IMPUTATION OF PAYMENT. In Civil Law. The application of a payment made by a debtor to his creditor.
The rules covering this subject are thus stated, substantially, in Howe, Studies' in the Civil Law, 156: 1. The debtor may apply his payment as he pleases, with the exception that in case of a debt carrying interest it must be first applied to discharging the interest.
2. If the debtor makes no, application, the creditor may apply the funds by infOrming the debtor at the time of payment.
3. The law imputes in the neglect of the parties to do so, and it will be made by the law in favor of the debtor, It directs that imputation which would have been best for the debtor at the time of payment, Hence it applies the funds to obligations most burdensome to the debtor : e. g. to a debt which is not disputed, rather than to one that is; to a debt that is • due rather than to one that is not ; to 'one on which the debtor may be arrested, rather than to one on which he cannot; to a debt for which the debtor has given rather than to one which he owes singly ; to a debt for which the debtor is principal obligor, rather than one of which he is merely surety ; to a mortgage rather than to an unsecured debt, and to a debt which would render the debtor insolvent if unpaid, rather than to any less important one.
4. Of debts of equal grade, if there be no imputation by the parties, the application will be to that of the longest standing.
5. To debts of the same date, and in other respects equal, the application will be pro rata.
6. As to debts bearing interest, the im putation is to interest before principal.
When the creditor is to pay himself out of a fund realized,—for example, from the sale of property pledged,—he should apply the money to the debt secured by the pledge, rather than to some other;' to interest be fore principal ; to the debt of the highest rank, rather than to those of lower rank; and if there are several of equal rank then pro rata.
Some of 'these rules have been followed in England and America, some decisions fol lowing the exact language of the Roman law,. See 1 Sto. Eq. Jur. 13th ed. § 459; hut see APPROPRIATION OF PAYMENTS.
In Louisiana the preceding civil law rules are in force. The statutory enactment, Civ. Code, art 2159, is a translation of the Code Napoldon, art. 1253-1256, slightly altered. See Pothier, Obl. n. 528, by Evans, and notes. Payment is imputed first to the discharge of interest ; Hynson v. Maddens, 1 Mart. N. S. (La.) 571; Estebene v. Estebene, 5 La. Ann. 738. But if the interest was not binding, being usurious, the payment must go to the principal; Hynes v. Cobb, 2 La. Ann. 363; Compton's Ex'rs v. Compton, 5 La. Ann. 616. The law applies a payment to the most bur densome debt; Hanse & Hepp v. Ins. Co., 10 La. 1, 29 Am. Dec. 456; Pargoud v. Griffings' Adm'r, 10 La. 357; Louisiana State Bank v. Barrow, 2 La. Ann. 405; McElrath v. Dupuy, 2 La. Ann. 520. A creditor's receipt is an irrevocable imputation, except in cases of surprise or fraud; Bloodworth v. Jacobs, 2 La. Ann. 24; Adams v. Bank, 3 La. Ann. 351. See APPROPRIATION OF PAYMENTS.