Appeal from the Circuit Court of DuPage County; the Hon. JOHN
A. KRAUSE, Judge, presiding. Judgment affirmed.
MR. JUSTICE DAVIS DELIVERED THE OPINION OF THE COURT.
Rehearing denied December 9, 1965.
The issue before this Court is whether, under the circumstances of this case, the plaintiff, Harry W. Kuhn, Inc. (herein called Kuhn), as a creditor of the defendant, Vincent Di Vito (herein called Di Vito), made an improper application of funds which Di Vito had received from the Village of Winfield (herein called Winfield) and had paid to Kuhn.
On or about October 19, 1960, Di Vito was awarded the contract for the construction of a sanitary sewer system in the Village of Winfield. De Vito procured a bond for the payment of all labor and materials furnished by subcontractors, as required by the provisions of Ill Rev Stats 1963, c 29, (Contracts), sec 15. The Standard Accident Insurance Company, which was subsequently merged into The Reliance Insurance Company, was surety on the bond. Kuhn furnished gravel and hauling services, as a subcontractor, on the Winfield project and subsequently brought this action against Di Vito and the surety, under the provisions of Ill Rev Stats 1963, c 29, sec 16, for monies due him for such labor and materials.
During the period beginning January 26, 1961 and ending November 18, 1962, Di Vito paid $11,500 to Kuhn. Defendants urge that these payments were made from funds derived from the Winfield project; that Kuhn wrongfully applied them to antecedent debts of Di Vito and may not, under the doctrine of Alexander Lumber Co. v. Aetna Acc. & Liability Co., 296 Ill. 500, 129 N.E. 371 (1921), recover from Di Vito and the surety for labor and materials furnished in connection with the Winfield project. Kuhn contends, and the trial court in the bench trial found, that applying the first-in, first-out principle, only $3,000 of the payments received by Kuhn were from Winfield funds; and that after crediting this amount to the total indebtedness due from Di Vito on the Winfield project, there remained due to Kuhn thereon, the sum of $8,316.15, for which both Di Vito and the surety were liable. This appeal is from the judgment entered in the trial court in favor of the plaintiff in that amount.
Kuhn made the first delivery on the Winfield job in November of 1960. At that time Di Vito owed Kuhn $4,715.56 on non-Winfield jobs. Between November 1960 and January 26, 1961, Kuhn provided services and materials on the Winfield job totaling $200. On the latter date, when he had a bank balance of $7,382.51, none of which was derived from Winfield sources, Di Vito deposited the sum of $32,980 from the Winfield project and $2,325.33 from other sources and paid Kuhn $2,000. Applying the first-in, first-out principle, none of this $2,000 payment was from Winfield funds.
Thereafter, on February 10 and 14 and March 8, Di Vito deposited $17,120.55 from non-Winfield sources. On March 16, his bank balance was $3,535.17, after which he deposited $48,200 from the Winfield project. On the next day March 17, 1961, Di Vito paid Kuhn $2,000. Continuing with the first-in, first-out principle, this payment was also from non-Winfield funds.
On March 23 and April 18, Di Vito received $8,285 of non-Winfield funds; on April 24, he received $25,820 from the Winfield project; and on May 10, 1961, when his balance was $15,537.02, Di Vito paid Kuhn the sum of $1,500, which under the first-in, first-out principle, was all from Winfield funds.
Thereafter, on May 15, June 1 and 2, Di Vito deposited a total of $17,100, none of which was Winfield money; on June 16, he deposited $25,400 of Winfield funds, and on June 19, 1961, paid Kuhn $1,500 when his bank balance was then $29,665.45. As only the last $25,400 of this balance was Winfield money, the $1,500 did not come from Winfield sources.
Between June 30 and July 10, 1961, Di Vito deposited $4,706 from sources other than Winfield. On July 17, 1961, he paid Kuhn the sum of $1,500, when his bank balance totaled $9,339.60. As only the last $4,706 of this balance was non-Winfield funds, all of the $1,500 payment was from Winfield funds.
On July 18, 1961, Di Vito deposited $32,000 from the Winfield project. The Di Vito bank statement for the month of August was not produced, but his bank balance as of July 31 was $11,042.03 and the balance as of August 31 was $36,391.73. While we do not know the full extent of deposits and withdrawals during August, we do know that there was a net gain of $25,349.70, all of which was from non-Winfield sources. On September 16, at a time when his bank balance totaled $18,300.74, Di Vito paid Kuhn another $1,000. This payment was derived from the deposits made in August and was not, therefore, from the Winfield funds.
Thereafter, from September through November, substantial amounts were deposited from non-Winfield sources. Nothing was deposited from the Winfield project. The last payment made to Kuhn was on November 18, 1961, in the sum of $2.000. None of this was from Winfield funds. Under the theory advanced by Kuhn, it is clear that of the $11,500 paid by Di Vito to Kuhn, only $3,000 can be traced to Winfield funds. Applying this as a credit on the amount due for the Winfield project, Kuhn had the sum of $8,316.15 remaining due to him.
The application of voluntary payments by the creditor, either with or without direction from the debtor, and where neither has made an appropriation thereof, the application by the court, as well as the rights of third parties secondarily liable on one or more of the debts under consideration, has produced a substantial body of law wherein courts have applied diverse rules to the end of dispensing intrinsic justice between the parties. 29 ILP (Payments) secs 21, 22 and 23, pp 492-500; 26 West's Ill Digest, (Payments) secs 36-47 incl, pp 382-392; Callaghan's Ill Digest, (Payments) secs 22-28, pp 608-616; 70 CJS (Payments) secs 50-80, pp 255-282; 40 Am Jur (Payments) secs 108-150, pp 790-817.
In Dehner v. Helmbacher Forge & Rolling Mills, 7 Ill. App. 47 (4th Dist 1880) at page 49 the court succinctly stated the general rule pertaining to the ...