Hill v. Gregory

Hill v. Gregory, Wythe 73 (1790), was a case that discussed whether a creditor could choose how to apply a payment among a debtor's different accounts in the absence of specific directions from the debtor.

Background

Fendall Southerland held a bill of exchange and a bond issued by Carter Braxton (the listed defendant, Roger Gregory, was executor of Southerland's estate). James Hill endorsed the bill of exchange, and so was also liable to Southerland for any amount of that bill that Braxton could not cover. Braxton assigned some securities to Southerland and claimed that their value would be credited to the bill of exchange, but Southerland credited them to the bond instead. Braxton had issued the bond in 1776, and had sold Southerland merchandise between 1777 and 1780. Southerland held Braxton's bill until 1784, and then Southerland filed suit and won a judgment for £361. Braxton was able to get this judgment reversed, and then in 1787, Southerland sued Hill and won a judgment for £1400. Hill sued and got an injunction from the High Court of Chancery, stating that Braxton had already paid off most of the bill, at which point the H.C.C. added Braxton as a co-plaintiff.

The Court's Decision

The High Court of Chancery allowed Southerland to credit Braxton's securities to the bond, stating that Braxton had not specified otherwise, and determined that the goods Braxton sold Southerland should be credited against the bond at their actual value as determined by the legal scale of depreciation. The Court of Appeals reversed, stating that it was evident that Braxton intended the payment to go towards the bill of exchange, and that therefore Gregory should credit the accounts that way. Furthermore, the Court of Appeals said that the merchandise Braxton sold Southerland during 1777 and 1778 had extra value at the time, due to the dangers of smuggling imports during the American Revolution, and that the goods sold during those years should be credited against the bond at the theoretical value they would have had back then. The rest of the goods, the Court of Appeals said, should be credited at their actual value, determined by the legal scale of 60 to 1 for goods from 1780.

Wythe's Discussion

Wythe begins by noting that it wasn't really necessary for the Court of Appeals to take a paragraph to affirm that the case had been properly brought before the High Court of Chancery, opining that this was well-settled law for nearly two centuries. Wythe then proceeds to describe Braxton's and Southerland's situation as a logical syllogism: the major proposition is the general legal principle that if a debtor does not specify which of several accounts a payment should be applied to, the creditor is free to apply that payment to whichever account the creditor chooses. The minor proposition is that when Braxton provided payment to Southerland, Braxton did not specify that the payment should go towards the bill of exchange. Therefore, Southerland was entitled to apply Braxton's payment to the bond. This syllogism, Wythe says, was the basis for the High Court of Chancery's decree. If the H.C.C.'s decision is in error, Wythe states, there must be a problem with either the major or minor proposition. The Court of Appeals seems to agree with the major proposition, Wythe continues, so unless the minor proposition was erroneous, the H.C.C.'s decision was proper.

The minor proposition, whether Braxton specified which account the payment should be credited to, is an issue of fact, and for this discussion, Wythe takes the facts as the Court of Appeals interpreted them.