Harrison v. First National Bank

Kirby, J., (after stating the facts). The undisputed testimony shows that the appellants borrowed the money from the bank with which to purchase the stock of goods and executed the note in controversy therefor. That the Neals afterward sold their interest to Harrison, who agreed to pay the note as the consideration for the sale, and the bank was fully informed of these facts and ■agreed that the .Neals should stand security upon the note until it was paid. Neither is there any dispute that the bank afterward loaned Hanson the money with which to purchase from Harrison the stock of merchandise after he had been six weeks in business and that Harrison took the check for $1,906.32, endorsed it and enclosed it in a letter to the bank with the directions to ‘ ‘ credit same upon my note” and this note was the only one he owed to the bank as large in amount as the sum of the check. The direction for the application of the payment to the note in controversy was so plain that it could not have been misunderstood. The bank officials it is true, claimed that since there was no note for the exact .amount, they could not understand the direction and credited the amount to the account of Harrison and afterward induced him to agree to the application of the payment to the other notes first. (1) A debtor has the right in the first instance to appropriate the payment made to any debt which he may owe. “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.” 30 Cyc. 1228. (2) “A direction by the debtor as to the application of payments may be changed by an express agreement between the debtor and creditor or by the express declaration of the debtor or it may be implied by circumstances showing the debtor’s intention.” 30 Cyc. 1230. In Atkinson v. Cox, 54 Ark. 444, this court said: “There was uncontradieted■ proof that the defendant had delivered to the plaintiff cotton to be sold with directions that its proceeds be applied to the rent note. It was therefore the plaintiff’s duty to have applied such proceeds to the extinguishment of the note, and a failure to do so could not be excused upon the ground that such application had been made to an account against the defendant.” (3) The debtor Harrison sent the check which was accepted by the bank with the direction to credit same “upon my note,” meaning obviously the note sued on, executed jointly by all the appellants, and it was such an appropriation and application of the payment as discharged the note for the full amount of the check so far as the Neals, the sureties, are concerned, and it could not afterward be changed even by the consent of the debtor to their prejudice. Pinney v. French, 73 Pac. (Kan.) 94; Miller v. Montgomery, 31 Ill. 350; Codman v. Armstrong, 28 Me. 91; Reid v. Wells, 56 S. C. 435. The money paid to the bank was derived from the sale of a stock of goods originally bought by the parties with the money borrowed from the bank for the payment of which this note was executed, and it was known to the bank upon the sale of the interest of the Neals to Harrison that he assumed the payment of this note in consideration therefor, that Harrison was insolvent and the check given by Hanson to him was the consideration for the sale of the same stock of goods, with such additions as had ben made thereto, and the bank will not be allowed to misunderstand the direction of the debtor, Harrison, to appropriate the proceeds of the sale of the stock of goods and change the application or appropriation from the payment of this note as directed to the payment of other notes owing it by the debtor, the law regarding the payment made as dire'oted to the note, regardless of where the creditor in fact applied it. Reid v. Wells, supra. It follows that the Neals were entitled to credit for the full amount of the check in payment of the note sued on and only Hable for the balance due after allowing such credit. The decree is therefore reversed as to them, but affirmed as to S. C. Harrison and judgment will be rendered here in accordance with this opinion. It is so ordered.