When there are two or more debts, the rule governing the application of payments in this State, is:
1. The debtor may apply the payment to either debt at his pleasure.
2. If he fails to make the application, the creditor may do so at his pleasure.
3. If neither make it, the law applies the payment to the most precarious debt. The debtor must direct the application when he makes the payment, and cannot resume the power at any time thereafter. The creditor may make the application at any time before action is brought and not thereafter. These rules apply where there are more than one debt. Moss v. Adams, 39 N.C. 42; S. v. Thomas, 33 N.C. 251. InMayor v. Patton, 4 Cranch, 317, Chief Justice Marshall in reversing the judgment below said that "the error was in holding that the (140) creditor's election was lost if not immediately exercised." In the case before us, the defendant contracted with the plaintiff early in 1896 for supplies to the amount of $75 and secured the same by a lien on his crops, and in the fall when the amount was about exhausted, he, according to the plaintiff's evidence, applied for further advancements, saying that he had crop enough to pay all, and that, "if I would advance him more to make his crop, he would deliver his crop to me, and that it should first be applied to the unsecured account last advanced, that is, to the supplies advanced after his agreement, until that was paid, and then to the crop mortgage account. I agreed to this and advanced him as requested, in all about $237.38." Only one account, called a "running account," was kept, showing in paralled [parallel] lines the debits and credits. The action is for the balance on the store book.
The defendant's position is that as there is only one account of the *Page 89 entire transaction, the rule of applying the first credit to the first item of the account, and so on, must be observed, and that when the payments equaled the amount secured by mortgage, the lien on his crop was discharged; and he requested the Court to charge the jury that the plaintiff must make out his claim by more than a proponderance [preponderance] of evidence, which was refused, and he excepted. The fallacy is in disregarding the agreement of the parties entered into before any payments were made. Neither reason nor the authorities support the defendant's contention. "The rule for the appropriation of payments on running accounts is that the first item on the debit side of the account will be applied to extinguish the first item on the debit side of the account; but this rule has no force against an understanding of the parties to the contrary. A merchant is not estopped from showing an understanding or agreement inconsistent with the deductions the law would draw (141) from the face of his books, unexplained." Mack v. Adler, 22 Fed., 570; Bancroft v. Holton, 59 N. H., 141; Smith v. Vaughan,78 Ala. 201; Langdon v. Bowen, 46 Vt. 512. "The law makes the application on failure of the parties to do it, on the presumption of the interest and intention of one or the other of the parties, and therefore it would give way to an actual application by both of the parties, as furnishing direct evidence and superseding the necessity for presumption. There could be no doubt that the concurrence of both the parties in an application of payments ex post facto would be effectual between them." This is the language of Ruffin, C. J., in Moss v. Adams, supra.
The motions of the defendant are disposed of in Byrd v. Bazemore, ante, 115. There was no error in the view of the law applied by the Court below.
Affirmed.
Cited: Rouss v. Krauss, 126 N.C. 670; Lee v. Manley, 154 N.C. 246.