Mitchell v. Wheeler

98 N.W. 152, 122 Iowa 368

• Court: Supreme Court of Iowa
• Decided: January 23, 1904
• Status: Published

Opinion

Bishop., J.

Tlie situation of the parties on April 4-, 1900, may be summed up in brief thus: Weare & Allison owned and were in possession of the Mitchell note, signed by both defendants, and the Steele note, signed by C. W. Wheeler alone. No directions as to the application of the proceeds of the cattle sale having been given, the bank applied the whole amount in payment of the note in suit, and gave notice thereof in writing to defendant C. W. Wheeler, who in turn delivered such written notice to his co-defendant, Martha A. Wheeler. Now, where a partial payment is made by a person indebted on more than one account, the general rule, acknowledged in all the cases, is that the person paying may, at or before the time of payment, prescribe the application of the payment. If he omits to do so, the creditor may apply it as he pleases. Counsel for appellees , do not question this rule. It is their contention that the application of the cattle money as a whole to the payment of the note in suit was an error, and that the change in the application and indorsement was made to correct such error. Error in making the application is alleged as a conclusion in the reply filed by plaintiffs, but the pleading is silent as to the nature and character of such error. Turning to the evidence, we find nothing whatever ^tending to prove that the application made was the result of error. It seems that on the day the change was made one of the members of the firm of Steele & Co. went to the bank and stated that the Steele note should be paid in full from the cattle proceeds. The bank refused to act in the absence of Wheeler. Later in the day Steele and Wheeler caiñe into the bank together, and the change in Ihe indorsement was made under instructions of Wheeler. At 'the time thereof Wheeler stated that a part of the cattle sold were under mortgage to Steele & Co. to secure payment of their note; that the same were sufficient in' value to pay such notej and the Steele note must be paid out of such money.

That it was competent for C. W. Wheeler- and the bank, as'affecting themselves alone, to agree upon a change in the indorsement cannot be doubted. But tbe parties thus acting could not, by force of a simple agreement between themselves, affect any right then vested in the surety defendant. Now, should it be conceded that the proof shows that material error was involved in the making of the indorsement in the first instance, it then could be said that there are many cases holding that such error might well be corrected by the principal parties to the note without consulting the surety; it being made to appear, of course, that the change was made in good faith; and no grounds appearing upon which to rest a plea of estoppel. But, as we read the record before us, no such case is made out. It does not appear that there was any understanding, much less agreement, between the owner of the notes and the principal maker'thereof, in respect to the application of payments. In the face of this fact, there could be no such thing as an erroneous indorsement. It would seem that C. W. Wheeler was induced to request the change in the indorsement by Steele, but what interest Steele had in the matter does not appear. Even if he was interested in some undisclosed way, still it is not made to appear that there had been any understanding or agreement with him that the note formerly owned by his firm was to be paid out of the cattle proceeds. It may be that the fact, conceding the existence thereof, that a mortgage had béen given.on part of the cattle to secure the Steele note, made it logically proper than such note should be paid from the proceeds of the property thus mortgaged. ' But there is no proof of such mortgage, such as can be binding'on' Martha A. Wheeler. The statement made by C. W. Wheeler while in the bank, if sufficient to bind him as an admission, could not be accepted as proof of the essential fact, so that his co-defendant in any way became bound thereby. But, if this weré not so, it still remains true that the bank, as owner of both notes, .and hence of any security given for the payment thereof, had the absolute right to make application as it pleased, and of this right it made exercise. Such being the facts, it follows that no change could there after be made in the indorsement without the consent of the surety. The debt, as to her, was paid by the application made, and it could not be revived in the absence of authority given by her therefor. Counsel for appellant cite the following cases, which upon examination will be found to be in point: Harding v. Wormley, 67 Tenn. 578; Baugher v. Duphorn, 9 Gill (Md.) 314.

We conclude that in sustaining the motion to direct a verdict the trial court was in error, and the judgment must be and it is bevebsed.