
    NO. 7430
    CONSERVATIVE HOMESTEAD ASSN. VS THOMAS A. POLLACK JR., ET AL.
    STATE OF LOUISIANA COURT OF APPEAL PARISH OF ORLEANS.
   0EI1II0H»

By his Honor John St. Paul;

This is a processing in concurso arising out of a Building contract, but the only issue before us is a controversy between the surpty on the contractor's bond and two furnishers of material, the precise point involved being whether certain credits received by the latter have been properly imputed.

1.

At the very outset it is urged that the statute (Act 262 of 1916) provides that the surSty on a contractor's bond shall be limited to such defenses only as the contractor himself might make; and since the contractor does not, and (it is said) cannot, complain of the imputations of payment herein made, it follows that the surEty cannot do so.

But it is manifest that the statute cannot be given a strictly literal interpretation without leading to consequences clearly not intended by the legislator; thus if the surety be a minor, or an interdicted person, it is not to be doubted that the tutofc or curator of such person could set up the minority or interdiction as a defense, although suoh minority or interdiction could not possibly auail the contractor as a defense.

Hof can we doubt that where the person seeking to hold the surity has done some act prejudicial to the rights of the surPty, the latter may set it up as a defense even though it would/have availed the contractor, who might have been a party to such act or might not have been Injured by.it. Conn vs Guaranty Co, 13 Ct of App 99 (102); Panama Sash Co vs Guaranty Co, 12 Court of App. 15; Meyer vs Bichow, 133 La. 975 (982).

We are therefore of opinion that the olauso in the Statute, providing that the surfty #### shall be confined to such defenses as the contraitor Himself might make, must be taken with this limitation, that the party invoking the clause must himself have done nothing a to prejudice tho rights of the surety, since it is well settled maxim of law that no man may profit hy his own wrong.

11.

It is also urged that a surlty cannot complain of an imputation of payment of which the principal debtor does not complain; that an allottment of payment satisfactory to the principal debtor must be accepted and accjjiiesed in by the surity.

But the law is, that the rights of third persons, especially of sureties, though not controlling, must yet be considered in applying payments; and"where'the payment, with the knowledge of the creditor, is MSétéété derived from such third person, or from a fund connected with the secured debt, it must b,e applied thereto"; 30 Cyc 1251-1252; See also Panama Sash Co vs Guranty Co, 12 Ct of App p. 15 (and authorities cited P. 204; Also Burbank vs Buhler 108 La 39; Roca vs Caruso, 7 Ct of App 451; Jordy vs Judlin, 9 Ct of App 43.

The preliminaries settled we now proceed to considdr the precise matter before us.

111.

The claim of W. H. Ward, doing business as the Algiers saw Sc Planing Hill, for (¡>1944.56 is not disputed as to amount; but the surity claims that the five payments amounting in all to $1725 should have been imputed go items sold to the contractor for the Conservative Homestead (or Kraft) Job, and should not have been imputed to other though older accounts.

As to this, the first of these payments ($300) was derived only for a third part from a payment by the Homestead to Pollock (the contractor), and the last payment (also #300) cannot be traced to any payment by the Homestead. The three other payments (in all $1125) appear to have come out of payments made by the Homestead .

But In each instance the payments received by Pollock fro* the Homestead were deposited in his own hank account and ha raid Ward with his own personal check upon his own hank; and both Vara and Pollock 3wear that Ward was not told and did not know whfnoa the funds were derived, and was not directed to impute them in any particular -¿“4 it also appears that Pollock had a number of other jobs on hand, so that there was no reason for Ward to know that Pollock was receiving funds from any#source morí another.

Under the circumstances we think Ward was entitled to input* the payments to the older accounts as he did; the authorities sham quoted by us holding that the obligation to Inputs' payment ts terns particular account arises only when the creditor knows thsfoonrce from which the funds were derated.

IV.

The claim of F. C. Duvio for #1049,48 is also not disputed as to amount. But here also the surfty claims that three psysents of #540.74,#412, and #260, fin all #1X22.74) should have been imputed to the Kraft or Homestead job as the older account, and not to certain other accounts as was done. -

The faota are that these three payments were not derived from the Homestead, but the first earns from the Suburban Drug Store, or Weilbaohsr job, the second from the Joseph Iripol^no.. Job, and the third from the Peter Taluto Job.

At the time the last of these payments was received (Npvenbsr 23rd) they would S### just have sufficed to wipe out the open account against Pollock as it stood on Duvio's books, including the items for tha Homestead or Kraft job, the last of which was charged on November 18th.

But Duvio undertook to impute the payments t.o two certain items, as follows; to a note which he held against Pollock for #805.01, and to an item of #217.85 which Pollock owed to one Sus Peterson, who in turn owed Duvio the same amount, Duvio agreeing tío accept Pollock as his. debtor, in place of Sus Seteraon.

Ah this latter transaction took place on December 8, that is to say, more than fifteen days after Duvic received the last payment; and as the transaction shows on its face that it was nothing more than a- hold attempt to unload on the surfty in this case the debt which Gus Peterson owed Duvic, we shall devote no space to a consideration of why the position taken by Duvic as to this item cannot be countenanced.

As to the note of $805, which Duvic held against Pollock, it was not due until November 27th and was in bank for collection three it when all payments were received by Duvic. There remained until its maturity and apparently was taken out by Duvic only about the time when the Gus Peterson matter was arranged, on which day (December, 8th) Duvic and Pollock made up a set of accounts and imputed the various payments in a manner satisfactory to themselves, hut which was clearly meant to wipe out all Pollock's indebtedness to Duvic sake and except the indebtedness for which this surfty was bound.

Sut as thi3 last named indebtedness was due and owing at the time the payments were received, and the note had not yet matured, it is clear that the payments must be imputed to the past due open account.and not to the note unless the equities of the ease should require otherwise.

But there is no equity which does so require. For the ledger account of Duvic shows that this note did not Include any indebtedness on the Trapolino or on the Taluto jobs, and included only $117.20 on the Weilbaeher Or Suburban Drug Store Job.

So that the most that equity and the principles above discussed would require in this case, would be that $117.20 out of the Weilbacher payment' be imputed to the note and the. rest to the account current.

But even this should not be allowed.

The taking of the note novated that account, not beacuse a debt is novated by the mere taking of a note thereforf, but because Duvic by striking a general balance and accepting a note in settlement of that balance, has so far confused, the various items of the acoount that they are no longer separable; since Duvio could no longer claim any one item separately from the rest, or Pollock tender payment of any one item without tendering the whole. C. C. 2052-366S. £/•£? •S@64 .llf'f-

February 1919.

And it is very generally agreed that a confusion of several distinct debts so as to render them no longer seperable operates a novation. Baudry-Lacantinerie, Proit Civil Vol 13 (obligations Vol 3) No. 1708 (1710)

Moreover, Duvic hating discounted the note with the bank, thereby changing the creditor, that itself operated a novation under our jurisprudence, Woolfolk vs Degelos, 24 An 199; C. C. 2189 #3.

And again sinoe the bank held the note when the payments were received by Duvio, it is a presumption that they were made on the open account, and not on the note which was not the property of Duvic. Act 64 of 1904 Sec 74, C. C. 2140.

We are therefore of opinion that the payments received by Duvic should have been applied on the open account and not to the unmatured note, and the judgment appealed from must be amended accordingly.

It is therefore ordered that the judgment appealed from be amendea by striking therefrom the item of #1049.42 in favor of F. C. Duvic as a charge against the surPty herein (United States Fidelity and Gauranty Co), and as thus amenaed the judgment is affirmed; the costs of this appeal to be borne one half by P. C. Duvic and one half by the United States Fidelity & gauranty Co.

Hew Orleans La,

OH REHEARING.

Per Ourlaw.

for the reasons assigned In the matter of Mrs Jalla Campagno, Praying for a Conoursua, Ho. 7443, this day decided,

It la ordered that, aa between the United States fidelity and Suranty Co and W. H. Ward, both our former teoree and the judgment of the lower oourt he reversed, and that the ease he remanded to the eourt a qua to he tried and deoided in aooordanoe with the views expressed In the opinion and final deoree handed down in said cause Ho. 7443.

Hew Orleans, la, May 1919.  