a port had given bond with sureties in the penalty of $10,000 for the faithful discharge of his official duties, and, being largely indebted to the United States, had made a deed of his property for their benefit, but previously thereto had transferred $10,000 to his sureties, and directed them to apply that money to their exoneration, and the sureties accordingly did so apply it, by paying it into the treasury, and receiving from the treasury their obligation, without any knowledge at the treasury that the money so paid had been transferred by the collector himself to his sureties, it was adjudged that by applying that payment to the extinguishment of the bond the sureties were discharged. United States v. Cochran, 2 Marsh., 274.

$179. In making payments on debts due for monthly wages, the debtor may apply the payments to either or any of the debts, but he must do so at the time of payment, and by some act, word, or other means, notify the creditor of such application. The Pioneer, Deady, 72.

§ 180. By the creditor. If the debtor, at the time of payment, does not direct to which account the payment shall be applied, the creditor may at any time apply it to which account he pleases. Mayor of Alexandria v. Patten,* 4 Cr., 317.

§ 181. A creditor may apply payments in his discretion when the debtor fails to give any direction, but if the creditor makes the appropriation he cannot change it afterwards. Offutt v. King, 1 MacArth., 312.

§ 182. Where the owners of a whaling vessel advance money during the voyage to the master, who is also a part owner, there being nothing to show whether the money was advanced on account of his earnings as master or on account of his interest as part owner, held, that they might properly appropriate the advance payments to the master's lay. Hazard v. Howland, 2 Spr., 68.

§ 183. The law will apply a payment in the way most beneficial to the creditor, and therefore to the debt least secured. T., the holder of the bonds of a certain company, recovered two judgments against the company, one for interest on said bonds and the other for the principal, the former standing on a footing of equality with another judgment recovered by other creditors against the company, the latter being subsequent to such judgment. The property of the company had been insured for the benefit of the holder of said bonds, and by the terms of the policy the loss was payable to the trustee. The property having been destroyed by fire, T., under a power of attorney from such trustee, collected $43,000 insurance money and applied the same to his last judgment. Held, that the application was properly made. Coons v. Tome, 9 Fed. R., 532.

§ 184. A creditor holding several notes, all of which are due, upon receiving a payment from the maker, with instructions to apply the same on the debt or notes due, is not obliged to make the application so as to pay, as far as it will do so, certain notes in full, leaving the others wholly unpaid, but may indorse such payment in equal amounts upon all the notes, and thus protect them from the bar of the statute of limitations. Jackson v. Burke, 1 Dill., 311.

§ 185. Under a statute which merely prevents a recovery by suit of more than ten per cent. per annum where there is no agreement in writing, but does not otherwise prohibit higher rates of interest, money paid on account by a debtor may be applied by the creditor to the payment of an account stated, which includes interest in excess of ten per cent., if there be no appropriation by the debtor. Marye v. Strouse, 6 Saw., 204.

§ 186. If a bank discount a note, knowing it was the intention of the party offering it that the proceeds should be applied to the discharge of a particular note held by the bank, those proceeds cannot be applied by the bank to the discharge of any other note. Bank of Alexandria v. Saunders, 2 Cr. C. C., 183.

§ 187. M. and R. had become, by separate engagements, liable to make up any deficiency of the proceeds of property assigned to the plaintiffs to pay the debts of another, for equal portions of which they were also liable as indorsers. After the deficiency was ascertained, an account was rendered, in which the proceeds of the sale were credited to both M. and R. R. having become insolvent, the court refused to permit the plaintiffs to apply the proceeds of the property to discharge the whole of R.'s engagement, and to claim the whole deficiency from M., the plaintiffs having applied the proceeds in the first instance to the discharge of both debts. Bank of North America v. Meredith, 2 Wash., 47.

§ 188. If a creditor takes a security, by deed of trust, of personal property, for a debt due to him by an indorsed promissory note, and the debtor becomes tenant of the creditor, and rent is in arrear, and the creditor, who is landlord, distrains the goods conveyed to the trustee, as security for the payment of the note, and the same goods are sold under the distress, and the proceeds paid over to the landlord, he is bound to apply the proceeds to the payment of the note, although the goods were found on the premises, at the time of the distress, the same being there, by the consent of the landlord, as security for the note; and these facts are ad353

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missible in evidence, on the part of the defendant, who is sued as indorser of the note. Bank of the United States v. Smith, 4 Cr. C. C., 712.

§ 189. Where debts of different dignities are due to a creditor of the estate of an intestate, and no specific application of the payment made by an administrator is directed by him, if the creditor applies the payment to either of his debts by some unequivocal act, his right to do so cannot be questioned. Quære: Whether the application must be made by the creditor at the time or within a reasonable time afterwards? Backhouse v. Patton, 5 Pet., 160.

§ 190. The law appropriates payments to the claims having the poorest security, and prefers lawful to unlawful claims; but it seems that the creditor may apply a payment upon an unlawful contract. The Pioneer, Deady, 72.

§ 191. It seems that the creditor cannot elect to what debt to apply an indefinite payment, except where it is utterly indifferent to the debtor to which it is applied. Gass v. Stinson, 3 Sumn., 99.

§ 192.

after action commenced.

When the creditor is left to make the application,

it seems that he may make it after an action is commenced. The Pioneer, Deady, 72. § 193. Secured and unsecured debts.- Where a party owes two debts, one secured by a lien and the other not, a payment not applied by either the debtor or the creditor will be applied by the law to the debt secured by the lien. The Ship Antarctic, 1 Spr., 206.

§ 194. A. mortgaged certain property to B. to secure a loan of $3,000. Subsequently there were various business transactions between them and various notes received by B. from A., no specific application of which by the mortgagor was shown'; it was held, under the circumstances, that the notes were not to be applied to the payment of the $3,000. Gordon v. Hobart, 2 Story, 243.

§ 195. If a creditor has several debts, some of which are secured by mortgage, and some not, it is gross negligence to unite them all in a single suit at law, and so take a single judgment therefor; and if in such case the execution issuing on the judgment is satisfied in part only, a court of equity will apply the moneys received on the execution in the first instance to extinguish such parts of the debt and judgment as were not secured by mortgage. Williams v. Reed, 3 Mason, 405.

§ 196. If both the debtor and creditor have failed to make application of payments, a court of equity may in its discretion apply them to the unsecured debts, although such debts form items in a running account the first or oldest items of which are secured by mortgage. Schuelenburg v. Martin, 1 McC., 348.

§ 197. The rule that where a creditor has two distinct debts, and money is paid him generally, without specific appropriation, the payment must be applied in the way most beneficial to the debtor, does not apply to a running account, and require a creditor to satisfy first all those items for which he has no lien. To such an account the general rule applies, that, if there is no appropriation at the time, the law will apply the payments to the items in the order of their dates. (The Antartic, 1 Spr., 206, distinguished.) The A. R. Dunlap, 1 Low., 350.

§ 198. If neither the debtor nor the creditor has made an application of the payments, the court will apply them to the debts for which the security is most precarious, it being equitable that the whole debt should be paid. Field v. Holland,* 6 Cr., 8.

§ 199. Running accounts. In cases of long and running accounts, where balances are adjusted merely for the purpose of making rests, the law will apply payments to extinguish the debts, according to the priority of time. United States v. Kirkpatrick, 9 Wheat., 720.

§ 200. Where a running account is kept at the postoffice department between the United States and a postmaster, in which all postages are charged to him, and credit is given for all payments as they are successively made, this amounts to an election by the creditor to apply the payments as they are successively made to the extinguishment of preceding balances. Jones v. United States, 7 How., 681.

§ 201. In the case of running accounts between parties, with various items of debit and credit on both sides, occurring at different times, each item of payment or credit is to be applied, in the absence of any special appropriation, in extinguishment of the earliest items of debt then actually due, and constituting debitum in præsenti. Gass v. Stinson, 3 Sumn., 99.

§ 202. When there is a running account between parties, every item on either side, whether for pay, services or otherwise, ending in a debt, is to be deemed a credit in favor of the party pro tanto. Ibid.

§ 203. The settlement of quarterly accounts at the treasury, running on in a continued series, is not conclusive. The officers of the treasury cannot, by an exercise of their discretion, enlarge or restrict the obligation of the collector's bond. Much less can they, by the mere fact of keeping an account current in which debits and credits are entered as they occur, and without any express appropriation of payments, affect the rights of sureties. United States v. Eckford, 1 How., 250.

§ 204. In the case of a running account of separate items, as for monthly wages due, general payments are presumed to have been made in discharge of the earlier items of the account. The Pioneer, Deady, 72.

§ 205. Where there are items of debt and credit in a running account between the postmaster-general and the deputy postmasters, in the absence of any specific appropriation by either party the credits are to be applied to the discharge of the debits antecedently due in the order of the account. Postmaster-General v. Furber, 4 Mason, 333.

206. Where payments are made from time to time, to apply generally on an open account, it is such an appropriation as to leave no particular item due, but only the balance after deducting the payments. But if this were not so, equity would not permit an appropriation of a payment, made subsequent to the execution of a trust deed by the debtor, to items of subsequent indebtedness, for the mere purpose of leaving an apparent indebtedness at the date of the deed of trust, in order to raise a presumption that such deed was executed in fraud of creditors. Offutt v. King, 1 MacArth., 312.

§ 207. The debtor, if he pleases, has the right to make the appropriation of payments; if he omits it, the creditor may make it; if both omit it, the law will apply the payments according to its own notions of justice. And in cases of running accounts between the parties, unless there are some particular circumstances to vary the rule, the payments ought to be applied to extinguish the debts according to the priority of time. Leef v. Goodwin, Taney, 460.

§ 208. Interest and principal.- Payments should be applied to extinguish the interest and then the principal. Russell v. Lucas, Hemp., 91.

§ 209. The correct rule as to interest is that the creditor shall calculate interest whenever a payment is made. To this extent the payment is first to be applied, and if it exceed the in-terest due, the balance is to be applied to diminish the principal. This rule is equally applicable, whether the debt be one which expressly draws interest, or on which interest is given as damages. Story v. Livingston, 13 Pet., 359.

§ 210. As between different sureties. A debtor cannot appropriate a payment in such a manner as to affect the relative liability or rights of his different sureties without their assent. Postmaster-General v. Norvell, Gilp., 106.

§ 211. Where a public officer has given different bonds with different sureties, his payments must be so appropriated as to give each bond credits for the moneys respectively due, collected and paid under it. Ibid.

§ 212. Where a collector is continued in office for more than one term, payments by him into the treasury of moneys accruing and received in the second term should not be applied to the extinguishment of a balance apparently due at the end of the first term. Payment made in a subsequent term of moneys received on duty bonds or otherwise, which remain charged to the collector as of the preceding official term, should be so applied. United States v. Eckford, 1 How., 250.

§ 213. As between different sureties, the court will apply the payments so as to avoid injustice. United States v. Linn, 2 McL., 501.

§ 214. A payment is to be applied to the oldest debt if the debtor gives no directions; and it must be proved that the payment came from receipts accruing under a second bond, if that is relied on against the propriety of applying it to any other balance whatever still due under a prior bond. Boody v. United States, 1 Woodb. & M., 150.

§ 215. Where a public officer has given successive official bonds with different sureties, moneys received subsequent to the execution of the latter cannot, before it is discharged, be applied to the payment of the former. Postmaster-General v. Norvell, Gilp., 106.

$216. When a collector of revenue has given two bonds for his official conduct at different times with different sureties, a promise by the supervisor to apply his payments exclusively to the discharge of the first bond, although some of the payments were for money collected and paid after the second bond was given, does not bind the United States, and does not amount to an application of the payments to the first bond. United States v. January, 7 Cr.,

572.

217. Where there is a general assignment of a debtor's property for the benefit of creditors, and the priority of the United States attaches, they having various debts due by bonds, with different sureties, all payments made by the assignees are to be applied pro rata to all the debts of the United States, and the latter are not at liberty to apply the payments in any other manner without the consent of all parties in interest. United States v. Amory, 5 Mason, 455.

218. When a question arises between liabilities of securities on different bonds of different dates, the general doctrine of the application of payment does not apply. Myers v. United States, 1 McL., 493.

§ 219. The government cannot apply money received by a receiver of public moneys, and

paid over, after the date of the bond, in discharge of a previous defalcation, to the prejudice

§ 220. Payments by a partner.-The natural presumption is that a partner paying a sum of money to his private creditor, who is also a creditor of the partnership, means to pay it on his private account, unless circumstances vary this presumption. Gass v. Stinson, 3 Sumn., 99.

§ 221. Quære, if the payments and credits made by one partner after a dissolution of the partnership and joint agency, and after a new individual agency in him, can be applied to the extinguishment of a debt of the partnership, unless circumstances justify the presumption that the partnership debt has been adopted as his individual debt. Ibid.

S 222. Where, during a long period of mercantile intercourse between the principal and factor, it appeared that the principal was permitted, upon shipments of tobacco, to draw bills for the estimated value thereof, which bills the factor was in the habit of accepting and paying, whether the cargoes were or were not sold; the factor being generally in advance, and charging interest upon his advances, and giving credit for interest upon the net proceeds of the cargoes, shipments made after dissolution of the firm of the principal by the death of one of the partners to the factor (upon the credit of which shipments bills were drawn by the surviving partner according to the usual course of their former dealings) were held to have been made according to such usual course, and were not to be applied to the liquidation of the general debt due by the principal to the factor at the time of the dissolution, but were to be applied, in the first place, to meet the bills drawn upon the credit of such shipments; and the surplus only, if any, to be applied to the liquidation of the general balance due by the principal to the factor. But if the bills thus drawn by the surviving partner and paid by the factor exceeded the net proceeds of the cargoes thus shipped after the dissolution of the firm, the excess was not chargeable to the estate of the firm, but to the survivor only; it not being competent for him to charge the estate of the firm by drawing bills after dissolution. Dick v. Laird, 5 Cr. C. C., 328.

III. RECOVERY BACK.

SUMMARY- Mistake, SS 223, 224.- Duress, §§ 225, 228.- Protest, § 226.- Legal compulsion, § 227.

§ 223. In an equitable action to recover back money paid under a mistake, the plaintiff must show that he is equitably entitled to the money; and if by his delay to give notice of the discovery of the mistake the defendant loses his temedy over against another party, no recovery can be had. United States v. The Union National Bank, §§ 229, 230.

§ 224. In the application of this rule no exception is made in favor of the United States. Thus, where a United States sub-treasurer gave notice to the defendant on the discovery of the mistake, and demanded payment, but subsequently withdrew the notice, held, that assuming that he was the proper person to give the notice, and demand payment of the defendant, he was also the proper party to withdraw that notice, and that the defendant, having relied upon the withdrawal of such notice until he had lost his remedy over, was released from all liability on account of the money paid him under mistake. Ibid.

§ 225. To constitute the coercion or duress which will be regarded as sufficient to make a payment involuntary, there must be some actual or threatened exercise of power possessed, or believed to be possessed, by the party exacting or receiving the payment over the person or property of another, from which the latter has no other means of immediate relief than by making the payment. Thus, where the Confederate government by public notice prohibited the exportation of cotton, except upon the condition that the exporter should sell to them an equal amount for the benefit of the Confederate government, and the plaintiff, an exporter, fearing that if he did otherwise his cotton would be confiscated, complied with the condition, receiving a permit to export his cotton upon payment of such sum as they might demand, took advantage of this privilege and redeemed the cotton, paying the sum demanded, held, that there was no such coercion or duress as to make the payment involuntary. Radich v. Hutchins, § 231.

§ 226. An action does not lie to recover back moneys claimed without right, if the payment was made voluntarily, and with a full knowledge of the facts upon which the claim was predicated. It is not enough that the payment was made under protest. The payment must have been compulsory; that is, it must have been made under coercion, actual or legal, in order to authorize the party paying to recover it back. Ocean Steam Navigation Co. v. Tappan, §§ 232, 233.

$227. Money paid upon a demand, to prevent the seizure of property, which can only take place by judicial proceedings, where the party paying may have his day in court and defeat

the proceeding, is not paid under legal compulsion, and cannot be recovered back, although paid under protest. Thus where a passenger tax, exacted under a New York statute, was paid under protest, in order to avoid the accumulation of penalties provided by the statute in case of refusal to pay, and the statute was afterwards declared to be unconstitutional by the supreme court of the United States, held, that the payments thus exacted could not be recovered back. Ibid.

§ 228. Where there is a detention of personal property by private bailees, money illegally exacted as the price of its release may be recovered back. Accordingly, where a carrier, having agreed to carry goods to a certain place for a certain sum, refused to deliver the goods at their destination except upon the payment of a larger sum, which was paid by the owner in order to obtain possession of his goods, held, that the payment was not a voluntary one, and the amount in excess of the stipulated freight might be recovered back, as paid under duress. Tutt v. Ide, §§ 234, 235.

[NOTES.-See §§ 236-255.]

UNITED STATES v. UNION NATIONAL BANK.

(District Court for New York: 10 Benedict, 408-410. 1879.)

Opinion by CHOATE, J.

STATEMENT OF FACTS.- This is a motion for a new trial for error of law in directing a verdict for the defendant. It was not attempted on the argument to sustain the action, except as an action for money paid under a mistake of fact.

§ 229. The United States is bound by the same rules of equity that affect other plaintiffs.

Assuming that all the elements of such a cause of action once existed, a question which it is unnecessary now to examine, yet I see no reason why the United States should be exempted from the general rule applicable to any other party who is entitled to maintain such an action, that they shall not, by their delay after the discovery of the mistake, lead the party liable to them into further loss, as, for instance, the loss of a remedy over against another party. This is an equitable action, and the plaintiff can only recover on showing that it is equitably entitled to the money.

§ 230. Where notice of a mistake is given and withdrawn by a competent agent, the defendant is released from the effect of such mistake.

The duty of promptly notifying the defendant, on discovery of the mistake, is conceded by the plaintiff's counsel; but it is claimed that the notice from the sub-treasurer was a performance of this duty. The discovery by the United States of the alleged mistake before that notice was given cannot, I think, be denied. Assuming that the sub-treasurer was the proper person to give the notice, and demand payment of the defendant, he was also the proper party to withdraw that notice, and I think it is clear that what took place after the notice was given was equivalent to a withdrawal of the notice, on which the bank had a right to rely, and did rely, until it lost all remedy over against Polhemus and Jackson; and after that, only, was the claim renewed by commencement of this action. I think this is a claim in respect to which laches may be imputed to the United States, and that on the ground of laches and entire want of equity in the claim on the undisputed facts, the direction of a verdict for the defendant was right. See United States v. Cooke, 5 Am. L. T.,

166.

Motion denied.

357