Court Opinion

ID: 5196713
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:44:23.166491+00
Date Added: 2024-06-11T08:27:06.167379
License: Public Domain

Hatch, J.:
It appears from the foregoing statement of facts that the plaintiffs - had actual knowledge of the relation which existed between the defendant and White, the agent, in making the payments. They had exacted from the defendant the guaranty of particular sums as the work progressed. When, therefore, moneys from the defendant were received, they were bound to apply such payments upon the contract which had been guaranteed by the defendant. In each ease the payment'was made by the check of the defendant payable to White, and the plaintiffs, understanding the relation which existed between these parties, were bound also to take notice of the fact that it was a payment made by the defendant upon his contract of guaranty. Tt-is doubtless true that the plaintiffs would have had the right to apply the money upon any indebtedness, as-between them and Mrs. or Mr. White, in the absence of any knowledge or. notice by them that the money was to be otherwise Applied, even- though it Was received from a guarantor. Such was the rule *525announced in Harding v. Tifft (75 N. Y. 461). That case, however, clearly recognizes that where the person receiving the money has knowledge' of the source from which it comes and that it is a payment upon a particular contract, the party receiving has no discretion in making application of the same, but is bound to appropriate it to the purpose for which it was paid. Under such circumstances the principle is not different from that which obtains in the ease of involuntary payments, as to which it is held that they must be applied in accordance with equitable principles. (Orleans County Nat. Bank v. Moore, 112 N. Y. 543.)
It is claimed, however, that the testimony in this case operates to remove it from the application of such rule. It was testified to by Scherbner, one of the plaintiffs, that after the execution of the guaranty by the defendant the latter stated to him that he was not feeling very well and that the plaintiffs should have all their dealings with Hr. White; that what he would do would be satisfactory to the defendant, and not to bother him about it, and that Hr. White told him at the time of making the payment to apply it upon the extra work. Assuming, as we must, that, this statement is true, I do not think it changes the résult. It certainly did not operate to modify the contract of guaranty, nor was it so intended. It did not confer authority upon the plaintiffs to appropriate the moneys of the defendant to other purposes than that covered by the contract of guaranty. The plaintiffs had actual knowledge that the moneys paid by White, although in the form of a check, were the moneys contributed by the defendant in discharge, of the obligation which the plaintiffs had exacted before entering upon the performance of the contract. All payments that had been made by- the defendant were made by check in this form. Consequently, tlie plaintiffs were at all times advised as to the source of the moneys.
The theory upon which a party receiving payment may make application of the same as he determines, in the absence of a direction, rests upon the basis that the debtor making the payment is the owner of the money. Such is the doctrine announced in the cases above referred to. The basis of the rule in the present instance fails, for White concededly was not the owner of the money at the time when he made the payment or at any other time. He was the mere agent of the defendant in making such payment, and such *526fact was known to the plaintiffs. The right .of application at the will of the plaintiffs, therefore, failed in the only aspect which Would invest them with such power. As there was no modification of the contract of guaranty, and as the moneys represented by the check belonged to the defendant, and as no authority was vested in the agent, White,- to change the terms of the guaranty, it necessarily follows that the application of payment Was required to be made upon equitable principles, and, so applying them, it discharged the debt of the defendant.
The exceptions, therefore, should be overruled and judgment directed for the defendant dismissing the complaint, with costs.
O’Brien, P. J., Patterson and McLaughlin, JJ., concurred-; ■Ingraham,'J., dissented.
Exceptions overruled and judgment ordered for defendant. dismissing complaint, with costs.