Chapter 26 MONEY HAD & RECEIVED

• Jurisdiction: North Carolina

26 MONEY HAD & RECEIVED

A. Definition

The cause of action for money had and received is ancient. It emerged from the old common-law action of assumpsit and the North Carolina Supreme Court has, indeed, described it as an action in assumpsit.¹ It was known as one of the "common counts" in assumpsit² The United States Supreme Court explained that it was originally an action to recover a debt and expanded to become a method for recovery on "every form of quasi-contractual obligation in which the duty to pay money is imposed by law, independent of contract, express or implied in fact."³

The North Carolina Supreme Court has described the action of money had and received simply:

It is, says the court, an action that may be maintained whenever the defendant has money in his or her hands that belongs to the plaintiff and which in equity and good conscience he or she ought to pay to the plaintiff.⁴

Often, the action is based on money mistakenly paid to the defendant.⁵ It apparently can also apply when a contract is unenforceable because it violates the statute of frauds,⁶ or because there was no consideration supporting the contract.⁷ The state supreme court has said:

Where the promisor in an oral contract to convey or devise real property has received the purchase price in money or other valuable consideration and has failed to transfer title, the promisee may recover the consideration in an action of quasi-contract for money had and received or under the doctrine of unjust enrichment.⁸

The relationship between money had and received and unjust enrichment is a bit fuzzy. The North Carolina Supreme Court has said that "an action to recover for money had and received, under the doctrine of unjust enrichment, is an action on implied contract."⁹ In other words, unjust enrichment is a principle of law under which one party should not be unjustly enriched at the expense of another, and money had and received is a cause of action that enforces that principle. Courts, however, sometimes treat unjust enrichment as a separate or encompassing cause of action.¹⁰

An action for money had and received is an action at law, but is governed by equitable principles.¹¹

Money had and received should be distinguished from actions for conversion and quantum meruit. Money can be the subject of conversion;¹² however, to prove conversion, the plaintiff has to show that the defendant acted wrongfully.¹³ The right of recovery under an action for money had and received does not presuppose a wrong by the person who received the money.¹⁴ Even if the defendant did not acquire the property wrongfully, he or she can be liable for conversion if the plaintiff demands the property and the defendant responds with an absolute, unqualified refusal to surrender it.¹⁵ The distinction between the two actions in that case is that a "demand" is not an element of an action for money had and received.¹⁶ Quantum meruit is an action in which the plaintiff provided the defendant with goods or services for which there was no contractual obligation to pay, but the court finds that obligation to be implied at law.¹⁷ In contrast, an action for money had and received does not concern any goods or services provided to the defendant, only that the defendant holds money belonging to the plaintiff.

B. Elements

The elements of an action for money had and received are that:

(1) The defendant has money in his or her hands that belongs to the plaintiff; and
(2) In equity and good conscience, the defendant ought to pay that money to the plaintiff¹⁸

C. Elements Defined

1. Defendant Has Money in Hand That Belongs to Plaintiff

The first element of the action is that the defendant has — possesses — money that belongs to the plaintiff.¹⁹ That implies that the money is presently in the hands of the defendant and that if the defendant no longer has the money in hand, he or she is not liable in an action for money had and received.²⁰ In fact, the North Carolina Supreme Court said in an early case "to maintain the action for money 'had and received' . . . the defendant must have the money; indeed the very name given [shows] that it must be so."²¹ The defendant, of course, might be liable in another action — for example, conversion. Possession is key to the first element, and thus, the North Carolina Supreme Court has said that it is immaterial how the money may have come into the defendant's hands and that the fact that it was received from a third person does not affect the liability of the defendant.²²

2. In Equity/Good Conscience, Defendant Ought to Pay Money to Plaintiff

The North Carolina Supreme Court has explained that in an action for money had and received:

Recovery is allowed upon the equitable principle that a person should not be permitted to enrich himself unjustly at the expense of another. Therefore, the crucial question in an action of this kind is, to which party does the money, in equity and good conscience, belong? The right of recovery does not presuppose a wrong by the person who received the money, and the presence of actual fraud is not essential to the right of recovery. The test is not whether the defendant acquired the money honestly and in good faith, but rather, has he the right to retain it.²³

For example, in one case, the defendants showed the plaintiffs some timber land. The plaintiffs bought the timber and paid the defendants a commission. Later, when the timber deed was delivered, the plaintiffs learned that it did not cover all the timber they had viewed. Nonetheless, they were able to sell the timber at a profit. The court said that the defendants, by their activities, consummated the sale of the timber to the plaintiffs and, in equity and good conscience, were entitled to retain the commission for their services. The evidence, concluded the court, was insufficient to support a recovery from the defendants for money had and received.²⁴ In another case, a bank mistakenly paid money from the account of one depositor to that of another. The court said that the money did not belong to the defendant and the defendant's refusal to correct the error and return the money revealed him to be in an "inequitable position."²⁵ The North Carolina Supreme Court has said, however, that if a payment is made by a mistake that arose from the fault or negligence of the party paying it²⁶ and it cannot be recovered without prejudice to the party who has received it,²⁷ the action will not lie.²⁸

When that money at issue is a gift bestowed on the defendant by the plaintiff, an action for money had received would fail because the defendant has the right to retain it.²⁹ As the North Carolina Supreme Court has explained, "money paid voluntarily with knowledge of the facts cannot be recovered back. If a man chooses to give away his money, or to take his chances whether he is giving it away or not, he cannot afterwards change his mind."³⁰

As the state's highest court has said, the question is to which party does the money, in equity and good conscience, belong? Thus, if payment of the money has caused a change in the position of the payee that would make it unjust to require a refund, the plaintiff may not recover.³¹ Equity then favors the defendant payee.

D. Defenses

North Carolina courts have rarely discussed defenses to an action for money had and received. One defense to the action is the statute of limitations, which is three years.³² It appears that a claim for money had and received can be barred by an accord and satisfaction³³ or by a contract between the parties.³⁴ A claim for money had and received can be preempted by federal law.³⁵ Sovereign immunity, however, is not a defense.³⁶

E. Remedies

The remedy in an action for money had and received is the return of the money at issue. The plaintiff can also recover interest from the defendant.³⁷

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Notes:

^[1] Morgan v. Spruill, 214 N.C. 255, 257, 199 S.E. 17, 19 (1938) (action to recover money paid under mistake of fact is action in assumpsit). See also Wells v. Foreman, 236 N.C. 351, 354, 72 S.E.2d 765, 766 (1952) (obligation or implied promise to repay money may be enforced in action in assumpsit for money had and received); Robertson v. Dunn, 87 N.C. 191 (1882) (plaintiff may waive tort of conversion and bring action in nature of assumpsit for money had and received to his use).

^[2] Restatement of the Law of Restitution, Part I, introductory note. See also Ballentine's Law Dictionary (Lexis Law Publishing 1969). The action was also called "indebitatus assumpsit for money had and received." See Bd. of Educ. v. Henderson, 126 N.C. 689, 694, 36 S.E. 158, 160 (1900) (defendant having received money that belongs to plaintiff, law presumes that it...