JENKINS CO. v. SMITH AND SMITH

Moore Gatling and Hill, for appellants, argued as follows:

As to exception 1, see Vest v. Cooper, 68 N.C. 131.

2nd and 3rd exceptions. Drafts for $ — and $ — were drawn in September and paid in October, not advances under bond, because every advance must of necessity create a separate debt. Hicks v. Critcher, Phil. 353; Page v. Ernstein, 7 Jones 147. Acceptance created a debt from Jenkins Co. to holder. Archd. N. P. 297, 148; Rev. Code, chap. 13, sec. 2.

4th exception. The words "this day" refer to August 1st. Generally all relative words are read as referring to the nearest antecedent." 2 Parsons on Contracts, p. 513.

In the construction of bonds and obligations. the rule of law is if the bond be a single one, it is to be taken most strongly against the obligee; but where it has a condition annexed to it which is doubtful, as that is for the ease and favor of the obligor it is to be taken most strongly in his favor. Bennehan v. Webb, 6 Ired. 57.

5th exception. Moss v. Adams, 4 Ired. Eq. 42; Jenkins Co. v. Beal, 70 N.C. 440, only establish that when the payment is made the debtor can make the appropriation; 2d, that if he does not the creditor can make it at anytime before suit brought; 3rd, if neither makes it, the law does.

The latter case differs from ours in this, that no account was rendered, in ours an account was rendered December 31st, and was an appropriation specifically of the payments to the items of account first made in regular order. It was a stated account. Adams Eq. 226 and 228, note 1; Freeland v. Horne, 7 Cranch 147; 1 Greenleaf's Evidence, sec. 197, p. 215 and note. Walker v. Fentress, 1 Dev. Bat. 17; Burrill's Law Dictionary "Account stated." Bouvier's Institutes vol. 4, p. 223. C.S. Smith's acquiesance [acquiescence] raised an implied promise to pay balance struck. Archd. N. P. 98.

Effect of account stated: Archd. N. P. 120, 271, note 1. Payment once applied cannot be re-ascribed except by consent. 2 Greenleaf's Evidence, sec. 532. p. 474.

Exception 6th. W. H. Smith was a surety because his liability did not arise till default of C. S. Smith; whereas C. S. Smith's liability arose on execution of bond. The duties of joint principals are identical as to third parties and reciprocal as to each other. Had C. S. Smith complied fully with terms of bond could he have sued W. H. Smith for contribution? See Archd. N. P. 248 and 249 as to a joint principal suing for contribution.

W. H. Smith is exonerated by the shipment of 162 bales cotton. "If the obligee defeats the condition of the bond the security is discharged. Cooper v. Arrington Wilcox, 2 Dev Bat. Eq. 90.

The surety is entitled to the benefit of every additional or collateral security which the creditor gets into his hands for the debt for which the surety is bound. As soon as the security is created and by whatever means the sureties interest in it arises and the creditor cannot himself nor by any collusion with the debtor, do any act to impair the security or destroy the surety's interest. He is bound not to do it. A security stand upon the same footing with a payment. As respects the surety the debt is paid. Nelson v. Williams, 2 Dev. Bat. Eq. 118.

The principle is that whenever a collateral security on the property of the principal is given or obtained, it amounts to a specific appropriation of those effects to the debt; and therefore the surety is entitled to the benefits of it as well as the creditor, and the creditor is under a duty to the surety not wilfully to impair the security." "The wrong done to the surety by the creditor is this, that the creditor has a security for his debt on the principal debtor's own property and has destroyed or departed with the same to the prejudice of the surety," not material that surety should know existence of securities. Smith v. McLeod, 3 Ired. Eq. 390; Caine's Cases in End, 2 vol., p. 1, U.S. v. Eckford.

W. H. Smith contracted that the cotton should be shipped. It was not his duty to see to its application.

Conigland, with whom were Bridges Son and Batchelor for the plaintiffs, among other points, submitted the following:

The fifth exception, it is submitted, is untenable under all the circumstances of this case.

The referee adjudges, that no application was made by either party before suit brought. But this conclusion is not warranted by the facts found by him.

I collect from the referee's report as facts in the case: That the plaintiffs refused to make any advances to the defendant Charles, after October 1st, 1872, unless he would send cotton to meet the same, and upon his express promise to do so, they advanced to him large sums after that date.

That in December, 1872, the said defendant agreed to forward to the plaintiffs, forty bales of cotton, to meet advances which he then asked.

That from October 1st, 1872, until January 1st, 1873, the difference between the large advances made, and net proceeds of cotton shipped, was only $971.52.

It is submitted, that the foregoing facts, clearly set forth by the referee in his report, show an express appropriation by the plaintiffs, with the assent of the defendant Charles, of the cotton shipped after October 1st, 1872, to the payment of the advances made after that date. The conclusion of the referee, that no application of credits was made by either party, can be construed only as meaning that no appropriation was made on the books of the plaintiffs.

The advances made and the proceeds of cotton shipped, after October 1st, 1872, nearly tally, showing evidently that the former were made on the faith of the latter. Indeed it would seem from the state of the account, that the cotton was purchased by means of the advancements. The facts present the case of two debts, and payment made to the amount of one which is evidence of an appropriation to that one. Greenleaf's Ev. vol. 2, p. 475. Marryatt v. White, 2 Stark 101.

But the appellant's counsel insist that the rendition of the account by the plaintiffs to the defendant Charles, is an appropriation to the secured debt in this case, and discharges the same. For this they rely on Clayton's Case, and Simpson v. Ingham, 2 B. C. 65.

Supposing this position to be correct as a general rule; it must be taken as subject to exceptions. To give such effect to the rendition of the account in this case, would be not only to ignore the intention of the plaintiffs, but the previous appropriation by the agreement of the parties, which evidently shows that the rendition had no other purpose than to inform the defendant of the state of his account.

Clayton's case holds, that where credits are entered generally on the books, it is an appropriation to the first debts. Moreover that the creditor must apply the payments at the time they are made, or lose his right; and when no application is made by either party, the law will apply the credits, in behalf of the debtor, to the most burdensome debt.

Now no principle of law can be more clearly established by the current of modern authorities, than the reverse, namely: That the creditor, in default thereof by the debtor, may make the application of credits, at any time before bringing suit. When no application is made by either party, the law will apply the credits to the more precarious debt. Such is the principle enunciated in Moss v. Adams, 4 Ired. Eq. 42, and in every subsequent case bearing on the point in this Court.

It is only where a running account is kept, and credits are entered generally, that the well established principle of law I have quoted, can operate. If the credits are entered specially that of course, is an appropriation per se. The conclusion, therefore, is irresistible, that the doctrine of Moss v. Adams, can be applied only, where the accounts are kept without distinction between the classes of debts, and the credits if entered at all, are entered generally. This the law construes as a case of non application, and makes the appropriation to the weaker debt.

But it is argued that while the entry of credits generally may not be held as an appropriation to the first debts, yet, where the creditor goes further, and renders his account in the same way, it is such an appropriation. I admit that nothing else appearing, Simpson v. Ingram, sustains this view. But the doctrine, as I have always argued, is not applicable to the circumstances of this case, which explain, control and limit, the rendition made by the plaintiffs. The case quoted is referred to in our text books, but I have met with no American decision that goes to the same extent.

It is difficult to understand why a construction should be given to the rendition of an account at variance with that given to an account kept in the same way on the books, as the one is but a copy of the other. Now a recent and well considered case in this Court meets the very point. I refer to Jenkins Co. v. Beale, 70 N.C. 440. In that case there were two accounts, one secured by mortgage, and one unsecured, and the statement of the case sets forth that —

"The plaintiffs had kept a general running account with the defendant,c., making no difference or distinction by which any part of the account could be distinguished as that secured by mortgage from any other part not so secured, and had given the defendant credit on the general account for all sums to which he was entitled to credit. There was no evidence to show any application, by either the plaintiff or defendant, to the payment of any particular part of the account as distinguished from any other part of the account, as secured or unsecured.

Such is the statement upon which the opinion of the Court is based, and it is held that no opplication [application] had been made, and that the credits must be applied to the unsecured debt.

I submit, therefore, that the exception is untenable, and that the judgment should be affirmed.