This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
In allowing an action for money had and received, the law intended to allow a simple remedy for a recognized right, and did not intend to create a right where there was none already. B had been dealing with X, a stock-broker, and the result of the transaction showed a balance in B's favor. B requested A, X's agent, for a settlement of that balance, and asked A to pay it. A finally made such payment, expecting X to remit the amount to him at once. X was insolvent, and such amount was never remitted. It was held, that A could not recover such amount from B.1 A, the publisher of a newspaper, made a subscription to a fund for the relief of the families of certain firemen who had lost their lives in the discharge of their duty, and published an appeal in his newspaper for other subscriptions. A number of subscriptions were made, and the money was paid to A. It was held that the only child and heir of one of the firemen had no right of action against A to recover his part of the money so paid in as money had and received, since, under the terms of A's request the disposition of the fund thus paid in was left to his discretion and judgment.2 While it did not affect the legal rights of the parties, the dispute arose in this way: plaintiff was a minor, the only son and heir of one of the firemen for the benefit of whose families the money was collected. A consulted a legal adviser, and decided to deposit the plaintiff's share of the fund with a trust company until the plaintiff came of age. The lower court made certain orders as to the disposition of the income of that fund for the benefit of the plaintiff during his minority, and to which orders A did not except. In the Supreme Court, the plaintiff was the party complaining of error in the proceedings of the court below, in refusing to turn over the entire fund to himself or his guardian. Where an officer is holding over as de facto treasurer, his successor, not having been elected legally, a school district cannot compel him to pay over funds lawfully in his possession by an action for money had and received.3 If A obtains money from B, under circumstances which make him liable to refund, and uses the money in whole or in part to discharge a valid debt which A owes X, and X takes without collusion or fraud, B cannot recover in an action against X for money had and received.4 Thus, where A borrowed money of X, and to secure the same he gave a forged note and mortgage apparently signed by third persons, and subsequently A borrows money from B and gives another forged mortgage, and with a part of the money thus borrowed pays the first mortgage to X, B cannot recover from X.5 So, where A gets money from B by giving a note to which A signs the name of his principal without authority, and A uses the money thus obtained to pay debts of his principal, which A should have paid out of those of X, which should have been in A's hands but which A in fact had embezzled, it was held that B could not recover from X for the money thus used.6 So, where B, a vendee of land, has a right to rescind the sale, he cannot recover in an action for money had and received from one who has received no part of the purchase price, except what was paid to him by the vendor, A, as commission for bringing about the sale.7 So, where A gets money from B by a forged draft, and with part of the proceeds thereof he discharges a debt which he owes X, who knows nothing of the forgery, and who surrenders to A a note endorsed by a third person, B cannot recover from X.8 So, where A, who is shipping hogs under an arrangement with B, a firm of commission brokers, whereby he agreed to consign the hogs to B, and draw upon B with each consignment, and to use the money thus obtained in paying for the hogs, it was held that where A took part of this money and paid a debt owing by him to a bank, X, B cannot recover such money from X, although X knew of the arrangement under which the money was received, since the relation of A to B was that of mere debtor and creditor.9 So, where X, the cashier of a bank, who was also county treasurer, owes certain taxes to the state as county treasurer, and draws a draft which he signs as cashier of his bank, on another bank in which his bank has deposited funds, and forwards such draft to the state in payment of the taxes due him, which draft is accepted and paid, the bank of which X is cashier cannot recover from the state, although the cashier never paid the bank for such draft.10 The court held that the fact that the cashier had signed the draft, was no notice to the state that he was using the bank's funds for his individual debt.11 If facts exist which discharge the plaintiff's right of action upon an express contract, the same facts will prevent him from waiving the express contract, and suing on an implied contract.12 Thus, where A, had deposited money with B to invest, and subsequently A and B had an accounting and made a settlement, this accounting will not only bar an action upon the express contract between A and B, but also will bar an action for money had and received.13 If A has paid money to B under such circumstances that he cannot recover it from B, and such payment has discharged a debt due from C to B, A's right to recover from C cannot be litigated in an action brought by A against B, even if C is made a party thereto.14
5 Thompson v. Investment Co., 114 la. 481; 87 N. W. 438.
6 Elliott v. Swartwout, 10 Pet. (U. S.) 137.
1 Clippinger v. Starr, 130 Mich. 463; 90 N. W. 280.
2Hallinan v. Hearst (Cal.), 62 Pac. 1063.
3 School District v. Smith, 67 Vt. 566; 32 Atl. 484.
4 Craft v. R. R., 150 Mass. 207; 5 L. R. A. 641; 22 N. E. 920; Walker v. Conant, 69 Mich. 321; 13
Am. St. Rep. 391; 37 N. W. 292.
5 Walker v. Conant, 69 Mich. 321; 13 Am. St. Rep. 391; 37 N. W. 292.
6 Craft v. R. R., 150 Mass. 207; 5 L. R. A. 641; 22 N. E. 920.
7 Limited Investment Association v. Investment Association, 99 Wis. 54; 74 N. W. 633.
8 Alabama National Bank v. Rivers, 116 Ala. 1; 67 Am. St. Rep. 95; 22 So. 580.
9 Hurlburt v. Palmer, 39 Neb. 158; 57 N. W. 1019.
10 Goshen National Bank v. State, 141 N. Y. 379; 36 N. E. 316.
11 Distinguishing, Claflin v. Bank,
25 N. Y. 293, where one who took the president's individual check certified to by him as president was charged with notice that the president had no authority to accept his individual check on behalf of the bank.
12 Hammer v. Downing, 39 Or. 504; 64 Pac. 651; 65 Pac. 17, 990; 67 Pac. 30.