York County Savings Bank v. Roberts

This is a bill in equity to redeem real estate from mortgage. The only question is, what amount the complainants must pay in order to redeem, or, in other words, how much is due on the mortgage.

The mortgage note was for $1000, dated December 12, 1874, payable in ten monthly payments of $100 each, with interest. The first six payments had been made and indorsed on the note as they fell due, when, on June 14, 1875, the maker of the note gave to the respondents, the payees, an order of that date authorizing them to transfer and appropriate $600, which had been paid on the note, to the payment, in whole or in part, of a certain account which they had against him and which was not secured by the mortgage.

Credit to that amount was thereupon given upon the account, and a memorandum of the transfer of that amount from the indorsements to the credits on book-account was made, on that date, on the back of the note.

*389It is conceded that, as against the complainants who were then second mortgagees of the same property, such a transfer of credits from the note to the account could not legally be made. To the extent of these payments, the mortgage debt had been extinguished, and could not be revived by agreement, of the maker and the payees of the note, to the prejudice of the vested interest of subsequent mortgagees.

Subsequently, on January 12, 1876, $185; on February 14, $104.50; and on April 10, $108, were paid and indorsed on the note.

It is claimed by the respondents that these payments were made under the belief that the transfer of the $600 was valid, and that the interest-bearing principal had been thereby raised to the original sum of $1000.

Each one of these three payments, it is urged, was intended to be a payment of $100, and the interest then due on a restored principal of $1000.

It is highly probable this was the fact. Each indorsement on the note is equal in amount to the sum of $100, and the interest then due, and the last three payments in each instance correspond in amount with a payment of $100, and the interest on a principal of $1000. Probably the parties to the note, after June 14, 1875, regarded it as restored to its original amount, and supposed the subsequent payments were of $100, and interest. But this is only a probability. There is no division of principal and interest expressed in the indorsements.

The argument seems to be that these last payments, having been applied to the note under a misapprehension as to the validity of the attempted transfer, and under the belief that the principal had not previously been reduced, should not now, when effect cannot legally be given to the transfer of credits, be allowed in reduction of the balance due on the note; — that if the law cannot allow the agreement, as to the transfer of the $600, to take effect, it can apply the later payments, so as, to that extent, at least, to serve the purpose which the parlies had in mind when the order was given.

Notwithstanding the force with which the argument to the con*390trary is urged, we cannot escape the conclusion that the parties themselves have appropriated these payments — that they have applied them upon the note. We assume that the payees of the note had but two claims against the maker, the note and the account. The case shows no other. These payments were not made on the account. They were indorsed in the usual form upon the note. There is a high degree of probability that, if it had not been supposed the transfer was effective, the later payments would have been made on the account rather than on the note; but such a probability is no substitute for proof that the money was in fact paid on the account, nor can there be anything in it to defeat an appropriation once made, and leave the money unapplied. In order to be applied upon the account, the money must either have been paid upon it, or paid without appropriation. Here we have neither fact.

But it is said these payments were not upon the balance of the note after deducting the $600, but upon the note supposed to be restored to the sum of $1000. The argument is, that it was competent, and no injury to the complainants, for the maker to pay the whole or any part of the $600, twice, if he saw fit; — and that, the transfer being defeated, these later payments, so far as they go, merely repeat the payment of the $600.

Upon this point, it is enough to say that the base is wanting in proof that either the payees or the maker intended anything of the sort, and it certainly is not a thing to be presumed. It would •leave the maker without credit for the amount of the last three payments, either upon the note or the account. It would compensate the payees for a failure to make a valid transfer of $600 from the note to the account, by giving them half that amount twice. We do not think the parties intended double payment of any part of the claim.

The controlling fact in regard to the matter is that these payments when m^de were applied to the note by the parties themselves. They were received and indorsed upon it. It was a valid claim, which they partially discharged, and the fact that the parties were in error as to their power to change prior indorsements on the note into credits on the account and supposed more due *391upon the note than was legally due does not enable the court to treat subsequent payments on the note as mere repetitions of former payments, nor to apply them, in discharge of the account. Their application by the parties at the time, to the payment of an existing debt, precludes the interference of the court. Such an error as to the legal effect of the order and as to the amount due upon the note is not a mistake which invalidates a subsequent appropriation of payments. Nor can there be any certainty that the maker of the note would not have insisted on the payments being applied precisely as they were applied, had he known that the order was without effect. Whether in January, February and April, 1876, he was as disposed to pay the account as he was in June, 1875, is a matter about which there is a probability, but no proof.

We see no way in which these three payments can either be applied to the account or treated as a substitute pro tanto for the $600 erroneously credited thereon.

The amount which the complainants will be required to pay in order to redeem, will be the amount due according to the tenor of the note, allowing all the indorsements and disregarding "the memorandum of June 14, 1875, in regard to the transfer of payments ; and in addition to this the expense of proceedings to foreclose the mortgage, which is agreed to be the sum of eight dollars ($8).

This amount having been brought into court by the complainants, the respondents are to take the same, less costs awarded against them, and the decree will be that the complainants may redeem from the respondents, and that the respondents release to the complainants their right title and interest in the mortgaged premises.

Decree accordingly.