a creditor whose claim was unpaid, when, as I read the record, the Newtown claim was paid and was later revived by agreement between Blackburn and Sherman. I think Judge Hincks finds as much, but he seems to believe that nobody had anything to say about the application except debtor and creditor. I can’t agree with him. I think it is wrong to say that Blackburn was a creditor under these circumstances. I vote to affirm as to Milcor, reverse as to Blackburn.”

 14 C.L.Q., 274.

 “Upon the uncontroverted and conceded facts, the principle of allocation or appropriation of payments, invoked by this Court, simply does not exist. By its ruling that such a doctrine applies to the instant case, empowering the creditor to make an application of the payments, within a reasonable time after their receipt, ‘to debts not yet matured’, even though only one indebtedness was in existence when the payments were made, this Court has formulated, a rule of law which has never been applied by any court anywhere at any time. Its decision contravenes the law of Connecticut, which it was required to apply, the law of New York, the common law of the United States, the common law of England and the Roman Civil law from which the doctrine of allocation was first obtained”.

 In 40 Am.Jur., Payment, Sec. 116, the rule of changing or revoking application is clearly set out. It is there stated, “It is firmly established that an application of a payment made by direction of the debtor cannot be changed or revoked except with the consent of both the creditor and the debtor. It is also held that an application once made by a debtor or creditor to a debt for which a surety or guarantor is bound discharges the latter pro tanto, and he cannot be affected by a change of the application by the creditor and the principal debtor”. Wait v. Homestead Bldg. Ass’n, 81 W.Va. 702, 95 S.E. 203, 21 A.L.R. 696.

 American Woolen Co. v. Maaget, 86 Conn. 234, 85 A. 583, Ann.Cas.1913E, 889.

 Baker v. Stackpoole, 9 Cow., N.Y., 420, 18 Am.Dec. 508; Niagara Bank v. Rosevelt, 9 Cow., N.Y., 409; Shipsey v. Bowery National Bank, 59 N.Y. 485; North American Fisheries & Cold Storage v. Green, 195 App.Div. 250, 186 N.Y.S. 313; Stone v. Seymour, 15 Wend., N.Y., 19, whore, at page 24, it is said:
“A fourth principle appears to be equally well established, to wit: where no application of the payment is made by the debtor, or with his assent, at the time it is received, and there is an existing indebtedness to the amount of such payment, it shall be applied to that; and neither the creditor nor the court shall apply such payment to a debt which was not then due and payable.”

 Contract Restatement, Sec. 389(a); Williston, Contracts, Yol. 6, Sec. 1797,

 United States v. Brent, D.C., 236 F. 771; United States Fidelity & Guaranty v. Eichel, 3 Cir., 219 F. 803; Columbia Digger Co. v. Rector, D.C., 215 F. 618; Appeal of Coon, 52 Conn. 186; Allen v. Culver, 3 Den., N.Y., 284; Wright v. Wright, 72 N.Y. 149; Wait v. Homestead Bldg. Ass’n., Note 4, supra; 40 Am.Jur., Payment, Sec. 116, Note 4, supra.

 Authorities, Note 8, supra.