Hibbs v. First National Bank

112 S.E. 669, 133 Va. 94, 25 A.L.R. 120, 1922 Va. LEXIS 86

• Court: Supreme Court of Virginia
• Decided: June 15, 1922
• Status: Published

Opinion

Sims, J.,

after making the foregoing statement, delivered the following opinion of the court:

The questions raised by the assignments of error will be dealt with in their order as stated below.

1. Were the plaintiffs, under the circumstances, entitled to recover from the bank the money paid to it under the mistake of fact above set forth?

The question must be answered in the negative.

The principle upon which a right of recovery is based, in the case of money paid by mistake of fact, is well settled. The right of recovery, where it exists, is based upon the promise to return the money which the law implies, irrespective of any actual promise, and even against the refusal to make it, whenever the circumstances are such that ex aequo et bono the money should be paid back, but in such case only. Norfolk v. Norfolk County, 120 Va. 356, 91 S. E. 820; Lawson’s Ex’r v. Lawson, 16 Gratt. (57 Va.) 230, 80 Am. Dec. 702; Rinehart v. Pirkey, 126 Va. 346, 101 S. E. 353; 2 R. C. L. sec. 38, pp. 784-5, sec. 8, pp. 749-750; 6 Idem. sec. 7, pp. 588-9; Moses v. Macfarlen, 2 Burrows, 1012; 3 Pomeroy’s Eq. Jur. (3rd ed.), sec. 1238; Bend v. Hoyt, 13 Pet. 263, 10 L. Ed. 154. Accordingly, it is well settled that money paid under a mistake of fact cannot be recovered back where the payment has caused such a change in the position of the payee that it would be unjust to require him to refund. 21 R. C. L., sec. 201, p. 170; 2 Elliott on Contracts, sec. 1390; Grand Lodge, etc., v. Towne, 136 Minn. 72, 161 N. W. 403, L. R. A. 1917E, 344, and note pp. 353 et seq.; Walker v. Conant, 65 Mich. 194, 31 N. W. 786.

As said in 21 R. C. L., sec. 201, p. 170: “The rule that money paid under a mistake of fact may be recovered back does not apply where the payment has caused such a change in the position of the other party that it would be unjust to require him to refund.” ■ — Citing numerous American and English cases. To the same effect is section 1390 of Elliott on Contracts.

In Grand Lodge, etc., v. Towne, supra, this is held: “In an action to recover for money had and received under a mutual mistake, defendant is not liable where he has irrevocably altered his position to his loss in reliance upon the payment.”

In the instant case the defendant bank was entirely without fault in bringing about the mistake. The mistake was made by an employee of either one or the other of two agents of the plaintiffs, for whose selection the bank was in no way responsible, and it must, therefore, be regarded as a mistake wholly made by the plaintiffs, in so far as this action is concerned. The bank, upon receipt of the payment and in reliance thereon, before it had any notice of the mistake, placed the money to the credit of the checking account of Duffey with the bank, and so notified the latter. Thereupon, the relationship between the bank and Duffey was changed — from that in which the bank was a mere agent for Duffey to sell and collect the proceeds of the stock — into that of general depositor on the part of Duffey and debtor on the part of the bank, from which resulted the unconditional right of Duffey to cheek upon the deposit. 3 Am. & Eng. Enc. of Law (2nd ed.), 826, citing numerous cases and among them Robinson v. Gardiner, 18 Gratt. (59 Va.), 509. Such being the case, the bank had no right to thereafter charge back the amount of the deposit against the account of Duffey without his consent, upon any happening whatsoever. It had become the unconditional debtor of Duffey to the amount of the deposit. It could not thereafter impose any condition upon that relationship. It was just as if Duffey had deposited the money in the bank derived from some source with which the bank had no connection. It was not the case of a deposit of commercial paper made and received as a deposit under a special arrangement, express or implied, from the usual course of dealing between the depositor and the bank, or otherwise, by which the depositor had merely a conditional right to check upon the amount of the deposit, subject to the right of the bank subsequently to charge back to the account the amount of the deposit, should the bank fail to realize upon the paper. See cases of that character referred to in Bank v. Bragg, 127 Va. 47, 102 S. E. 649, 11 A. L. R. 1034.

There are many cases and authorities which deal with the effect of the negligence of the payor plaintiff (by reason of which the mistake is occasioned), upon the right of recovery back of money paid under a mistake of fact, where the payee defendant is free from fault, or is less in fault than the payor; but as there is present in the case in judgment the element of the change of status quo ante aforesaid, which, certainly where the payee is wholly without fault, of itself renders it unjust that he should be required to refund to the payor, .we have not entered upon any specific consideration of the cases and authorities concerning the comparative degrees of the negligence of the plaintiff and the defendant or the effect of the negligence in such cases.

It is argued in behalf of the plaintiffs that the bank, upon receiving notice that payment had- been made under the mistake of fact aforesaid, at the least owed to the plaintiffs the duty of instituting an inter-pleader proceeding, convening the plaintiffs, Duffey and Sprague, before the court, and thus having the rights of all parties determined while the money was yet in the hands of the bank. The answer to this, however, is obvious. The bank would have owed such duty only had it had control of the money at the time it received such notice. As we have seen, it then no longer had such control. It had prior to that time become the debtor of Duffey for the money, and as much so as if Duffey had obtained it from some source with which the bank had no connection and of which it had had no information.

2. Were the plaintiffs, under the circumstances, as the jury were warranted in finding, and as, therefore, we must find them, entitled to recover from Duffey the money which, in effect, came into his hands as a result of the payment of it to his agent, the bank, by the plaintiffs, under the mistake of fact aforesaid, or any part thereof?

This question must also be answered in the negative.

The principle and the considerations affecting the right of the plaintiffs to recover of Duffey are, manifestly, in general the same as those above considered as affecting the right of recovery of the bank; and there was the same entire absence of fault on the part of Duffey, as there was on the part of the bank, in bringing about the mistake; and also an absence of all responsibility for the employment of those, one or the other of whom made the mistake; so that the mistake, in so far as Duffey is concerned also, must be regarded as a mistake wholly made by the plaintiffs. Further: And since in the case of Duffey also, we find the presence, as claimed, of the element of change of status quo ante, which, if true, must have the same effect upon his liability as upon that of the bank, we shall, upon the question now before us, confine ourselves to the consideration of whether there was sufficient evidence before the jury to warrant their finding that there was such change of status, and, if so, whether there was evidence before the jury from which they could properly reach the conclusion that Duffey, in equity and good conscience, did nothing which forfeited his right to rely upon such change of position.

That Duffey, on receipt of information from the bank, on December 13th, that the money was paid to the bank and had been deposited to his credit (which was three days before he had any notice of the mistake aforesaid), drew and sent his cheek upon the bank to Sprague for one-half of the money in question, which belonged to Sprague, was shown by the evidence without controversy. This was a change of position on the part of Duffey, caused by the payment to the bank, which, certainly in view of the subsequent actual enforced payment of the money by Duffey to Sprague under the judgment therefor obtained by the latter, plainly made it unjust that he should be required to refund that portion of the money to the plaintiffs; unless it appears from the evidence that Duffey, by his conduct, caused the plaintiffs to lose some remedy of theirs against Sprague, or the bank. As bearing on this single point, there is conflict in the evidence as to the conduct of Duffey in one particular. The testimony for the plaintiffs is to the effect that after Duffey had phoned to the bank, stopping the payment of the check to Sprague, Duffey stated to one of the plaintiffs that he (Duffey) would have a talk with the cashier of the bank and let the plaintiffs “know” something further about the matter,-— just what he was to let the plaintiffs “know” is not disclosed by the evidence. Duffey, in Ms testimony, denied that he made any such promise. Now, in the first place, that conflict in the evidence presented a question of credibility of the witnesses, which the verdict concluded in favor of Duffey. Secondly: There is no evidence for the plaintiffs showing that they relied upon such a promise on the part of Duffey to their detriment in any way. Certainly the plaintiffs did not lose any remedy against the bank, or Sprague, by reason of reliance upon such a promise, because one of the plaintiffs, Mr. Spaid, testified that about two weeks after he claimed that tMs promise was made, he inquired of the bank what further had been done about tbe matter, and was given actual or constructive notice from tbe bank of bow tbe matter then stood — at wbicb time tbe matter stood precisely as it did at tbe time tbe alleged promise aforesaid was claimed to bave been made by Duffey, in so far as tbe remedies of tbe plaintiffs are concerned. Tbat is to say, at botb of sucb times tbe position of tbe bank was sucb tbat there was no liability upon it, and Duffey bad not paid any money to Sprague. And, as appears from Mr. Spaid’s testimony, tbe plaintiffs did not, after sucb notice from tbe bank, rely upon any alleged promise of Duffey, but immediately placed tbe matter in tbe bands of tbeir attorneys. Tbe plaintiffs bad every remedy, at tbe latter time, against tbe bank, against Sprague, and against Duffey, tbat they bad at tbe time o.f tbe alleged promise on tbe part of Duffey to inform tbe plaintiffs further about tbe matter. And so far as losing any remedy against Sprague is concerned, tbe plaintiffs, as tbe evidence showed, never even made any demand upon Sprague for any part of tbe money.

Tbe sole remaining enquiry is, whether tbe application by Duffey, of tbe other half of tbe money in question, to tbe satisfaction of Sprague’s indebtedness to him, and bis acquittance of Sprague of sucb indebtedness, in pursuance of tbeir prior mutual understanding and agreement to tbat effect (wbicb application and acquittance occurred upon Duffey’s receipt of notice from tbe bank tbat tbe payment of tbe money into bank bad been made, as aforesaid), constituted sucb a change of position on tbe part of Duffey, with respect to sucb half of tbe money, tbat it would, in equity and good conscience, be unjust to require Duffey to refund sucb money to tbe plaintiffs? This was unquestionably so, if, by sucb applicátion and acquittance, Duffey released Sprague from the obligation of his indebtedness aforesaid, and if such obligation, if it had not been released, would have been worth anything, however little, to Duffey. Now it is elementary that this transaction did release Sprague from such obligation, if it amounted to an accord and satisfaction; and, in view of the evidence in the case showing the position Sprague occupied in business some two years before and that Duffey had recently rendered professional services for him for which Sprague had paid the fees, the jury were warranted in finding, and, hence, we must find, that the obligation of said indebtedness would have been worth something to Duffey, if it had not been released. Our concluding enquiry is, therefore, reduced to this question: Did the transaction under consideration amount to an accord and satisfaction in contemplation of law? We think that it did.

As disclosed by the evidence it would seem that, more probably, the claim of Duffey against Sprague, was not a definitely ascertained amount — was not evidenced by an obligation for a definite sum — but was merely the reasonable value of certain professional services rendered by Duffey at the instance and request of Sprague; that is to say, it was an unliquidated demand. If that was so, the agreement between Sprague and Duffey, fixing its amount, as between eight hundred and a thousand dollars, constituted an accord. And, in such ease, the application by Duffey of the one-half of the money in question to the satisfaction in full of the indebtedness • and his complete acquittance of Sprague from the obligation thereof, in pursuance of the prior agreement authorizing him so to do, while that agreement still existed, executed the accord; so that, at common law, the accord and satisfaction became complete. But even if the indebtedness was a liquidated demand, the aforesaid application of the money was an express acceptance thereof by the creditor in full satisfaction of the debt, in pursuance of the agreement aforesaid; so that, under the statute (Code sec. 5765), the same result followed. The accord and satisfaction having thus become complete, it could not have been rescinded by Duffey alone, without the consent of Sprague. It, therefore, extinguished and operated as a final bar to the obligation of said indebtedness, either at common law (R. C. L., Article “Accord and Satisfaction,” sections 1, 30, 35, 38), or under the statute (Code, sec. 5765).

The case will be affirmed.

Affirmed.