Opinion
Submitted October 30th, 1931.
Decided February 1st, 1932.
A creditor holding both a secured and unsecured debt may apply payments against the unsecured debt even though such application be disadvantageous to one who holds a subsequent lien on the same security.
On appeal from a decree of the court of chancery advised by Vice-Chancellor Bigelow, who filed the following memorandum:
"I have concluded that the complainant's exceptions to the master's report should be overruled. I agree with his counsel that if money paid on a mortgage be afterward repaid to the mortgagor, the lien of the mortgage cannot be extended to cover the amount of repayment to the detriment of the complainant; but it is also the rule that a creditor holding both a secured and an unsecured debt, may apply payments against the unsecured debt even though such application be disadvantageous to one who holds a subsequent lien on the same security. I apply these rules as follows:
"The bank, on January 28th, 1927, held the note of Landells for $3,250, secured by the mortgage in question. This debt was reduced to $3,110 by August 11th, when the bank made an additional loan to Landells of $650. This new loan was not secured by the mortgage as against complainant. Nor were the other new loans totaling $1,415 set forth in the master's report. But between August 11th, 1927, and the date of the report, Landells paid the bank $2,394, of which $2,065 is properly applied to the payment of the new loans and $329 should be applied as the master did, to the further reduction of the debt secured by the mortgage. This leaves the principal sum of $2,781 and interest of $82.97, making a total of $2,863.97 as stated in the report."
Messrs. Ely Ely, for the appellant.
Mr. Leo F. Reilly and Mr. Harry S. Town, for the respondent.
The decree appealed from will be affirmed, for the reasons expressed in the memorandum filed by Vice-Chancellor Bigelow. For affirmance — THE CHIEF-JUSTICE, TRENCHARD, PARKER, CAMPBELL, LLOYD, CASE, BODINE, DALY, DONGES, VAN BUSKIRK, KAYS, HETFIELD, DEAR, WELLS, KERNEY, JJ. 15.
For reversal — None.