8

money paid by mistake if he did not have actual knowledge. In such a case, it is clear that a payment cannot well be said to be voluntary, since the party does an act which he did not intend to do. In the leading case of Kelly v. Solari, recovery was allowed where payment was made on an insurance policy which had lapsed and the money was paid by the insurance company under a bona-fide forgetfulness of these facts. And, in Missouri Pacific Ry. Co. v. Askew Saddlery Co.10 the plaintiff was also allowed to recover where, at the time a railroad company paid a sum in settlement of a claim for a supposed loss of goods in shipment without actual knowledge of the true situation, although, it had data from which it could get car information, but failed to do so.

The general rule is, however, not applied without exception. The question then arises: When will relief be denied the plaintiff for the recovery of money which he paid under a mistake of fact? Lord Mansfield says in Sadler v. Evans "It is a liberal action, founded upon large principles of equity, where the defendant cannot conscientiously hold the money. The defence is any equity that will rebut the action." In the more recent case of Baylis v. Bishop of London, 12 Justice Farwell declared that since Lord Mansfield was known as the friend of the action, some limitation must be placed on the generality of his words. The equity to which LordMansfield was referring was not "an equity" in the sense in which the term is used in the Court of Chancery but he is referring to the jus naturale of Roman Law. In the same case Lord Justice Hamilton said:13 "The question is whether it is conscientious for the defendant to keep the money, and not whether it is fair for the plaintiff to ask to have it back. To ask what course would be ex aequo et bono to both sides never was a precise guide *** Whatever may have been the case 146 years ago, we are not now free in the twentieth century to administer that vague jurisprudence which is sometimes attractively styled 'justice as between man and man."

Accordingly, courts generally hold that mere negligence on the part of the plaintiff will not preclude his recovery.14 And, in England and New York, recovery has been allowed where both parties are equally blameless or there is a balance of blame.15 But where as a result of

Rutherford v. McIvor, 21 Ala. 750 (1852); Bessler Movable Stairway Co. v. Bank of Leakesville, 140 Miss. 537, 106 So. 445 (1925); Clark v. Bradley, 270 S. W. 1050 (Tex. Civ. App. 1925).

18 Supra note 3.

13 Ibid at 140. If the circumstances exist which make such recovery inequitable, the burden of proving that fact rests upon the party resisting the payment. Mayer v. Mayor, etc., of N. Y., 63 N. Y. 455 (1875).

14Devere v. Edwards, 101 Ill. 138 (1881); Bessler Movable Stairway Co. v. Bank of Leakesville, supra note 8; Kingston Bank v. Eltinge, supra note 1. Contra: Rosenfield v. Boston Mutual Life Ins. Co., 222 Mass. 284, 110 N. E. 304 (1915).

Durant v. Ecclesiastical Commissioners, 6 Q. B. D. 234 (1880); Kingston Bank v. Eltinge, supra note 1.

the payment, the defendant has irrevocably altered his position in reliance on the payment and has received the money in good faith, and was not responsible for the mistake, the plaintiff is generally not permitted to recover.16 And therefore, money paid to an agent by mistake may not be recovered from him if, before learning of the mistake he pays it over to his principal.17 But in Deisch v. WootenAgie Co.18 where purchaser of a tenant's crop by mistake drew a check to his landlord for more than was due, the fact that the landlord has given credit to the tenant for such excess before he has been informed of the mistake does not change the landlord's position to his prejudice so as to deprive the purchaser of the right to recover such overpayment.

In the principal case, Lord Chancellor Viscount Cave, one of the dissenting judges, was of the opinion that the detriment suffered by the defendants as a result of the payment consisted in the re-delivery of the goods to B and letting him have additional goods. Although the defendants afterwards retook possession of them, the goods had suffered depreciation since the time of their re-delivery to B., to the defendants' detriment.

The facts involved in the principal case present a situation where a third person is involved. The mistake is due to a fraud worked upon the plaintiff by a third person. It is not a mistake arising as between the parties to the action. Our question then becomes: Does this new situation demand the application of a different rule? Upon this question there is a considerable amount of conflict.

21

In New York, we have the two interesting cases of Hathaway v. County of Delaware1 and Ball v. Shepard.20 In Hathaway v. County of Delaware, one W, was the county treasurer of Delaware county. He was later succeeded by the defendant, who discovered that W was indebted to the county for a certain sum of money, demanded payment. To get the money, W presented to the plaintiff what purported to be a note of the county of Delaware and executed by the defendant, the new treasurer, for a loan of $5000. The signature of the defendant was forged. W represented to the plaintiff that he was obtaining the loan for the county. The plaintiff thereupon drew a check to the order of the defendant, county treasurer, and delivered it to W for transmission to the defendant. W turned the check over to the defendant on account of his own personal indebted

16 Crocker-Woolworth Bank v. Nevada Bank, 139 Calif. 564, 73 Pac. 456 (1903); Phetteplace v. Bucklin, 18 R. I. 297, 27 Atl. 211 (1893); Costigan, Change of Position as a defense in Quasi Contracts (1906) 20 HARV. L. REV. 205.

17Yarborough v. Wise, 5 Ala. 292 (1843); Maher v. Miller, 61 Ga. 556 (1878). Professor Woodward stated that a better reason for denying relief against the agent would seem to be that since a payment to an agent is in legal contemplation a payment to his principal, it is the principal and not the agent who benefits by the mistake. WOODWARD, QUASI-CONTRACTS, op. cit. supra note 1 at 42.

1895 Ark. 279, 129 S. W. 819 (1910). If the defendant pays out the money received by mistake for his own benefit, that in itself does not constitute such a change of position as justifies a refusal to make restitution in value. Standish v. Ross, 3 Ex. 529 (1849).

19185 N. Y. 368, 78 N. E. 153 (1906). 20202 N. Y. 247, 95 N. E. 719 (1911).

21 Supra note 19.

ness. The defendant was ignorant of the means by which W had obtained it. The plaintiff was permitted to recover as money paid under mistake of fact. In Ball v. Shepard, the defendant, a stockbroker had bonds to sell. One V, desired to purchase these and a price was agreed upon. At V's request the bonds were billed to the plaintiff at an advance price. V falsely represented to the plaintiff that he had a customer for them who was responsible and who would send a check for them in an hour. Thereupon, the plaintiff gave the defendant's messenger his check payable to the defendant and received the bonds under the mistaken belief that V had "cleared" for him, as such a transaction is technically called. The court did not permit the plaintiff to recover where it was shown that money was paid by one party, who labored under a mistake of fact, to another party who did not share in the mistake, and who received the money in good faith in the regular course of business and for a valuable consideration.

The court in the Shepard23 case pointed out that there are two classes of cases divided by a line which is very narrow and yet well defined. In the first class, illustrated by the cases previously cited, the mistake of fact is usually one which arises inter partes, and in order to justify a recovery in any such case it must appear that the defendant was not in the first instance, entitled to receive the money; and that his circumstances have not been so changed through its receipt as to render it unjust to compel him to refund. In the second class the mistake of the payor is usually superinduced by the fraud of a third person and the payee is not only ignorant of the fraud or mistake, but receives the money in good faith in the regular course of business and for a valuable consideration. The court makes it clear, though, that even in this class of cases the circumstances may be such as to permit the plaintiff to recover. For instance, the result reached in the Hathaway case is justified on the ground that the check, being made payable to the county, was diverted from the only purpose for which it could lawfully have been made, and was used to pay the debt of a defaulting treasurer to the county, a purpose for which neither of the parties to the action had ever intended to give it currency. These facts, then, supplemented by the circumstance that the defendant's position had not been changed to its prejudice, were the controlling factors in that decision which upheld the recovery.

The same problem is involved in cases where a purchaser or mortgagee from one having no title or authority seeks to recover back money applied to discharge a prior encumbrance by the latter.

22 Supra note 20.

23 Ibid. See also Justh v. Nat. Bank of Commonwealth, 56 N. Y. 478 (1874); Stephens v. Board of Education, 79 N. Y. 183 (1879); Manufacturers' Bank v. Prudential Ins. Co., 102 Misc. 339, 168 N. Y. Supp. 913 (1918); Smith v. Hillman Motor Corp., 122 Misc. 422, 204 N. Y. Supp. 229 (1924); New York Title & Mtge. Co. v. Title Guarantee & Trust Co., 206 App. Div. 490, 201 N. Y. Supp. 529 (1st Dept. 1923).

Supra note 19.

A typical case is Gaffner v. American Finance Co.25 In that case one H stole an automobile. The defendant made a loan thereon for a certain sum of money and took from H a chattel mortgage which was duly recorded. H entered into negotiations with the plaintiff for the sale of the car and told the plaintiff that the defendant held a mortgage on it. The price was agreed upon. H and the plaintiff went to the office of the defendant for the purpose of closing the deal. While there, the plaintiff paid the defendant the balance due him on the mortgage and secured a surrender of the note which H gave the defendant. He paid the balance of the purchase price directly to H. The police, having found the car, returned it to the owner. The plaintiff in an action to recover the amount paid to the defendant was not permitted to recover on the ground that there was no mistake as to the indebtedness paid; that as to the mortgage, both parties were innocent and the equities in favor of the defendant were as great as those of the plaintiff. But in Grand Lodge, A. O. U. W. v. Towne, 26 with similar facts before it another court declared that in such a case the plaintiff should be permitted to recover for the reasons that the money was paid under a mutual mistake of fact, and without consideration; and, that it could be recovered back unless the defendant has changed his position in reliance upon the payment, so that to compel repayment would be against conscience. A few courts deny recovery in such cases on the ground that the payment is in legal contemplation the payment by the defrauder and therefore it cannot be said that the plaintiff paid under a mistake of fact.27

It appears that in all the cases the same general principle is involved. No exclusive classification can or should be made of these cases. From the very nature of the action the mistake does not have to be mutual. The question then becomes whether from all of the facts of the case the plaintiff did in fact pay money to the defendant under a mistake of a material existing fact. And if he did whether or not he should recover should depend, in the last analysis, upon the equities between the parties to the action. If the rights of the defendant are not prejudiced the plaintiff should be permitted to recover although negligent. Where the defendant has acted in good faith and has received the money in the regular course of business and for a valuable consideration although running to a third party, and where his position is changed to his detriment, recovery should not be allowed. The defendant, in the latter case, can in good conscience retain the money.

In conclusion, it appears, that in the principal case, the plaintiffs paid the money under an actual mistake of fact.28 And while, it is true as Pollock, M. R. declared in the lower court, that there was such a complete absence of inquiry on the part of the plaintiffs and

25120 Wash. 76, 206 Pac. 916 (1922).

26136 Minn. 72, 161 N. W. 403 (1917). For collection of cases see 28 A. L. R. 628.

27Russell v. Richard & Thalheimer, 6 Ala. App. 73, 60 So. 411 (1912). See also on this general subject, L. R. A. 1918 C, 178 note.

28 The court also held that a payee cannot be a holder in due course. See the note on this point in (1927) 40 Harv. L. Rev. 494.

they acted in a way unusual in real life, nevertheless, under the general rule, they are not precluded from recovering unless, as a result of the payment, the defendants have irrevocably changed their position to their detriment. The defendants retook the goods after they were in the possession of B., for only two weeks. Could it be said that in that short period the goods depreciated to such an extent that the defendants would be justified in retaining both the £5,000 and the furniture? The solution which seems the more equitable is the one suggested by Lord Chancellor Viscount Cave in his dissenting opinion: That the defendants be permitted to retain the £5,000 but subject to the undertaking to return such part of that sum as is in excess of the detriment sustained by the defendants as a result of the payment of the money and the further delivery of the goods to B. until possession was again taken by the defendants after the discovery of the fraud.

Samuel Mezansky.

Real Property: Constitutional Law: Constructive eviction: Covenant of quiet enjoyment: Private covenant forbidding sale or lease to negro.-Shall the black and white man be entirely separated in their residences? This problem is presented in a novel manner by Wyatt v. Adair, 110 So. 801 (1926), an Alabama case, where the plaintiff, a white man, leased part of a house from the defendant, the lease containing no restrictions as to the renting of the other part of the house. There was a toilet to be used in common by the tenants. The defendant rented the other part of the house to negroes, and the plaintiff abandoned the premises and sued for damages. The court held that there was a custom in the district not to rent to negroes premises having a toilet common to quarters rented to whites, that the renting was a breach of the implied covenant of quiet enjoyment, and a constructive eviction for which the plaintiff could recover. It was also held that such a covenant was not repugnant to the Fourteenth Amendment of the Constitution of the United States.

The early common law did not recognize constructive eviction, an actual eviction being necessary to relieve the tenant of liability for rent. Constructive eviction is now generally recognized and is uniformly held to exist "when the lessor, or one acting under him, does some act amounting to intentional, injurious interference by the lessor with the tenant's possession, and which deprives the tenant of the means or the power of beneficial enjoyment of the demised premises, or any part thereof, or materially impairs such beneficial enjoyment". The intention of the lessor is generally implied from

1Hunt v. Cope, 1 Cowp. 244 (1775); 16 R. C. L. 686.

Dolph v. Barry, 165 Mo. App. 659, 668, 148 S. W. 196 (1912). For further definitions of the same tenor, see Tallman v. Murphy, 120 N. Y. 345, 24 N. E. 716 (1890); 12 C. J. 1304.