Same - Money Paid Under A Mistake Of Fact

An important class of cases in which an action will lie as for money received by the defendant for the use of the plaintiff is where money is paid under a mistake of fact. As a rule, whenever a person makes a payment to another under such a mistake as to material facts as to create a belief in the existence of a liability to pay which does not really exist, the money may be recovered back as having been received by the person to whom it was paid for the use of the person paying it.68 If the mistake is caused by the fraud of the person receiving the money, or if he knows of the mistake when he receives the money, the case will fall within the class which we have already considered.69 We are speaking here of cases in which the mistake is not induced by fraud, and in which both parties may act in perfect good faith. Such an obligation arises where money is paid as due upon the basis of erroneous accounts, and upon a true statement of account is found not to have been due. It may be recovered as money received for the plaintiff's use.70 The money must have been paid under the belief that it was due. If the plaintiff knew that it was not due, and voluntarily paid it because he thought he could not show that it was not due. or for any other reason, it cannot be recovered back. This is not ignorance of fact, but ignorance of the means of proving a fact.71 The mere fact that the party paying the money suspects that it is not due does not bring the case within this rule. He must believe it is not due.72 It is essential that there shall have been a mistake of a material fact. A voluntary payment with knowledge of all facts cannot be recovered, even though there may have been no obligation to pay.73 . By the weight of authority, if the mistake occurs and causes the payment, it is immaterial that it arose from negligence or want of diligent inquiry on the part of the plaintiff, or from forgetfulness, or the fact that he had the means of knowledge;74 provided, however, the defendant has not so changed his position that he cannot be placed in statu quo.75 If the money is intentionally paid "without reference to the truth or falsehood of the fact, the plaintiff meaning to waive all inquiry into it, and that the person receiving shall have the money at all events, whether the fact be true or false," it cannot be recovered.76 A compromise, therefore, cannot be repudiated, and money paid recovered, on the ground of mistake, where it was made without reference to the truth or falsity of facts.77 But it is otherwise if there was a mistake as to a fact which was believed to be true, and on the belief in the truth of which the compromise was made.78

68 Bize v. Dickason, 1 Term R. 285; Citizens' Bank v. Grafflin, 31 Md. 507, 1 Am. Rep. 66; Barber v. Brown, 1 C. B. (N. S.) 121; Milnes v. Duncan. 6 Barn. & C. 671; Mills v. Guardians of the Poor, 3 Exch. 590; Mayer v. City of New York, 63 N. Y. 455; Rheel v. Hicks, 25 N. Y. 289; Hazard v. Insurance Co., 7 R. I. 420; Holtz v. Schmidt, 59 N. Y. 253; Clark v. Sylvester (Me.) 13 Atl. 404; McDonald v. Lynch, 59 Mo. 350; Glenn v. Shannon, 12 S. C. 570. See "Payment;' Dec. Dig. (Key-No.) § 85; Cent. Dig. §§ 272-281.

69 Sharkey v. Mansfield, 90 N. Y. 227. 43 Am. Rep. 161. This distinction, for several reasons, may become important. Where there is no fraud, for instance, a demand before suit is necessary; but where there is fraud (and it amounts to fraud if the other party knew of the mistake), demand is not necessary. Sharkey v. Mansfield, supra; Taylor v. Spears, 6 Ark. 381, 44 Am. Dec. 519. See "Payment," Dec. Dig. (Key-No.) § 85; Cent. Dig. §§ 878-281.

70 Dails v. Lloyd, 12 Q. B. 531; Townsend v. Crowdy, 8 C. B. (N. S.) 477; Stuart v. Sears, 119 Mass. 143; Keenholts v. Church, 57 Hun, 589. 10 N. Y Supp. 615. See "Payment," Dec. Dig. (Key-No.) § 85; Cent. Dig. §§ 278-881.

71 Keener, Quasi Conk 26; Windbiel v. Carroll, 16 Hun (X. Y.) KM. See "Payment," Dec. Dig. (Key-No.) § 85; Cent. Dig. §§ 272-281.

72 Keener, Quasi Cont. 28; National Life Ins. Co. v. Jones, 1 Thomp. & C. (N. T.) 466 [affirmed 59 N. Y. 649]. See "Payment," Dec. Dig. (Key-No.) § 85; Cent. Dig. §§ 212-281.

73 Adams v. Reeves, 68 N. C. 134, 12 Am. Rep. 627; Lemans v. Wiley, 92 Ind. 436. See "Payment;' Dec. Dig. (Key-No.) § 85; Cent. Dig. §§ 272-281.

74Kelly v. Solari, 9 Mees. & W. 54; Appleton Bank v. McGilvray, 4 Gray (Mass.) 518, 64 Am. Dec. 92; Devine v. Edwards, 101 I11. 138; Lawrence v. Bank, 54 N. Y. 432; Bell v. Gardiner, 4 Man. & G. 11; Townsend v. Crowdy, 8 C. B. (N. S.) 477; Waite v. Leggett, 8 Cow. (N. Y.) 195, 18 Am. Dec, 441; Kingston Bank v. Eltinge, 40 N. Y. 391, 100 Am. Dec. 516; Brown v. Road Co., 56 Ind. 110; Rutherford v. Mclvor, 21 Ala. 750; Baltimore & S. R. Co. v. Faunce, 6 Gill (Md.) 68, 46 Am. Dec. 655; Koontz v. Bank, 51 Mo. 275; Walker v. Conant, 65 Mich. 194, 31 N. W. 786; Citizens' Bank v. Rudisill, 4 Ga. App. 37, 60 S. E. 818. Contra, Brummitt v. McGuire, 107 N. C. 351, 12 S. E. 191; Wilson v. Barker, 50 Me. 447. See "Payment," Dec. Dig. (Key-No.) § 85; Cent. Dig. §§ 212-281.

75Keener, Quasi Cont. 71; Walker v. Conant, 65 Mich. 194, 31 N. W. 786. A change of position which is not irrevocable does not prevent a recovery. Phetteplace v. Bucklin, 18 R. I. 297, 27 Atl. 211. See "Payment" Dec. Dig. (Key-No.) § 85; Cent. Dig. §§ 272-281.

76 Kelly v. Solari, 9 Mees. & W. 54; McArthur v. Luce, 43 Mich. 435, 5 N. W. 451, 38 Am. Rep. 204; Mowatt v. Wright, 1 Wend. (N. Y.) 355, 19 Am. Dec. 508; Buffalo v. O'Malley, 61 Wis. 255, 20 N. W. 913, 50 Am. Rep. 137; Bergenthal v. Fiebrantz, 48 Wis. 435, 4 N. W. 89; Troy v. Bland, 58 Ala. 197. See "Payment," Deo. Dig. (Key-No.) § 85; Cent. Dig. §§ 212-281.

77 See cases cited supra, note 76.

78 Rheel v. Hicks, 25 N. Y. 289; Wheadon v. Olds, 20 Wend. (N. Y.) 174; Stuart v. Sears, 119 Mass. 143. See "Compromise and Settlement," Dec. Dig. (Key-No.) § 19; Cent. Dig. §§ 67-75; "Payment," Dec. Dig. (Key-No.) §.85; Cent. Dig. §§ 272-281.

A person cannot recover money paid under a mistake of fact if he has received the equivalent for which he bargained, so that there is no failure of consideration; and it is immaterial that he need not, and would not, have made the payment if he had known the true state of facts. Where a bank, for instance, pays the check of a depositor under the erroneous belief that it has sufficient funds, it may not recover from the payee the excess paid him over the amount to the depositor's credit.79 And it makes no difference that because of the overdraft it had a right to refuse to pay anything on the check.80 So the drawee may not recover money paid by mistake on a forged check or bill of exchange.81

In order that money paid may be recovered on the ground of a mistake of fact, the mistake must be as to a fact material to the legal duty to pay or to the legal right to receive something in return; and it is not sufficient that payment was made under a mistake which merely made it seem desirable or advantageous to pay.82