By the Court,
Allen, J.
The defendant insists that the referee erred in holding that Etheridge was not the agent of the plaintiff for the settlement of the debt in suit with Gates in Wisconsin, and that the same was not satisfied and discharged by the arrangement then made. Had Etheridge undertaken to compromise and discharge the note in suit, it might, at least, have been plausibly argued, upon the evidence, that he was the authorized agent of the plaintiff in that behalf, with full power to treat and act in respect to it. There was some.conflict of evidence upon the question whether the note in suit was, in truth, taken into consideration and provided for in the settlement which was made between Etheridge and Gates; and if it had depended entirely upon the oral evidence, the referee might well have found that this note entered into, and formed a part of, the consideration for the transfer of property then made by Gates to Etheridge. Especially might this have been so found if the plaintiff is right in his claim that the transfer to Etheridge was only by way of security, and not in discharge of Gates’ former liability. The several indorsers for Gates, including the then cashier of the plaintiff, up to that time and for some time subsequent thereto, had acted in concert, with a view to the? mutual benefit and protection of each other, and in contemplation of a division of the final loss. Etheridge testifies that after taking the conveyance in Wisconsin he told the defendant that the propérty would pay the .entire indebtedness of Gates, into about $1000, and ,that deficiency he and the defendant with Pomroy, would pay in equal parts, after the sale of the property and the application of the proceeds. Pomroy says that the *15defendant always wanted the moneys recovered applied pro rata on the several liabilities, and that he never dissented from that proposition: and that he only consented to the application of the moneys to the payment óf the liability of Etheridge on condition that an arrangement should be made between the defendant and Etheridge satisfactory to both, and that he consulted the defendant about the payment of the Chipps note because he might be interested in the application of the funds. That the defendant was away from home a great deal of the time, and left the matter with him (Pomroy) to protect his interest, so far as he could, and see that he, fared like others. A statement of all the indebtedness of Grates to the bank was sent at the time the notes surrendered were transmitted to Etheridge, and was exhibited at the time of the arrangement. But the written memorandum of the parties will control the oral evidence and the other circumstances of the case, and to arrive at the agreement of the parties all the papers executed by them at the time of the arrangement and as evidence of its terms, must be read together. The paper given by Etheridge to Grates and Phillips, (who was associated with Grates in some way, and as it would seem liable with him for the debt,) is general in its terms, and, subject to a verbal criticism, is sufficiently comprehensive to include the entire debt of Grates to the bank. By it Etheridge agrees to account for the property transferred, after the payment of the amount due and owing to the Frankfort Bank and the expenses incurred by him in relation to it. He had incurred no expenses, so far as appears, except in relation to that part of the debt for which he was liable as indorser. But this alone would not restrict and limit the general description of the debts provided for, to that one class. The paper, however, executed by Grates and Phillips at the same time and as a part of the same transaction, specified the notes which made up the amount of the indebtedness they were owing the Frankfort Bank, and to secure which they had given the deed of land, and the notes indorsed by Etheridge and surrendered *16on that occasion are the only notes referred to. These papers, making together a single written agreement of the parties, exclude from the arrangement the note in suit. The referee was therefore right in deciding that Etheridge did not undertake to act for the hank in respect to this note. The other questions relate to the effect of the dealing by Etheridge in respect to the notes indorsed by him and surrendered to Gates, upon the rights of the defendant and his liability in this action. Ho objection was taken, upon the trial, to the' sufficiency of the answer, or to any defense, in whole or in part, legal or equitable, established by the evidence, for the reason that it was not warranted by the pleadings, and the decision of the referee is made upon the merits and not upon any technical ground that might have been • obviated by an amendment.' The objection, therefore, taken for the first time upon this appeal, to the answer, cannot prevail, even if it had been well taken on the trial. The referee was asked to decide that Etheridge was the agent of the bank in reference to all the notes which he had at the time of the settlement at Madison, and that those notes were canceled and given up to Gates, in consideration of the jwoperty then and there turned out by Gates, and that sufficient money remained in the bank to pay the notes in suit, if it had been properly applied. That the notes having been paid at Madison it was improper to pay them 'again out of the proceeds of the property in Herkimer county; and that the funds transferred on the books of the bank by Pomroy and Etheridge to pay those notes, were still in the bank applicable to pay this note. The case contains a prolix statement of facts found by the referee, but he does not definitively pass upon the agency of Etheridge as a question of fact. He merely states the circumstances, and the acts of the party in detail, and then says that he was not, and did not act, as the agent of the bank in any other way than as stated, in the narrative of the circumstances. As matter of law he decided that Etheridge was not the agent of the hank at Madison, but acted for his own indemnity as indors*17er of the notes sent to him, and that the bank had never ratified the acts of Etheridge in respect to such notes.
It is true that Etheridge did act on his own behalf and for his own indemnity, but it is no less true that the bank, by placing the notes in his hands to be used in obtaining that indemnity, consented to be bound by his acts, and to this extent constituted him its agent. The cashier of the bank, as its executive officer having charge of its whole moneyed transactions in paying and receiving debts, and discharging and transferring securities, had authority to take such measures for' the security and eventual collection of the debt as he deemed proper, and to act in reference to the collection or compromise of the debt, according to the general usage, practice and course of business. (Story on Agency, § 114. Minor v. Mechanics' Bank of Alexandria, 1 Peters, 46. Dunlap’s Paley on Agency, 156, n. 1.) In the absence of evidence that the cashier was restricted in his authority it will be assumed that the transmission of the notes to Etheridge for the purpose mentioned was within the scope of his authority. It was not necessary that Etheridge should be constituted the agent of the bank by formal letter of attorney. It was sufficient that he was put in possession of the notes, with apparent authority in respect to them, to make him the agent of the holder. That his interest was identical with that of the holder does not detract from his authority, but rather strengthens the apparent authority with which he was clothed. There was an implied authority deducible from the nature and circumstances of the act of the bank in sending the notes to Etheridge. By the act of the bank Etheridge was clothed with the apparent right of disposing of them, and in such case it will be assumed that the apparent authority is the real authority. (Story on Agency, §§ 93, 94, 228, 81.) If a person, authorizes another to assume the apparent right of disposing of property in the ordinary course of trade, it must be presumed that the apparent authority is the real authority; and he may bind his principal within the limits of the authority with which *18he has heen apparently clothed, with respect to the subject matter. (Per Lord Ellenborough, Pickering v. Bush, 15 East, 43. Johnson v. Jones, 4 Barb. 369.) A general agency is therefore constituted, not by the authority which the agent actually receives from his principal, but by that which the latter allows the agent to assume. But the authority of Etheridge to deal with the notes as he should think for his interest was express, and necessarily resulted from the purpose for which they were sent to him, to wit, that he might be enabled to secure himself, in whole or in part, against loss by reason of his liability to the bank. He was the only responsible party to the note, and as the bank relied upon him, and him alone, there was no good reason why he might not be permitted to make such use. of the notes as should best secure his purpose.
Unless Etheridge could control the notes and coerce their payment by suit against Gates, or negotiate and deal with Gates in relation to them, the hope expressed by the cashier, in his letter transmitting them to Etheridge, that he might succeed in getting the security he had spoken of, would have been a vain hope, and the expression an idle one, and the sending of the notes would have been a farce.
As between Gates and the bank, the latter was bound by the acts of Etheridge in respect to the notes transmitted, as well by reason of the authority necessarily and expressly conferred in view of the purpose for which the notes were sent, as by reason of the apparent authority with which the agent was clothed, and upon the faith of which Gates had a right to act.
But if the authority, as originally conferred, was not, for any reason, ample to bind the bank to the extent of the dealings of the agent, the acts of the latter were ratified by the subsequent acts and acquiescence of the principal. . The bank was advised of what had been done, and within a very few days, and as early as October, 1856, received a part of the fruits of the arrangement, and has never repudiated the trans*19action, or reclaimed the notes. If it did not intend to abide by the acts of Etheridge in the premises, it should have dissented, and given notice within a reasonable time; and not having done so, an assent to, or ratification of the acts will be presumed. When the principals received a letter from their agent, in July, informing them of what he had done, and they were silent until October and then for the first time complained, they were considered to have waived any right of action they might have had. (Cairnes v. Bleecker, 12 John. 300. 2 Kent’s Com. 316. Benedict v. Smith, 10 Paige, 127.) It follows that the bank must abide by the acts of Etheridge in accepting the transfer of property and surrendering the notes to Gates to be canceled.
It is true the conveyances were to Etheridge directly, and not to the bank; but by the transfer a trust was created for the payment of a debt due to the bank, and the fund provided belonged to the bank and might be controlled by it; first, as having been taken by its agent in his own name, the agent in such case taking as trustee and not in his own right; (Torrey v. Bank of Orleans, 9 Paige, 663;) and second, as the surety of Gates for the payment of the debt, receiving security from the principal debtor to which the creditor was entitled. (Curtis v. Tyler, 9 Paige, 432. Heath v. Hand, 1 id. 329.) A fund was then provided for the payment of the notes delivered up for the benefit and by the assent of the bank. Whatever may have been the rights of the bank as against Etheridge as the indorser of those notes, as between the bank and Gates the trust was for the benefit of the bank, and upon satisfaction of the debt from the trust fund to the trustee, the agent and trustee of the bank, the debt would be discharged quoad the bank as well as the indorser. That the trustee was personally liable for the same debt did not affect his relation to the principal debtor and the creditor, growing out of the transaction by which the trust was created. If this was not the effect of the whole transaction, as between the bank and Gates, then it must be held that by suffering Etheridge to possess *20and deal with the notes for his own benefit, and to obtain a valuable property from the maker upon and in consideration of the delivery of them to be canceled, the bank consented to, and did, discharge Gates from all liability to it, and took Etheridge as their sole debtor'—a view much more fatal to the plaintiff than that before taken; for in that view there was from that time no right in' the bank to look to Gates or his property for the payment of the debt, or to appropriate any fund of Gates in satisfaction of it. But the just view of the transaction and its effect is as before intimated. The debt was not discharged, as between the bank and Gates. A specific fund was dedicated and set apart by the debtor and received by the creditor for its payment, and whether the personal remedy against the debtor was suspended until the trust was closed and the entire fund applied in payment of the debt, it is not necessary to inquire. But if, upon a sale of the property, in the execution of the trust, it should prove insufficient to satisfy the debt, the debtor, Gates, would be personally liable for the deficiency. The written agreement of the parties treats the debt as still subsisting and as due a,nd owing from Gates to the bank, and not as a debt discharged and paid by the transfer of the property to Etheridge.
The debt remaining, it constituted one of the debts secured by and entitled to share in the real estate mortgage given by Gates directly to the bank, in August, 1855, and before any of the notes in evidence were made. At the time of the arrangement with Etheridge the bank had foreclosed its mortgage and the mortgaged premises had been sold by the cashier, Pomroy, and were held doubtless in trust for the bank. The bank had realized no money from the security, and had not appropriated it to any particular debt of Gates to the bank, but it was held as security generally for “ all the debts.” The effect of the arrangement with Etheridge was, by giving a new security upon property which, as the evidence tends to show,' exceeded the debt secured in value, for the notes delivered up and canceled, as between the two funds or securities, the one *21general and embracing all the debts but insufficient to pay a very considerable portion of them, and the other specific to secure a given debt, to make the specific security the primary fund, for the payment of the debt specifically secured by it, and to postpone the right of that debt to participate in the general fund until the specific fund should be exhausted. It is claimed that the cashier held the money realized from the sale of the mortgaged premises, and that it stood to his individual credit on the books of the bank until the appropriation was made. But it was received by him as cashier, for a debt due the bank, and was the money of the bank from the time of its receipt, notwithstanding the breach of trust of the cashier in keeping it nominally separate from the funds of the bank. The bank must be held to have received it at the time it came to the hands of the cashier, which was on the 23d of October, 1856. I pass by the attempted appropriation of over $800 of it by Pomroy without the knowledge or assent of any other person, to the payment of a debt for which he was personally responsible, with the single remark, that in case it shall ever be investigated a serious question will arise as to his right, acting as the financial officer of the bank, and at the same time as the friend and agent of the present defendant, in relation to the power to appropriate it to relieve himself from a personal liability, and thus act for himself and his two principals, each having distinct interests and the interest of each being distinct and adverse to~ his own. It is possible it can be sustained against the equal equities of other sureties as well as against the possible interests of the bank, that might, if the right of appropriation was vested in it, have an interest in applying it to some debt of Grates not so well secured as that indorsed by Pomroy. But it is by no means certain. As to the residue, there was no appropriation of it until the 16th of December, 1856, and then Pomroy having paid his debt without difficulty merely by directing as cashier a credit on the books of the bank, Etheridge came in as cashier, and by the same process took to himself the benefit of the *22residue of the fund; and the debt to the bank not being quite sufficient to exhaust it, he took $80.56 in cash to balance the account; so that even if the present defendant had in turn came in as cashier the next day, he could not have had the same benefits of his office that appear to have been taken and enjoyed by his predecessors. I am of the opinion that the acts of Pomroy and Etheridge were insufficient to appropriate the money, and that portion of the debt of Grates which was secured upon the Wisconsin property and by the Etheridge trust. (1.) They were the agents of the bank, occupying a confidential relation towards it, and could not act as such in matters in which they had a personal interest. (Story on Agency, § 210 et seq. Moore v. Moore, 1 Selden, 256.) (2.) Pomroy was intrusted by the present defendant to look after his interests and see that he shared in the security equally with the others; and having undertaken to act in that capacity, it was a fraud upon the defendant to appropriate the funds to his exclusion. (3.) The fund was in the possession of the bank, and if the law did not appropriate it to the several debts due the bank, ratably, the debtor not having appropriated it, the creditor alone, and not the two indorsers acting in hostility to the third, could make the appropriation.
But aside from this, under the circumstances of this case, the bank itself could not, by the solemn act of its directors, have appropriated any part of this fund, realized from the mortgaged premises, to the payment of the notes provided for in the Etheridge trust. Regarding the fund realized from the mortgaged ¡Dremises as so much money paid by the debtor, without indicating how, or to which of the debts, it should be applied, it was the right of the creditor to make the application of the partial payment in such manner as he pleased; provided he made the election within a reasonable time, and the application made by him was not inequitable. (Field v. Holland, 6 Cranch, 27. 15 Wend. 19.)
Judge Story says: “If the creditor has a right, in any case, to elect to what debt to appropriate an indefinite pay*23ment, it seems proper that he should, have it only when it is utterly indifferent to the debtor to which it is applied, and then, perhaps, his consent that the creditor may apply it as he pleases, may fairly he presumed.” (Story’s Eq. Juris. § 459, d.) In this case it was inequitable in respect to the debtor, as well as to the other sureties, to apply the fund in hand to the debt for the payment of which a specific fund had been provided; and it was not indifferent to the debtor, for by such application he was left liable to be called upon for immediate payment of the debt not thus provided for and paid, while, by a different application, he was relieved from his liability to protect his indorsers, pro tanto, who were not specifically secured, and his property was equitably applied to the discharge of his debts. Pothier lays down the rule that “ the application ought to be made to the debt for which the debtor has given sureties, rather than to them he owes singly.” (Story’s Eq. Juris. § 459, c, note 3. Marryatts v. White, 2 Starkie, 101.) The honor of the debtor is concerned in such payment. Having provided for the payment of the notes delivered up, he was more particularly interested in providing for the note not thus protected; and justice to the parties bound for him required the application of the fund to these debts, and the creditor had no right to make any other application of the fund. The referee therefore erred in deciding that the moneys realized from the sale of the premises mortgaged by Grates had been exhausted by being applied to the payment of the notes indorsed by Etheridge, and which were secured upon property in Wisconsin.
But within well settled principles, the defendant, without reference to the Eldridge trust, had a right, legal as well as equitable, to share ratably with both Pomroy and Etheridge in the fund and security provided generally for the debts due the bank; and this right could not be affected or impaired by any act of the bank or its officers. The note indorsed by the defendant appears to have been the debt first created in point of time, and to have first matured among the notes held by *24the hank, with the single exception of that indorsed hy Ohipps, and which was paid with the defendant’s consent.
Applying our rule as laid down in the hooks, to wit, that if debts are contracted at divers times upon the securities of the same farms or mortgages, the moneys arising from the pledges would in such case be applied in the first place to the discharge of the debt of the oldest standing, (9 Cowen, 777, note,) the whole fund would be applicable to the payment of the note in suit. But the interest of the parties was doubtless to provide a security for all the debts, and not to secure one debt by the mortgage, and then secure the next debt incurred upon the residue of the mortgage, but rather "that all should stand as if contracted at the same time. In such case the debts must share ratably in the fund realized from the security. (9 Cowen, supra.)
Where a creditor, having several claims against his debtor, receives a portion of the entire amount, in a judicial proceeding founded upon them all, the law will apply such money as a payment ratably upon all the claims. The creditor has no right to apply it to the satisfaction of some of the demands, to the entire exclusion of others. (Cowperthwaite v. Sheffield, 1 Sandf. S. C. Rep. 416, affirmed, 3 Comst. 243.)
The moneys realized by the bank were the fruits of a judicial proceeding or sale upon the foreclosure of a mortgage given to secure all the debts, and were therefore within the principle of this case. But the security and its application must be the same whether given by the debtor voluntarily or obtained in invitum. It is a principle of equity which controls and gives the rule of law in both cases, and as there is no distinction in principle there can be none in the rule. Before the bank can claim to share in respect to the notes delivered up, the value of the property, or the proceeds of the property, transferred to Etheridge for their payment, must be deducted. (Cowperthwaite v. Sheffield, supra.) Perhaps a suit in the nature of a bill in equity may be necessary to settle all the equities of the parties. But the judgment must be *25reversed and a new trial granted, for the reasons stated. Some part of the fund was applicable to the note in suit, and must be deemed as actually paid upon it.
[Onondaga General Term,
July 3, 1860.
Allen, Mullin and Morgan, Justices.]
Judgment reversed and new trial granted; costs to abide the event.