Lead Opinion
This appeal arises out of a postjudgment garnishment proceeding. The plaintiffs obtained a judgment against defendant Newman, which they sought to enforce through a writ of garnishment directed to garnishee First Allmerica Financial Life Insurance Company. The garnishee paid the judgment in the mistaken belief that it was indebted to the defendant. The circuit court denied its request for relief from the garnishment order, and the Court of Appeals denied leave to appeal.
We conclude that the case on which the lower courts relied, Shield Benefit Administrators, Inc v Univ of Michigan Bd of Regents,
i
Defendant Newman borrowed money from the plaintiffs. When he failed to repay the debt, plaintiffs brought this action to recover the remaining loan balance, together with interest and attorney fees. Ultimately, Newman agreed that he owed the debt, and a consent judgment was entered in plaintiffs’ favor.
The plaintiffs obtained issuance of a writ of garnishment directed to garnishee First Allmerica Financial Life Insurance Company, seeking any funds owed by First Allmerica to Newman.
In preparing the response to the writ of garnishment, First Allmerica’s staff discovered several insurance policies owned by a Robert L. Newman and disclosed indebtedness to defendant Newman as a result. When no objections to the disclosure were received, it sent a check to the plaintiffs in care of their attorney dated September 1, 1998, in the amount of $43,021.58. The funds were withdrawn from two life insurance policies owned by its insurer. Shortly thereafter, the garnishee discovered that the policies were not those of defendant Newman, but rather of a Colorado resident with a different social security number.
The circuit court denied relief, relying on Shield Benefit, supra. It opined that the garnishee, the party making the mistake, should bear the loss. The court noted that there was no claim that the plaintiffs made any misrepresentations or knew of the mistake.
The garnishee filed a delayed application for leave to appeal with the Court of Appeals.
The Court orders that the delayed application for leave to appeal is denied for lack of merit in the ground presented. Pursuant to MCR 7.215(H), we are bound to follow Shield Benefit Administrators, [supra]. MCR 7.215(H)(2) does not provide this panel authority to declare a conflict with Shield Benefit Administrators, Inc, supra, because orders of this Court are not published. Appellants’ relief, if any, rests exclusively in the Supreme Court.[3 ]
Garnishee First Allmerica has filed an application for leave to appeal to this Court.
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Shield Benefit, supra, involved a claim that health insurance benefits were mistakenly paid. The case was submitted on stipulated facts, which the Court of Appeals summarized as follows:
*439 According to the stipulated facts, the husband of Claudette Hodge was an employee of plaintiff Oven-Fresh Bakeries, Inc., through which he and his dependents were insured under a group health plan. Plaintiff Shield Benefit Administrators, Inc., (Shield) is a third-party administrator that administers Oven-Fresh’s health plan. Hodge was insured under the Oven-Fresh health plan and received treatment at the University of Michigan Medical Center. The medical care was delivered during the first five months of 1994 and cost $4,260. Before each provision of service to Hodge, the Medical Center obtained preauthorization from a Shield agent. The Medical Center obtained an assignment from Hodge and directly billed Shield for the services rendered to Hodge. Shield submitted full payment to the Medical Center for Hodge’s treatments.
After making the payment to the Medical Center, Shield discovered that benefits had been paid in excess of Hodge’s maximum plan benefit for the applicable period. Accordingly, in November 1994, Shield notified the Medical Center that Shield should not have paid for Hodge’s services, and Shield requested that the payment be refunded. The Medical Center refused to return the $4,260 paid by Shield for the services rendered to Hodge. Shield then filed this action. [225 Mich App 468 -469.]
The Shield Benefit majority recognized that there was a well-settled rule that payment made under a mistake of fact can be recovered even if the mistake could have been avoided by the payor. Couper v Metropolitan Life Ins Co,
A creditor of another or one having a lien on another’s property who has received from a third person any benefit in discharge of the debt or lien, is under no duty to make restitution therefor, although the discharge was given by mistake of the transferor as to his interests or duties, if the transferee made no misrepresentation and did not have notice of the transferor’s mistake.
Relying on a number of cases that have adopted the Restatement principle in the context of payments by insurers to medical care providers, particularly Federated Mut Ins Co v Good Samaritan Hosp, 191 Neb 212;
Judge Young, dissenting in Shield Benefit, saw no reason to abandon the well-settled rule that a voluntary payment made under a mistake of material fact may be recovered. Montgomery Ward & Co v Williams,
Noting the hospital’s request to adopt § 14(1) of the Restatement, Judge Young said:
I am unconvinced that the Michigan rule is inadequate, as contended, to cover sufficiently and equitably the circumstances of this case. As a rule of equity, it seems reasonable to require the return of a mistaken payment, particularly when the payee can demonstrate no change of position or detrimental reliance as a consequence of receiving the mistaken payment. Such has been Michigan’s rule for more*441 than one hundred years, and it is well understood. [225 Mich App 474 .]
Judge Young went on to question the appropriateness of changing the longstanding rule regarding restitution of payments made by mistake, noting the lack of information about the effect of such a policy change.
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We agree with the dissent in Shield Benefit that it was inappropriate for the Court of Appeals to have adopted the principle of § 14 of the Restatement of Restitution in that case. The longstanding Michigan authority on the subject is sound, and provides all the necessary exceptions to protect payees where it is appropriate to do so. We summarized those principles in General Motors Corp v Enterprise Heat & Power Co,
The general rule relative to the right, to recover money paid through a mistake of fact is well stated in Smith v Rubel,140 Or 422 , 426, 427 (13 P2d 1078 ,87 ALR 644 ) [(1932)], where it was said:
“As a general rule, a payment made under a mistake of fact which induces the belief that the other party is entitled to receive the payment when, in fact, the sum is neither legally nor morally due to him, may be recovered, provided the payment has not caused such a change in the position of the payee that it would be unjust to require the refund. . . .”
Michigan has generally followed this rule. In Walker v Conant,65 Mich 194 , 197, 198 [31 NW 786 (1887)], we said:
“The rule is general that money paid under a mistake of material facts may be recovered back, although there was negligence on the part of the person making the payment; but this rule is subject to the qualification that the payment*442 cannot be recalled when the situation of the party receiving the money has been changed in consequence of the payment, and it would be inequitable to allow a recovery.”
In Pingree v Mutual Gas Co,107 Mich 156 , 159, 160 [65 NW 6 (1895)], we said:
“Payments made by reason of a mistake or ignorance of a material fact are regarded as involuntarily made. Ignorance of a fact may be equivalent to a mistake of fact.”
In State Savings Bank of Ann Arbor v Buhl,129 Mich 193 , 197 [88 NW 471 (1901)] (56 LRA 944), we said:
“While it may be difficult to find a case on all fours with this, it may be said the courts almost unanimously now hold that, although the mistake of facts is caused by the negligence of one party, that party is not precluded thereby from availing himself of the mistake if the other party can be relieved of any prejudice caused thereby.”
See, also, Couper v Metropolitan Life Insurance Co,250 Mich 540 . [350 Mich 181 -182.][4 ]
Accordingly, we reverse the decision of the lower court that precluded recovery of the mistaken payment on the basis of § 14 of the Restatement of Restitution. We remand the case to the Oakland Circuit Court for further proceedings to determine whether, on the facts of this case, restitution of the mistaken payment is appropriate.
Notes
Defendant Newman’s social security number was correctly stated in the writ of garnishment.
It originally attempted to file a claim of appeal, which the Court of Appeals dismissed for lack of jurisdiction because the order denying relief from garnishment was a postjudgment order that is not appealable of right. MCR 7.202(7)(a)(i). Unpublished order, entered March 11, 1999 (Docket No. 216293).
Unpublished order, entered July 26, 1999 (Docket No. 218654).
Indeed, even under the established Michigan law, denial of reimbursement in Shield Benefit may well have been appropriate. In that case, before providing service to the patient, the defendant medical center obtained preauthorization from a Shield Benefit agent. Thus, the medical center was arguably relying on the expected payments from Shield Benefit in rendering services to the insured.
Similarly, we think the traditional Michigan rule permitting restitution of mistaken payments, with appropriate exceptions, produces a just result in the instant case. It is undisputed that the property held by garnishee Allmerica Financial was not that of defendant Newman, but rather of another person with the same name, making this a case of payment by mistake within the general rule. As many Michigan cases have said, the fact that the mistake is the result of negligence by the payor is not dispos-itive. E.g., General Motors Corp v Enterprise Heat & Power Co, supra; Couper v Metropolitan Life Ins Co, supra; Pingree v Mut Gas Co, supra.
Courts often say that when one of two innocent parties must suffer a loss, it should be borne by the one whose conduct made the loss possible. E.g., Langschwager v Pinney,
Dissenting Opinion
I dissent. Today, the majority holds that the Court of Appeals improperly rejected existing Michigan precedent when it wrote Shield Benefit Administrators, Inc v Univ of Michigan Bd of Regents.
However, these cases involved a different circumstance than exists either in Shield Benefit or in the case before us on appeal. Specifically, Couper and Madden involved a mistaken payment in a two-party situation. One party mistakenly paid money to the other. Shield Benefit, like this case, concerns a mistaken payment to a third-party creditor. One party mistakenly paid the creditor of another party. Because the factual settings in Couper and Madden are markedly different from those in Shield Benefit and the instant case, the holdings of the former do not bind the latter.
The majority rejects the principles embodied in Restatement, § 14. In so doing, it ignores this Court’s holding in Walker v Conant.
Because the rejection of precedent involves a juris-prudentially significant matter, the Court should have granted leave here.
Restatement Restitution, § 14(1), p 55, provides:
*444 A creditor of another or one having a lien on another’s property who has received from a third person any benefit in discharge of the debt or lien, is under no duty to make restitution therefor, although the discharge was given by mistake of the transferor as to his interests or duties, if the transferee made no misrepresentation and did not have notice of the transferor’s mistake.
Dissenting Opinion
(dissenting). The rationale of the per curiam is unacceptable, and I think that the issue presented is significant enough to the state’s jurisprudence that the question should be resolved by grant rather than by per curiam. Perhaps argument and briefing would lead me to the conclusion that the Restatement is inconsistent with existing Michigan law, but at this point, I see only a number of cases that can be distinguished. The question is not well settled, and should not be resolved so summarily. I, therefore, prefer that this Court grant leave.