Title: Messersmith v. G.T. Murray & Co.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Messersmith v. G.T. Murray & Co.1983 WY 77667 P.2d 655Case Number: 83-41Case Number: 83-41Decided: 08/02/1983Supreme Court of Wyoming
DANIEL H. MESSERSMITH AND 
FRANCES MESSERSMITH, APPELLANTS (DEFENDANTS),

v.

G.T. MURRAY & CO., 
APPELLEE (PLAINTIFF).

Appeal from the District 
Court, LaramieCounty, Joseph F. Maier, 
J.

Don W. Riske, 
Rocky L. Edmonds and Roger L. Kahler of Riske & Edmonds, P.C., Cheyenne, for appellants.

Bert T. 
Ahlstrom, Jr., Cheyenne, for appellee.

Before ROONEY, C.J., and THOMAS, ROSE, BROWN and 
CARDINE, JJ.

BROWN, 
Justice.

[¶1.]     Appellee G.T. Murray 
and Company filed suit to recover monies it had received from the sale of stock 
and mistakenly paid the appellants, Daniel and Frances Messersmith. Following a 
trial to the court, the judge found in appellee's favor and ordered the money 
returned. From the judgment, appellants raise three issues on appeal. First, 
they argue the mistake was a unilateral one upon the part of appellee's agent, 
and therefore it was insufficient to justify the rescission of the contract. 
Second, they claim that since appellee, as a stockbrokerage firm, had 
considerably more knowledge, information, and expertise, it should suffer the 
consequences of its mistake. Finally, they assert that, because to their 
detriment they changed their position in reliance upon appellee's mistake, 
justice demands that they not be forced to return the money to 
appellee.

[¶2.]     We 
affirm.

[¶3.]     At about 9:00 a.m. on 
July 28, 1982, Frances Messersmith called the offices of G.T. Murray and 
Company. She talked with James King, a stockbroker, about the possibility of 
selling some stock. She stated she had no idea what it was worth but wanted to 
find out. When asked the name of the stock, she read off what appeared on the 
stock certificate, "Western Preferred." King looked up the name and discovered 
that Western Preferred was selling for approximately $46 per share. Frances 
Messersmith expressed some surprise but indicated she had 200 shares and would 
like to sell them. King told her he would take care of the sale and asked her to 
bring the stock certificate to his office. By the time she arrived at 10:00 
a.m., the sale was completed; the stock had been sold for $47 per 
share.

[¶4.]     After the necessary 
paperwork was completed and some ten days had passed, the Messersmiths received 
a check in the amount of $9,260.70. This represented the net proceeds from the 
sale of 200 shares of Western Preferred at $47 per share.

[¶5.]     On October 1, 1982, 
King received a phone call from appellee's parent company, Bache. He was 
informed that an error had been made in the sale of the Messersmiths' stock. It 
turned out that that stock had been subject to a reverse stock split two years 
before. At that time holders of the stock had been directed to return their 
stock certificates in order to receive new stock issued as a result of a merger 
with another company. One share of the new stock had been issued for every 40 
shares turned in. Though the Messersmiths never responded to the notification, 
their 200 shares of the old stock actually equalled five shares of the new stock 
valued at $47 per share, and had a gross value of $235. 

[¶6.]     After being informed of 
the problem, King called the Messersmiths. He told them that they had been 
overpaid by about $9,000. He was advised that $8,000 had been used as a down 
payment on a house and the rest had been spent.

[¶7.]     On October 8, 1982, 
appellee initiated this lawsuit in order to recover the overpayment. The trial 
court found in its favor and ordered the appellants to pay appellee 
$8,810.70.

[¶8.]     Appellants first 
challenge the trial court's determination that a mutual mistake of fact 
occurred. They contend the mistake was unilateral.

[¶9.]     In Ohio Co. v. Rosemeier, 32 Ohio App.2d 116, 61 Op.2d 
105, 288 N.E.2d 326 (1972), a stockbroker was asked by Rosemeier if her stock, 
Santa Fe International, was selling for $36 per share. After the broker checked 
a stock exchange listing and discovered a Santa Fe International selling at $36 
per share, he confirmed that it was. She then told him to sell the 500 shares 
she believed she owned. However, it turned out that the stock listed was a 
California corporation and the stock she owned 
was a Colorado 
corporation worth 80 cents a share. The appellate court concluded "the parties 
were mutually mistaken as to the identity of defendant's stock when sold," and 
thus allowed recovery. Ohio Co. v. 
Rosemeier, supra, 288 N.E.2d  at 328.

[¶10.]  In the present case, it appears that the 
mistake was mutual also. Neither party knew the true value of the stock; they 
were both mistaken. Further, as pointed out in Ohio Co. v. Rosemeier, supra, it does 
not matter that the broker may have negligently induced his client's mistaken 
belief.

[¶11.]  Generally, other courts are in accord 
with the result reached in Ohio Co. v. 
Rosemeier, supra. However, most courts have not found it necessary to 
distinguish between mutual and unilateral mistakes with respect to mistaken sale 
of securities. The courts have proceeded upon the principle that money paid 
under a mistake of fact, which would not otherwise have been paid, may be 
recovered unless the payee has changed his position to the extent that it would 
be unjust to require a refund. Akerson v. 
Gupta, 458 F. Supp. 189 (E.D.Mo. 1978). See also, Annot., 48 A.L.R.3d 513, 
516 (1973). So long as the parties can be returned to the status quo, courts 
should strive to achieve such a result. However, if the payees suffer damage as 
a result of a mistake made by the broker, recovery by the broker may be barred 
to the extent of the damage.

[¶12.]  Second, appellants claim that since 
appellee was in a better position to discover the mistake, it should suffer the 
loss. Case law, however, fails to support appellants.

[¶13.]  In Westamerica Securities, Inc. v. 
Cornelius, 214 Kan. 301, 520 P.2d 1262 (1974), the court 
considered whether a stockbroker's failure to exercise due care could bar it 
from recovering funds mistakenly paid to a customer. The court concluded it did 
not and quoted Restatement of the Law, Restitution, § 59, p. 
232:

"`A person who has 
conferred a benefit upon another by mistake is not precluded from maintaining an 
action for restitution by the fact that the mistake was due to his lack of 
care.'"

Also see Board of Education of the City of Chicago v. 
Holt, 41 Ill. App.3d 625, 354 N.E.2d 534 (1976); and 
Ohio Co. v. Rosemeier, supra.

[¶14.]  Lack of due care will not serve to bar an 
action for restitution of funds mistakenly paid where no damage to the payee has 
resulted.1

[¶15.]  Finally, appellants contend that they 
changed their position as a result of the overpayment and that it would be 
unjust to force them to return the money. Normally, payees will not be required 
to return the overpayment where they have changed their position such that 
demanding a refund would be unfair. Akerson v. Gupta, supra; and Ohio Co. v. Rosemeier, supra. To 
constitute such a change, the burden is on the payee to establish that the 
change has been detrimental to the payee and that it was material and 
irrevocable such that the payee cannot be returned to the status quo. Westamerica Securities, Inc. v. 
Cornelius, supra. However, a mere change in the form of the proceeds does 
not qualify when the payee has retained the value. Akerson v. Gupta, supra. Also see, 66 
Am.Jur.2d, Restitution and Implied Contracts § 136 (1973). In other words, the 
payor can recover the proceeds only to the extent that the payee will not be 
damaged.

[¶16.]  Here, appellants spent approximately 
$1,200 on bills. In Ohio Co. v. 
Rosemeier, supra, 288 N.E.2d  at 329, the payee used the money to pay off a 
mortgage. The court there said: "Since the value of the original payment was 
retained by the defendant, she has not detrimentally changed her position by 
liquidating her mortgage." Accordingly, to the extent the Messersmiths paid off 
debts there was no loss of value.

[¶17.]  Appellants applied the remaining $8,000 
of the overpayment towards the purchase of a house. Though the briefs both make 
reference to the fact that the money was placed in escrow and subject to 
forfeiture, no evidence of such was produced at trial. The only competent 
evidence in the record is Frances Messersmith's statement that she had put 
$8,000 on a home. Such evidence is insufficient to establish that appellants did 
not retain the value. Merely putting money down on a house is just a change of 
form. Since the burden of proof was upon appellants to establish a loss of value 
and they failed to introduce any evidence to prove that they have not retained 
the value of the overpayment, we must affirm the trial court's finding. No 
change of circumstances was established.

[¶18.]  Affirmed.

FOOTNOTES

1 Appellants filed a 
counterclaim, contending they had been damaged by the negligence of appellee's 
agent. However, the district court's award implicitly found that appellants had 
suffered no damage as a result of the agent's error.