
    Thomas R. Rutherford, assignee, etc., Resp’t, v. Julius Schottman et at., App’lts.
    
      (Supreme Court, General Term, Fifth Department,
    
    
      Filed June 23, 1888.)
    
    1. Confession of judgment—When fraudulent and void.
    Where the statement upon which a confession of judgment is made is not true, whether it was intentionally false, and thus the confession fraudulent in fact,is immaterial. . In such a case it would be fraudulent in law and the judgment confessed void.
    '2. Appropriation of payments — Law will not disturb appropriation MADE BY THE PARTIES.
    M. S. succeeded the firm of S. and Bros., and assumed the debts of that firm to another firm in New York city of the same name. M. S. continued to deal with the New York city firm and made payments from time to time. The accounts kept by M S., the debtor, contained no reference to the old account. The books of the New York city firm showed that an individual account was opened with M. S., immediately upon the dissolution of the firm of S. and Bros., while the old account remained inclosed for the rest of the year during which time only two credits were entered on the old account and those at a time when there was nothing due on the individual accounts The Balance of the old account was carried into the individual account at the end of the year. During that year the number of payments credited to the individual account was nine, aggregating $1,466.50. Held, that by the act and consent of the parties actual appropriation of the amount of $1,466 50 was made to the extinction of the individual indebtedness of M. S. That it was competent for the parties to make that appropriation; and being made the law does not operate to disturb it.
    Appeal from a judgment entered on the findings and •decision of the court at special term.
    
      Wm. F. Cogswell, for app’lts; I. F. Parkhurst for resp’t.
   Dwight, J.

The action was to set aside a judgment confessed by the plaintiff’s assignor to the defendants. The complaint contained several allegations of fraud, and of conspiracy to defraud the creditors of the assignor, which were either negatived or not found by the trial judge. But it was also alleged, and so it was found, that the statement, upon which the confession of judgment was made, was not true; and for that reason the judgment was held fraudulent and void as against the plaintiff.

The falsity alleged and found, consisted (in the main) of an over statement of the amount of indebtedness, resulting (in the main) from an under statement of the amount of payments made thereon; and the whole case, so far as we find it necessary to consider it on this appeal, is resolved into a question of the application of payments.

The question arises as follows: In August, 1883, the plaintiff’s assignor, Morris Schottman, of Bath, and his brothers Heiman and Jacob, formed a co-partnership in the clothing business at Bath, under the name of Schottman Bros., which continued until March, 1885, when it was dissolved. They bought goods of the defendants, Schottman Bros., of New York, and at the date of the dissolution, they owed the New York firm $1,930, which, as between themselves, w'as assumed by Morris, of Bath, who continued the business in his own name.

He also continued to buy goods of Schottman Bros, of New York, making payments from time to time; and, at the date of the confession of judgment, the balance of his indebtedness to the defendants, on both the old account of Schottman Bros, of Bath, and his individual account, was $4,201.50; being the amount for which judgment was confessed. But the statement upon which the confession was made was of an individual indebtedness merely, for goods sold to Morris Schottman alone, to the amount of $5,301.50, no part of which (it was stated), had been paid, except the sum of $1,100, leaving the balance of $4,201.50, for which judgment was confessed.

The statement, though correct as to the final amount of indebtedness, was plainly false as to its consideration, and. as to the aggregate of payments made thereon, unless, by the application of payments to the required amount, the old indebtedness had been extinguished; leaving only the individual indebtedness unpaid, and only the balance of the payments made, applicable thereto; and this, the appellants-contend, was the application of payments made by the law.

The rule of law relied upon is not open to question, nor its effect in applying the payments made, provided it was left for the law to make the application ; otherwise, if the parties themselves have made other application of those payments, or a portion of them. And so the question becomes one of fact. Did the parties themselves apply payments, as they were made, during the period in question, to the current individual indebtedness of Morris Schottman ?

This question the trial judge has, by implication, answered in the affirmative ; and, in so doing, we think he; was supported by the evidence.

First. It was altogether likely that payments would b& so applied. It could apparently make no difference to the debtor whether he paid the earlier or the later account; but to the creditors there was all the difference that existed between the responsibility of the three persons who were liable for the old debt, and that of Morris Schottman, who alone was liable for the new; and who, as the sequel showed, was all this time in failing circumstances.

Second. The books of both the parties indicate that a large portion of the payments in question were so applied.

The amount as kept by Morris Schottman, the debtor, contained no part of, or reference to the old account of the Bath firm, but was an individual account of new purchases from the New York house after the dissolution ; in which he credits himself with all the payments which, by his book, appear to have been made by him during the same period.

The books of Schottman Bros., the creditors, are even more significant upon the question of the actual application of the payments in question.

In those books an individual account was opened with Morris Schottman, of Bath, immediately upon the dissolution; whilst the old account of Schottman Bros., of Bath, remained unclosed. Two of the payments made by Morris during the year 1885 (amounting to $500) were credited to the old account, and all the remainder, during that year, were credited to the new and individual account of Morris Schottman.

No balance or footings were carried from the old account into the new until 1886; indeed, the old account was not footed until after the entry of the last of the two credits above mentioned (which was of October 5, 1885), nor, so far as appears, until the close of the year. Then the footings of the old account were figured into the individual account of Morris, and the balance of the whole was carried to the opening of his account for the year 1886.

So that during the year 1885, from the time of the dissolution of Schottman Bros., of Bath, all the payments made by Morris Schottman were credited to his individual account, with the two exceptions mentioned, which were credited to the old account. And those exceptions seem to have, peculiarly, the effect of “proving the rule.” The fact that they only, out of the whole number of payments, were so credited shows that a clear distinction was made between the two accounts. Why, then, two payments were credited in the old account is not explained by direct evidence; but a very reasonable explanation is suggested "by the fact (pointed out by counsel for the respondent) that at the times those payments were made, there was nothing due on the individual acccunb of Morris Schottman.

As we have already observed, the distinction between the two accounts was not maintained after the year 1885 ; but during that year the number of payments credited to the individual account was nine, and their aggregate was $1,466.50.

Thus we think, in the absence of any evidence to the contrary, the fact is established that by the act and consent of the parties, actual appropriation of the payments in question, to at least the amount of $1466,50, was made to the extinction of the individual indebtedness of Morris Schottman. It was competent for the parties to make that appropriation, and, being made, the law does not operate to disturb it. (See Hunger on the Application of Payments, p. 102, and the cases cited.) Besides the $500 specifically appropriated to the old debt and $1466. to the new, the payments made by the debtor amount to $1900. By the first appropriation the old debt was reduced to $1430; this left $470., of the payments not appropriated, to apply on the new debt in addition to the $1466 appropriated thereto; and the total credit applicable to the individual indebtedness of Morris Schottman, mentioned in the confession, was $1936, instead of $1100, as therein stated. This result supports the finding of the trial judge as to the falsity of the statement contained in the confession of judgment; and his conclusion of law is well founded upon such finding of fact.

Whether the statement was intentionally false, and thus the confession fraudulent in fact, is immaterial; it was fraudulent in law; and the judgment confessed was, consequently, void. Flour City National Bank v. Doty, 2 N. Y. State Rep., 336.

The judgment of the special term must be affirmed.

Judgment affirmed with costs.

Barker P. J., Haight and Bradley, JJ., concur.  