Is there an obligation to make restitution of a benefit conferred under the inducement of a mistake as to one's legal relation, not with the recipient of the benefit, but with a third person? In a few cases, the question is answered, apparently without qualification, in the negative:
Chambers v. Miller, 1862, 13 C. B. N. S. 125: Action for assault and imprisonment. The plaintiff presented a check at the defendants' bank, which defendants' cashier paid. Before the plaintiff left the bank, it was discovered that the account of the drawer was overdrawn, whereupon the return of the money was demanded. The plaintiff at first refused, but was detained until he made repayment. The defendants justify the detention upon the ground, inter alia, that the money was legally recoverable from the plaintiff. Erle, J. (p. 133): "The plaintiff had taken possession of the money, counted it once, and was in the act of counting it again, when the clerk, who had gone from the counter, finding that there was a mistake, not as between him and the bearer of the check, but as between him and the customer, returned and claimed to revoke the act of payment which on his part was already complete, and claimed to have the money back. . . . But, as between the parties here, there was no manner of mistake."
Merchants' Insurance Co. v. Abbott, 1881, 131 Mass. 397: Assumpsit for money had and received by the defendants, Denny, Rice & Co., under an insurance policy of which they were assignees. After the insurance had been paid it was discovered that the building insured had been destroyed at the instigation of the original holder of the policy before the assignment. The defendants knew that the building had been burned, but were not aware of their assignor's fraud. Gray, C.J. (p. 401) : "The only contract of the plaintiffs was with Abbott [the assignor], and the only mistake was between them and him. ... In other words, the money was paid by the plaintiffs to these defendants, not as a sum which the latter were entitled to recover from the plaintiffs, but as a sum which the plaintiffs admitted to be due to Abbott, under their own contract with him, and which at his request and in his behalf they paid to these defendants, who at the time of receiving it knew no facts tending to show that it had not in truth become due from the plaintiffs to Abbott. ... As between the plaintiffs and these defendants, there was no fraud, concealment or mistake." 1
Upon principle there is a distinction between a mistake as to legal relations with a third person which affects merely the policy of conferring the benefit, and a mistake as to such legal relations which affects either the duty of conferring the benefit, or a right to be acquired by conferring it. In Harris v. Loyd, stated in the preceding section, where the plaintiff's mistake was as to his rights under a deed of trust from a third person, he was led by his mistake to believe that it would be to his interest to pay money to the defendant for the release of certain goods from execution, but he was not led to believe that he was under a legal duty to release the goods from the defendant's execution, or that he would acquire a legal right by so doing. The same is true of Aiken v. Short, also stated in the preceding section, where the plaintiff's mistake as to his rights under a mortgage given to him by a third person induced him, as a matter of policy only, to pay a claim of the defendant. But in Chambers v. Miller, supra, and Merchants' Insurance Company v. Abbott, supra, where the plaintiff's mistake was as to his obligation to a third person to pay money to the defendant, he was induced by his mistake to believe, not merely that it would be good policy to pay the money, but that he was bound to pay the money. To say, in such cases, that the money is paid under a mistake as to a collateral or extrinsic fact, or a mistake as to the payer's legal relation with a third person, is to beg the question. The money is paid in misreliance upon a supposed legal duty, and not merely under a mistake as to policy, and it is submitted that in the absence of special circumstances justifying the retention of the benefit, the payor is equitably entitled to restitution.1
1 See also Southwick v. First Nat. Bank, 1881, 84 N. Y. 420; Ball v. Shepard, 1911, 202 N. Y. 247; 95 N. E. 719, 721, ("The mistake . . . must arise in the transaction between the parties to the action."); Johnson v. Boston, etc., R. Co., 1897, 69 Vt. 521; 38 Atl. 267 (services).