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 order to permit recovery of a payment, however, the mistake of fact must not be as to some collateral matter, but must affect the very existence of the liability which the payment was intended to discharge.1 If a liability of any sort exists payment thereof cannot be recovered on account of some mistake in the inducement.2 Thus, where A owes B, and C takes A's check, thinking it good, and pays B personally, C cannot recover such payment from B if A's check proves worthless.3 So where A is indebted to B and by mistake as to some other liability pays B on a different non-existent claim, A cannot recover such payment from B until A's indebtedness to B is satisfied.4 Thus where A had a claim against a railroad for killing cattle, and after he had presented his claim he received a voucher, which the railroad paid, he is not obliged to repay such sum until his claim is settled, even though such order was intended for another man of the same name and was paid under mistake as to the identity of the person asking payment.5 So if A owns two lots and B a third adjoining A's, and the city brings suit to enforce an assessment on such lots and takes a decree for the assessment against the three lots jointly, A cannot redeem his lots alone, but must redeem B's as well. Hence if A redeems all three, thinking that B's lot belongs to A, this is a mere matter of inducement and A cannot recover from the city the amount due on B's lot alone. This is true especially after the city has paid over the money received at the tax-sale, from which sale A was redeeming his land, to the contractors.6 A endorsed several instruments for B, thinking them in effect promissory notes. As they fell due, and were not paid by B, A paid those first maturing to C, the holder thereof, under the belief that A was liable as endorser. A resisted payment of the last instruments of the series and established his non-liability.7 A then sued C to recover the payment made by him to C on the first instrument of the series. It was held that he could not recover, even though he had been mistaken in his belief that upon paying such instruments he would be subrogated to the security held therefor.8 By mistake of fact, is meant mistake as to the fact creating or relieving from liability, and not mistake as to the evidence by which such fact was to be proven.
7 Merchants' National Bank v. Bank, 139 Mass. 513; 2 N. E. 89.
8 Martin v. Morgan, 3 Moore (C. P. & Ex.) 635; Peterson v. Bank, 52 Pa. St. 206; 91 Am. Dee. 146.
1 Aiken v. Short, 1 Hurl. & N. 210; Garretson v. Joseph, 100 Ala. 279; 13 So. 948; Langevin v. St. Paul, 49 Minn. 189; 15 L. R. A. 766; 51 N. W. 817; Southwick v. Bank, 84 N. Y. 420; Pepperday v. Bank, 183 Pa. St. 519; 63 Am. St. Rep. 769; 39 L. R. A. 529; 38 Atl. 1030; Buffalo v. O'Malley, 61 Wis. 255; 50 Am. Rep. 137; 20 N. W. 913. "A mistake where that is the foundation of the action must relate to a fact which is material, essential to the transaction between the parties. A payment made under the influence of a mistake concerning a fact which, even if it were as it is supposed to be, would create no legal obligation, but merely operate as an inducement upon the mind of the party paying the money, the other party being without fault, would not justify a recovery as for money had and received." Langevin v. St. Paul, 49 Minn. 189, 196; 15 L. R. A. 766; 51 N. W. 817.
2 Pensacola, etc., R. R. v. Braxton, 34 Fla. 471; 16 So. 317. " The mistake must be to such an extent as will amount to destruction of the consideration." Ashley v. Jennings, 48 Mo. App. 142, 147.
3 Garretson v. Joseph. 100 Ala. 279;' 13 So. 948; Pepperday v. Bank, 183 Pa. St. 519; 63 Am. St. Rep. 769; 39 L. R. A. 529; 38 Atl. 1030.
4 Pensaeola, etc., R. R. v. Braxton, 34 Fla. 471; 16 So. 317; Ashley v. Jennings, 48 Mo. App. 142.
5 Pensaeola, etc., R. R. v. Braxton, 34 Fla. 471; 16 So. 317.
6 Langevin v. St. Paul, 49 Minn. 189; 15 L. R. A. 766; 51 N. W. 817.
7 First National Bank v. Alton, 60 Conn. 402; 22 Atl. 1010.
8 Alton v. Bank, 157 Mass. 341; 34 Am. St. Rep. 285; 18 L. R. A. 144; 32 N. E. 228. The court said that the right of subrogation was "A collateral matter and no part of his principal contract by which he makes himself surety. The existence of that right is not the implied foundation of the principal contract."
Thus where A paid a debt and subsequently lost the receipt, and on demand of his creditor paid the debt again, it was held that A could not recover such payment after he had found his receipt, and was thus able to prove that he had paid it before.9 Payment of a judgment not a lien on the homestead, made because the judgment debtor, by reason of a mistake in his abstract of title thinks it is a lien thereon and that he cannot borrow money on his homestead unless such debt is paid, is not under mistake.10