two shares of the capital stock of a corporation engaged in the fruit business. It is not disputed that the corporation was indebted to various persons in a sum exceeding $135,000, and it appears that it was insolvent. The affairs of the concern were involved in litigation, and there was great dissension and bitterness between Bell and Harrison on the one hand and the Seropians on the other. To prevent a sacrifice of the property in a court of bankruptcy, and to effect a permanent settlement of their joint affairs, the said agreement was entered into by the terms of which the said Bell and Harrison were to pay all the debts of the corporation, provided the Seropians would contribute to its assets a fifteen thousand dollar mortgage on their Fresno ranch, and the former further covenanted to surrender to the latter all their interest in said corporation upon repayment to them of the sum of $110,000. An escrow arrangement was devised to accomplish the desired result. A satisfaction of said mortgage and also all of the capital stock of the corporation owned by the parties, properly indorsed so as to entitle it to be transferred on the books of the corporation, were deposited with O. J. Woodward, subject to the following conditions, to wit: "Said satisfaction of mortgage and all of said stock to be delivered to second parties, they having performed all of the terms and stipulations of this agreement by them to be performed, whenever within two years from the date thereof said first parties shall have been repaid, on account of their advances made and those to be made to said corporation as herein before specified, the sum of one hundred and ten thousand dollars U. S. gold coin. . . . It being a still further condition of such payment that said $40,000 and interest thereon be fully paid within six months from date hereof, . . . time being expressly made of the essence of this agreement and particularly of the escrow. . . . In the event, however, such payments have not been made to said parties of the first part in the amount and at the times herein before specified, and also in the event that parties of the second part have failed or neglected to perform any of the covenants, terms, conditions or stipulations on their part to be performed by this agreement, then all of said capital stock so deposited in escrow, and said satisfaction of mortgage shall be delivered 11 Cal. App.-2

to parties of the first part, and said escrow shall thereupon be terminated.'

The method contemplated for the repayment to the said parties of the first part is shown in the following provision of the agreement: "It is further agreed that the parties of the first part shall have full charge of the liquidation of the affairs of said corporation of Seropian Bros. The parties of the first part shall proceed at once to sell in the name of said corporation, and shall sell as speedily as possible, at prevailing market prices, all fruits of said corporation; . . . it being understood that the cash proceeds of the liquidation of the assets of said corporation, including therein proceeds of sales of any assets of said corporation which shall be made during such liquidation, shall be applied on account of said sum of $110,000."

It was further provided "that all reasonable and proper expenses connected with the liquidation of the affairs of said. corporation, including the packing, seeding and stemming required by agreements with the California Raisin Growers' Association, are to be taken from cash proceeds of liquidation before the application thereof to the payment of indebtedness of the corporation to the parties of the first part," and that the parties of the first part "shall advance the sum of $3,500 to enable said corporation to complete its confirmation or purchase of raisins from the California Raisin Growers' Association, which said advance shall be considered one of the expenses of the liquidation of the affairs of the corporation, to be paid together with interest thereon from the date thereof, at the rate of six per cent per annum to said parties of the first part, independent of said sum of $110,000.”

On the ground that they had not been repaid the sum of $40,000 as prescribed, plaintiffs, after the expiration of the six months and the days of grace allowed, brought the action to recover a judgment directing the said O. J. Woodward to deliver to plaintiffs said documents held by him in escrow as aforesaid. Defendants denied "that all money received by plaintiffs from the sale of the assets of said corporation or from any proceeds of said liquidation was credited by plaintiffs on the said sum of $40,000 and interest thereon that was to be paid to them in accordance with the terms of said agreement, but allege that large sums of money far exceeding

the said sum of $40,000 and said interest thereon were received by said plaintiffs and not credited on said sum of $40,000 or on their accounts with defendants."

Defendants also filed a cross-complaint charging plaintiffs with inefficiency, want of diligence and criminal conspiracy in conjunction with their employees in their method of caring for the fruit and in selling the same and making collections therefor, whereby defendants were damaged in a sum exceeding $200,000.

The conclusion of the court was in favor of plaintiffs upon all the material issues. The amount including the interest to be paid within the six months was the sum of $41,200, and the court found that to this account no more than $31,000 could be credited as payment. This finding is the subject of the principal controversy between the parties.

Appellants insist that error was committed by the trial court in charging against this sum of $41,200, as expenses of liquidation, two items of $3,500 and $9,694.27. It seems that plaintiffs, about a week after the execution of said contract of January 23d, advanced the sum of $3,500 to "complete the confirmation" of the purchase of certain raisins pursuant to said contract, and on the same date they caused the corporation to execute and deliver a promissory note for $9,694.27 in favor of the First National Bank of Fresno. This note was also signed by the plaintiffs and was paid by them prior to the expiration of the term for the payment of the said sum of $41,200. Prior to the execution of the contract of January 23d the corporation, by George M. Seropian, acting president, entered into a contract for the purchase of a large quantity of raisins from the California Raisin Growers' Association, agreeing to pay therefor $19,614, paying on account ten per cent of the purchase price. Certain lots of these were sold and paid for prior to said January 23d, and at that time $13,194.27 was the balance due on the purchase price. As before stated, it was a part of the contract of liquidation that plaintiffs should advance the said sum of $3,500 to close the transaction of purchase, it being understood by the plaintiffs and the Seropians that Woodward would advance on the security of the raisins taken over the balance of the purchase price. The association was in need of funds and was insisting upon the payment by the corporation of its indebtedness.

The association owed the corporation $6,075 for rent of the latter's packing-house, and it had also agreed to pay the corporation a bonus of $3,375 on condition that the corporation keep its agreement as to the purchase of the raisins. Both these sums were likely to be lost if the purchase was not completed. Woodward refused to loan the $9,694 on the corporation's note to be secured by the raisins, but insisted upon the signatures, as joint makers, of Bell and Harrison. The note was thereupon executed upon the agreement of the association to waive all claim to the forfeiture of the said bonus of $3,375 and to pay at once the said rent of $6,075, then past due. This rent was applied to the payment of one of the obligations of the corporation which plaintiffs had assumed under the said contract of January 23d. As stated by respondents: "In purchasing these raisins the corporation not only saved the ten per cent which it had already paid, but made an immediate collection of $6,075, and a few months later of the bonus of $3,375, and in addition realized later the full value of the raisins purchased. Not to have completed this transaction would have been most detrimental to the interests of the corporation, and had Bell and Harrison failed. to do so in the face of their stipulation to make the $3,500 advance, the Seropians would certainly, and properly so, have been most severe in their denunciation of them." Indeed, there can be no valid objection to the action of the plaintiffs in completing the purchase of the raisins. It was not only authorized by said contract of January 23d, but it was clearly within the principles of ordinary prudence and fair dealing. Nor does it seem a matter of just complaint that the payment was made a short time before plaintiffs could be compelled by Woodward to do so. They had a right to use their own judgment as to such details of the liquidation, and the trial court was justified in holding that they acted wisely and in the utmost good faith.

The appellants, however, contend that the respondents having rendered a statement to the Seropians under date of July 12, 1904, showing at that date $29,171.60 to have been paid on the said $40,000 and interest, leaving a balance of $10,870.49 to be paid on or before August 8th, the said respondents could not by a subsequent application of expenses of liquidation reduce this balance. Appellants declare:

"There can be no question as to when or how the changes in the application of payments took place. The first occurred on July 14, 1904, and consisted in taking the sum of $3,500 and interest from the $29,171.60 already credited on the $40,000 account, and with it paying the account entitled 'Catton, Bell & Co. % C. R. G. Assoc.' This amount was then charged to the debit side of the account with the Seropians. The next change was made on July 21, 1904, when the further sum of $8,241.77 was deducted from the $29,171.60 already credited on the $40,000 account to pay the remainder of the account entitled 'Bills Payable % C. R. G. A.' This change of application was noted in the statement sent to the Seropians on July 21, 1904. These two changes in the application of payments already credited on another account aggregated $11,747.77. Adding to $31,000-the amount found by the court to have been paid on the $40,000 account-the said sum of $11,747.77 and the amount paid by the Seropians was $42,741.77, $1,541.77 in excess of the amount required."

The point is that the law does not permit such a change of the application of payments already made on account. (Wendt v. Ross, 33 Cal. 650; Cardinell v. O'Dowd, 43 Cal. 586; White v. Costigan, 138 Cal. 564, [72 Pac. 178]; Civ. Code, sec. 1479, subd. 2.)

The trial judge, in disposing of this contention, used the following language: "There is some claim as to the way in which the various charges and credits are made in reference to settlements with the raisin association. I do not understand the claim to be made now that the plaintiffs are not entitled to credit the amount they paid in confirming that sale. . . . In determining how these credits and charges should be made, the defendants must consider the matter as simply between plaintiffs and the corporation without regard to the question whether the $40,000 was to be raised by a certain time. The charges should be made and the credits given. just as they occurred. When the plaintiffs paid out money they paid it. Of course, that should be credited to them at that time. If they afterward got any money they would charge themselves with it, but only as of the time when they received it. The theory of the defendants seems to be that they should postpone any credits to themselves for payments because afterward they would be getting in more money.