International Harvester Co. of America v. Holmes

Rosenberry, J. It is contended that the judgment should be affirmed (1) because defendant was released on account of [509] the sale to Gray; (2) that the property was sold contrary to sec. 2316a, Stats., relating to the sale of personal property taken by virtue of a chattel mortgage; and (3) that defendant was released by the provisions of sub. (3) and (4a) of sec. 1679 — 1, Stats. “(3) By the discharge of a prior party;” “(4a) By giving up or applying to other purposes collateral security applicable to the debt, or, there being in the holder’s hands or within his control the means of complete or partial satisfaction, the same are applied to other purposes.” The first and second contentions may be dismissed without further consideration than to say that sale in fact was not made to Gray and therefore the contract was not complied with, and (2) that no property was taken under the terms of the chattel mortgage, and therefore the procedure relating to the sale and disposition of property taken under a chattel mortgage has no application. Plaintiff claims that the matter of the application of the payments is governed by Northern Nat. Bank v. Lewis, 78 Wis. 475, 47 N. W. 834, and First Nat. Bank v. Finck, 100 Wis. 446, 76 N. W. 608. Eespondent contends that it is governed by the principles applied in Jenkins v. Gunnison, 50 Wis. 388, 7 N. W. 256, 423. In disposing of this question two things must be taken as clearly established: (1) that the rights of the defendant as guarantor could not be impaired or diminished by any contract made between the mortgagor and the mortgagee subsequent to the time of the making of the guaranty, and (2) that at the time of the sale of the property, which was by the terms of the contract, to the extent of the proceeds of the sale, to be a voluntary payment by the mortgagor, none but the first and second note was due. There is no direct evidence as to what application, if any, the plaintiff made of the proceeds of the sale. Assuming, however, that the bringing of this suit upon the note guaranteed by the defendant is equiv [510] alent to the application of the proceeds of the sale upon the remaining notes of the series, the question arises, Could the plaintiff apply the voluntary payment made by the mortgagor to the notes not yet due, to the prejudice of the guarantor of the note which was then past due ? By the terms of the mortgage the plaintiff had power to declare the whole debt due and to enter upon the premises and take and sell the property. -There is no evidence in the case that plaintiff proceeded or attempted to proceed under this clause of the mortgage. The evidence is that the matter was adjusted under the terms of the bill of sale hereinbefore referred to. The plaintiff not having proceeded under the mortgage to declare the amount of the debt due, the contract contained in the bill of sale is of no effect against the defendant, and we must treat the matter as if the maturity of the debt is determined by the terms of the notes to secure the payment of which the chattel mortgage was given. There is no dispute that when a debtor makes a payment without application a creditor cannot apply the amount of the payment to a debt not due, to the exclusion of one due or overdue. 30 Cyc. 1237. and cases cited; Cain v. Vogt, 138 Iowa, 631, 116 N. W. 786. Therefore as against the defendant the plaintiff was bound to apply the proceeds of the voluntary payment to the notes in the order of their maturity. Upon making such application the note guaranteed by the defendant must be held to be paid and the defendant discharged. By the Gouri. — ¿Judgment affirmed, with costs.