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.
A different question arises where the judgment has been reversed, set aside, modified, and the like. In such cases a payment made upon such judgment can be recovered (1) if made under duress and not voluntarily, and if the judgment is reversed upon the merits, or (2) if the judgment of reversal contains an order of restitution.1 If the property of the judgment-debtor is seized and sold on execution and the proceeds paid over to the judgment-creditor, the judgment-debtor may recover such amount from the judgment-creditor.2 The same principle applies where money in the hands of an officer of the court is distributed by such officer under an erroneous order or decree. Upon reversal, the party who was entitled to such fund may recover from the person to whom it is paid.3 If the law permits execution to issue on a judgment while appeal or proceedings in error are pending, money paid by reason of such execution may be recovered if the judgment is reversed thereafter.4 Thus if the execution is levied, and payment is made to stop the sale,5 or if an execution has issued but has not been levied and payment is made to prevent a levy,6 such payment is under compulsion and may be recovered. So recovery has been allowed where the execution was forwarded by mail to the debtor, and the amount for which it issued was paid in by him.7 On the same principle a payment made after a creditor's bill has been filed in equity to enforce the lien of the judgment on certain realty may be recovered after reversal, the court finding as a fact that such payment was compelled by the action, and was not made voluntarily in settlement of the claim.8 The same relief has been given, though in another form, where payments have been made upon a decree in equity, which fixes the amount of the debt and orders a sale of the realty. Where such decree has been reversed because the amount of the debt was ascertained erroneously by the trial court, payments on the original decree should be credited upon the subsequent decree.9 In some cases the court does not think it necessary to indicate more than that money was paid on a writ of execution without indicating whether a levy was made or not, on the ground that in either case payment was made by duress.10 If execution has not issued, but may issue at the option of the judgment-creditor, there is some conflict of authority on the question whether payment of the judgment is voluntary. In some jurisdictions it is held that if the judgment-debtor pays such judgment before execution issues he does not do so voluntarily.11 Where this view obtains, such payments may be recovered,12 even if the surety who pays the judgment against himself and his principal takes a formal assignment of the judgment to keep it alive against the principal.13 Relief is also given in such cases on a rule by the court to which such cause is sent on reversal to show cause why restitution should not be made.14 In other jurisdictions payment of a judgment on which execution has not issued is not under duress,15 even if execution is threatened,16 and such payment, therefore, cannot be recovered. Hence a payment of a judgment in which excessive attorney's fees have been awarded, made in order to clear the title to realty so that a new loan could be effected, cannot be recovered.17 So if a judgment is paid voluntarily while appeal or error proceedings are pending, such payment cannot be recovered even though the decree appealed from is modified or reversed.18 When Kalmbach v. Foote first came before the Supreme Court19 it was held that a payment under a threatened levy made to the attorney of the plaintiff and retained by him for his own use could be recovered from him. The judgment below was reversed and the cause remanded. When it came before the Supreme Court a second time the evidence showed that no threat of levy was made, that the party making the payment, a surety of the principal debtor made the payment voluntarily and took an assignment of the judgment against his principal, which was afterwards reversed, and that the attorney who collected the money paid it over to his client, not even retaining his fees. It was then held that such payment could not be recovered.20 Thus, where A's land is sold as the property of B, and while an appeal is pending A voluntarily pays the amount necessary to redeem such realty, A cannot recover such payment when the decree under which the realty was sold is reversed.21 But where no opportunity to make a defense is given to the judgment-debtor, as where a cognovit judgment is taken, payment or giving a new security may be considered as made under duress.22 Where the officer who is about to serve the execution has an agreement with the judgment-creditor to receive half the proceeds collected, and such agreements are illegal, it has been held that because of such interest, a payment or security given to avoid such unlawful levy is given under duress.23 Whether the judgment-debtor's right of action for involuntary payments always accrues on reversal is a question on which there is a divergence of authority. In some cases the right of the debtor to recover is denied if the money belongs in good conscience to the creditor.24 Money which is paid in satisfaction of a judgment cannot be recovered where the judgment is reversed, not upon the merits, but upon mere technicalities, as where the judgment was reversed because the judgment-creditor who took a default judgment had omitted to make proof in proper form,25 or because it was held that the judgment creditor had technically waived his right to recover.26 On reversal of a judgment in foreclosure, as being excessive in amount,27 the trial court attempted to evade the reversal by the Supreme Court, by reducing and modifying its original judgment nunc pro tunc; while this innovation in procedure was held erroneous,28 it was held that the defendant could not recover from the plaintiff for the rents during the time that plaintiff was in possession as purchaser under the erroneous order of sale, since "his only remedy is to have them applied on the mortgage debt."29 In other cases the court has ordered restitution as a matter of course, and has declined to prejudge the result of a new trial following reversal in a proceeding to recover.30 A suit in assumpsit has been held to lie where an action by an insurance company against its agent for premiums collected by him had