since the drawee's payment is made and received as a discharge of the instrument, and unless the person to whom payment is made is the owner, the rights of the true owner are not discharged.65 So where paper is sold (as distinguished from presented for payment) recovery may be had if the instrument is not genuine, or if security accompanying it is not genuine.67 But the fact that a party to the instrument is insolvent at the time of a sale of it, will not justify a rescission of the bargain,68 unless the seller knew of the insolvency. In that case the transaction is voidable," and indeed the seller impliedly warrants that he knows nothing which would impair the validity of the instrument or render it valueless; 70 and is therefore liable in damages, if he has such knowledge, as is one who sells an instrument to which a signature is forged."1 § 1573. Unilateral mistake. In two classes of cases mistake of one party only to a contract undoubtedly justifies affirmative relief as distinguished from a mere refusal to enforce the contract specifically against him: Bank v. Nassau Bank, 91 N. Y. 74, 43 Am. Rep. 655. But if by lapse of time before suit the position of the person receiving payment is changed, the payment cannot be recovered. London, etc., Bank v. Bank of Liverpool, [1896] 1 Q. B. 7. 65 First Nat. Bank v. Bremer, 7 Ind. App. 685, 34 N. E. 1012. 66 See supra, § 1162. 67 Jones v. Huggeford, 3 Metc. 515; Ross v. Terry, 63 N. Y. 613, 614; Uniform Sales Act, Sec. 36; Uniform Warehouse Receipts Act, Sec. 44, supra, § 1063. 68 Hecht v. Batcheller, 147 Mass. 335, 17 N. E. 651; Bicknall v. Waterman, 5 R. I. 43; Burgess v. Chapin, 5 R. I. 225. But see Harris v. Hanover Bank, 15 Fed. 786. This principle is not applicable to bank notes. One who pays, even innocently, with the notes of a broken bank cannot retain the benefit of the transaction. Owenson v. Morse, 7 T. R. 64; Small v. Franklin Mining Co., 99 Mass. 277; Lightbody v. Ontario Bank, 11 Wend. 9, s. c. sub nom. Ontario Bank v. Lightbody, 13 Wend. 101, 27 Am. Dec. 179; Roberts v. Fisher, 43 N. Y. 159, 3 Am. Rep. 680; Westfall v. Braley, 10 Oh. St. 188, 75 Am. Dec. 509. 69 Fenn v. Harrison, 3 T. R. 757, 759; Henry v. Allen, 93 Ala. 197, 9 So. 579; Gordon v. Irvine, 105 Ga. 144, 31 S. E. 151; Sebastian May Co. v. Codd, 77 Md. 293, 26 Atl. 316; Day v. Kinney, 131 Mass. 37, 38; Brown v. Montgomery, 20 N. Y. 287, 75 Am. Dec. 404; Rothmiller v. Stein, 143 N. Y. 581, 592, 38 N. E. 718, 26 L. R. A. 148; Bicknall v. Waterman, 5 R. I. 43, 48; Burgess v. Chapin, 5 R. I. 225, 227, 228. 70 Uniform Neg. Inst. Law, Sec. 65. See, supra, § 1162. 71 Ibid. 1. Where the mistake was known to the other party to the transaction.72 2. Where the person against whom relief is sought is in the position of a donee or volunteer.73 The first of these rules is based on obvious justice; the second is in accordance with a far-reaching principle of courts of equity concerning volunteers. Under this head also must be included not only cases where a gift was intended, but cases where there is a total failure of supposed or expected consideration, as where money paid under a mistake is recovered. § 1574. Recovery of money paid under a mistake of fact. One who by error in computation,74 or by mistake of any fact,75 pays a real or supposed creditor more than is his due, or pays a debt previously discharged, may recover the over-payment; and generally speaking money paid over under a mutual mistake of an essential fact, or under a unilateral mistake as to such a fact where the defendant has parted with nothing and the plaintiff has not received an expected return, may be recovered.76 In most of the cases there was a mutual mistake of 72 See supra, §§ 1525, 1557. 73 See supra, § 1556. 74 Millett v. Holt, 60 Me. 169; Davis v. Krum, 12 Mo. App. 279; Hanson v. Jones, 20 Mo. App. 595. 75 Citizens' Bank v. Rudisill, 4 Ga. App. 37, 60 S. E. 818; International Bank v. Bartalott, 11 Ill. App. 620; Chickasaw County, etc., Fire Ins. Co. v. Weller, 98 Iowa, 731, 68 N. W. 443; Rhodes v. Lambert, 22 Ky. L. 691, 58 S. W. 608; Beasley v. Allen, 11 Rob. (La.) 502; Stevens v. Burgess, 61 Me. 83; Baltimore & S. R. Co. v. Faunce, 6 Gill, 68, 46 Am. Dec. 655; State Sav. Bank v. Buhl, 129 Mich. 193, 88 N. W. 471, 56 L. R. A. 944; Garrison v. Murphy, 2 Neb. (Unof.) 696, 89 N. W. 766; Tinslar v. May, 8 Wend. 561; Woodruff v. Claflin Co., 198 N. Y. 470, 91 N. E. 1103, 28 L. R. A. (N. S.) 440; Pool v. Allen, 29 N. C. 120 (7 Iredel Law); Mitchell v. Walker, 8 Ired. L. 243; Guild v. Baldridge, 2 Swan, 295; Hummel v. Flores (Tex. Civ. App.), 39 S. W. 309. 76 Milnes v. Duncan, 6 B. & C. 671; Newsome v. Graham, 10 B. & C. 234; Chatfield v. Paxton, cited 2 East, 471, n.; Union Nat. Bank v. McKey, 102 Fed. 662, 42 C. C. A. 583; Jackson v. White, 194 Fed. 677, 115 C. C. A. 71; Walker v. Mock's Admr., 39 Ala. 568; Hunt v. Matthews, 132 Ala. 286, 31 So. 613; Rand v. Columbian Realty Co., 13 Cal. App. 444, 110 Pac. 322; Young v. Kimber, 44 Colo. 448, 98 Pac. 1132, 28 L. R. A. (N. S.) 626; Gilson v. Boston Realty Co., 82 Conn. 383, 73 Atl. 765; Stanley Rule, etc., Co. v. Bailey, 45 Conn. 464; Cullen v. Seaboard Air Line R. Co., 63 Fla. 122, 58 So. 182; Charleston, etc., R. Co. v. Augusta Stockyard Co., 115 Ga. 70, 41 S. E. 598; Rosenbaum v. Drumm Comm. Co., 146 Ill. App. 229; Devine v. Edwards, 101 Ill. .138; Board of Highway Commrs. v. Bloomington, 253 fact, but if the element of failure of consideration exists, this is enough to entitle the plaintiff to recover, though he alone was acting under a mistake. The defendant is a mere volunteer and it is immaterial what was his mental attitude. But if, in spite of even a mutual mistake, and a failure of the exact consideration expected, it nevertheless seems to the court that the defendant has such moral right to what he received as to make recovery inequitable, it will be denied." Where A under a mistaken belief in his liability to B, on direction of the latter pays III. 164, 97 N. E. 280; Daily v. Board of Comm'rs, 165 Ind. 99, 74 N. E. 977; State v. Mutual Life Ins. Co., 175 Ind. 59, 93 N. E. 213, 42 L. R. A. (N. S.) 256; Jackson v. Creek, 47 Ind. App. 541, 94 N. E. 416; Reister v. Bruning, 47 Ind. App. 570, 94 N. E. 1019; Nat. Bank v. Myers, 65 Kans. 122, 69 Pac. 164; Lowe v. Wells, Fargo & Co. Express, 78 Kan. 105, 96 Pac. 74; Williams v. Shelbourne, 19 Ky. L. 1924, 44 S. W. 110; Lyon v. Mason, etc., Co., 102 Ky. 594, 44 S. W. 135, 19 Ky. L. 1642, 44 S. W. 135; Hotchkiss v. Bon Air, etc., Iron Co., 108 Me. 34, 78 Atl. 1108; Citizens' Bank v. Grafflin, 31 Md. 507, 1 Am. Rep. 66; George's Creek, etc., Co. v. County Commissioners of Allegany County, 59 Md. 255; Stoakes v. Larson, 108 Minn. 234, 121 N. W. 1112; Norton v. Bohart, 105 Mo. 615, 16 S. W. 598; Roberts v. Neale, 134 Mo. App. 612, 114 S. W. 1120; Jenkins v. Clopton, 141 Mo. App. 74, 121 S. W. 759; Himmelberger-Harrison Lumber Co. v. Dallas, 165 Mo. App. 49, 146 S. W. 95; Schaeffer v. Miller, 41 Mont. 417, 109 Pac. 970, 137 Am. St. Rep. 746; Garrison v. Murphy, 2 Nebr. (Unof.) 696, 89 N. W. 766; McDonald v. Metropolitan Life Ins. Co., 68 N. H. 4, 38 Atl. 500, 73 Am. St. Rep. 548; Redington Hub Co. v. Putnam, 76 N. H. 336, 82 Atl. 715; Sarasohn v. Miles, 52 N. Y. App. D. 628, 65 N. Y. S. 108; Durkin v. Cranston, 7 Johns. 442; Waite v. Leggett, 8 Cow. 195, 18 Am. Dec. 441; Burr v. Veeder, 3 Wend. 412; Carnegie Trust Co. v. Battery Place Realty Co., 67 N. Y. Misc. 452, 122 N. Y. S. 697; Montgomery v. Fry, 127 N. C. 258, 37 S. E. 259; Luther v. Hunter, 7 N. Dak. 544, 75 N. W. 916; Turner Falls Lumber Co. v. Burns, 71 Vt. 354, 45 Atl. 896; City Bank of Norfolk v. Peed (Va.), 32 S. E. 34; Bart v. Pierce County, 60 Wash. 507, 111 Pac. 582, 31 L. R. A. (N. S.) 1151; Milwaukee, Town of, v. County of Milwaukee, 114 Wis. 374, 90 N. W. 447. 77 In Badeau v. United States, 130 U. S. 439, 32 L. Ed. 997, 9 Sup. Ct. 579, the United States sought to recover money paid Badeau on the assumption that he was entitled to receive it as a retired army officer. Inasmuch as he was receiving compensation from the government as a member of the diplomatic service the court held that his right to compensation as an army officer ceased. Though the the mistake under which the payment was made was one of law the court recognized that this would not bar recovery, but nevertheless held that "inasmuch as the claimant, if not an officer de jure, acted as an officer de facto, we are not inclined to hold that he has received money which, ex æquo et bono, he ought to return.' See also Walker v. United States, 139 Fed. 409; Monroe National Bank v. Catlin, 82 Conn. 227, 73 Atl. 3; Keener, Quasi-Contracts, p. 34. Ca claim which C has against B, A cannot recover the payment from C.78 If the payment was voluntarily and intentionally paid by A to C to satisfy the latter's claim against B, and C had a genuine claim against B, it seems clear that no recovery should be allowed. C is a purchaser of the money for value and in good faith.79 Where, however, C has no valid claim against B, but only thinks he has, he is not a purchaser for value, and if he is allowed to retain the money, it must be on the vaguer ground that under the particular circumstances of the case it is unjust to deprive him of what he has received. 80 78 Aiken v. Short, 1 H. & N. 210; Whitehurst v. Mason, 140 Ga. 148, 78 S. E. 938; Ferguson v. Hirsch, 54 Ind. 337; Merchants' Ins. Co. v. Abbott, 131 Mass. 397; Moors v. Bird, 190 Mass. 400, 77 N. E. 643; Winslow v. Anderson (N. H.), 102 Atl. 310, L. R. A. 1918 C. 173; Ball v. Shepard, 202 N. Y. 247, 95 N. E. 719; Belloff v. Dime Sav. Bank, 118 N. Y. App. D. 20, 103 N. Y. S. 273, affd. 191 N. Y. 551, 85 N. E. 1106. But see Guild v. Baldridge, 2 Swan, 295. 79 See supra, § 1531. It is assumed in the text that taking money in payment of an antecedent debt is a taking for value. Batson v. Alexander City Bank, 179 Ala. 490, 60 So. 313; Benjamin v. Welda State Bank, 98 Kan. 361, 158 Pac. 65, L. R. A. 1917 A. 704; Stephens v. Board of Education, 79 N. Y. 183, 35 Am. Rep. 511; Hatch v. Fourth National Bank, 147 N. Y. 184, 41 N. E. 403; even though similar taking of negotiable paper (see supra, § 1146), or of chattels (see Williston, Sales, § 620), possibly may not be. 80 In Strauss v. Hensey, 9 App. D. C. 541; Walker v. Conant, 69 Mich. 321, 37 N. W. 292, 13 Am. St. 391, and Grand Lodge v. Towne, 136 Minn. 72, 161 N. W. 403, L. R. A. 1917 E. 344, a person had forged and sold a mortgage on another's property. Later he forged a larger mortgage on the same property, arranging with the subsequent mortgagee that a part of the loan should be used to pay the prior mortgage, and the second mortgagee made this payment directly to the first mortgagee and paid the balance to the fraudulent person, who was supposed to be the mortgagor's agent. On discovery of the fraud the second mortgagee sued the prior mortgagee to recover the amount paid the latter. Neither mortgagee was negligent. In the Michigan case the action failed; in the District of Columbia and Minnesota cases it was successful. Russell v. Richard, 6 Ala. App. 73, 60 So. 411; Ex parte Richard, 180 Ala. 580, 61 So. 819, also is similar in its facts and the decision follows that of the Michigan court, the ground of decision in both cases being that the money had been lent to the swindler, and that it was the swindler's money, not the plaintiff's, which the defendant received. As there was no mortgage or mortgage debt, due from anyone to the defendant, but only the counterfeit appearance thereof (in which respect the situation differs from that in Merchants' Ins. Co. v. Abbott, 131 Mass. 397, and other cases in the preceding note), it seems correct to allow recovery; and it does not seem material whether the plaintiff paid the defendant with his own hand or by the hand of the borrower, so long as the money which was paid was dedicated by the plaintiff to that purpose and the borrower was merely executing And where the payment by A to C is made by A not for the discharge of C's claim against B but for another purpose, the fact that C supposes the payment was made to discharge his claim against B should not preclude recovery unless C has changed his position or other special circumstances make recovery inequitable.81 § 1575. Recovery of the value of goods or services rendered under a mistake. The same principle of justice which requires the return of money paid under a mistake, requires that other benefits received under a similar mistake should likewise be restored.82 If the transferee still has possession of all or part of what has been transferred, or of anything received by him in exchange for it, when demand is made upon him or when he discovers the real facts, a mistake of such a character as ever to justify rescission should subject him to a duty to return in specie what he has in his possession; and a failure to perform the duty should involve liability for its value.83 Where what was transferred under a mistake was money, other money is the exact equivalent, so that the mere fact that the money originally received by him is no longer in his possession does not preclude rescission. It may be supposed, however, that goods or serv a trust when he paid it. That the plaintiff would undoubtedly have lent the whole sum to the fraudulent person, if the latter previously had paid the prior mortgage from his own funds seems immaterial. 81 In Hathaway v. Delaware County, 185 N. Y. 368, 78 N. E. 153, 13 L. R. A. (N. S.) 273, 113 Am. St. 909, the plaintiff had in exchange for a forged note of the defendant county delivered to the forger, a former treasurer of the county, a check payable to A, the existing treasurer. The forger delivered this check to A in payment of a shortage in the forger's accounts, and A so applied it. The plaintiff was allowed to recover. In Continental Caoutchouc &c. Co. v. Dunlop &c. Co., 90 L. T. (N. S.) 474, one who, when under a duty, to pay a particular creditor of another, paid the wrong creditor, was held entitled to recover the payment. See also Kleinwort v. Dunlop Rubber Co., 97 L. T. (N. S.) 263. In Koontz v. Central Nat. Bank, 51 Mo. 275, and Munroe v. Bonanno, 16 N. Y. App. D. 421, 45 N. Y. S. 61, one who had by mistake paid a debt due from another was allowed to recover the payment. 82 In this connection may be considered goods or services rendered under an invalid or unenforceable contract. See supra, § 1479, and topics therein referred to. 83 Johnson v. Saum, 123 Iowa, 145, 98 N. W. 599; Goff v. Gott, 5 Sneed, 562; supra, § 94, ad fin. Cf. Hendricks v. Goodrich, 15 Wis. 679. |