49

it to debts not due, if there were debts already due.48 The privilege does not apply to compulsory payments; nor to an unlawful demand, as for usurious interest;50 and if appropriation is once made by the creditor, he cannot change it.51 If the debtor deny one of the debts, the creditor cannot apply payment to it in exclusion of one acknowledged.52 And though the creditor refuse, vet if he receive the money, he must apply it as directed.53 And if a general credit of a payment be made at the time thereof by the creditor on general account against the debtor, he cannot afterward make a particular application thereof to subserve his interests subsequently developed.54

1252. (3) Third: When neither party appropriates the payment, the law will apply it according to equitable principles, and with regard to the probable intention of the parties.55 It will impute the payment to interest before principal;56 and where the interest itheld, where a person is the maker of a note, and joint maker of another, a payment by him should, in the absence of a designation of its application, be credited to his individual indebtedness. Its application by payee as a payment on the joint note would not suspend the running of the Statute of Limitations. Moose v. Marks, 116 N. C. 785, 21 S. E. 561; Walton & Whann Co. v. Davis, 114 N. C. 104, 19 S. E. 159, in the last case R. & Co., holding a mortgage to secure a note and advances made and to be made, transferred the note before maturity to the plaintiff as collateral security, and thereafter made an assignment to the defendants of all their property, including the mortgage, for the benefit of creditors. The mortgagor delivered a part of the crop covered by the mortgage to the defendant, who converted the same into money, which he claimed he had the right to apply in part payment of the account due for advances. Plaintiff, however, contended that such proceeds should be credited on the note. Shepard, C. J., held that the assignee in this case succeeded only to the rights of his assignors, M. Rountree & Co., and that plaintiff, assignee of the note, is entitled to have the money applied on the note in preference to the account for advances.

48. Bobe v. Stickney, 36 Ala. 482.

49. Blackstone Bank v. Hill, 10 Pick. 129.

50. Brown v. Lacy, 83 Ind. 436. See Tomblin v. Higgins, 58 Nebr. 336, 78 N. W. 620.

51. Tooke v. Bonds, 29 Tex. 419; Hill v. Southerland, 1 Wash. (Va.) 128; Mayor of Alexandria v. Patten, 4 Cranch, 317; White v. Trumbull, 3 Green (N. J.) 314; Bank of North America v. Meredith, 2 Wash. C. C. 47; Harding v. Wormley, 8 Baxt. 578. If the debtor were not notified, it is otherwise. Hankey v. Hunter, Peake Ad. Cas. 107.

52. Tayloe v. Sandiford, 7 Wheat. 13.

53. Reed v. Boardman, 20 Pick. 441; Wetherell v. Joy, 40 Me. 325; Wipperman v. Hardy, 17 Ind. App. 142, 46 N. E. 537.

54. Lane v. Jones, 79 Ala. 161.

55. See Chitty on Bills [*403, 404], 455, 456; Lingle v. Cook, 32 Gratt. 272. 56. Lash v. Edgerton, 13 Minn. 210. If payment is made before maturity

self bears interest, it will impute it, first, to interest on interest; secondly, to interest on principal; and thirdly, to the principal." It will also impute payment to those debts which are prior in date;58 and to unsecured in preference to secured debts, unless the latter are secured by a surety, in which case the appropriation will be made for his relief.60

59

63

So it will apply payment to the debt most burdensome to the debtor, especially to one bearing interest, or subjecting him to a penalty or criminal charge, rather than to those which are less burdensome.61 So to a debt which is still binding in law rather than to one barred by the Statute of Limitations.62 It has been thought, however, that a creditor may apply payment to a debt barred by limitation when the debtor makes no election. But this is doubtful at least. The debtor only would be permitted to apply it to an illegal demand.64 If one of two demands becomes of a debt drawing interest, it will be appropriated to principal instead of interest. Starr v. Richmond, 30 Ill. 276. It will not be applied to unearned or unaccrued interest. Monroe v. Fohl, 72 Cal. 568. But if the interest be usurious, payments will be applied to the principal. First Nat. Bank v. Turner, 3 Kan. App. 352, 42 Pac. 936; First Nat. Bank of Hutchinson v. McInturff, 3 Kan. App. 536, 43 Pac. 839.

57. Anketel v. Converse, 17 Ohio St. 11; Anderson v. Perkins, 10 Mont. 154, 25 Pac. 92.

58. Mills v. Fowlkes, 5 Bing. N. C. 461; United States v. Kirkpatrick, 9 Wheat. 720; Bobe v. Stickney, 36 Ala. 482; Smith v. Loyd, 11 Leigh, 512; Wendt v. Ross, 33 Cal. 650; Horne v. Planters' Bank, 32 Ga. 1; Goetz v. Piel, 26 Mo. App. 634; National Bank of Battle Creek v. Dean, 86 Iowa, 656, 53 N. W. 338.

59. Lash v. Edgerton, 13 Minn. 210; Moss v. Adams, 4 Ired. Eq. 42; Baine v. Williams, 10 Smedes & M. 113; Burch v. Tebbutt, 2 Stark. 74; Cole v. Withers, 33 Gratt. 204; Trullinger v. Kofold, 7 Oreg. 228. But see Gwinn v. Whitaker, 1 Harr. & J. 754; Goetz v. Piel, supra; Plain v. Roth, 107 III. 594; Blackmore v. Granbery, 98 Tenn. 277, 39 S. W. 229, citing text; Moose v. Marks, 116 N. C. 785, 21 S. E. 561; Wipperman v. Hardy, 17 Ind. App. 142, 46 N. E. 537.

60. Marryatts v. White, 2 Stark. 101.

61. Wright v. Laing, 3 B. & C. 165; Meggot v. Mills, 1 Ld. Raym. 286: Peters v. Anderson, 5 Taunt. 596; Spiller v. Creditors, 16 La. Ann. 292. Contra, Mills v. Fowlkes, 5 Bing. N. C. 455, 7 Scott, 444; Stone v. Seymour, 15 Wend.

29.

62. Nash v. Hodgson, 6 De G., M. & G. 474.

63. Armistead v. Brooke, 18 Ark. 521; Mills v. Fowlkes, 5 Bing. N. C. 455; Beck v. Haas, 111 Mo. 264, 20 S. W. 19, 33 Am. St. Rep. 516.

64. Kidder v. Norris, 18 N. H. 532; Rohan v. Hanson, 11 Cush. 44; Stone v. Talbot, 4 Wis. 442.

barred by limitation before any appropriation of payment is made, then the law will appropriate payment to the barred debt. If payment is made to a party who holds a debt due to himself, and another due to himself and the plaintiff, he is bound to apply the payment ratably between the two debts.

66

§ 1253. Payments by partners and joint debtors. If a partner owes a debtor, of whom his firm is debtor also, and pays the money of the firm, it will be appropriated by law to the debt of the firm;67 and if he pays such debtor his own money, it will be appropriated to his own debt.68 And no appropriation will be allowed which has the effect of paying one man's debt with another man's money. When a person owes the same debtor on joint and on individual account, and simply pays an amount, without appropriating it specifically, or it appearing whether it came from his individual or his joint funds, the creditor may apply it to either account.70 "Where one of several partners dies, and the partnership is in debt, and the surviving partners continue their dealings with a particular creditor, and the latter joins the transactions of the old and new firms in one entire account, then the payments made from time to time by the surviving partners must be applied to the old debt." 71

SECTION VIII.

PAYMENT SUPRA PROTEST OR FOR HONOR.

1254. There is a peculiar kind of payment sometimes made after protest, and which is called accordingly payment supra protest. It is a general principle of the common law, that a stranger cannot voluntarily, and without the request of another, pay his

65. Robinson's Admrs. v. Allison, 36 Ala. 525.

66. Colby v. Copp, 35 N. H. 434. And if a note drawing interest is payable in whole or in part before due at the option of the maker, the interest on each payment up to the time it was made should be cast up and the payment applied, first to the reduction of the interest, and then to the reduction of the principal. See Jacobs v. Ballenger, 130 Ind. 231, 29 N. E. 782. 67. Thompson v. Brown, Moody & M. 40.

68. Fairchild v. Holly, 10 Conn. 175.

69. Thompson v. Brown, Moody & M. 40.

70. Van Rensselaer's Exrs. v. Roberts, 5 Den. 570; Baker v. Stackpole, 9 Cow. 420.

71. Simon v. Ingham, 2 B. & C. 72, Bayley, J.; 3 Dowl. & R. 249; Hooper v. Keay, 2 Q. B. Div. 178.

73

debt and acquire a right to reimbursement.72 But an exception is made in respect to bills of exchange, and for the benefit of trade, which is not extended even to negotiable notes." When the bill has been protested for nonpayment, and not before, a stranger may pay it for the honor of the drawer, or acceptor (if it has been accepted), or of any indorser, or he may pay it for the honor of all the parties for honor generally, as such a payment is termed. And such a payment does not, like a simple payment by the original drawee, operate as a satisfaction of the bill, but itself transfers the holder's rights to the party paying, unless the party paying limits and narrows them. If the payment is made for the honor

of a particular indorser, the party paying may sue such indorser, and all parties prior to him whom he could have resorted to, but not subsequent indorsers, for it stands like a payment made at the request of the indorser, for whose honor it is made, and the payor supra protest narrows and limits his right to recover against them only. But if he pays for honor of the bill generally, it is the same as payment for the honor of the last indorsee, and he may recover against all parties to the bill," declaring specially upon the bill, according to the custom of merchants,78 or generally upon a count for money paid for defendant's use.79 But Mr. Chitty says "it is considered safer to declare specially.'

" 80

§ 1255. Payor supra protest is subrogated to rights of party for whose honor he pays. As the party paying supra protest becomes substituted, as against parties anterior to the one for whose honor he pays, to the rights and remedies which such party for whose honor he pays would have had against them, had he himself paid, it follows that the right of one who pays for the honor of the drawer to sue the acceptor depends upon whether or not the ac

72. Story on Notes, § 453.

73. Smith v. Sawyer, 55 Me. 141.

74. Vandewall v. Tyrrell, Moody & M. 87; Bayley on Bills (2d Am. ed.), 328; Chitty on Bills [*508, 509], 575; Byles on Bills [*262], 409.

75. Chitty on Bills (13th Am. ed.) [*509], 576.

76. Mertens v. Withington, 1 Esp. 112; Chitty on Bills [*509], 577.

77. Fairley v. Roch, Lutw. 891; Chitty on Bills [*509], 576, 577; Byles on

Bills (Sharswood's ed.) [*261], 408; Edwards on Bills, 441.

78. Cox v. Earle, 3 B. & Ald. 430; Fairley v. Roch, Lutw. 891.

79. Vandewall v. Tyrrell, Moody & M. 87; Smith v. Nissen, 1 T. R. 260 (semble).

80. Chitty on Bills [510], citing Reid v. Smart.

ceptance was for value.81 In England it was at first held that he could sue the acceptor, whether he had effects of the drawer in his hands or not; but this view was subsequently overruled, and the doctrine of the text established.83

82

1256. When acceptor may pay supra protest. The acceptor, if he have previously made a simple acceptance, cannot pay for honor of an indorser, because, as acceptor, he is already bound in that character. But if he has accepted the bill for the drawer's accommodation, without being in possession of effects, and no provision is made by the drawer for its payment, he may pay it supra protest, and acquire a remedy against the drawer on the bill. But this is unnecessary, except as a precaution in regard to evidence, for without it the acceptor might, in an action for money paid, recover back the amount, though he could not without such ceremony recover on the bill.

§ 1257. The person who desires to pay a bill for the honor of another, must be ready and offer to do so at the time and place of payment, otherwise he will have no right to insist on that privilege, 86

No person should make a payment supra protest without ascertaining that the signatures of those for whose honor he pays are genuine; for should it turn out otherwise, he would have no remedy against them. Nor could he recover back the amount from the party to whom he has paid it, unless he discovers the mistake, and gives notice to him in time to prevent any loss.87 And it has been held that the forgery must be discovered, and the notice thereof given, on the very day of payment, so as to enable the

81. Byles on Bills (Sharswood's ed.) [*260], 407, 408; Chitty on Bills [*508],

575.

82. Ex parte Wackerbath, 5 Ves. 574 (1800), the Lord Chancellor saying: "I have talked to one or two persons in trade upon this, who answered that the persons accepting for the honor of the drawer have a right to come upon the acceptor. I put the case, that the drawer had no effects in the hands of the acceptor. The answer is, they accept for the honor of the drawer, but they accept an accepted bill. The justice of the case is, that if there were no effects they should go in the first place against the drawer, but they should not be altogether without remedy."

83. Ex parte Lambert, 13 Ves. Jr. 179 (1806). 84. Chitty on Bills (13th Am. ed.) [*508], 575.

85. Chitty on Bills (13th Am. ed.) [*508], 575.

86. Denston v. Henderson, 13 Johns. 322; Bayley on Bills (2d Am. ed.), 329. 87. See chapter XLII, on Forgery, section IV.