Philadelphia Mercantile Loan Ass'n v. Moore ( 1864 )

The opinion of the court was delivered by

Strong, J.

The first bond, dated May 8th, 1858, was conditioned for the payment of $800, with interest, in one year from its date, and also for the payment of four dollar monthly instalments upon four shares held by Moore in the capital stock of the association. On the'4th of June 1858, less than a month after the bond was given, the debtor assigned to the company as collateral security for the loan, these four shares of stock together with four others which he then held. There had at that time been paid upon them about $440, the monthly instalments from June 1st, 1854, when the certificate was issued to him. Of course the assignment of the stock as collateral, was not a discharge of the loan to the extent of the instalments paid. The declaration that it was given as collateral negatives this. Besides, no part of the bond, either principal or interest, was then payable. It is true, the debtor might have appropriated the sum of the instalments paid to the discharge of the debt, but he did not. On the contrary, when on the 8fch of Oct. 1859, he borrowed from the plaintiffs an additional sum of $400, and made another assignment of the same stock as collateral security for the repayment of the second loan, he elected not to treat the first assignment as a partial payment of the first bond, and pledged the stock as a living security for the payment of the second. It is true, that without the consent of the company he could not pledge it for the payment of a second debt, until that for which it was first pledged had been paid. But when the company assented, as they did, by receiving it as a collateral for the security of the second loan, he had no longer any right to insist that it should be applied to the discharge of the first. It is to be remembered that neither assignment amounted in itself to a payment of the debt for which it was pledged as security; 11 Casey 468. The same thing has been ruled this winter in Loan Association v. Saving Fund. The case, then, is this : the debtor made no application of the instalments paid on the stock when he assigned it .as a security for the first loan. He made none afterwards, and before the second loan was made. By the second assignment he disabled himself from insisting that the payment should be applied to the reduction of the first bond, and put in the power of the creditors to use the stock for the satisfaction of either debt at their option. It is not, therefore, to be treated as a payment made by a debtor owing two debts, of which neither he nor the creditor has made any application, and which the law will therefore apply. It was in reliance on the second assignment that the second loan was made. If the debtor may now destroy the value of the security by insisting that the instalments paid shall go to the discharge of the first debt, he is enabled to work a fraud. Had he, on the 16th of October 1859, assigned the stock to any other than the plaintiffs, he could not claim a credit for its value upon the first debt. This was ruled in Shober v. The Accommodation Saving Fund and Building Association, 11 Casey 223, and the reason is that the assignment would have been another appropriation. The supposed case does not differ in principle from the present. It follows that the court erred in directing the jury to apply the payments made on the stock to the discharge of the first bond. Against the consent of the creditor such an application can be made only to the extent of what may remain after the second bond is paid.

Judgment reversed, and a venire de novo awarded.

Woodward, C. J., was absent at Nisi Prius when this case was argued.