Roakes v. Bailey & Newcomb

The opinion of the court was delivered by Powers, J. I. Upon the dissolution of a firm, its old customers lose no legal rights against it until they have notice in fact of the dissolution. A debtor paying money to his creditor has the primary and paramount right to direct the application of his money to such items or demands as he chooses. This direction may be given in' express terms, or it may appear by implication from the circumstances of the transaction. If the debtor pays with one intent and the creditor receives with another, the intent of the debtor shall govern. If no application is directed by the debtor, the creditor may make it. These general rules upon the subject are clearly deducible from the authorities. Newmarch v. Clay, 14 East, 240 ; Tayloe v. Sandiford, 7 Wheat. 14; Boutwell v. Mason & Seott, 12 Vt. 608; 1 Am. Lead. Cases, 329, et sequentia. [544] II. Roakes had no notice of the dissolution of the firm of Bailey & Newcomb with whom he had dealt, and supposed the payments made to Newcomb were to apply on Bailey & Newcomb’s account. Bailey & Newcomb before the dissolution had entered upon a “ pass book ” held by Roakes the goods sold to Roakes, with the prices-and also the cash paid on account by.Roakes. After the dissolution like entries on both sides of the account were made upon this book by Newcomb, the successor of Bailey & Newcomb. Roakes had no opportunity to direct in express 'terms the application of his payments after the dissolution, as he had no knowledge that there had been a dissolution. He all the time supposed his creditor was Bailey & Newcomb. He all the time intended that his payments should apply upon their account. It was the fault of Newcomb , that Roakes was ignorant of the dissolution, and Roakes cannot be deprived of the opportunity to elect where his payments shall go by the fault of his creditor. When Newcomb, therefore, applied the payments made by Roakes after the dissolution to his own private account, he diverted the money from the destination that Roakes gave it. This he could not do. As said by Oh. J. Redfield', speaking of the creditor’s right of application when the debtor gives no express directions, in Boutwell v. Mason & Scott, 12 Vt. 608, “The creditor may make such application of the money as he will, unless the circumstances under which it was paid, show an intention on the part of the debtor to have it applied to some particular demand.'1'1 Here the circumstances show conclusively Roakes’ purpose to pay Bailey & Newcomb and no one else. The right of the creditor to make the application never existed. The judgment of the County Court is reversed, and judgment for the claimants for the amount of their claim as established by the Court of -Insolvency, less the payments made after their dissolution, the computation to be made by the clerk; and it is ordered that this judgment be certified to the Court of Insolvency.