§ 1153. The general rule in regard to the appropriation of payments on account is that the party who pays money has a right to apply the payment as he sees fit; if there be several debts due from him, he can designate that one to which it shall be applied. If the party making the payment do not, at the same time, make any specific appropriation thereof, then the party to whom the payment is made may apply it to legal claims1 as he pleases. If neither party make any specific application of the payments to the discharge of any particular debt, the presumption is that the first items of a running account, or that the debts which are first in point of time, are to be thereby discharged. In all cases, if the parties themselves have omitted to make any specific appropriation of payments, the law will appropriate them according to the justice and equity of the case, for the benefit of both parties.2 This general rule applies equally in favor of sureties and guarantors; and any appropriation made by the party en-

1 If the payee hold a legal and an illegal claim against the payor, he must apply the payment to the former. Rohan v. Hanson, 11 Cush. 44: Haynes v. Nice, 100 Mass. 327; Huffstater v. Hayes, 64 Barb. 573 (1873); Warren v. Chapman, 105 Mass. 87 (1870). And therefore a note given to the holder of such claims, being for less than the amount of the legal item, will be valid. Warren v. Chapman, supra.

2 Cremer v. Higginson, 1 Mason, 338; United States v. Ward well, 5 Mason, 85; Pattison v. Hull, 9 Cow. 747; Baker v. Stackpoole, 9 Cow. 420; Seymour v. Van Slyck, 8 Wend. 403; Niagara Bank v. Rosevelt. 9 Cow. 409; Mitchell v. Dall, 4 Gill & John. 3(31; Reed v. Boardman. 20 Pick. 446; Gass v. Stinson, 3 Sum. 98; United States v. Eckford, 17 Pet. 251; 8. c. 1 How. 250; Copland v. Toulmin, 7 C. & F. 350; United States v. Kirkpatrick, 9 Wheat. 720; Gordon v. Hobart, 2 Story, 264. In this case Mr. Justice Story says: "What under such circumstances is the rule promulgated both by courts of law and courts of equity ? It is that where money is paid by or received for a debtor by his creditor, the debtor has a right to make the appropriation to what purpose he titled at the time to make such appropriation is binding upon all parties.1

§ 1154. In cases where there are running accounts between the parties, however, there being various items of debt on the one side and of credit on the other, occurring at different times, the rule obtains that where payments are made without special appropriation by either party, they are to be applied to the discharge of the separate items in the order of time in which they stand in the account, - the earliest item of debt being first extinguished, and so on until the whole account of debt is cancelled; unless, indeed, in the absence of any such appropriations, a different application growing out of the relations of the parties and the nature of the account or transactions between them is required in order to do justice.2 But if there be no running accounts between the parties, and the debtor make no special appropriation of the payments, the creditor may apply them to the extinguishment of any debt that he pleases,3 that is to say, to any legal debt; for he cannot apply it to a debt which is itself void, as to a claim for usurious interest, or for articles sold contrary to law; nor to a claim barred by the Statute of Limitation.4 pleases. If the debtor makes no appropriation, then the creditor may apply it to the satisfaction of any demand which he has against his debtor at his own pleasure. If neither party make any such application, then, if there are various debts due to the creditor, the court will make the application according to its own view of the law and equity of the case, under all the circumstances."

1 Theobald on Principal and Surety, p. 221, § 239; Shaw v. Picton, 4 B. & C. 715; s. c. 7 Dowl. & Ry. 201; Dunn v. Slee, Holt, N. P. 399; Devaynes v. Noble, 1 Meriv. 585; Plomer v. Long, 1 Stark. 153; 1 Story, Eq. Jur. § 459 a to § 459 g, 3d ed., where the whole matter is elaborately discussed and all the cases cited; Gass v. Stinson, 3 Sum. 98; Brooke v. Enderby, 2 B. & B. 70; Lysaght v. Walker, 5 Bligh (n. s.), 28; Bosanquet v. Wray, 6 Taunt. 597; Bank of Scotland v. Christie, 8 Clark & F. 214, 227, 228; Thompson v. Brown, M. & M. 40. See post, § 1350.

2 Upham v. Lefavour, 11 Met. 184; Wright v. Laing, 3 B. & C. 165; Peters v. Anderson, 5 Taunt. 596. See post, § 1350.

3 See 1 Story, Eq. Jur. § 459 a; Lysaght v. Walker, 5 Bligh (n. s ), 28; Bosanquet v Wray, 6 Taunt. 597; Brooke v.. Enderby, 2 B. & B. 70; Upham v. Lefavour, 11 Met. 184.

4 Rohan v. Hanson, 11 Cush. 44; Bancroft v. Dumas, 21 Vt. 456; Ayer

§1155. The creditor is not, however, bound to make an immediate decision as to the particular debts or accounts to which he will appropriate payments, where there are several debts or accounts, or where there is a running account; but he will be allowed a reasonable time to decide to which account or debt he will place them. When once he has made his election, however, he is bound thereby. The difficulty in each case is, to decide whether such an application has actually been made, which is matter of mere evidence, depending upon the circumstances of the particular case.1 It has been held that his entry of payments upon one account does not preclude him from applying them subsequently, within a reasonable time, to any other account to which he might originally have applied them, provided that such entry has not been communicated to the party making the payment. This decision was made upon the ground that the fact of the creditors making private entries in their books, which were not communicated to the other party, did not indicate a complete election so to appropriate the payments, but only an idea of so appropriating them.2

§ 1156. But this right of appropriation is one strictly existing between the original parties; and no third person has any authority to insist upon an appropriation of such money in his own favor, where neither the creditor nor the debtor has made or required any such appropriation.3 v. Hawkins, 19 Id. 26; Caldwell v. Wentworth, 14 N. H. 431; Warren v. Chapman, 105 Mass. 87 (1870).

1 Simson v. Ingham, 2 B. & C. 65; s. c. 3 D. & R. 249; Shaw v. Pic-ton, 4 B. & C. 715; s. c. 7 Dowl. & By. 201; Dunn v. Slee, Holt, N. P. 399; Dows v. Morewood, 10 Barb. 183; Allen v. Culver, 3 Denio, 293; Seymour v. Van Slyck, 8 Wend. 403.

2 Simson v. Ingham, 2 B. & C. 65; 8. c. 3 D. & R. 249.

3 Gordon v. Hobart, 2 Story, 264, per Mr. Justice Story. The surety on a promissory note given to secure a loan to a member of a money club formed for the purpose of raising money by means of monthly subscriptions, and lending it in small sums to the members, and dividing the proceeds when the shares are fully paid up and the loans repaid, cannot rely upon the monthly subscriptions and premiums paid by his principal as payments in reduction of his liability upon the note. Wright v. Hick-ling, Law R. 2 C. P. 199 (1866).