the money to a prior equitable demand in preference to a later legal one. He may apply a payment to a demand not secured in lieu of one secured, or to one the security for which is more precarious.2 The particular circumstances may give the creditor a right to infer the consent of the debtor to an application not other wise admissible. He may apply an unappropriated payment to a contingent liability, to a debt not due, to one barred by the statute of limitations, or even to an illegal demand if he has no other. The payment of money under such circumstances necessarily implies a consent to apply it to the demands actually existing.3 Some distinctions have been made in respect to the creditor's right of application between debts which the debtor paying owes separately and alone, and those which he owes jointly with others; and also between debts owing to the person receiving the payment alone, and those to which he and others are jointly entitled. It has been held that if one member of a firm makes a payment to a person who has an account against him, and also against the firm of which he is a member, [410] the creditor must apply the money to the individual account unless he can show a consent to have it otherwise applied." The law will appropriate it to the individual debt in the absence of any application by the parties, if the money paid is not shown to have been derived from the fund from which the joint liability was to be met." This strict rule has not been 1 See Bosanquet v. Wray, 6 Taunt. 597; Birch v. Tebbutt, 2 Starkie, 74; 2 Pars. on Cont. 631. Hargroves v. Cooke, 15 Ga. 321; Waterman v. Younger, 49 Mo. 413; Jenkins v. Beal, 70 N. C. 440; Simmons v. Cates, 56 Ga. 609; Driver v. Fortner, 5 Porter, 9; Burks v. Albert, 4 J. J. Marsh. 97; Wood v. Callaghan, 61 Mich. 402; White v. Beem, 80 Ind. 239. 3 Hall v. Clement, 41 N. H. 166; Bowe v. Gano, Hun, 6; Treadwell v. Moore, 34 Me. 112; Ayer v. Hawkins, 19 Vt. 26. See Rackley v. Pearce, 1 Ga. 241; Bancroft v. Dumas, 21 Vt. 456; ante, § 238; Arnold v. Prole, 4 M. & G. 860. 4 Johnson v. Boone, 2 Harr. 172; Gass v. Stinson, 3 Sumn. 98: Sneed v. Wiester, 2 A. K. Marsh. 277. 5 Baker v. Stackpoole, 9 Cow. 420; Livermore v. Claridge, 33 Me. 428. See Lee v. Fountaine, 10 Ala. 755. After the dissolution of a partnership one of its members continued the business, agreeing to pay all the partnership debts and taking enough of the firm property to do so; he added other goods to the stock and mortgaged it to secure both the joint and individual debts. It was uniformly recognized. The creditor has been given the choice, in the absence of directions, to apply it upon the joint debt.' Payments made by a surviving partner, while carrying on the partnership business for the joint benefit of himself and the estate of the deceased partner, pursuant to a stipulation in the partnership articles, upon an account, some items of which were contracted before and some after the death of the other partner, must be applied to the discharge of the first items.2 Where the debtor making a general payment owes a debt to a firm, and also one to the member of it to whom the payment is personally made, the receiver is precluded by his relation of agent for the firm from preferring his own claim. It is implied in the very nature of an agent's or trustee's contract that he will take the same care, at least, of the property intrusted to him that he does of his own. Therefore, he should apply the payment pro rata to both debts.* [411] § 240. Same subject. A creditor cannot apply a payment made generally on account of existing debts to a new debt subsequently contracted; nor to an instalment of the held that a creditor might apply payments made to the latter debt. King v. Sutton, 42 Kan. 600; St. Louis Type Foundry Co. v. Wisdom, 4 Lea (Tenn.), 695. 1 Van Rensselaer v. Roberts, 5 Denio, 470; Boyd v. Webster, 59 N. H. 89. 5 be applied to the portion of the account accruing after the withdrawal, on the principle that it should be applied to the debt for which there was the least security, because it did not appear but that the company was as solvent after the withdrawal as before; but that the money so paid 2 Stanwood v. Owen, 14 Gray, 195; should be applied to the oldest items Morgan v. Tarbell, 28 Vt. 498. In Fairchild v. Hoolly, 10 Conn. 475, an account against a partnership, upon which sundry payments had been made, was entire and unbalanced; before any payments had been made a secret partner had withdrawn from the concern, and the payments were made by one of the partners who remained. Held, that the money with which payment was made could not be presumed to have accrued out of the funds of the new firm, and to be applied, therefore, to the benefit of the fund from which it had been taken; that it could not of the account. 3 Colby v. Copp, 35 N. H. 434. 4 Id.; Favenc v. Bennett, 11 East, 36; Barrett v. Lewis, 2 Pick. 123; Scott v. Ray, 18 id. 360; Cole v. Trull, 9 id. 325. 5 Miles v. Ogden, 54 Wis. 573; Law's Ex'r v. Sutherland, 5 Gratt. 357; Baker v. Stackpoole, 9 Cow. 420. A. owed a debt to B. payable on demand, for which C. was surety. A. assigned debts of others to B. as a means of payment in part. After such assignment, but before the assigned debts were collected, A. contracted another debt to B. for which same debt becoming due subsequent to the payment.' It has been held that the creditor's application is not complete and absolute until the debtor has been notified of it. When such notice has been given the money is appropriated.3 If the holder for collection of several notes against one debtor which are owned by various persons receives from him a sum less than the amount of all the notes, and the debtor makes no application of the payment, it is competent for the creditors owning the notes to direct the application to any of them. In an action after such payment upon one of such notes, in the absence of any application up to the time of the trial, no part will be applied to the note in suit if it appears that the plaintiff has not received part of the money. An attorney holding several notes for collection belonging to different persons, and receiving a payment on account of them not appropriated by the debtor, may himself appropriate it. But if an agent having a demand himself against the debtor, and also acting for a principal who has a demand against the same debtor, receives an unappropriated payment from such debtor, he must apply it ratably to both." The right of appropriation is confined to the parties; no third person can insist on any application which neither of them has made. Thus the grantee of the mortgagor cannot insist that money of the mortgagor in the mortgagee's hands [412] shall be used to pay off the mortgage unless this was clearly contemplated by the parties, and the grantee made his purchase upon that understanding. Strangers can demand noth there was no security. Held, that B. could not, after collection of the assigned debts, apply the same to pay the debt contracted after the assignment, and recover the first debt from C., the surety for it. Donally v. Wilson, 5 Leigh, 329. Gates v. Burkett, 44 Ark. 90; Heard v. Pulaski, 80 Ala. 502; Kline v. Ragland, 47 Ark. 111; Seymour v. Sexton, 10 Watts, 255. 2 Ryan v. O'Neil. 49 Mich. 281; Lane v. Jones, 79 Ala. 156; Simson v. Ingham, 2 B. & C. 65; Allen v. Culver, 3 Denio, 284; Van Rensselaer 4 Taylor v. Jones, 1 Ind. 17. 7 Harding v. Tifft, 75 N. Y. 461; Feldman v. Beier, 78 id. 293; Coles v. Withers, 33 Gratt. 186; Mack v. Adler, 22 Fed. Rep. 570; Jefferson v. Church of St. Matthew, 41 Minn. 392. $ Gordon v. Hobart, 2 Story, 243; Backhouse v. Patton, 5 Pet. 160. ing in this regard which the parties have not required.1 Where creditors claim equities through their debtors they are usually estopped by what the debtors do; but fraud never estops creditors. This doctrine relative to the application of payments applies only where the creditor has two or more honest claims against the debtor; it does not apply so as to conclude creditors where there is only one such. Therefore a subsequent mortgagee may object to the application by the holder of an earlier mortgage of partial payments to usurious interest for the purpose of keeping alive that part which is valid. As has been already stated, a surety of a debtor who makes an indefinite payment cannot interfere with the election of the creditor; nor will an intention of the debtor be presumed to apply it in favor of the surety so as to exclude the right of the creditor to make the application. But where at the inception of the contract of suretyship a mode of payment was agreed upon and a particular fund identified for that purpose, the surety may insist on the application of that fund when it is realized. Thus, a factor who has accepted a bill drawn by his principal, as against an accommodation drawer who becomes such on the faith of a consignment of cotton made to meet it at maturity, cannot apply the proceeds of the consignment to another debt, and no factor's lien for such other debt will be permitted to intervene. When the party 1 Spring Garden Ass'n v. Tradesmen's Loan Ass'n, 46 Pa. St. 493. See Parker v. Green, 8 Met. 137. 2 Greene v. Tyler, 39 Pa. St. 361, See Chester v. Wheelwright, 15 Conn. existing. Kirby v. Marlborough, 2 M. & S. 18. See Merrimack Co. v. Brown, 12 N. H. 320. It is held in Gore v. Townsend, 105 N. C, 228, that a mortgagee who holds two mortgages, the older of 3 Hanson v. Myer, 72 Iowa, 48; which was executed by a husband and Wilson v. Allen, 11 Ore. 154. 562. Payments made generally to the creditors on account of a person for whom a guaranty is given may be applied by them in liquidation of a balance existing against him before it was given, and the guarantor cannot insist on the payments being applied in exoneration of his liability, although at the time of his assuming it the creditors did not give him notice that any such balance was then his wife to secure the former's debt, and the latter of which was executed by him alone on the same property to secure a subsequent note, cannot appropriate the proceeds of personal property to the payment of the second mortgage; it must go to the payment of the first in exoneration of the wife's dower right, she being a surety for her husband. + Brander v. Phillips, 16 Pet. 121. See Marryatts v. White, 2 Stark. 101, having a right to appropriate a payment has done so, [413] the appropriation is final, and he cannot change it.' § 241. Appropriation by the court. Where the parties have not made a specific appropriation of moneys paid, and there are several debts or demands for which the party paying the money is liable to the party receiving it, the fundamental rule or principle is that the law will appropriate it according to the justice and equity of the case. In applying this cardinal principle various subsidiary rules have been recognized, in respect to which and in the reasons assigned therefor the decisions are not entirely in accord. Many cases proceed upon the assumption that the intention of one or both of the parties is to be effectuated, or that the interest of one party in preference to that of the other is entitled to be [414] subserved. But it is believed that there is no presumption of in which security having been given by a surety for goods to be supplied and in respect of a pre-existing debt, the goods were supplied, and payments made from time to time by the principal, in respect of some of which discount was allowed for prompt payment; held, that it must be inferred in favor of the surety that all these payments were intended to be in liquidation of the latter account: also Shaw v. Picton, 7 D. & R. 201; 4 B. & C. 715, where the same agent had a bill of account with the grantor of several annuities, for the payment of which A. became surety, and in consequence of a letter written by an attorney in the names of the grantees, at the instance of the agents, demanding payment the arrears of the annuities from the grantor and his surety, a sum of money was paid under circumstances from which it was to be collected that the money was intended to be specifically appropriated to the annuity account, and the agents applied it to the bill account; held, that this was a misapplication, and that the money ought to be ap propriated pro rata among the annuitants in relief of the surety. 1 Wright v. Wright, 72 N. Y. 149. 2 Field v. Holland, 6 Cranch, 8; Souder v. Schechterly, 91 Pa. St. 83; Spiller v. Creditors, 16 La. Ann. 292; Stone v. Seymour, 15 Wend. 19; Parker v. Green, 8 Met. 144; Norris v. Beaty, 6 W. Va. 477; Robinson v. Doolittle, 12 Vt. 246; Randall v. Parramore, 1 Fla. 409; Chester v. Wheelwright, 15 Conn. 562; Calvert v. Carter, 18 Md. 73; Neidig v. Whiteford, 29 Md. 178; Haden v. Phillips, 21 La. Ann. 517; Upham v. Lefavour, 11 Met. 174; Seymour v. Van Slyck, 8 Wend. 403; Hargroves v. Cooke, 15 Ga. 321; Leef v. Goodwin, Taney, 460; Callahan v. Boazman, 21 Ala. 246; Bayley v. Wynkoop. 10 Ill. 449; Benny v. Rhodes, 18 Mo. 147; Proctor v. Marshall, 18 Texas, 63; Oliver v. Phelps, 20 N. J. L. 180; McFarland v. Lewis, 3 Ill. 344; White v. Trumbull, 15 N. J. L. 314; Carson v. Hill, 1 McMull. (S. C.) 76; Selleck v. Sugar Hollow T. Co., 13 Conn. 453; Rosseau v. Cull, 14 Vt. 83; Starrett v. Barber, 20 Me. 457. 3 McDaniel v. Barnes, 5 Bush, 183; |