2 F. 747 | U.S. Circuit Court for the District of Kansas | 1880
This is a bill to foreclose a mortgage executed by Hugo Kullak to the plaintiffs. The defendants are the heirs at law of the mortgagor, who, since the execution of the mortgage, has deceased.
The evidence shows that plaintiffs, and the said Kullak, about the first day of April, 1869, entered into a contract as follows: The plaintiffs, who were dealers in lumber at St. Louis, Missouri, agreed to furnish to said Kullak, who was engaged in the same business at Topeka, Kansas, such quantities of lumber as he might order for a period of one year, on a credit of 60 days, provided no order for more than
The plaintiffs have proved their whole claim against the estate of Kullak in the probate court of Shawnee county, Kansas, and the same has been allowed; no proof that the same, or any part thereof, was secured by mortgage, being made in that court. It appears, from the agreement of parties on file, that the whole amount of the plaintiffs’ claim against said estate, as proved and allowed in the probate court, was $19,700.44, including the account in controversy here, and that the plaintiffs have received from the administrator two dividends upon the whole sum, amounting to $5,319.11. My conclusions are as follows:
1. It is no objection to the validity of the mortgage that it was given to secure future advances, no present indebtedness subsisting at the time of its execution. Conrad v. Atlantic
2. The payments made after the expiration of the year covered by the mortgage should, under the circumstances, be applied to the liquidation of the unsecured portion of the account. There is some conflict of authority upon the question of the appropriation of payments in Buch a case. It is clear that the debtor may direct the application of money paid by him to a creditor having several claims against him, and it is also clear that if the debtor gives no direction he is presumed to leave the question to the discretion of the creditor, who may make the application. . But there are cases which hold that where the debtor has given ho direction, and the creditor has made no particular application, the court should presume, in favor of the debtor, that he intended to extinguish that debt which would bear most heavily upon him; as, for example, a mortgage or judgment. Patterson et al. v. Hull et al. 9 Conn. 747; The Antarctic, 1 Sprague, 206. But a different rule has been adopted by the supreme court of the United States. In Field et al. v. Holland et al., 6 Cranch, 8, Chief Justice Marshall, in delivering the opinion of the court, said: “It is contended by the plaintiffs that if the payments have been applied by neither the creditor nor the debtor they ought to be applied in the manner most advantageous to the debtor, because it must be presumed that such was his intention. The correctness of this conclusion cannot be conceded. When a debtor fails to avail himself of the power which he possesses, in consequence of which that power devolves upon the creditor,- it does not appear unreasonable to suppose that he is content with the manner in which the creditor will exercise it. If neither party avails himself of his power, in consequence of which it devolves upon the court, it would seem reasonable that an equitable application should be made. It being equitable that the whole debt should be paid, it cannot be inequitable to extinguish first those debts for which the security is most precarious.” And see Mayor, etc., v. Patten, 4 Cranch, 317 ;
3. It is insisted by counsel for defendants that this rule is only applicable to a case where there are several separate and distinct debts, and that it is, therefore, not a proper guide for the determination of the present case, which is ons of a continuous or running account. In such a case it is insisted that the payments must be applied to the extinguishment of the first or oldest items of the account. The general rule, that payments made on an open running account are presumably to be applied to the extinguishment of the items thereof in the order of their dates, is well settled. Postmaster General v. Farlen, 4 Mason, 333; The U. S. v. Wardwell, 5 Mason, 82; The U. S. v. Kirkpatrick, 9 Wheat. 738; Jones v. The U. S. 7 How. 681. But a different rule must prevail, under the authority of Field et al. v. Holland et al., in a ease-where the earlier items of the account are secured, and the later items unsecured. Besides, the question of the application of the payments, in such a case, rests largely in the discretion of the chancellor, and in this case the proof shows, as already suggested, that the parties intended to preserve the security of the plaintiffs’ mortgage to the extent of $5,000 of the indebtedness, and it is clearly equitable to apply the payments so as to carry out that intention. It may be added that we have here two separate contracts: first, the mortgage and the indebtedness secured thereby; and, secondly, the open account not connected with, or secured by, the mortgage. Viewed in this light, we may, for the purpose of applying the payments, separate the secured from the unsecured portion of the account, and treat them as separate debts.
4. The fact that plaintiffs proved their entire debt as against the estate of Kullak, and received two dividends thereon from the assets of said estate, does not extinguish their rights under the mortgage. The sum collected from the estate upon that portion of the debt which is secured by the mortgage must, however, be credited thereon. It appears from the stipulation of the parties that the plaintiffs have
