269 S.W. 53 | Ark. | 1925
STATEMENT OF FACTS.
This appeal is prosecuted to reverse a decree of the chancery court in directing the application of payment between two mortgagees of the same land.
On July 8, 1919, Jas. P. Turner and wife executed to D. L. Jordan a mortgage on certain land in Conway County, Arkansas, to secure the sum of $3,211.90, evidenced by two promissory notes and an open account of $1000, more or less, for merchandise to be furnished during 1920.
On the 24th day of March, 1920, Jas. P. Turner and wife executed a mortgage on the same land to the Bank of Morrilton to secure the sum of $6,340.
According to the testimony of the cashier of the bank, Turner represented that he owed D. L. Jordan a balance of $2,735.29 on his mortgage indebtedness, and the bank retained that amount of money to be applied in satisfaction of the balance of the mortgage indebtedness from Turner to Jordan. Turner expressly agreed to apply the money in this way. Turner then gave a check to D. L. Jordan for $2,735.29, dated March 25, 1920. The check was drawn on the Bank of Morrilton, and was cashed by Jordan in due course.
According to the testimony of Jas. P. Turner, the cashier of the bank knew that the check for $2,735.29 was to be used in the payment of an open account which Turner owed D. L. Jordan. Turner told the cashier of the bank that he owed an account to Jordan of at least that amount. Turner agreed with Jordan that the check should be applied towards the payment of his merchandise account, which was not secured by the mortgage.
According to the testimony of D. L. Jordan, the open account was not secured by the mortgage on the land, and, by agreement with Turner, he applied the check in question to the payment of the open account. This left the mortgage indebtedness due and unpaid.
The present suit was commenced in the fall of 1922 by the Bank of Morrilton to foreclose its mortgage, and subsequently D. L. Jordan was made a party to the foreclosure *119 suit, and testimony substantially as above set forth was taken to show the rights of the respective parties.
The chancellor found the issues in favor of the Bank of Morrilton, and, to reverse the decree in its favor, D. L. Jordan has prosecuted this appeal.
A debtor has the primary right to direct the application of the payment.
It is true that Turner testified that he told the cashier of the bank that this sum of money was to be applied towards the payment of an open account which he owed to Jordan, and which was not secured by a mortgage on the land in question. The chancellor, however, found this issue in favor of the bank on the testimony of its cashier, and it cannot be said that his finding is against the preponderance of the evidence. Therefore, under our settled rules of practice it may be treated as settled, that the bank lent the money to Turner with the express understanding that the sum of $2,735.29 was to be applied towards the payment of the mortgage indebtedness of Turner to Jordan.
Counsel for Jordan seek to reverse the decree under the general rule that, at the time of making a payment, a debtor has the primary right to direct the application of payment, and may apply it to the payment of his unsecured debt. Snow v. Wood,
There is a well-recognized exception to this rule, and that is, if the creditor had notice that money had been furnished his debtor upon an understanding that it was to be applied towards the payment of a particular debt, it could not be appropriated to the payment of another debt. Here, according to the finding of the chancellor, the bank, lent the money to Turner with the express understanding that a specified part of it should be applied towards the payment of a debt, of Turner to Jordan *121
secured by a mortgage upon the same land which he had mortgaged to the bank. If Jordan had notice of these facts, he would not be permitted, even with the consent of Turner, to misapply it. Harding v. Tifft,
The check given by Turner to Jordan contained the notation, "in full," which was dated March 25, 1920. According to the testimony of Jordan himself, this did not pay the whole of the indebtedness of Turner to him. If he had made any inquiry whatever at the bank, he would have found out that the money had been lent to. Turner with the understanding that the amount of the check should be "in full" of the mortgage indebtedness of Turner to Jordan. Therefore in law Jordan will be deemed to have notice that Turner had agreed to apply the amount of the check towards the payment of his mortgage indebtedness to Jordan, and Jordan had no right to divert the fund to the payment of his unsecured indebtedness.
The result of our views is that the decree will be affirmed. *122