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June 16, 1942 (56 Stat. 367, as amended by section 1 of the act October 18, 1943, 57 Stat. 571; 37 U. S. C. 115), provides that on a after 1 June 1942, retired officers of the Navy shall have their retir pay computed as now authorized by law on the basis of pay provid therein, which pay shall include increases "for all active duty pe formed since retirement
in the computation of their longe ity pay and pay periods.” (File: JAG: II:LCM: mgl, 21 Jan. 1948.) Checkage of pay where allotment erroneously paid officer's wife without 1
knowledge. In January 1941, Lt. Col. (then 2d lieutenant) A registered a allotment, designated as for support of a dependent, period indefinit first payment February 1941, amount $165 monthly, in favor of tł Security Trust & Savings Bank, San Diego, Calif.
On 13 January 1944, Lt. Col. (then major) A requested stoppag of the said allotment. The disbursing officer carrying Lt. Col. A pay account forwarded the allotment stop notice to Marine Cort Headquarters, where it was filed in Lt. Col. A's individual file jacke instead of being handled in the Marine Corps allotment office in at cordance with normal procedure. No action was taken towar stopping the payment of the allotment and payments of $165 monthl to the designated allottee continued to be made up to and including th month of April 1947. Appropriate entry of the allotment stoppage wa made on Lt. Col. A's pay record, and after the date when the stoppag should have become effective, amounts credited to him on his pa; account by the various disbursing officers carrying that account wer increased by $165 monthly, thus giving ostensible indication that thi aforesaid request for stoppage had been placed in actual effect.
It appeared further that on the same date that Lt. Col. A requested stoppage of the allotment, to wit: 13 January 1944, he registered a new allotment designated as for savings, in the amount of $150 monthly first payment February 1944, period indefinite, in favor of the same bank. This allotment was handled in a routine manner, without untoward incident, did not influence subsequent developments, and need not be the subject of further consideration.
As a result of auditing procedures at Marine Corps Headquarters, it was discovered that the allotment stoppage executed by Lt. Col. A had not been placed in effect. This was accordingly done, the last payment being made in April 1947. The period from the date of intended effect of the request for stoppage to the date of actual stoppage comprised a total of 39 months, for each of which the sum of $165 had been paid to the bank aforesaid, or a total thus paid of $6,435.
Marine Corps Headquarters then initiated action with a view to checkage of Lt. Col. A's pay account in the amount of $6,435. At the same time, Lt. Col. A was requested to make a statement as to whether he had been aware of the fact that the allotment had continued to be paid during the 39-month period aforesaid.
In response to that request, Lt. Col. A, in a letter dated 3 July 1947 to the Chief, Disbursing Branch, Supply Department, Marine Corps Headquarters, made his statement in the following words:
1. During January or February 1941, I established a joint checking account in the Security Trust & Savings Bank, San Diego, Calif. for my wife and myself and made out a monthly allotment to that account for $165. I used the account myself in February to settle outstanding bills just prior to leaving for Samoa with the Seventh Defense Battalion and at various times until my return to the United States in April 1943. I was with my wife for a short time in May 1943, at which time we agreed to a divorce after the war. At that time I also informed my wife that I would not use the checking account in San Diego. I never used the account subsequently and all bank statements were thereafter mailed to her address.
2. About January 1944, while serving with the Fifth Amphibious Corps in Pearl Harbor, I executed a stoppage of the $165 allotment and made out a new one for $150 a month to the same account.
3. Upon returning to the United States in July 1946 I initiated correspondence which resulted in my wife and me signing a separation agreement. She obtained a lawyer about December 1946, in order to institute divorce proceedings. I have recently been informed by this lawyer that the suit has been filed and will be final in the near future.
4. Upon being notified of the contents of the reference of this letter, I telephoned the Security Trust & Savings Bank in San Diego. They verified the information contained in the reference and further stated that the account is at present overdrawn $27.98. I then telephoned my wife and informed her of the situation concerning the checkage of my pay account. She stated that she had informed me by letter about February or March 1944, of the two deposits being made monthly in the account. No letter containing such information was ever received by me. She also stated that she does not have funds to repay this overpayment.
5. At no time after I requested stoppage of the $165 allotment and made out the new allotment for $150 did I have any knowledge
or suspicion that the $165 allotment was still being paid. Lt. Col. A was then requested to sign a consent to checkage of his pay account in the amount of $6,435, and, by letter dated 29 July 1947, addressed to the Chief, Disbursing Branch, Supply Department, Marine Corps Headquarters, he declined to do so in the following words:
1. The undersigned respectfully declines to acknowledge responsibility for the short-checkage referred to in reference (a) because of the circumstances as stated in reference (6) (Lt. Col. A's letter of 3 July 1947), and for the following reasons:
(a) Proper steps were taken to stop the allotment, and the request for stoppage was received at Marine Corps Headquarters.
(6) The undersigned believed that the stoppage had been effected since checkage was not made on his pay account and no information to the contrary was received.
(c) The undersigned did not use the checking account in any respect during the entire period involved and consequently had no correspondance [sic] with the bank during that period. It is believed that this procedure was entirely reasonable since the undersigned was overseas when the stoppage was entered and did not return to the United States until approximately 242 years later.
(a) The undersigned did not, and will not, benefit in any way from the over payment as other and adequate arrangements were made for the support of his wife from his service pay. These arrangements were in no way affected by the over payment.
(e) The undersigned is unable to recover the six thousand four hundred thirty five dollars ($6,435) in order to repay this
over payment. The Commandant of the Marine Corps has now submitted the matter for decision was to whether checkage of the amount involved should be directed against the pay account of Lt. Col. A.”
It may be said at the outset that Lt. Col. A's averments of fact as set forth above, appear to be consistent with all other known facts, are not controverted in any way by anything in the record, and have been accorded full credence by all persons officially connected with the case. For the purposes of this discussion, they will be accepted as true.
On the case stated, the relative rights of the United States and Lt. Col. A should be evaluated as though a court were hearing a case in which the United States had brought suit against Lt. Col. A for the recovery of $6,435 paid to his bank account without warrant of law.
The action of the United States in the case would be for the recovery of money paid under a mistake, namely, the erroneous assumption that the allotment previously executed by Lt. Col. A continued in full force and effect. Historically, claims for the recovery of money paid under a mistake were brought in the classic action at law of indebitatus assumpsit (Ames, History of Assumpsit, 2 Harv. L. Rev. 1). The theory of the action was that a person who had been unjustly enriched by the mistaken payment to him of the money of another should not be suffered to retain that money as against the payor. Where a situation of that kind has arisen, the law raises an implied or imputed promise by the recipient to repay the money to the person rightfully entitled thereto. The obligation thus imposed by the law upon the recipient is termed quasi-contractual, since it exists regardless of consent, without contract, and yet may be enforced in a contract action. “In one word, the gist of this kind of action is that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money.” (Lord Mansfield, speaking in Moses v. MacFerlan, 2 Burr. 1005, 1012.)
Some cases have distinguished between payments made under mistake of law and payments made under mistake of fact. Those cases have barred recovery in the former case, while allowing it in the latter. However, the right of the Federal Government to recover public money paid under a mistake of law is unquestioned (Wisconsin Central R. R. Co. v. United States, 164 U. S. 190, 17 Sup. Ct. 45). And the cases of Grand Trunk Western Ry. Co. v. United States, 252 U. S. 112, 40 Sup. Ct. 309, and Sutton v. United States, 256 U. S. 575, 41 Sup. Ct. 563, establish the principle that it is immaterial whether payments of public funds thus sought to be recovered were made under mistake of law or mistake of fact (Talcott v. United States (C. C. A. 9th Circ. 1928) 23 F. (20) 897; see also Pomeroy's Equity Jurisprudence (5th Ed. 1941) vol. III, sec. 851a).
The record indicated the possibility of negligence somewhere within the Government in the disbursement of the funds involved in the present case. Nonetheless, if a benefit is bestowed through mistake, no matter how careless or inexcusable the act of the bestower may have been, the recipient must, in equity, make restoration (United States v. Northwestern National Bank & Trust Co. of Minneapolis (D. C., Minn. 1940) 35 F. Supp. 484, 486; see also Woodward, The Law of Quasi-Contracts, secs. 15 and 92). And the doctrine applied in some cases, prohibiting the recovery of payments voluntarily made, does not apply to payments without authority by public officers. Such payments are not presumed to be made voluntarily by the Government, but by its officers in excess of their authority and in defiance of its rights (Champ Spring Co. v. United States (C. C. A. 8th Circ. 1931), 47 F. (20) 1, (certiorari denied (1930) 283 U. S. 852, 51 S. Ct. 560) and cases cited).
The legal foundations supporting the right of the United States to maintain an action of the kind described have been spelled out with some
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particularity because we are here in a misty realm where rights and remedies are in full interplay, the one ceaselessly enlarging or diminishing the other as different situations of fact define and redefine their respective scopes.
It can be accepted, then, that the United States may assert its claim against Lt. Col. A unimpeded by any of the substantive or remedial bars adverted to above. Indeed, a long line of cases testifies to the successful prosecution by the Government of such claims, either directly or by way of set-off, against officers of the armed services, as well as others. U. 8. v. Heidt (C. C. A. 5th Circ. 1932) 46 F. (20) 559 (certiorari denied 287 U. S. 601, 53 Sup. Ct. 8), is typical, as are several of the cases cited supra.
It was undisputed that $6,435 of public funds found its way into a bank account of Lt. Col. A. On the case stated, he was not aware of this accretion to his wealth until it had passed beyond his control and powers of disposition. Nonetheless, the public purse had been diminished by the unwarranted diversion of $6,435. Does the law require Lt. Col. A to make up the amount?
That the public money should be inviolate is a principle hallowed from the beginnings of democratic government. But when the public money has gone astray, and the sovereign descends into the forum to reclaim it, the sovereign must doff the purple robe, and array itself in the mufti of the common litigant. Like any other litigant asserting a right, the sovereign must make out its case, and must prevail or fall on the law and the facts (Walker v. U. S. (C. C. M. D. Ala. 1905) 139 F. 408, affirmed 148 F. 1022).
In this case, the United States attempted to charge Lt. Col. A, and in the nature of the case, must demonstrate to be proper the imputation to him of an enforceable undertaking to repay the amount by which he has been enriched. But the assertion of the right to recover, being quasi-contractual and based, therefore, on grounds of natural equity, was subject to many equitable defenses not available against other legal actions. The law will never imply a promise to pay where it would be unjust to the party to whom it would be imputed and contrary to equity so to imply it. No promise to pay can be imputed, unless duty creates the obligation to pay (12 Am. Jur., sec. 6; see also Carey v. Curtis, 3 How. (U. S.) 236, 11 L. ed. 576).
Illustrative of the wide scope of equitable defenses is the doctrine that where the innocent recipient of a mistaken payment has changed his financial position subsequent to its receipt so as to make his refusal to repay it as equitable as the other party's demand for repayment, the law will consider that change of position a complete defense (Costigan, Change of Position As a Defense in Quasi-Contracts, 20 Harvard Law Review, 205). In a celebrated English case, the doctrine