Stamford Bank v. Benedict

15 Conn. 437

• Court: Supreme Court of Connecticut
• Decided: June 15, 1843
• Status: Published

Opinion

Church, J.

The facts in this case appearing upon the report of the committee, so far as necessary to a correct understanding of the principles involved in it, are, — that Jesse Whiting and Whiting Peck were indebted to the Stum-ford Bank in four promissory notes, indorsed by the defend- , r , , „ lor the accommodation of Whiling and Whiting op Peck; that the defendant became liable to the bank, as in-dorser, and afterwards, on the 4th of May, 1837, he executed to the bank a mortgage of the land described in this bill, as security for the payment of the four notes indorsed by him ; that the said Jesse Whiling and Whiting ¿p Peck were also indebted to the Stamford Bank in other sums of money, which, inclusive of the aforesaid notes, amounted to the sum of 6137 dollars, 82 cents, for which sum Whiting executed his note to the bank, and also a mortgage to secure the same» on the 22nd day of April, 1837 ; that the original notes and other evidences of debt were not given up to Whiting, when the note of 6137 dollars, 82 cents, was executed, and by the terms of the arrangement, were not to be cancelled, unless Whiting complied with certain conditions, which, it appears he never did perform ; that Whiting’s mortgage to the bank was foreclosed, and the entire avails of it amounted to no more than 2818 dollars, 7 cents, after deducting the legal charges ; which sum, the cashier of the bank, by the verbal orders of the directors, applied in part payment and satisfaction of the other claims of the bank against Whiting, which constituted a part of said sum of 6137 dollars, 82 cents, exclusive of the notes indorsed by this defendant.

1. The defendant now claims, that the sum received by the bank as the avails of the Whiting mortgage, shall be applied pro rata, upon all the debts due from Whiting to the bank» which made up the note of 6137 dollars, 82 cents, including as well the notes for which he is responsible as indorser, as the other claims ; and that the same be deducted from the amount now claimed by the Stamford Bank to be due upon the defendant’s mortgage.

The doctrine of the application of payments upon distinct debts due from the same debtor to the same creditor, has beén too frequently discussed and considered, to require a particular examination at this time.

If both the debtor who pays, and the creditor who receives, waive their respective privileges of making an application of the payment upon any one of the separate debts due, it would seem, that neither of them ought to claim a right to demand of the court so to make the application as to advance the peculiar interest of the one to the injury of the other. Their rights having been waived, ought not to be revived and in such case, we know of no better administration of the principles of equity, than so to direct the application of the money paid by the debtor, or received from other sources by the creditor, as that, under all the circumstances, the greatest equity shall be done, or the mutual intention of the parties, at the time of payment, if it can be ascertained, shall be best carried out. Field v. Holland, 6 Cranch, 8. The United States v. Kirkpatrick, 9 Wheat. 720. Cremer v. Higginson, 1 Mason, 323. Brander & al. v. Phillips & al., 16 Peters, 122. Newmarch v. Clay, 14 East, 239. Stone v. Seymour & al., 15 Wend. 19. Fairchild v. Holley, 10 Conn. R. 176. And the result of the operation of this principle will be, as it frequently has been, that in some instances, payments will be applied upon the oldest demands, and sometimes upon the most precarious debts. But in no case can they be applied, by the court, where no direction has been given by the debt- or, to a demand not due when payment is made, if there be another debt already due. Field v. Holland, 6 Cranch, 8. Brander v. Phillips, 16 Peters, 122.

Although the indebtedness of Whiting and of Whiting 4* Peck had all been consolidated, and was embraced in the note and mortgage of 6137 dollars, 82 cents, yet, as the committee find, that this was not by way of extinguishment of the former separate demands, but only an additional security for them, upon terms too, which Whiting had not complied with the original debts still existed as if no such consolidation had been attempted, and the same right of applying payments continued to both the parties. This feature in the case is material, and constitutes an essential distinction between the present and the cases in Massachusetts, to which we were referred, by the defendant, in the argument, and in which there was no power or opportunity of election. Blackstone Bank v. Hill, 10 Pick. 129. Lincoln v. Bassett, 23 Pick. 154. Dalton v. The Woburn Agricultural and Mechanic Association, 24 Pick. 257.

Some cases from the English books were relied upon, by the defendant, as furnishing authorities for his claim, and especially the cases of Bardwell & al. v. Lydall, 7 Bing. 489. (20 E. C. L. 213.) and Raikes v. Todd, 8 Ad. EL 84⅜ ^35 L 546') The first of 1⅛88 cases was assumpsit upon a guaranty for 4001. The plaintiff had furnished goods upon it to an amount considerably beyond that sum. May-hew, for whose benefit it was given, assigned his property for the benefit of all his creditors, and for the payment of his debts prorata. The plaintiff received a dividend, which he applied to that part of the debt which exceeded the 400/., and now attempted to hold the defendant liable for the whole sum. But he failed in this; for the court said, the payment was not a payment in gross, but a payment of Ss. Id, on the pound, specifically made and received as so much on each and every pound; and this necessarily operated as a part payment of the 400/.

The latter case was, in effect, the same, only the person for whom the guaranty was given, had become bankrupt, and his estate paid a dividend of 2s. 5d. on the pound of the debts proved. The plaintiff had proved his whpie debt; but had applied the dividend to that part of it not covered by the guaranty. But this was not sustained, by the court, for the same reasons. It is evident, in both these cases, that the rule of decision was, that the debtor in the first case, and the bankrupt law in the other, had made a specific application of the dividends to every part of the entire debt, as being indivisible; and that the court could only sanction and enforce what had been already done. The facts here are essentially different. As we have already seen, the original debts remained distinct and separate, and no application was made of the money received in payment, either by the debtor or by the statute.

If, then, as the defendant supposes, there was no application made by either debtor or creditor, of the avails received by the Stamford Bank from its mortgage from Whiting, the question is, is the court, by the principles of law or equity before stated and applicable to this case, bound to apply the payment so as to reduce the amount due upon the notes indorsed by this defendant ? What are his peculiar equities) that he should claim to direct the application of payments made and received by other parties ? The debtor and creditor had the sole right of controuling these payments ; and if neither of these have done this, the court must do it, as the rights, equities, and intention of these parties seem to demand. The defendant is an indorser, or at most a surety ; and this constitutes his only relationship to these debts. , ... • . ~ t-i has been said, that sureties are to be favoured in trie construetion and enforcement of contracts. But we cannot extend such considerations to cases like the present. To do this, would be to defeat the object and end of suretyship; it would be to hold, that the surety might have the money paid by his principal, so applied, as to leave the creditor a loser, notwithstanding his care and vigilance; and in truth, to discharge an indorser, who has been duly charged as such,, without the fault or negligence of the creditor. And such would be the effect, in the present case. This would be inequitable; and we cannot direct the application of this money, upon this principle. Indeed, this is a case, in which, if the creditor had made no application of the payment, the court, upon equitable principles, would apply it upon the precarious debts. Plomer & al. v. Long, 1 Stark. Ca. 153. (2 E. C. L. 334.)

But the plaintiff here insists, and we think very properly* that the creditor, the bank, when the money was received, correctly exercised its privilege of applying it in payment of such of the debts due to it from Whiting, &c., as were not secured by the defendant’s indorsement. The court would have done the same.

It was objected here, that this was done only by the cashier of the bank, by verbal directions from the directors, and not by the authority of a corporate vote. Such vote was not necessary. Much of the old strictness and formality required by the common law, on the subject of corporate action, from necessity, as well as upon principles better understood, has been dispensed with, in modern times, and especially in this country of corporations. The agents of corporations must necessarily have some latitude of discretion, and especially agents of such general powers as the cashiers of banking institutions. It is the duty of such cashiers to receive all moneys paid to the banks, and as incidental to this power, to apply them, subject to the supervisory authority of the directors. Beverley v. The Lincoln Gas Light and Coke Company, 7 Ad. & El. 829. (33 E. C. L. 222.) Bank of Columbia v. Patterson, 7 Cranch, 299. Fleckner v. Bank of the United States, 8 Wheat. 338. Osborne v. Bank of the United States, 9 Wheat. 738.

2. The defendant still further claims, that, whatsoever may his rights in regard to the application of the avails received by the bank from the Whiting mortgage, yet by virtue of his position of indorser or surety, he is in equity entitled to par-**cipate >n the avails of that mortgage, as a common fund for the payment of all the debts secured by it.

That a surety who has paid the debt, and perhaps in some cases, where he has not paid it, may, in the language of the civilians, be subrogated into the place of the creditor, as to all the securities and funds in the hands of such creditor, we admit. This right, however, is not one which can be exercised against the essential interests of the creditor; whose rights, by virtue of the securities or funds in his hands, are paramount, but can be ultimately enforced only against the debtor. If the creditor has been paid, he is to remain paid ; if only secured, he is to remain secured. It is very obvious, in this case, that to enforce the defendant’s claim, will be to withhold from the creditor a portion of the joint and legal demand which he has against the defendant, and which the defendant is liable to pay, and to compel him to forego the benefit of the security he has obtained to the extent claimed by the defendant. The bank is now to lose a considerable portion of its claims against Whiting and Whiting <$• Peck; and we are asked to compel it to suffer a still greater loss.

For our views more particularly, on this subject, we refer to our opinion in the case of Belcher v. The Hartford Bank, ante, 381.

We advise the superior court, that the defendant is entitled to no deduction from the amount due on his mortgage to the Stamford Bank, by reason of the avails received by that bank from the Whiting mortgage.

In this opinion the other Judges concurred.

Decree for plaintiffs.