Court Opinion

ID: 6408844
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:51:03.384117+00
Date Added: 2024-06-11T15:51:18.261280
License: Public Domain

Shaw, C. J.
The facts in this case are somewhat complicated, but when analyzed and understood, we think it will not be difficult to ascertain the rights of the parties. It appears that John Farnum & Co. are commission merchants in Philadelphia, of which firm Peter Farnum was a partner; that the deceased, Percy Atherton, was a manufacturer at Fitch-burg, in this county. Atherton and David BufFum, for their joint account, .purchased the machinery of a factory, and Atherton mortgaged his undivided half to John Farnum, to secure his note to Farnum or order, for $2500. Atherton carried on the business of manufacturing at a place called the Stone Mill, and consigned his manufactured goods to the plaintiffs at Philadelphia, as factors, for sale, and the plaintiffs advanced large sums to Atherton ; and this continued _to the death of Atherton. About the time this account was opened, John Farnum indorsed the note for $2500, and assigned the mortgage, given to secure it, to John Farnum & Co. who charged the note in their account current, but at the same time gave Atherton notice, that they still considered the mortgage in force as collateral security.
Now, it is contended by the plaintiffs, that as this note was charged as an item in an extensive account current, and the amount, many times over, afterwards credited, the earliest credits, by the rules of appropriation, must be applied to the payment of the earliest debits, and so the note must be deemed absolutely paid, and the mortgage discharged, although there was constantly a large cash balance due, on such account, from Atherton to the plaintiffs. But these conventional rules respecting the appropriation of payments are adopted only in the absence of proof of the agreements or acts of the parties regulating such application of payments. It is always at the election of a party indebted to another on more than one account, on paying money, to elect on which account the payment shall be applied ; and this election being notified to the creditor, if he accept the payment, it shall be *163deemed a payment on the account to which the debtor has directed it to be applied. Reed v. Boardman, 20 Pick. 441. So here, Atherton, having received notice from John Farnum & Co. that they still considered the mortgage in force, might, on consigning goods to them, have directed the proceeds to be applied specifically to the payment of the debt thus secured by mortgage ; and if they had accepted the consigned goods, sold them, and received money for the proceeds, to the amount of that note, it must have been deemed defacto payment, and the mortgage discharged. This, however, never was done ; the goods were consigned on general account, and the plaintiffs were always in advance to Atherton.
Such was the state of things when Atherton died; and on his estate being represented insolvent, the defendant, as his administrator, brought his estate and effects to a sale at auction, at which Peter Farnum, one of the partners in the firm of John Farnum & Co. attended; the firm, as it appears in this case, being large creditors. The state of the factory and machinery was this: John Farnum & Co. had purchased one undivided half of the machinery of Buffum, the original co-purchaser with Atherton. Atherton had obtained a lease of the premises where the business was carried on, and had an unexpired term therein. The interest, which the administrator proposed to sell, was an undivided half of the machinery, with the unexpired term in the mill, and the advantages incident thereto.
A question then arose, whether the machinery, thus to be sold, still remained subject to the incumbrance of said mortgage. Peter Farnum, being called upon, said he had a good and valid mortgage on the machinery, and that nothing had been paid upon it. The administrator then said he should sell, subject to whatever incumbrance was on it, and that the purchaser must take his risk. Peter Farnum became-the purchaser at $3500. Now, whether any other purchaser might have successfully contested that mortgage with John Farnum & Co. for whose account it was purchased, or not, we think that they could not. After the declaration of Peter Farnum. *164that the mortgage was in force, he must be taken to bid for the equity of redemption, and to take it, if the highest bidder, as an equity of redemption; that is, the sum to be given after deducting the $3500 for which it stood mortgaged. It has substantially the same effect as if enough of the machinery had been taken out to pay the $3500, and then bids were made for the residue. Such a declaration on the part of the holder of the mortgage would have a natural tendency to deter other buyers, and therefore he, and those for whom he acts, must be estopped from afterwards insisting that the mortgage was paid and discharged, by credits in account, especially credits given for proceeds of goods, on which new advances were constantly made. The court are therefore of opinion, that the $3500, thus deemed paid by the mortgaged goods, must be stricken out of the general account. The specific question is, whether the sum of $3500, part of the plaintiffs’ demand against the estate of the deceased insolvent, should be allowed ; and this depends on the question, whether that debt has been paid, and the mortgage discharged, by its being introduced into the general account of the firm. For, if the mortgage remained in force at the time of the decease of the debtor, then it is very clear, as well upon principle as authority, that the creditors cannot prove their debt, without first waiving their mortgage, or, in some mode, applying the amount thereof to the reduction of the debt, and then proving only for the balance. Amory v. Francis, 16 Mass. 308. But in the present case, it is apparent from the evidence, that one half of the machinery upon which the mortgage, if in force, was a lien, exceeded the sum of $3500, and therefore if the plaintiffs retained the mortgage, no part of the $3500 can be proved. Being of opinion, for the reasons stated, that the mortgage did remain in force, and was so declared by one of the partners, when the mortgaged property was offered for sale, they are bound by it, and therefore cannot prove that $3500.
In regard to the other question raised on the report, the court are of opinion, that the plaintiffs are bound to account *165*o the administrator for the $1752-81, in cash, and have no right to credit them, in their general account with the intestate, in reduction of their claim. A factor has undoubtedly a lien upon all goods of his principal, consigned to him for sale, and in his actual or constructive possession, for his general balance. But before such lien attaches, the goods must have been delivered or sent to the consignee, or, at least, put upon their transit to him; and an intention so to consign them, and an intimation of such intention by letter, whilst they remain in the actual possession and custody of the consignor, is not sufficient to create a lien. In the present case, it appears that the goods remained on the premises of the intestate at the time of his decease, and were subsequently forwarded by his son. But by whomsoever they were forwarded, it must have been without authority. It could not be by authority of the intestate, because all authority conferred by him ceased with his death; nor by the administrator, for he was not then appointed. But when the administrator was appointed, the property vested in him, by relation, from the decease of the intestate. Com. Dig. Administration, B. 10. Long v. Hebb, Style, 341. Wonson v. Sayward, 13 Pick. 404.
The goods, when forwarded, were the property of the administrator ; the consignees’ lien for their general balance against the intestate did not attach to them; and therefore the consignees must account for them to the administrator for the full amount, and their claim against the estate will be increased accordingly by withdrawing that credit.