C. Elements Defined

• Library: Elements of Civil Causes of Action (SCBar) (2021 Ed.)

C. Elements Defined

1. The Defendant Holds Money

Courts often state that an action for money had and received requires that the defendant holds the money in question in his or her hand.⁴² That suggests that the money must presently be in the hand of the defendant.⁴³ The complaint probably need only briefly state that fact, leaving it to the defendant to deny that he or she has the money. If the defendant no longer has the money in hand, he or she may be subject to some other action — conversion, for example — but presumably is not liable in an action for money had and received.

2. The Defendant Ought in "Equity and Good Conscience" Pay the Money Over to the Plaintiff

The ultimate question in an action for money had and received is: to which party does the money at issue belong?⁴⁴ The "usual" test in cases for money had and received is whether the defendant is entitled "in equity and good conscience" to the retain the money at issue,⁴⁵ and the plaintiff must show that the defendant should not retain the money, but should pay it over to the plaintiff. Sometimes the formulation is reversed and courts say that in equity and good conscience, the money belongs to plaintiff.⁴⁶ However, it will be observed that these are not the same thing: the defendant may have no right to retain the money, but that does not necessarily mean it belongs to the plaintiff.⁴⁷ Therefore, in an abundance of caution, the plaintiff might want to say in the complaint that the money in question belongs, in equity and good conscience, to him or her and should not, in equity and good conscience, be retained by the defendant.

The plaintiff does not need to allege that money was "wrongfully" obtained by the defendant, although it may later prove necessary to show that was the case. The general principle — that the plaintiff must only show the defendant should not in equity and good conscience retain the money — applies even when the plaintiff has mistakenly made a payment through forgetfulness or inadvertence.⁴⁸ Actions for money had and received have been based on both mistaken transfers of funds as well as wrongful procuring of them. In the former category are cases in which: a death benefit was mistakenly paid to the beneficiary of a life insurance policy under the erroneous belief that the insured had died in World War II;⁴⁹ life insurance premiums were paid by the mother of an insured in the mistaken belief that he was still alive;⁵⁰ money was paid by mistake under a warrant of attachment when some of it was owed under two prior warrants of attachment;⁵¹ money was held by a sheriff that was obtained pursuant to a void judgment;⁵² rent was overpaid by mistake;⁵³ a contractor was overpaid for construction of municipal improvements.⁵⁴ The classic case in which the action for money had and received lies to recover wrongfully obtained funds is the conversion and sale of personal property in which the plaintiff waives the tort.⁵⁵ The action may also lie when money is obtained through false representations,⁵⁶ or "extortion or oppression, or by taking undue advantage of the situation of the party."⁵⁷ And in one case an action to recover a municipal license fee paid under protest was treated as an action for money had and received.⁵⁸

Many cases concern "wrongful retention" of funds.⁵⁹ These include: a party who retained money that he or she was directed to pay to another;⁶⁰ money an executor should have paid to a devisee;⁶¹ failure to follow instructions regarding application of funds received;⁶² termination of an agency;⁶³ a legacy intentionally withheld from an heir;⁶⁴ the demand of a testator's creditor against a legatee who received his or her legacy, leaving the testator's debts unpaid, and without available assets for payment;⁶⁵ failure of an attorney who obtained a judgment for his or her client to surrender the proper amount to the client;⁶⁶ recission of an executory contract formed for an illegal purpose;⁶⁷ retention by a county in its general funds of fees to which the plaintiff's decedent was entitled in his position as a county treasurer.⁶⁸ There are also a number of cases in which a governmental authority was found to be legally obligated to holders of notes under money had and received, even though the note may not have been valid.⁶⁹ Similarly, the action is said to lie when a plaintiff has paid money to the defendant under an unenforceable contract⁷⁰ or a contract that has been rescinded.⁷¹

Two early cases illustrate that answering the basic question of an action for money had and received — to which party does the money at issue belong? — isn't always easy. In one case the superintendent of the state penitentiary took notes as payment for convict hire. The superintendent raised money for operation of the penitentiary by discounting the notes — endorsed by him — at a bank. When, at maturity, the bank presented the notes for payment, it received no payment. The bank sued the state for recovery of money it claimed to be due it from the state. The state, however, argued that the superintendent acted without authority and that he alone was individually liable for the amount at issue. The circuit court refused to dismiss the case, and the state appealed. The South Carolina Supreme Court reversed and remanded with instructions to the lower court to sustain the demurrer and dismiss the complaint. It concluded the action could not be sustained as one for money had and received because the state only received that to which it was entitled: money for the hire of convicts. The plaintiff bank had paid no money to the state by mistake. It dealt with the superintendent, not the state, and received from him all that it contracted for: the liability of the makers of the notes, supported by the superintendent's endorsement.⁷²

In County of Richland v. Miller,⁷³ the plaintiff county brought an action against its clerk to recover money that had been paid to him by a previous board of commissioners. The clerk had rendered his account for services to the board which had audited it and ordered it paid. The complaint, brought by a subsequent board of commissioners, contended that payment had been improper. The court said the action was "in the nature of an action of assumpsit for money had and received" by the defendant clerk that he should not retain, but which belonged to the plaintiff. The trial court found for the plaintiff, but the South Carolina Supreme Court reversed deciding, in effect, that the money did not belong to the county because the clerk was entitled to reasonable compensation, and when the prior board audited the defendant's accounts and ordered them paid, the county could not later disregard that action and recover the money absent "mistake or fraudulent collusion."

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Notes:

^[42] McDonald's Corp. v. Moore, 237 F. Supp. 874 (D.S.C. 1965) (action may be maintained whenever one has money in his hands belonging to another that, in equity and good conscience, ought to be paid over); Duncan v. McCormick County, 192 S.C. 216, 6 S.E.2d 265 (S.C. 1939) (quoting federal court that relied on legal encyclopedia for proposition that all plaintiff need show is that defendant holds money that, in equity and good conscience, belongs to plaintiff) Drake v. Whaley, 35 S.C. 187, 14 S.E. 397 (S.C. 1892) (when one person holds money that really belongs to another cause of action is in assumpit for money had and received); Marvin v. M'Rae, 24 Rice 171, 176 (1839) (if a party has money in his hand that belongs to another, that other party may sue the first in an action for money had and received).

^[43] See, e.g., Gist v. Western Union Tel. Co., 45 S.C. 344, 23 S.E. 143 (S.C. 1895) (defendant telegraph company that was allegedly negligent in delivering message, was not sued for any money received by it for use of plaintiff, and could not be because it did not received any money belonging to plaintiff). See also Griffin v. Griffin, 20 S.C. 486 (S.C. 1884). In Griffin the plaintiff was a person who had been declared incompetent and who had a sum of money in the hands of county commissioners. The plaintiff's nephew brought a proceeding in the Probate Court, representing that his aunt had recovered her mind. He obtained possession of the money as her agent. Evidently he then applied to be appointed her guardian, but the court denied the application and appointed another person who brought an action against the nephew for the money. The aunt was subsequently joined as a party plaintiff. The defendant nephew argued the county commissioners should be parties to the action. The South Carolina Supreme Court, however, decided it was not necessary to make the county commissioners parties. Although they had control of the money at one time, they had paid it to the defendant pursuant to a judgment obtained through the representations of the defendant...