Sec. 796. Payment By One Not Beneficial Owner

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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.

Sec. 796. Payment By One Not Beneficial Owner

If one person who has in his hands money of which another person is the beneficial owner, a payment by the holder of such money to a third person is not such a voluntary payment by the real owner thereof as to prevent him from recovering it if it is made without his authority and if not in payment of a claim justly due from him. The principle of voluntary payments does not apply where the recovery is sought by one having a beneficial interest in the money paid, and the payment was not made by him but by some one acting as his trustee, agent, and the like, and the person receiving the money knew that the person paying it was acting in such capacity. Thus, where an assignee for the benefit of creditors pays debts out of priority, the creditor who receives the money and notes out of the trust estate, is liable to the creditors to whom such money should have been paid.1 Money of a principal, paid by his agent without authority, may be recovered by his principal from the person to whom it was paid.2 Thus if a bank cashier pays his own debt by entering the amount thereof as a credit on the pass-book of his creditor, and such creditor draws checks against such credits and the checks are paid, the bank may recover the amount of such checks from such creditor ;3 so if the cashier of a bank gives the draft of the bank in payment of his own debt, the receiver of the bank may recover from such creditor.4 Accordingly, payments of public money form an exception to the ordinary rules as to voluntary payments and payments under mistake of law, since the payments are always made by public officers, and not by the public, which is really beneficially interested in such money. Thus, money which is paid out by public officers in violation of the law, may be recovered from the person to whom it is paid.5 The fact that the payment was voluntary on the part of the officer, does not prevent the public from recovering.6 A government may recover money paid by a public officer under an erroneous construction of the law, and without any legal authority therefor.7 So if money is paid out by a public officer upon a contract, which the corporation represented by him had no power whatever to make,8 or upon a claim which the corporation had no power under any circumstances to allow,9 such payment may be recovered. Accordingly, if a public officer draws money from the public treasury,10 as his compensation,11 such as his salary,12

11 Fletcher v. Waring. 137 Ind. 159; 36 N. E. 896.

12 Maylmry v. Berkery, 102 Mich. 126; 60 N. W. 699.

1 Dickie v. Northup, 24 N. S. 121. 2 Rogers v. Batchelor, 12 Pet. (U.

S.) 221; Dob v. Halsey, 16 Johns. (N. Y.) 34; 8 Am. Dec. 293; Mt. Verd Mills Co. v. McElwee (Tenn. Ch. App.), 42 S. W. 465.

3Hier v. Miller, - Kan. -; 63 L. R. A. 952; 75 Pac. 77.

4 Campbell v. Bank, 67 N. J. L. 301; 91 Am. St. Rep. 438; 51 Atl. 497.

5 Weeks v. Texarkana, 50 Ark. 81; 6 S. W. 504; McLean v. Montgomery County, 32 111. App. 131; Snelson v. State, 16 Ind. 29; Heath v. Albrook, - la. -; 98 N. W. 619; Adams v. Power Co., 78 Miss. 887; 30 So. 58; Demarest v. New Barbadoes, 40 N. J. L. 604; People v. Fields, 58 N. Y. 491; (Board, etc., of) Richmond County v. Ellis, 59 N. Y. 620; Commonwealth v. Field, 84 Va. 26; 3 S. E. 882; Tacoma v. Lillis, 4 Wash. 797; 18 L. R. A. 372; 31 Pac. 321; Frederick v. Douglas County, 96 Wis. 411; 71 N. W. 798.

6Ft. Edward v. Fish, 156 N. Y. 363; 50 N. E. 973.

7 Wisconsin, etc., R. R. v. United States, 164 U. S. 190; McElrath v.

United States, 102 U. S. 426; United States v. Bank, 15 Pet. (U. S.) 377.

8 Griffin v. Shakopee, 53 Minn. 528; 55 N. W. 738; Chaska v. Hed-man, 53 Minn. 525; 55 N. W. 737.

9 Ward v. Barnum, 10 Colo. App. 496; 52 Pac. 412.

10 Ada County v. Gess, 4 Ida. 611; 43 Pac. 71; Huntington County v. Heaston, 144 Ind. 583; 55 Am. St. Rep. 192; 41 N. E. 457; 43 N. E. 651; St. Croix County v. Webster, 111 Wis. 270; 87 N. W. 302.

11 Weeks v. Texarkana, 50 Ark. 81; 6 S. W. 504; Council Bluffs v. Waterman, 86 la. 688; 53 N. W. 289; Union County v. Hyde, 26 Or. 24; 37 Pac. 76.

12 Ellis v. Board, etc., 107 Mich. 528; 65 N. W. 577; Allegheny County v. Grier, 179 Pa. St. 639; or fees collected by him from the public treasury without authority of law,13 such payments may be recovered in an action for money had and received. The fact that money paid to a state officer as compensation for services was paid upon the advice of the attorney general, does not prevent the recovery thereof, if unauthorized by law ;14 nor does the fact that the payment was made voluntarily, with full knowledge of the facts and without fraud,15 or under a mistake of law,16 even if such mistake is shared by the officer to whom payment is made, who takes in good faith.17 The right to recover public money is especially clear where the officers who have ordered payment of the claim, have done so fraudulently, and in order to convert the money to their own benefit,18 or have otherwise acted fraudulently.19 Even an order of court authorizing the payment of such illegal fees is no defense to an action to recover them if made in a proceeding to which the public corporation is not a party.20 If a public officer renders services to the corporation which he represents, outside of those appropriate to his official position, and which could have been rendered as well by a private individual, money paid him for such services cannot be recovered in the absence of a statute, provided the transaction is free from fraud.21 The right to recover public money is especially clear in cases where payment is made under a mistake of fact.22 Thus, where an excessive bill is presented for public printing, and printers appointed pursuant to the statute to examine the account, certify to its correctness under a mistake of fact, such payment may be recovered.23 Public money, however, can be recovered only from one to whom it was paid, or for whose benefit it was paid. Thus, a county cannot recover from one who holds county bonds which constitute an overissue, interest paid upon such bonds to a prior holder thereof.2* So where town officers acting for the public at large and not for the town alone, collected school taxes and paid them disproportionately the school district which was entitled to a part of such taxes cannot maintain assumpsit against the town.25 In some jurisdictions, however, it is held that payments of public money to public officers made under a mutual mistake of law cannot be recovered.26