Opinion ID: 890183
Heading Depth: 2
Heading Rank: 2

Heading: Restitution as a Form of Relief

Text: ¶ 21 At the outset, we note that there is substantial support for Evans' restitution theory. It is a well established principle that one has a right to recover what one has lost by the enforcement of a judgment subsequently reversed. Baltimore & Ohio R.R. Co. v. United States, 279 U.S. 781, 786, 49 S.Ct. 492, 493, 73 L.Ed. 954 (1929); accord Anderson v. Border, 87 Mont. 4, 11, 285 P. 174, 177 (1930); Nepstad v. East Chicago Oil Assn., 96 Mont. 183, 190-91, 29 P.2d 643, 646 (1934); Waggoner v. Glacier Colony of Hutterites, 131 Mont. 525, 528-29, 312 P.2d 117, 118-19 (1957); Reil v. State Compen. Mut. Ins. Fund, 254 Mont. 274, 278, 837 P.2d 1334, 1336-37 (1992); Crail Creek Assocs., LLC v. Olson, 2008 MT 209, ¶ 42, 344 Mont. 321, 187 P.3d 667. This is the longstanding rule of the Restatement. [1] Under Restatement (First) of Restitution § 74 (1937), [a] person who has conferred a benefit upon another in compliance with a judgment, or whose property has been taken thereunder, is entitled to restitution if the judgment is reversed or set aside, unless restitution would be inequitable or the parties contract that payment is to be final; if the judgment is modified, there is a right to restitution of the excess. Likewise, under Restatement (Third) of Restitution and Unjust Enrichment § 18 (2011), [a] transfer or taking of property, in compliance with or otherwise in consequence of a judgment that is subsequently reversed or avoided, gives the disadvantaged party a claim in restitution as necessary to avoid unjust enrichment. ¶ 22 In Hansen v. Hansen, 134 Mont. 290, 295, 329 P.2d 791, 793-94 (1958), this Court favorably cited and applied Restatement (First) of Restitution § 74. The Court also quoted similar principles from Am.Jur. Appeal and Error § 1242: [A]ll proceedings taken under the judgment are dependent for their validity upon the judgment being sustained. When it is reversed or set aside, the law raises an obligation against the party to the record who has received the benefit thereof to make restitution to the other party of any and all money or property received under it, or of its value or equivalent, in money in case the recipient asserts title to the thing received or has converted it to his own use. In other words, a party against whom an erroneous judgment or decree has been carried into effect is entitled, in the event of a reversal, to be restored by his adversary to that which he had lost thereby, but no further liability should in any case be imposed. Hansen, 134 Mont. at 294-95, 329 P.2d at 793 (emphasis omitted); accord Aye v. Fix, 192 Mont. 141, 147, 626 P.2d 1259, 1263 (1981). ¶ 23 Of relevance to the issue at hand, the Restatement applies these principles where funds received in satisfaction of a judgment are in turn paid by the judgment creditor to a bona fide payee. If the judgment is subsequently reversed, the judgment debtor has a restitution claim against the judgment creditor. The bona fide payee, on the other hand, holds the payment free of the judgment debtor's restitution claim. Restatement (Third) of Restitution and Unjust Enrichment § 18 cmt. g. Thus, for example, A sues B and obtains a money judgment of $150,000, which B pays. A pays $50,000 of this amount to discharge an obligation to Bank, a bona fide payee (§ 67). A's judgment against B is later set aside on the ground that it was based on a claim that A knew to be fraudulent. B is entitled to restitution from A of $150,000 with interest from the date of payment. B has no claim against Bank. Restatement (Third) of Restitution and Unjust Enrichment § 18 illus. 15. This principle also applies to situations where property of a judgment debtor is sold on execution and the underlying judgment is thereafter set aside. The judgment debtor has a restitution claim against the judgment creditor, but not against a bona fide purchaser of the property (unless the underlying judgment is void ab initio). Restatement (Third) of Restitution and Unjust Enrichment § 18 cmt. f. Likewise, where the underlying action is a contest over title to real estate, and the party who prevails at trial then sells the property to a bona fide purchaser, after which the underlying judgment is set aside, the opposing party has a restitution claim against the prevailing party or, depending on the doctrine of lis pendens, may instead have a claim against the purchaser. Restatement (Third) of Restitution and Unjust Enrichment § 18 cmt. g., illus. 12; Fox v. Clarys, 227 Mont. 194, 196, 738 P.2d 104, 105 (1987) (explaining the doctrine of lis pendens). ¶ 24 Restitution may be ordered in connection with the reversal, either by the appellate court or by the trial court on remand, or may be pursued in an independent action. See Burgess v. Lasby, 94 Mont. 534, 550, 24 P.2d 147, 153 (1933); Hansen, 134 Mont. at 295, 329 P.2d at 793-94; George E. Palmer, The Law of Restitution vol. II, § 9.9(b), 290 (Aspen 1978); Restatement (Third) of Restitution and Unjust Enrichment § 18 cmt. b.; see also e.g. Aye, 192 Mont. at 147-48, 626 P.2d at 1263; Reil, 254 Mont. at 278, 837 P.2d at 1336-37. But what is important, for purposes of this discussion, is the fact that restitution may be a form of relief available to an appellant upon obtaining a reversal of a judgment on appeal. This, in turn, bears on the question whether the appeal is moot.