It seems impossible to deny that the usual rules governing the application of payments should control the application of any payment, if the debtor who makes the payment did not hold it subject to a trust. Thus a contractor who received a payment from one interested in a particular application being made might have bought an automobile with the money, and the seller of the machine knowing all the facts could not have been subjected to any claim. Even a donee of the money could keep it, unless the donor were so nearly insolvent at the time of the gift that a gift of any of his property would be fraudulent against creditors. If this is true, a creditor of the contractor may surely take the money in satisfaction of any valid debt, even though he knows the source from which the money is derived. This may put him on inquiry whether there is a trust and, even if there is no trust, may sometimes have evidentiary value as indicating the debtor's intention; but if it be granted that no intention is manifested by the debtor, and that there is in fact no trust, the creditor should be allowed to apply the payments to any debt. Good authority supports this conclusion. Money paid by a contractor to a material man without direction may be applied by the latter to any debt due him from the contractor, though the money was derived from a payment under a contract, in the performance of which materials had been used for which an obligation with a surety had been incurred to the material man.57 Nor should the mere fact that the creditor knows the source from which a payment is derived bind him to apply it towards the discharge of a surety or property connected with that source, unless it is a natural inference from such knowledge that it is a violation of duty by the debtor to apply it to any other debt.57a Some cases, however, decide that though the debtor does not hold the money under any trust, the creditor will not be allowed to apply it to any other debt than that which its source renders appropriate, if the creditor when the payment is made has notice of that source; 58 and a few even hold that without regard to notice of the source the money must be applied to the satisfaction pf the debt for which is bound the property of the person who supplied the debtor with funds.59
55 Clow v. Goldstein, 147 11I. App. 571; Young v. Swan, 100 la. 323, 326, 69 N. W. 566, and decisions cited infra, n. 58, 59 which favor the person making the original payment or his surety, though there is no trust, necessarily are opposed to the text.
56 Thompson v. Brown, Moody & M. 40; Wiesenfeld v. Byrd, 17 S. C. 106. See also Fairchild v. Holly, 10 Conn. 175.
57 People v. Powers 108 Mich. 339, 66 N. W. 215; B. F. Sturtevant Co. v. Fidelity & Deposit Co., 92 Wash. 52, 158 Pac. 740, L. R. A. 1917 C. 630. See also. Thacker v. Bullock Lumber Co. 140 Ky. 463, 464, 131 S. W. 271. But see contra Columbia Digger Co. v. Rector, 215 Fed. 618, 227 Fed. 780, 142 C. C. A. 304; Campbell Glass & Paint Co. v. Davis-Page Planing Mill Co., 130 Mo. App. 474, 110 S. W. 24; St. Louis Sash & Door Works v. Tonkins, 188 Mo. App. 1, 173 S. W. 47; W. H. Pipkom Co. v. Evangelical Ac. Soc., 144 Wis. 501, 129 N. W. 516.
In B. F. Sturtevant Co. v. Fidelity, etc., Co., 92 Wash. 52, 158 Pac. 740, 745, L. R. A. 1917 C. 630, the court said: "It is worthy of note that, while appellant, as surety, had in a sense an equity in the money with which the heating company paid respondent, yet it is not true that the heating company unqualifiedly held this money in trust. The conditions of the bond upon which appellant is surety do not require the heating company to pay the debts secured by the bond with money which it is to receive from the school district. . . . Nor is there anything in its contract with the school district nor the statute requiring the heating company to pay its debts with that particular money." A similar decision is Grace Harbor Lumber Co. v. Ort-man, 190 Mich. 429,157 N. W. 96. See also Mack v. Colleran, 136 N. Y. 617,32 N. E. 604.
57a In Jefferson v. Church of St. Matthew, 41 Minn. 392, 43 N. W. 74, a check given by the owner of a building to a contractor was indorsed by him to the plaintiffs who were material men with no specific directions as to the debt to which it should be applied. It was held that the plaintiff, though knowing from the check, whence the money originally came might apply it to the oldest debts due from the contractor.
58 Williams v. Willingham-Tift Lumber Co., 5 Ga. App. 533, 63 S. E. 584; Thacker v. Bullock Lumber Co., 140 Ky. 463, 464, 131 S. W. 271; Bowles Co. v. Clark, 59 Wash. 336, 109 Pac. 812, 31 L. R. A. (N. S.) 613; Hughes v. Flint, 61 Wash. 460, 112 Pac. 633.