Theophilus Parsons.

A treatise on the law of promissory notes and bills of exchange (Volume 2) online

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secured oidy hy an unstamped bill, it was held that the holder miglit apply a payment to
that in preference to a bill duly stamped. Biggs v. Dwight, 1 Man. & H. 308. B was the
holder and A the acceptor of two l)ills, both overdue, the one unstamped for X25, the
latter stamped for £50. The acceptor paid .£22 lOx. to B, the holder, " on account.'
B said he wished to have the full amount of llic £25 bill. A replied, that he had no
more then, but would pay some more soon. B then indor.scd the £25 bill, Keceived
£22 10s., in part of two bills. It was allowed B to appropriate this payment to
the unstamped bill. So, although one of two debts has been barred by the Statute of
Limitations, the creditor is at liberty to appropriate a general payment to the discharge
of a debt so barred. Mills v. Fowkes, 5 Bing. N. C. 455, 7 Scott, 444. In this case
Tindal, C. J. said, the rule of the civil law, thai a general payment is to be applied to a
more burdensome debt, is unknown to our law. It is said, and with good reason, that
application of payment cannot be made after a controversy has arisen, or after an action
has been brought. In U. S. v. Kirkpatrick, 9 Wheat. 737, Story, J., delivering the
opinion of the court, said : " The general doctrine is, that the debtor has a right, if he
pleases, to make the appropriation of payments ; if he omits it, the creditor may make
it. If both omit it, the law will apply the payments according to its own notions of
justice. It is certainly too late for cither party to claim a right to make an appropria-
tion after the controversy has arisen and a fortiori at the time of the trial. In cases
like the present, of long and running accounts, where debits and credits are perpetually
occurring, and no balances are otherwise adjusted than for the mere purpose of making
rests, we are of opinion that payments ought to be applied to extinguish the debts ac-
cording to the priority of time, so that the credits are to be deemed payments pro tanio
of the debts antecedently due. Robinson ?'. Doolittle, 12 Vt. 24G ; Fainliiid c. Holly,
10 Conn. 176.

(c) Aver v. Hawkins, 19 Vt. 26; Cowperthwaite r. Sheffield, 1 Sandf. 416; Parcli-
man v. MeKinney, 12 Smedes & M. 631 ; Bancroft !-. Uumas, 21 Vt. 456 ; Caldwell r.
Wentworth, 14 N. H. 431.

[dj Hill V. Southerl:\nd, 1 Wash. Va. 128 ; White v. Trumbull, 3 Green, N.J. 314 ; Hil-
ton V. Burley, 2 N. H. 103. When an account was delivered by an agent in which he
charges himself with a balance, and then continues to receive moneys for his principal,
subsequent payments made by the agent are not necessarily applied to cancelling the
previous balance, when subsequent receipts are equal to subsequent payments. Ly-
saght V. Walker, 5 Bligh, N. S. 1 ; Taylor v. Kymer, 3 B. & Ad. 320. When the con-
signor of goods appropriates the proceeds, he may alter the appropriation any tirao
before the goods or a notice of the former appropriation have reached the creditor.
Hankey v. Hunter, Peake, Ad. Cas. 107, per Lord Kenyan. When the creditor has
rendered an account of the application of a payment to various debts, he cannot elect
to vary such election, so as to affect the rights of third persons. Bank of North Amer-
ica V. Meredith, 2 Wash. C. C. 47.

(e) Blackstone Bank r. Hill. 10 Piek. 129.


joined in a suit, and execution satisfied in part, the surety of one
of tlie notes has a right to demand a proportional appropriation.
If a debtor makes a payment without appropriation, the creditor
cannot apply it to debts not then due and payable, if there be
other debts then due and payable. (/)

Thirdly, if neither party appropriates the payment at the time,
the law will do it.(i^) And in making this appropriation the law
will regard the probable intention of the parties and the justice
and merits of the case.(/t) Among the most general rules of

(/) Bacon v. Brown, 1 Bibb, 334; McDowell v. Blackstone Canal Co., 5 Mason,
11 ; Seymour v. Sexton, 10 Watts, 255.

{g) See preceding note on this subject. But in Philpott r. Jones, 2 A. &E. 41,
Taunton, J. said, that the ap[)ropriation might be made by the creditor any time before
the case came to be considered by the jury. The application of a payment by law
would seem to be of little benefit to the debtor. In Peters v. Anderson, 5 Taunt. 596,
it seems that the action is sufficient, and sufficiently early notice of the appropriation
made by the creditor.

(h) Postmaster-General v. Norvell, Gilpin, 106 ; Marker v. Conrad, 12 S. & R. 301 ;
United States v. Kirkpatrick, 9 Wheat. 720; Cremer». Higginson, 1 Mason, 323 ; Gwinn
w. Whitaker, 1 Harris & J. 754 ; Briggs y. Williams, 2 Yt. 283; Robinson ». Doolittle, 12
Vt. 246 ; Randall v. Parramore, 1 Fla. 409 ; Bayley v. Wynkoop, 5 Gilman.449. The
probable intention of the debtor, the creditor having made no appropriation, seems to
control. Hilton v. Burley, 2 N. U. 193 ; Dorsey v. Gassaway, 2 Harris & J. 402 ; Ded-
ham Bank i'. Chickering, 4 Pick. 314; United States r. Bradbury, Daveis, 146. And
it will be presumed that he meant to extinguish those debts which were most burden-
some, — those which bear interest rather than those which do not, — debts secured by a
penalty, including such debts as may be used to declare the debtor bankrupt. But if
all debts arc alike in other respects, the payment will be appropriated according to their
priority in time, and it was the rule, that, if all were alike in every respect, the payment
would be applied ratably to their reduction. Dig. 46, 3 ; Favenc v. Bennett, 1 1 East, 36.
But the intention of the debtor must be compatible with an honest intention to discharge
all the debts at some time. Otherwise, if upon a series of debts payment were made, it
would certainly be for the debtor's interest to have payment made to the in point of
time, and so have the benefit of the Statute of Limitations as to those which were earlier.
So the debtor, if dishonest, would prefer to cancel a debt which was secure<l ; but
the law makes appropriation of payment first to such debts as are not secured. But
atill the law will appropriate a payment so as to relieve a surety for another, when left
to operate of itself. But see Mills o. Fowkes, 5 Bing. N. C. 455-457, 7 Scott, 444,
where Tindal, C. J. denies that the application of a general payment to the more burdcT.-
some debt is known to the common law ; and also Stone v. Seymour, 15 Wend. 29, in
which the principle of applyhig the money to the debt most burdensome to the debtor,
as was the Roman and civil law rule, — 1 Domat, 6, 4, tit. 1, Mi 'i""'- 2, 3, — is criti-
cised, as overlooking the fact, that, where there are conflicting interests, the golden
rule applied as well to the debtor as to the creditor. Field v. Holland, 6 Cranch, 27.
See Bell's Law Diet , Art. Indefinite Payment. Hcyward v. Lomax, 1 Vem. 24, al-
lows the application to be made by law to the most burdensome debt, — as, in that
case, to paying off a mortgage drawing interest, rather than an account not flccnred,


application are these, that interest is to be paid first, (i) and then
the principal ; and that application of payment is to be made
to those debts which are prior in date. (7) Tlie appropriation
by either party should be indicated in some way to the other ;
as, if he makes an entry in his books, he should show it to
the other party. (A:) And if one of the debts be secured, and
others not, the law (in the absence of appropriation by the
parties) will apply the payment first to the unsecured debts, (/)
unless the others are secured by a surety, and then, in gen-
eral, the appropriation will be made to benefit and relieve

and on which no interest was payable. This seems to look to the ultimate intention
of tlie debtor not to pay all the debts. Wilkinson v. Sterne, 9 Mod. 427, per Lord
ITardu'icke. To the same effect is Bacon v. Brown, 1 Bibb, 334 ; Anonymous, Comb.
463, per Lord Holt. In Manning v. Westerne, 2 Vern. 607, the application was ruled
to be proper which was most beneficial to the creditor, which is the reverse of the rule
stated above. Blanton v. Rice, 5 T. B. Mon. 253, applied the payment to the debts
which were most precarious; but in Stone v. Seymour, 1.5 Wend. 40, Senator Tracy
states that the course of decisions has been to reverse the civil law rule of application
to the most burdensome debts. Goddard v. Cox. 2 Stra. 1194 ; Newmarch v. Clay,
14 East, 239; Peters v. Anderson, 5 Taunt. 596; Jones v. Kilgore, 2 Rich. Eq. 63;
Briggs V. Williams, 2 Vt. 283 ; Capen v. Alden, 5 Met. 268 ; Blanton v. Rice, 5 T. B.
Mon. 253 ; Planters' Bank v. Stockman, 1 Freein. Ch. 502 ; Field v. Holland, 6 Cranch,
8; Hammer v. Rochester, 2 J. J. Marsh. 14. See, however, in support of civil law
rule, Meggot v. Mills, 1 Ld. Raym. 288 ; Dawe v. Holdsworth, Peake, N. P. 64 ; Robert
V. Garnie, 3 Caines, 14. For a general statement of the rules by which courts will be
governed when the application devolves upon them, see Emery v. Tichout, 13 Vt. 15,
17; Stamford Bank v. Benedict, 15 Conn 437 ; Portland Bank v. Brown, 22 Maine,
295; Smith v. Loyd, 11 Leigh, 512; Heilbron v. Bissell, 1 Bail. Eq. 435 ; Bosanquet
I'. Wray, 6 Taunt. 597.

(j) Gwinn v. Whitaker, 1 Harris & J. 754 ; Frazier v. Hyland, id. 98 ; Peebles v.
Gee, 1 Dev. 341 ; Spires v. Hamot, 8 Watts & S. 17 ; De Bruhl v. Neuffer, 1 Strobh.
426 ; Bond v. Jones, 8 Smedes & M. 368 ; Righter v. Stall, 3 Sandf Ch. 608 ; Jenks v.
Alexander, 11 Paige, 619; Hart v. Dorman, 2 Fla. 445.

(j) AUstan v. Contee, 4 Harris & J. 351 ; United States v. Kirkpatrick, 9 Wheat.
720 ; Fairchild v. Holly, 10 Conn. 175 ; Postmaster-General v. Furber, 4 Mason, 333 ,
McKenzie v. Nevius, 22 Maine, 138 ; Berghaus v Alter, 9 Watts, 386 ; Boody v. United
States, 1 Woodb. & M. 1.50; Upham v. Lefavour, 11 Met 174 ; United States v. Brad-
bury, Daveis, 146; Caldwell v. Wentworth, 14 N. H. 431.

{k) Simson v. Ingham, 2 B. & C. 65, 3 Dowl. & R. 249. See note w, supra, p. 222.

(/) In Birch v. Tebbutt, 2 Stark. 74, A had a legal claim against B, as the acceptor
of a bill of exchange ; he had also possession of a certain mortgage deed from B to
a third person, of which he was able to compel an assignment in equity to himself.
B paid money to A, without prejudice to his claim on any securities, and the law
applied the payment to the bill of exchange. Moss v. Adams, 4 Ired. Eq. 42 ; Jones
V. Kilgore, 2 Rich. Eq. 63 ; Baine v. Williams, 10 Smedes & M. 113. Gwinn v. Whit-
aker, 1 Harris & J. 754, conflicts with the doctrine in the text, and favors the creditor;
also, Dorscy v. Gassaway, 2 Harris & J. 402.


the surety. (w) If there be no reason to the contrary, the law
will apply the money to a debt which is more burdensome to the
debtor, rather than to one less so ; (n) as to one bearing interest,
or having a penalty annexed, rather than to one without. (o) If
a partner, who owes personally one who is also a creditor of the
firm, pays the money of the firm, the law will appropriate it to the
notes of the firm ; (p) and, by parity of reason, if he pays his own
money, the law should appropriate it to his personal notes, (g)

(m) Marryatts v. White, 2 Stark. lOI. A promissory note was given by a surety for
goods, to be supplied to his principal, and not in respect of a previous debt. Goods
were subsequently supplied, and from time to time payments were made by the prin-
cipal, on some of which, for his promptness, discounts were m:ide. The court held, in
favor of the surety, that all these payments were intended in liquidation of the latter

(n) Supra, p. 227, note h.

(o) Meggot V. Mills, I Ld. Raym. 286 ; Dawe v. Holdsworth, Peake, 64 ; and ob-
eervations in Peters v. Anderson, 5 Taunt. 596. In Meggot v. Mills, Holt, C. J. said,
and was not contradicted by the other judges, that if a debtor owe a debt, contracted
while a trader within the bankrupt act, and another debt contracted afterwards, a pay-
ment will be applied by law to the debt upon which a commission of bankruptcy
could be taken out. It is said by Chitty, 8th ed , 403, that it should be noticed
that bankruptcy was criminal.

(/)) Thompson v. Brown, Moody & M. 40. In this case a partner was liable before
the partnership, and was also liable on a copartnership debt. The creditor received
money paid generally, but as the money so paid was partnership property, it was held
that it could only be applied to a partnership debt. But in Smith v. Wiglcy, 3 Moore
& S. 174, A and B were partners, and became indebted to C. B, after dissolution of
the partnership, became personally indebted to C, and then made general payment,.
It was held, that these payments should be applied to the reduction of the earlier items,
in the absence of any particular appropriation. It is frequently the case that one part-
nership is dissolved and a new one formed by the admission of new parties. A party
continues dealing with the new firm, and the same accounts are continued. The old
firm, it seems, is not thereby discharged. Gough v. Davies, 4 Price, 200. If such a
party makes payments, they should be carried by the new firm to the old account.
Strange v. Lee, 3 East, 484 ; Bodenham v. Purchas, 2 B. & Aid. 39 ; Newmarch b.
Clay, 14 East, 239 ; Fairchild v. Holly, 10 Conn. 175.

(q) Fairchild v. Holly, 10 Conn. 175, a leading case, sustains the principles laid
down in the text. In this case there was an account against a copartnership, entire
and unbalanced, upon which, however, sundry payments from time to time had been
made. There was a secret partner in the firm, wlio had withdrawn before any pay-
ment had been made. One of the remaining partners made the payment. These pay-
ments, it was held, could not be presumed to have been made with money accruing
out of the funds of the new firm. That it was to be applied to the i)enetit of the fund
out of which it had accrued, and that it could not be applied to the portion of the ac-
eoant subsequent to the withdrawal, on the principle that it should be applied to that
which was the least secure ; that the money should be applied to the oldest items in
regular order. It did not appear but that the old and new firm were equally solvent, —
if it is possible to add a member to a partnership without adding to its available means.

VOL. II. 20


If the creditor have demands personally, and also officially, as
executor, for example, he may appropriate a general payment
first to his personal debt.(r) If the several items of debt are
continuous and connected as parts of one account, and notes
were given, from time to time, as the debts successively became
defmite, the rule is, that money paid must l)e applied to the
earliest first,(A') and the earliest part of one entire account is
considered to be cancelled first. (^) And no appropriation will be

la Snced i;. Wiester, 2 A. K. Marsh. 277, after the dissolution of a copartnership, one
partner continued to deal with a former creditor and made payments ; it was held that
such payment might be applied to the individual debt. But we think this properly a
question of fact for the jury, and depending upon which was the owner of the money.
Fowkc V. Bowie, 4 Harris & J. 566.

(r) It is a general rule, that, when an agent is employed to receive money for his prin-
cipal, he cannot appropriate such money to a debt due himself from the principal, un-
less the principal consents. Morse v. Woods, 5 N. H. 297. But if both as agent and
principal one has claims on another, an unappropriated payment must he applied to
both debts raUibly. Barrett v. Lewis, 2 Pick. 123 ; Cole v. Trull, 9 id. 32.'j. When
one, however, owes in personal and official capacity, it seems to be law and sense that
the jury are to decide for which the payment is made. Fowke v. Bowie, 4 Harris & J.
566. Here debts were due from A personally, and as an administrator.

(s) See supra, p. 227, note h.

(t) Clayton's Case, 1 Meriv. 585, 608 ; per Baijley, J., in Bodenham v. Purchas,
a B. & Aid. 39, 45. See 2 Bridg. Index, 586, 2d ed., tit. Trade ; Harrison's Index,
Vols. IL and III. pp. 893, 897, 2442, 3d ed., tit. Debtor and Creditor; Kilsby v. Wil-
liams, 5 B. & Aid. 815 ; U. S. v. Kirkpatrick, 9 Wheat. 720 ; Postmaster- General v.
Furber, 4 Mason, 333 ; Baker v. Stackpoole, 9 Cowen, 420 ; Pemberton v. Oakes, 4 Russ.
154 ; Smith v. Wigley, 3 Moore & S. 174 ; Gass v. Stinson, 3 Sumner, 98 ; McKen-
zie V. Nevius, 22 Maine, 138 ; Miller v. Miller, 23 id. 22 ; P^iirchild v. Holly, 10 Conn-
175; Smith v. Loyd, 11 Leigh, 512. See Logan v. Mason, 6 Watts & S. 9 ; Capen
V. Alden, 5 Met. 272. If several notes are joined in one suit, and the execution recov-
ered in such suit is satisfied only in part, a surety who is such on part of the notes only-
may insist on a proportional application of the money. Blackstone Bank v. Hill, 10
Pick. 129 ; Marsh v. Houlditch, Sittings at Westminster after Easter Term, 1810, be-
fore Mr. Justice Abbott, Chitty on Bills, 9th ed- 404. The plaintiffs who sued upon the
bill were nonsuited upon the following state of facts. The plaintiff's discounted a bill,
accepted by the defendant for the accommodation of the drawer, who, when informed
of the dishonor, requested the plaintiff's not to apply to the acceptor. Afterwards, the
balance with the bankers came to be in favor of the drawer of the bill, and it was re-
garded as satisfied, although the drawer failed and became insolvent, with a large bal-
ance unpaid with the bankers. Bloxsome v. Neale, K. B. 1832, Chitty on Bills, 9th
ed. 219; Hammersley v. Knowlys, 2 Esp. 665 ; Dawe v. Holdsworth, Peake, 64. Bat
.see Tinson v. Francis, 1 Camp. 19: Atwood v. Crowdie, 1 Stark. 483; Bosanqnet w.
Dudman, id. 1. In Hammersley r. Knowlys, 2 Esp. 665, a person who had cash on
deposit with a banker left with him a note of a third person for a sura of money, telling
him that it was made for his accommodation, and afterwards paid a sum of money into
the bank without making any specific appropriation of it. It was held that this money
must be applied, as far as it would go, to the discharge of the then existing debt, ard


allowed which has the effect of paying one man's debt with an-
other man's money. (w) And there can be no appropriation
which will deprive a debtor of a benefit to which he is entitled ;
as, for example, the taxation of costs. (?;)

It has been held, that, if one of two debts be barred by the
Statute of Limitations, a creditor is still at liberty to apply a
payment to such a debt.(r^) And it should seem to be in accord-
ance with reason and authority, that, if there be two debts, one
of which is legal and the other illegal, the appropriation must
be made to the one which is legal. (.c)

that the maker of the accommodation note could only be held liable for what balance
there at any time remained due on the note. In Field v. Carr, 5 Bing. 13, 2 Moore
& P. 46, the defendant accepted a bill drawn by C, who indorsed it to his bankers,
who entered it upon the credit side of C.'s account, but when it was dishonored en-
tered it upon the debit side. A few days after the dishonor the defendant paid the
amount of the bill to C, but omitted to take the bill out of the bank. C. afterwards
paid into the bank more than enough to cover the items preceding the bill and the bill
itself. The bankers treated the bill as paid for three years, and then sued the banker
on his acceptance. He was held not liable. But then a bill may be given and con-
tinue a security, if intended to be a continuing security. Pease v. Hirst, 10 B. &
C. 122, .5 Man. & R. 88. But see Williams ;;. Rawlinson, 3 Bing. 71, 10 J. B. Moore,
362, Kyan & M. 233.

(u) Thompson v. Brown, Moody & M. 40.

(r) James v. Child, 2 Tyrw. 732, 2 Cromp. & J. 252. In Grigg v. Cocks, 4 Sim.
438, the circumstances were peculiar. A, who was a solicitor in the country, received
money from a client to pay for him into chancery. A got a bill for the sum from a
country banker, and remitted it to his London bankers without notifying them of the
above circumstances. A was indebted to his bankers for £450, for which they held
securities, and this account was kept separate from the general account between the
bankers and A. A died, and the bill became due a few days afterwards, and was
paid, and the amount was carried to the general account by the bankers, and the ac-
counts were still kept separate until after the bankers had been notified of the purpose
for which the bill was given. Ultimately they paid over the balance of the proceeds
of the bill, deducting the £450 of the separate account, to the executrix of A. It was
held, that there was no agreement to keep separate accounts by the bankers, and that
ihey had no notice at the time, or before the amount was received, of the purpose
to which it was to be applied, and therefore the proceeds of the bill could not be col-
lected of them by the client.

(w) Mills V. Fowkes, 5 Bing. N. C. 455, 7 Scott, 444. Where an action was brought
for a balance of a banking account, a question arose whether a disputed sum above six
years due had been paid by the plaintiffs by the defendant's authority. It was held
that the jury, having found that the payment was authorized by the defendant, the
plaintiffs were entitled to apply subsequent unappropriated payments of the defend-
ants in discharge thereof, so as to prevent the operation of the Statute of Limitations.
Williams v. Griffith, 5 M. & W. 300.

(x) Wright V. Laing, 3 B. & C. 165, 4 Dowl. & R. 782 ; Ribbans v. Crickett, 1 B. &
P. 264 ; Ex parte Randleson, 2 Deacon & Ch. 534. In Biggs v. Dwight, 1 Man. & R.


When the appropriation comes to be determined by law, the
merits and equities of the case are regarded, and tlie rights of
third persons which have intervened are closely considered, so
that wliere a factor has funds in his hands from goods sold for
his principal and consignor, he cannot ap[)ly such funds to the
bills of his principal alone, drawn against such proceeds, in pref-
erence to bills drawn by his principal and a surety, which surety
relied upon the credit of the goods which were in the factor's
hands. (//) And where a bank holds security for the payment of
notes made by the cashier of a bank, and there are balances on
the books in his favor, such a balance may be appropriated to the
payment of such notes, instead of being applied to reduce the
damages for breach of his bond.(z)



A JUDGMENT on a bill or note, even without satisfaction, may
be a discharge of it, as between the parties to the suit, for the
judgment remains as a valid claim ; but without satisfaction it
certainly does not discharge the other parties. The old doctrine
of merger has been much qualified, but some questions in rela-
tion to it are still undetermined. In regard to negotiable paper,
it seems certain that a holder may recover a judgment against a
party, and even take out an execution, without losing his rights
against otlier parties, until the execution is satisfied. In fact,
we should say that a judgment in any action cannot work a
merger, except as between the parties to that action. (a)

308, a payment was allowed to be appropriated by tlie creditor to a bill which Wiis void
for want of a stamp. But there were circumstances indicating that tlie consent of
the debtor was given to such an application. I'hilpott v. Jones, 2 A. & E. 41 ;
Cruickshanks v. Rose, 1 Moody & R. 100.

(y) Branderr. Phillipp, 16 Pet. 121.

(2) Dedham Bank v. Chickering, 4 Pick. 314.

(a) Bayley, 335 ; Claxton v. Swift, 2 Show. 441, 494, 1 Lutw. 882 ; Tarleton v. All'
husen, 2 A. «& E. 32. In England, it has been contended that a mere warrant of attor-
ney was a merger of the debt ; but in Norris v. Aylett, 2 Camp. 329, an action was
brought upon a bill of exchange by the payee against the acceptor. The defence wa.i
rested upon the following facts. An action had been previously commenced upon the


Nor would other parties be discharged by an execution issued
against a party ; nor by the discharge of a party from execu-
tion, but without payment ; (b) nor by the taking of a higher

same bill. It was, however, agreed by the parties that the defendant should pay the
costs, renew the bill, and give a warrant of attorney to secure the debt. The defend-

Online LibraryTheophilus ParsonsA treatise on the law of promissory notes and bills of exchange (Volume 2) → online text (page 31 of 103)