Lowentraut v. Jackson

The opinion of the court was delivered by Gummere, Chief Justice. The defendant was the holder of four promissory notes made by one Schaller, which fell due between October 15th, 1901, and November 26th of that year. The aggregate of the notes was $7,289.34. Upon two of these notes, amounting together to $4,350.80, the plaintiff’s testator, Peter Lowentraut, was endorser, and was responsible to the defendant for their payment, and before their maturity gave the defendant a bond and mortgage for $10,000, bearing interest at five per cent, to secure their payment, as well as the payment of a $5,000 note held by the defendant, upon which he was also an endorser. (This latter note was subsequently paid by a prior endorser, and cuts no figure in the present litigation.) About the time of the maturity of the notes Schaller, their malier, died without having paid them, and left an estate of doubtful solvency. The defendant proved his claim on the [403] four notes with the executor of Schaller, and from time to time received payments on account thereof as follows: November 18th, 1903, $2,573.08; May 4th, 1904, $1,366.77; August 24th, 1904, $508.06; March 18th, 1905, $1,239.69, and on Jane 28th, 1905, $729.23. No further payments were made to the defendant by the executor of Schaller up to January 15th, 1907. On that day the plaintiff’s testator called upon the defendant for the purpose of discharging his liability upon the two notes which he had endorsed, and obtaining the surrender and cancellation of the mortgage which ho had given as collateral security. He prepared a statement showing that the amount for which he was then liable by reason of his endorsements, after crediting the payments which had been made by the Schaller estate to the defendant, was the sum of $1,076.83. The defendant testified that he did not dispute the accuracy of this statement, and agreed to accept that sum in satisfaction of Lewentraut’s liability as endorser, and to deliver up the mortgage to Mm, upon condition that if anything more was paid to the defendant by the Schaller estate it should belong to him. Lowentraut, by whom this suit was originally instituted and prosecuted to judgment, did not deny that the settlement was made upon the terms testified to by the defendant, and those terms must, therefore, bo accepted as the agreement between the parties. A little more than two years after the date of this settlement, and on January 15th, 1907, the Schaller estate made a final payment of $875.08 to the defendant, and received from him a release from all further liability upon the notes. The theory upon which the present suit was rested by Lowentraut is that the Schaller estate was insolvent to such an extent as to be able to pay only the principal sum of the several notes held by the defendant against it, and that, consequently, neither Lowentraut nor the defendant had any right to look to it for interest upon the notes. Assuming the correctness of this theory, Lowentraut then contended that at the time of the settlement between himself and the defendant, the whole of the latter’s claim against the Schaller estate had been satisfied by the payments hereinbefore recited, except the sum [404] of $875;' that the money paid by him at the settlement was an overpayment to the extent of $201 which he was entitled to recover back upon the ground of mistake; and that the moneys afterward paid by the Schaller estate to the defendant were, in law, paid to him for the use of Lowentraut. The trial was had before the court without a jury, and resulted in a judgment for the defendant. • Subsequent to the entry of that judgment Lowentraut died, and his death being suggested on the record an order was thereupon entered authorizing all further proceedings in the cause to be conducted in the names of his executors, the present plaintiffs in error, who now seek to have the judgment reversed. We concur in the finding of the trial court. The trouble with the plaintiffs’ case is that it is based upon a theory which is untenable. In the first place, there was no proof that the estate of Schaller was insolvent; it was not- settled as such, under the statute, so far as the proofs show, and the assets received by the executor were slightly in excess of the amount of the claims as proved against the estate. For all that appears to the contrary, the decedent may have left real estate which, if sold, would have produced a sum sufficient, when added to the funds distributed by the executor, to have satisfied all creditors in full. In the second place, even if the estate had been insolvent, that fact would not have relieved the executor from the obligation to pay interest upon the claims of creditors. He was bound to pay them such, a percentage of their claims, both principal and interest, as the funds in his hands would, permit. The payments made by him to the defendant from time to time went in reduction of the latter’s claim as it existed at the time when they were made—that is, in reduction of the total principal and interest then due. In determining the amount due from a debtor to his creditor the rule applicable to the calculation of interest, where payments have been made from time to time by the debtor in excess of the interest which has accrued up to the date when they are respectively made, is that the excess shall be deducted from the principal. Holcombe v. Holcombe, 45 Vroom 257. A rough calculation, made upon this basis, will show that, at the time [405] when Lowentraut made the $1,076.83 payment in exoneration of his liability upon the two notes on which he was endorser, the amount then due from the Sehaller estate was in excess of $1,900. The Lowentraut payment, therefore, instead of more than satisfying the debt then due to the defendant from the Sehaller estate, left that estate still in debt to him in the neighborhood of $900; and the final payment of $875.08 was not equal to the amount then due. The judgment under review will be affirmed. For affirmance—Tpi.e Chancellor, Chief Justice, Garrison, Swayze, Trenct-tard, Parker, Bergen, Yoorhees, Kalisch, Bogert, Vredenburgh, Congdon, White, JJ. 13. For reversal—None.