It appears in this case by the bill of exceptions, that although "the note sued on, with a bill of exchange for $243, was taken to the Bank for the purpose of paying a bill of exchange for $1200, then in Bank, yet when it was discounted, the proceeds remained on the books of the Bank to the credit of Shaw for some time, without any specific directions from him as to how the same should be applied; and that afterwards the cashier of the Bank applied the proceeds of the note to extinguish it, which was equivalent to cancelling the discount, andhaving applied the mark of cancellation to it, it was delivered to the defendant.
The bill of exceptions-sets out all -the proof in the cause, *712and from this it does not appear that this cancellation of the paper was made through any mistake. The cashier of the Bank was himself examined, and he does not say that there was any error in regard to it. In this condition, in the absence of further proof, we do not see how the Bank can recover upon the cancelled note.
The general rule is, that where payments are made by a debtor to a creditor, the debtor has the right to direct the application of the funds paid, but if he fails to give direction as to the application, then the creditor may apply the payment as he pleases. So, if the debtor has two several sureties bound with him for different debts, he may elect to which of the debts his payment shall be applied, and consequently which of the sureties he will discharge. — Burge on Sur. 122. But when either debtor or creditor legally makes the application of the payment, the other has no right to change it.
The above principles of law are of easy application to the case made by the facts set forth in the record before us. Shaw, the defendant below, having procured the discount of his note now sued on, and the proceeds having been placed to his credit generally upon the books, had the right to order or direct the specific application of the funds, either to the payment of the bill for which he was bound, or the note upon the discount of which the fund accrued. True, it would seem to be 1 out of the ordinary course of dealing for a party to procure the discount of a note, and leave the proceeds in Bank to remain unproductive, while his note bears interest, merely to pay the note when it should fall due; but however unnatural and unwise such an operation may be, still the party had the right to make it, and if he did so, the bill remains unpaid, and the note becomes cancelled.' But from aught appearing to the contrary, the discount was rescinded, and no interest was paid by him. The fact that Shaw, the maker of the note, received it back in its cancelled condition, without making any payment other than the application of the funds raised by its discount, is conclusive to show that he acquiesced in its being thus cancelled. His subsequently subpoenaing Hampton to prove that the $1200 bill was paid by the note only proves that, he was attempting to set up an unreal and pretended de-fence, which show of defence, perhaps, caused the Bank to en*713ter the nonsuit. The proof clearly warranted the instruction to the jury, that although the note sued on was given by Shaw for the purpose of paying the bill, the jury must find that it was accepted by the Bank in payment, and that the subsequent conduct of the parties in applying the proceeds to the cancellation of the note, as shown in proof, was evidence that no such agreement existed. But if such agreement had been made, still before it was executed by the application of the funds in accordance with it, the parties could have altered it. Certainly Shaw, who has received the benefit of the funds in can-celling his note, cannot be allowed to avail himself of them again in satisfaction of the bill. This view shows that the note is extinguished and that the bill remains unsatisfied, so far as the proceeds of the note are concerned.
The cases to which we are-cited by the counsel for the defendant in error do not militate against the view here taken. The case of Dewey v. Bowers, et al. 4 Ired. Rep. 538, merely decides that the giving up a note by the creditor to the debtor, through a mistake, is no payment or satisfaction of it. — Morehead v. The West Branch Bank, 3 Watts’ Rep. 550, but affirms the general doctrine, that if a debtor give a draft to the creditor and direct the application of the proceeds to a particular debt, the creditor is bound to apply it to that liability. None of the cases come up to the case at bar, and we apprehend no case can be found where the debtor, after his acquiescence in the application of the fund in the extinguishment of one debt, and holding the cancelled demand in his hands, has been permitted to turn round and avail himself of the fund so applied the second time, in the extinguishment of another demand, to pay which he may originally have designed it. The note sued on has been cancelled. Both parties have acquiesced and adopted the application of the fund to its extin-guishment, and the bill remains as it was.
The ruling of the Circuit Court was opposed to this view, and the judgment must be reversed, and the cause remanded.