22 Ga. App. 138 | Ga. Ct. App. | 1918
This case giróse on an affidavit of illegality, in which it was alleged that a certain execution issued from the superior court of Richmond county “in favor of The Citizens & Southern Bank against the Irish-American Bank, maker-, and Patrick Armstrong, as surety,” and levied by the, sheriff upon certain described property of Armstrong, was proceeding illegally for the reason that Armstrong had paid the balance in full due on the execution. The bill of exceptions sets out the issues to be_ determined as follows: “Plaintiff, Patrick Armstrong,- set up in his affidavit of illegality that The Citizens & Southern Bank had received from the receiver of the insolvent estate of the Irish-Ainerican Bank, the principal debtor, a dividend of 8 per cent, upon the debt on which he was surety, amounting to $3,164.82, which should have been credited on the said debt upon which he was
“The Irish-American Bank became insolvent, and its affairs were placed in the hands of a receiver, at the suit of the State of Georgia. In the administration of the estate the receiver declared a dividend of 8 per cent, to the general creditors of the insolvent bank, and among them The Citizens & Southern Bank received its dividend of 8 per cent, on the aggregate claim of $84,855.25, or
“To this judgment of the court defendant excepted and now excepts and assigns error thereon, and says that the court erred in sustaining the said affidavit of illegality and in not holding that The Citizens & Southern Bank had the right to apply said payment by the receiver of the Irish-American Bank to the unsecured indebtedhess of the said insolvent bank to The Citizens & Southern Bank represented by overdraft, becarise: (1) It was an older debt. (3) It was an unsecured debt. (3) The creditor, in the absence of instruction to the contrary, has the right to elect to which debt the payment shall be appropriated. (4) If the creditor did not have this right, the court should direct the application in such manner as is reasonable and equitable, both as to parties and third persons, observing the general rule that such application should be made to the older and to the unsecured or least secured debt. (5) A surety or guarantor on one of the notes or debts has no right in law or in equity whereby he may compel the creditor to apply-all
When this case was before the Supremo Court for the determination of another question (Citizens & Southern Bank v. Alexander, 147 Ga. 74 (92 S. E. 868), it' was held by that court: “Where a creditor of an insolvent bank holds collateral security for a portion of the debt, and the receiver of the bank realizes from its assets an amount of cash to be applied on its debt, the creditor is not entitled to a dividend upon the entire indebtedness due, as though he had no collateral. Such secured creditor must first apply the amount realized from the collateral to reduce the amount of indebtedness, and is entitled, like other creditors, to a dividend upon the unpaid balance.” The point now at issue was not involved in the previous adjudication.
Section 4316 of the Civil Code is as follows: “When- a payment 'is made by a debtor to a creditor holding several demands against him, the debtor has the right to direct the claim to which it shall be appropriated. If he fails to do so, the creditor has the right to appropriate at his election. If neither exercises this privilege, the law will direct the application in such manner as is reasonable and equitable, both as to parties and third persons. As a general rule, the oldest lien and the oldest item in an account will be first paid, the presumption of law being that such would be the fair intention of the parties.” It is conceded in the brief of counsel for the plaintiff in error that “there is nothing in the record to show that the unsecured claim to which the payment was applied was older than the claim upon which the defendant in error was endorser.” It is broadly held in Kyle v. Chattahoochee Nat. Bank, 96 Ga. 693 (24 S. E. 149), that the code section quoted above (Code of 1882, § 3722) “is applicable only in cases of voluntary payments by the debtor.” In the decision the court said: “The rule stated in the Code . . , supra, has no application to the distribution of funds resulting from judicial proceedings. It provides for the appropriation of money voluntarily paid. In -such a case, the debtor may direct how it shall be applied. If he
In.this ease the payment applied by the plaintiff in execution to unsecured demands held by it against the Irish-American’ Bank was not a voluntary payment made by the principal debtor, or by any other person for it, but was made to the creditor as a dividend upon the aggregate sum of all demands held by it against the Irish-American Bank, including the particular demand secured by the indorsement of Armstrong on which it sued to judgment. In determining the precise amount the receiver should pay to the Citizens & Southern Bank in compliance with the order of the court fixing the' amount of such dividend at 8 per cent., it was ^necessary to include the demand which was secured by the indorsement of Armstrong, as well as the remaining claims in favor of the Citizens & Southern Bank' which went to make the total sum of its claim against the insolvent bank. The money was not paid by the- receiver in accordance with any agreement or direction on the part of the principal debtor or the surety, but was paid over to the • plaintiff in fi. fa. in pursuance of the order -of the court, without any agreement by the principal debtor, to which the surety assented, that it should be appliec to one or more of the unsecured demands. It would be manifestly inequitable to allow the application of that part of the sum paid by the receiver
It is insisted in the brief of counsel for the plaintiff in error that the “third persons” referred to in the Hargroves case and contemplated by section 4316 of the Civil Code, supra, “are creditors whose rights and liabilities arise outside of the debt under discussion, and not sureties or guarantors of that debt.” Even conceding the correctness of this position, the statute expressly authorizes the application of payments by the court in the circumstances under review in such manner as may be equitable “both as to parties and third persons;” and at all events Armstrong was a party in fact as well as in name in this case,' in whose behalf the court might direct the application of payments in such a manner as to protect his equitable rights.
It is likewise argued that it is too late for either party to insist on the right to appropriate payments, at the time of trial, but no appropriation of any voluntary payment is sought to be made by the surety in this case, the affidavit of illegality being interposed by him to compel the ratable application of a payment made by virtue of judicial proceedings. The fund in question being paid over under order of the court as a dividend upon various demands held by the plaintiff in fi. fa., including the execution levied, and the application of the amount so paid having been made solely at the option of the plaintiff in fi. fa., it is apparent that the surety would not necessarily have been apprised of the fact that the proportion ratably applicable to the execution against him had not been so applied until the, levy of the execution, nor would he have had an opportunity to object to the application made, except by affidavit of illegality interposed when notice of 'the levy for the entire amount of the fi. fa., without allowing the credit claimed thereon, was brought to his attention. '■
We think, therefore, that the trial judge did not err in sustaining the affidavit of illegality. 7
Judgment affirmed.