This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
The Civil Law rule requires the law to apply payments foi the benefit of the debtor in accordance with his presumed intention.1 Where this rule is followed, the law applies a payment to the debt which is most burdensome to the debtor.2 Thus payment will be applied to a secured debt,3 as one secured by mortgage,4 or chattel mortgage.5 So payment will be applied to a debt which bears interest in preference to one which does not,6 and to one bearing a higher rate of interest in preference to one bearing a lower rate.7 If a trustee who is individually indebted to a beneficiary makes payments to him in excess of the income arising from the trust-fund, it will be presumed that the excess is to be applied to the individual debts.8 Even where payments ure to be applied in the manner most beneficial to the debtor payments must be applied to interest first.9
5 The Katie O'Neil, 65 Fed. Ill; Jeffers v. Pease, 74 Vt. 215; 52 Atl 422.
6 Wagner's Appeal, 103 Pa. St. 185; 49 Am. Rep. 121.
7 McCauley v. Holtz, 62 Ind. 205.
8 Sanborn v. Stark, 31 Fed. 18; White v. Beem, 80 Ind. 239; Burks v. Albert, 4 J. J. Mar. (Ky.) 97; 20 Am. Dec. 209; Burt v. Butter-worth, 19 R. I. 127; 32 Atl. 167.
9 Andrews v. Loan Association (Ky.), 70 S. W. 409. A different result was reached on similar facts in First National Bank v. Hollings-worth, 78 la. 575; 6 L. R. A. 92; 43 N. W. 536, on the theory that the superiority of a debt to homestead rights was not a lien, that the rights of the debtor's family should be protected; and that the law tended to favor homestead rights.
10 Pardee v. Markle, 111 Pa. St.
548; 56 Am. Rep. 299; 5 Atl. 36; Berghaus v. Alter, 9 Watts (Pa.) 386; Blackmore v. Granbery, 98 Tenn. 277; 39 S. W. 229.
1 " The doctrine of the civil law upon this subject has been adopted in this state." McLaughlin v. Green, 48 Miss. 175, 205; Hamer v. Kirkwood, 25 Miss. 95; Poindex-ter v. La Roche, 7 S. & M. (Miss.) 699.
2 Scott v. Fisher, 4 T. B. Mon. (Ky.) 387; Clark v. Boarman, 89 Md. 428; 43 Atl. 926; Harker v. Conrad, 12 S. & R. (Pa.) 301; 14 Am. Dec. 691; Roakes v. Bailey, 55 Vt. 542.
3 Gillard v. Huval, 22 La. Ann. 426; Clark v. Boarman, 89 Md. 428; 43 Atl. 926; Blackmore v. Granbery, 98 Tenn. 277; 39 S. W. 229; Bussey v. Gant, 10 Humph. (Tenn.) 238; Robinson v. Doolittle, 12 Vt. 246.