Opinion ID: 1140596
Heading Depth: 1
Heading Rank: 3

Heading: Money Had and Received

Text: The second theory of liability under which the trial court may have found the defendants liable in this case arises under the common law claim of money had and received. Appellants argue that the UCC's statutory scheme for bank deposits and collections precludes FAB's recovery against its customers under a common law cause of action for money had and received, restitution, or unjust enrichment. While the appellants cite several cases that ostensibly support this position, we recognize that a split of authority exists among the states. See, Brannon v. First Nat'l Bank of Atlanta, 137 Ga.App. 275, 223 S.E.2d 473, 476 (1976); First Georgia Bank v. Webster, 168 Ga.App. 307, 308 S.E.2d 579 (1983); but cf., Greer v. White Oak State Bank, 673 S.W.2d 326 (Tex.Dist. Ct.App.1984); Great Western Bank & Trust v. Nahat, 138 Ariz. 260, 674 P.2d 323 (Ariz.Ct.App.1983); Demos v. Lyons, 151 N.J.Super. 489, 376 A.2d 1352 (1977); City Nat'l Bank v. Crocker Nat'l Bank, 150 Cal.App.3d 290, 197 Cal.Rptr. 721 (Dist.Ct. App.1983) (later vacated by agreement of the parties); City Nat'l Bank v. Crocker Nat'l Bank, 211 Cal.Rptr. 517, 695 P.2d 1058 (1984). We are persuaded by the reasoning of the Texas District Court of Appeals in the case of Greer v. White Oak State Bank, supra. In Greer, the court held that while a collecting bank could not recover against its customer as an indorser because it failed to give the indorser timely notice of dishonor, the collecting bank was not precluded from proceeding against him on a cause of action for money had and received: As indicated Greer [and others] were all discharged, as indorsers, from any obligation on the check. Greer, however, was also a customer of the bank, and a recovery against him on a cause of action for money had and received, or unjust enrichment, was proper under the jury findings. When a bank provisionally settles with its customer, and by reason of a dishonor of the item fails to receive the funds, it may revoke its settlement and charge the item back or obtain a refund from its customer. [Citations omitted.] Greer contends this remedy is exclusive and prohibits a recovery against him on equitable principles. But [UCC § 4-212(5)] provides that a failure to charge back or claim a refund does not affect other rights of the bank against the customer, and [UCC § 1-103] provides that unless displaced by other provisions of the code the principles of law and equity shall supplement its provisions. [Emphasis added.] Hence the equitable right of restitution is still available unless it conflicts with code provisions. [Citations omitted]. We find no provision of the code which conflicts with or abrogates the equitable right of a bank to proceed against its customer for restitution of funds which rightfully belong to the bank. Id., at 329. Similarly, in Great Western Bank & Trust v. Nahat, 138 Ariz. 260, 674 P.2d 323 (Ariz.Ct.App.1983), the court held that a collecting bank's right to charge back a dishonored check was lost by its failure to notify its customer of the dishonor within the required time, but that this did not preclude recovery from the customer on a theory of restitution: [The collecting bank] concedes that it is not entitled to a chargeback because it failed to notify [the customer] of the check's dishonor within the required time. [Citations omitted.] It argues that this does not preclude recovery under a theory of restitution. . . . . Since restitution was adequately pled, we must next determine whether chargeback pursuant to [UCC § 4-212(1) ] is an exclusive cause of action. We begin by recognizing that common law principles are incorporated into the commercial law of Arizona by [UCC § 1-103] unless displaced by a particular statutory provision. [The collecting bank] cites [UCC § 4-212(5) ] to support its position that the remedy of restitution should be recognized. That statute provides: `A failure to charge back or claim refund does not affect other rights of the bank against the customer or any other party.' By its terms [UCC § 4-212(5) ] expressly recognizes that the right to charge-back is not an exclusive remedy. Other jurisdictions have held that UCC § 4-212(1) ... is not the sole remedy. . . . . ... [W]e hold that the common law remedy of restitution was available to the bank. Id., 674 P.2d at 326-27. By the authority of Greer and Nahat, and the express provisions of §§ 7-4-212(5) and 7-1-103, we find that FAB is not precluded by the UCC from asserting and proving a right of recovery under the principles of money had and received. Thus, we next look to determine whether FAB adduced the necessary evidence to prove the elements of its case so that the trial court may have justifiably granted a recovery to FAB based upon this common law theory. The cause of action for money had and received is based upon the theory that one person shall not be unjustly enriched at the expense of the other, and is equitable in nature. That is to say, the action lies wherever one has received and holds money which in good conscience belongs to another, or where one wrongfully converts the property of another the tort may be waived and an action brought for the proceeds arising from such conversion. Christie v. Durden, 205 Ala. 571, 572, 88 So. 667, 668 (1921). Thus, the question that this Court must answer by weighing the facts is whether the appellants received and held money that rightly belonged to FAB. After a careful review of the record, we find that the evidence clearly indicates that the appellants paid good and valuable consideration in exchange for the $100,000 check issued them by Hannah. When we further consider FAB's failure to encode the instrument properly, the collecting banks' failure to remedy the error, FNBL's failure to compare the encoded amount of the draft against the true tenor of the check, FNBL's return of the instrument to Hannah, and the 41-day delay in notifying the appellants of the purported dishonor of the check, we can reach but one conclusion: the appellants were not unjustly enriched. If anyone, under these facts, could be found to have unjustly benefited from these turns of events, we would have to say it was Hannah. After all, it was he who received consideration for the $100,000 check, it was he who had but a tenth of what he truly owed debited from his account, and it was he who had the instrument upon which his obligation was based returned to him by FNBL. We note, also, that FAB currently holds a judgment against Hannah for the full amount of the $100,000 check. The appellants, in contrast, were severely prejudiced by the actions of the banks. Forty-one days elapsed between the date of deposit and the date on which they were finally given notice of dishonor. It was during that period of time that Hannah apparently absconded with whatever funds remained in his account. Had FAB properly encoded the check, one of two things is certain. When the full and proper amount of the instrument was presented for payment to FNBL, either the full amount of the check would have been paid, or Hannah's stop payment order would have prevented payment and the check would have been dishonored and returned to the appellants. Obviously, in the first instance, no one would have been injured. In the second instance, however, the appellants would have been placed in a significantly better position to pursue Hannah, either to recover their consideration or to sue upon the instrument. Because the appellants were not unjustly enriched, the judgment of the trial court cannot be affirmed based upon a theory of money had and received.