Morgan v. Tarbell

The opinion of the court was delivered by Isham, J. It appears, from the report of the auditor, that Brown became a partner in the firm of Morgan, McCaine & Co., in March, 1852; and at that time there was a considerable balance on account due from the defendant. Brown continued as a partner until February, 1853, when he sold back his interest to the other members of the firm. On the account which accrued while Brown was one of the firm, there was a small balance due from the plaintiffs to the defendant, provided the payments made during that period are applied on the charges which were then made. The present plaintiffs, it is obvious, are not entitled to the judgment which they have recovered, unlesss the payments made during that time, are first to be applied in satisfaction of the balance which was due from the defendant in March, 1852. In that event, the balance, as reported by the auditor, is due from the defendant to these plaintiffs. The change in the members of the firm, by the introduction of Brown as a partner, produced no alteration in their mode of doing business ; the business was continued in the name of Morgan, McCaine & Co. while this account was accruing. During that time Brown was a resident of Boston, in Massachusetts, and took no open or active part in the business of the firm. It was certainly competent for the plaintiffs to have kept the balance due them in March, 1852, distinct from the account which subsequently accrued, and if, in that manner, the continuity of the account had been broken, a general payment should be applied in satisfaction of the subsequent account; such would be the presumed intention of the parties from that circumstance. [502] Simpson v. Ingham, 2 Barn. & Cres. 65. Logan v. Mason, 6 Watts & Serg. 9. This account, however, was not so kept. It was at the request- of the defendant that, for some time before the commencement of this account, and consequently before Brown became a partner, the plaintiffs were in the habit of making monthly statements of the account, as it stood on the day-book, and when examined and corrected by the defendant, the aggregate amount was carried forward to the account for the next month. In that manner the account was balanced in March, 1852, and the balance made the first item of charge in the succeeding month, the same as if there had been no change in the members of the firm. The payments during that period were generally on the account, and for the purpose of paying or reducing the general balance, as no other application of those payments was requested at that time by the defendant. This account, therefore, by the mutual understanding of the parties, has . been kept as a continuous, open and current account from its commencement to its close. The balance due in March, 1852, has thereby become blended with the subsequent account between these parties, as if no change in the firm had been made. If the firm had continued the same as it existed previous to March, 1852, no one would question the rule that the payments should be applied to the charges in the order of time in which they were made. The earliest charges are the first to be extinguished by the application of such payments, unless a different application is directed by the debtor at the time of payment. In Clayton’s case, 1 Merivale 608, it was observed by the master of the rolls that “ there is no room for any other appropriation than that which arises from the order in which the receipts and payments take place, and are carried into the account. It is the first item on the debit side of the account which is discharged or reduced by the first item on the credit side. Upon that principle all accounts current are settled and particularly cash accounts.” In 1 Am. Lead. Cas. 299, the same rule is recognized, and it is further observed that “ this rule will apply to accounts with a partnership, of which there is some change in the members, provided the account goes on as one continuous, open and current account.” The case of Bodenham v. Purchas, 2 Barn. & Ald. 39, is a strong case upon tins subject, and very analogous to this in its facts. In that case a bond was [503] given to a firm, conditioned for tlie repayment of the balance of an account, and of such further sums as should be advanced to the obligor. One of the partners died, and a new partner was taken into the firm ; at that time a considerable balance was due from the obligor to the firm; advances were afterwards made by the firm, and payments made to them, on account, by the obligor, and he was credited by the new firm with the several payments, and charged with the original debt and advances, as constituting^ items in one entire account. It was held, that as the old balance was not treated as a distinct account, but having been carried forward and blended in the general account with other transactions, they were not at liberty, at a subsequent period, to treat it otherwise ; and that having received, in different payments, a sum more than was sufficient to pay the debt, when the change in the firm took place, the bond was considered as paid. If the rights of third persons or sureties were involved in this matter, or if, for any other reason, the plaintiffs in this case were now desirous of separating that balance, and applying the payments in satisfaction of the charges made after Brown became one of the firm, it is clear, from the authorities, that they would not be allowed to do it. Having carried the balance due in March, 1852, forward, and added it to the amount of the succeeding account, he has not only the right, hut would be compelled, even against his interest, to have that balanqe satisfied by the application of the subsequent payments which were made on the account. Smith v. Wigley, 3 Moore & Scott 174. Simpson v. Ingham, 2 Barn. & Cres. 65. Henniker v. Wigg, 4 Adol. & Ellis, N. S. 792. In The United States v. Kirkpatrick, 9 Wheat. 737, it was said by the court that, if both parties omit to make an application of payments, “the law will apply them according to its own notions of justice,” and in making that disposition, regard will be had to the character of the claims, the rights of sureties, and all circumstances showing the intention of the parties. United States v. Wardell, 5 Mason 82. Field v. Holland, 6 Cranch 27. Smith Mer. Law 636-7-8. 2 Greenl. Ev. This case not involving any of those considerations', affecting the rights of third persons or sureties, we think it must be governed by the rule as established in the case of Bodenham v. Purchas. The judgment of the county court is affirmed.