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 determining the right of one whose money has been placed in the hands of another to recover the same, we must distinguish between two general classes of cases. In the first class, the party who receives the money of another, receives it from a third person in whose hands it is, without the consent of the real owner thereof. In the second class of cases, the person receiving the money receives it from the real owner, or from a third person, with the consent of the real owner. The chief distinction in legal effect, between these two classes of cases, is this: In the first class, we are not embarrassed by the question whether the payment was a voluntary one. In the second class, in addition to the question of ownership of the original fund and the right to recover the same, presented in the first class, we have the further complicating question whether the payment was not a voluntary one, since if the payment was voluntary no recovery can be had although all the other facts might be such as to entitle the original owner to recover. If A receives money from X which belongs to B, without B's consent, the general rule is, that in the absence of special circumstances B may recover such money from A.1 A public officer, as a sheriff who has retained money which he claims to be due him as
13 Hammer v. Downing, 39 Or. 504; 64 Pac. 651; 65 Pac. 17, 990; 67 Pac. 30.
14 Holt v. Thomas, 105 Cal. 273; 38 Pac. 891; Langevin v. St. Paul, 49 Minn. 189; 51 X. W. 817.
1 United States v. Bank, 96 U. S. 30; Bayne v. United States, 93 U. S. 642; Brand v. Williams, 29 Minn. 238; 13 N. W. 42; Knapp v. Hobbs, 50 X. H. 476; Haebler v. Myers, 132 X. Y. 363; 28 Am. St. Rep. 589; 15 commissions, but which belongs to a board of education, is liable in an action for money had and received.2 A public quasi corporation, as a county which receives taxes and applies them all to its own use when it should pay bonds issued by a town out of such taxes, is liable to such town therefor.3 So, if a county receives money belonging to other persons without authority, it must refund to such persons.4 Thus, where taxes are paid in to a county by a sheriff, when they should have been paid to a city, the city may recover.5 So, where a county is divided, and the original county is legally entitled to taxes which were due when the division was made, but which had not then been paid, but the state officials through whose hands such taxes passed, pay a part thereof to the new county, the original county may recover such taxes from the new county.6 A stockholder who receives dividends when the corporation is insolvent, and the dividends are paid out of the capital of the corporation, knowing of such condition, may be compelled to repay such dividends in an action brought by the receiver of the company.7 Where a school trustee expends money for the actual use and benefit of township schools, which by law he is required to pay over to another school corporation, such township is liable to such corporation for the amount of money thus expended.8 If a wife has taken money belonging to her husband and paid premiums on an insurance policy, taken out by her upon his life without his authority, the husband may recover the premiums, thus paid from the insurance company.9
L. R. A. 588; 30 N. E. 963; State v. St. Johnsbury, 59 Vt. 332; 10 Atl 531.
2 Socorro Board of Education v. Kobinson, 7 N. M. 231; 34 Pac. 295.
3 Strough v. Jefferson County, 119 N. Y. 212; 23 N. E. 552.
4 Chapman v. County of Douglass, 107 U. S. 348.
5 Salem v. Marion County, 25 Or. 449; 36 Pac. 163.
6 Colusa County v. Glenn County, 117 Cal. 434; 49 Pac. 457.
7 Warren v. King. 108 U. S. 389; Davenport v. Lines. 72 Conn. 118; 44 Atl. 17.
8 Center School Township v. School Commissioners, 150 Ind. 168; 49 N. E. 961 (citing Argenti v. San Francisco. 16 Cal. 255; Merrill v. Marshall County, 74 la. 24; 36 N. W. 778).
9 Metropolitan Life Ins. Co. V Trende (Ky.). 53 S. W. 412.
Where the statute provided that property to the value of one thousand dollars is exempt from administration for the benefit of the widow and minor children, and such property is delivered to the widow, a minor child may recover its share from the widow in an action for money had and received, where the widow refuses to pay to such child its share of such amount.10 A village incorporated under an unconstitutional act, borrowed money from the state for school purposes. The county, as the agent of the state, collected from the village, and the township in which it was situated, the entire amount thus borrowed, and paid it to the state, and then collected another and additional sum as a part of such loan. It was held that the township could collect from the county the amount thus collected by the county in excess of the actual loan, the county having retained such excess of amount, and not having paid it over to the state.11 If X is indebted to B, and A collects from X the amount of this indebtedness under such circumstances that X is still liable to B, and cannot plead the payment to A as discharge of his liability to B, the question is presented whether B can recover from A for money had and received. Where A gave B a note, which B indorses before maturity to C, and X brought suit against B and garnisheed A, and A disclosed his indebtedness to B, and paid the amount of the indebtedness to the sheriff, who forwarded it to X, it has been held that C has no right of action against X on the theory that he had no claim to the specific fund, his right of action being against A.12 If X is indebted to B under circumstances which give B a property right in a specific fund, and A collects that fund from X under circumstances which leave X still liable to B, it has been held that B has an election to sue A or X at his option. If he sues A, A cannot defend on the theory that B has a right of action against X.13 On the other hand, it has been held that if B sues X, and obtains a judgment, this amounts to an election, and B cannot afterwards maintain an action against A.14 Thus, where A had deposited money in a savings bank, in trust for his wife, B, and the bank had given a pass-book for such money, and after the death of A and B, B's executor had demanded payment, but had been refused because he did not have the pass-book, and A's executor produced the pass-book and was paid by the bank, and B's executor sued A's executor and obtained a judgment, execution upon which was returned because no property could be found, and B's executor then sued the bank, it was held that the first action and judgment amounted to an election, and operated as a bar to the second action.15 If B has in some way obtained a lien upon a fund or property belonging to X, and this fund or property is delivered to A, he takes with full knowledge of B's lien, B can enforce the amount of his lien in an action against A for money had and received. Thus, where B seizes a certain property belonging to X on a judgment, and A with knowledge of the judgment induces the sheriff to sell the attached property and pay the proceeds to him, X can maintain an action against A for money had and received.16 So, where the sheriff wrongfully pays to A money in his hands which he should have paid to B, B has an election to sue the sheriff or A.17 So, where B obtained a judgment in an action against X, and A claiming a lien on the property, intervenes, and has the attachment vacated, and A then induces the sheriff to pay him the money made on such attachment, and on appeal the attachment is held valid, and B takes judgment against X, and shows an execution which is returned unsatisfied, X can maintain an action against A for money had and received.18 Where a de facto officer receives his fees and retains them the liability of the public corporation to the officer de jure is discharged; but the de jure officer may recover such fees from the de facto officer as money had and received.19 A legal right to a definite sum must be shown to enable the plaintiff to recover. A and B, each owning stock in a corporation, agreed jointly to sell their interests to X. By a secret agreement between X and A, A was to receive additional compensation. B sued A to recover his share of such amount. It was held that whatever B's rights might be in an action of deceit, or in a suit in equity for an accounting, he could not maintain this action.20 If A holds money in his hands which is claimed by B and X, and A voluntarily pays such money over to X, A is liable to B for money had and received if B proves to be the real owner thereof.21 Thus, where X stole B's money and deposited it with A, who took it in good faith, but before payment A was notified that the money was really that of B, A is liable to B for money had and received if after such notice he pays it to X on X's order.22 Since compensation fixed by law for members of a board is not to be distributed among them in proportion to the work actually done by each, one member may recover from another for money had and received where such member has collected the salary due the board but retained a disproportionate amount under the claim that he had performed more work than the other member.23 Where, contrary to law, attorneys' fees are included in the amount for which property is advertised on foreclosure of a mortgage, and the amount of the mortgage and such attorneys' fees is bid therefor, the mortgagor may recover from the party to whom such excess amount is paid.24 Thus, if the mortgagee bids in the property for the amount of the mortgage debt, costs, and such fees, the mortgagor may recover such surplus from him.25 If costs are included by the sheriff, which he has no right to include, as where the mortgagee buys the land in, and such costs are paid over by the sheriff to the county, the mortgagor may recover such amount from the county.26 If an excessive judgment is rendered, and the judgment creditor bids in the land for the full amount of such judgment and costs, and such judgment is subsequently corrected, the judgment debtor may recover such difference as surplus from the judgment creditor.27 If a check payable to B is forwarded to him, but stolen by X before B receives it, and X deposits such check with a bank, A, which collects the check and pays the proceeds to X, B may recover from such bank in an action for money had and received.28