Gulf Life Insurance Co. v. Folsom

Marshall, Chief Justice.

The United States Court of Appeals for the Eleventh Circuit certified the following question to this court pursuant to OCGA § 15-2-9. “. . . Statement of the facts. Between March 1974, and March, 1977, four $100,000 insurance policies were issued by the appellant, Gulf Life Insurance Co. (Gulf) on the life of appellee Sydney M. Folsom, the ex-president of appellee Folsom Construction Co. (Folsom). A total of $17,396 in premiums was paid for these policies. Folsom became the owner of these policies and on June 16, 1981, applied to Gulf for the maximum amount available under the policies based upon their cash value. Later in June, 1981, Folsom received a total of $56,530.65 from Gulf representing the cash value of the policies. A year later, on June 15, 1982, Folsom again sought the maximum value of the policies and received $62,425.39 from Gulf.

“At the time that Folsom made its second application for the maximum value of the policies, they actually had no value. The second payment of over $60,000 was the result of a computer mistake. This mistake occurred when the premiums that were due on the policies in March of 1982 were not paid on their due date or within the grace period. Because the premiums were not paid, Gulfs computer automatically checked the cash value of the policies to determine if there was any cash value remaining. When the computer checked the Folsom policies, it found that there was no cash value and therefore recorded a lapse of those policies. Subsequently, the premiums on the policies were paid and the policies were reinstated, but in the course of reinstating the policies, the computer did not pick up the 1981 loans as part of the information relating to these policies. It is undisputed that this error stemmed from Gulfs programming system, which had been prepared by one of its subsidiaries. Thus, when Folsom applied for the second maximum loan, the loans made in 1981 were not disclosed by the computer and the computer printed out checks for the loan value as if there had been no pre-existing loans on these policies. It is uncontested that Folsom did not play any role in this error. Furthermore, Gulf had in its possession the file on the policy which contained the correct information, and a clerk checking the file manually would have discovered the 1981 requests.

“In early 1983, agents of Gulf called Randall M. Folsom, the insured’s son, suggesting that the coverage be converted to a different type of policy. The premiums for the upcoming year were not yet paid and Folsom had to decide whether or not to keep paying the premiums on the policies. Sydney Folsom, the insured, was no longer the president of the company. Randall Folsom, as the new president of Folsom, asked Gulfs agent to determine the outstanding cash surren *401 der value of the policies. He was told that their value was $3,500. This information was incorrect, because it was based upon the same computer mistake that resulted in the second payment of the maximum loan value of the policies. Randall Folsom decided not to pay the premiums for the next year, but instead sought the cash surrender value of the policies. As a result of the signing of these cash surrender agreements, each policy was immediately cancelled.

“Randall Folsom never received the $3,500, so he contacted one of Gulfs agents. The agent said he did not understand the problem, but he would check on the matter. On September 8, 1983, Folsom received a letter from Gulf stating that the loan value of the policies had been overpaid and that Folsom owed Gulf $45,326.84. In addition, Gulf refused to pay Folsom the $3,500 that represented the mistaken cash surrender value of the policies. After Folsom did not return the money, Gulf instituted this action for money had and received in the United States District Court for the Middle District of Georgia. Gulf claimed that it was entitled to the $45,326.84 that had been mistakenly paid to Folsom. Folsom filed a counterclaim seeking to recover the $3,500 which it alleges Gulf is obligated to pay because of the cash surrender agreements. The district court granted Folsom’s motions for summary judgment as to both Gulfs claim for money had and received and Folsom’s counterclaim. The district court found that the overpayment was caused solely by Gulfs negligence, and therefore OCGA § 13-1-13 dictated the grant of summary judgment to the defendant.

“OCGA § 13-1-13 provides the following: ‘Payments of claims made through ignorance of the law or where all the facts are known and there is no misplaced confidence and no artifice, deception, or fraudulent practice used by the other party are deemed voluntary and cannot be recovered unless made under an urgent and immediate necessity therefor or to release person or property from detention or to prevent an immediate seizure of person or property . . .’ Georgia courts have held that this section applies not only when one pays money with knowledge of all the facts but also when one pays by mistake without a valid reason for failing to ascertain the truth. See e.g., Atlanta Coach Co. v. Simmons, 184 Ga. 1 [190 SE 610] (1937); Barker v. Federated Life Ins. Co., 111 Ga. App. 171 [141 SE2d 206] (1965). See also Bohannon v. Manhattan Life Ins. Co., 555 F2d 1205, 1212 (5th Cir. 1977).1 In addition, Georgia courts have placed the burden on the party seeking recovery to prove that the payment was not made voluntarily because at the time of the payment, material facts *402 were not known, or because a valid reason existed for the failure to ascertain the truth. New York Life Ins. Co. v. Williamson, 53 Ga. App. 28 [184 SE 755] (1936). Relying on this interpretation of OCGA § 13-1-13, the district court concluded that Gulf could not recover its overpayment to Folsom, because there was no valid reason for Gulfs failure to ascertain the true value of Folsom’s policies.

“There is another Code section, however, that sheds doubt upon this conclusion. OCGA § 23-2-32 (b) provides that ‘[r]elief may be granted even in cases of negligence by the complainant if it appears that the other party has not been prejudiced thereby.’ It is clear that this Code section applies to actions for money had and received. See Barton & Ludwig, Inc. v. Thompson, 170 Ga. App. 187 [316 SE2d 786] (1984); J. C. Penney Co. v. West, 140 Ga. App. 110 [230 SE2d 66] (1976). There appears to be a conflict between OCGA § 23-2-32 (b) and OCGA § 13-1-13, and we have been unable to find a Georgia case that resolves this conflict.

“. . . Question to be Certified. In an action for money had and received, can the plaintiff recover a payment mistakenly made when that mistake was caused by his lack of diligence or his negligence in ascertaining the true facts and the other party would not be prejudiced by refunding the payment?

“The particular phrasing used in this certified question is not intended to restrict the Supreme Court’s consideration of the issue in its analysis of the record certified in this case. This latitude extends to the Supreme Court’s restatement of the issue or issues and the manner in which the answers are given. See Martinez v. Rodriguez, 394 F2d 156, 159, n. 6 (5th Cir. 1968).” Held:

An action for money had and received (formerly known at various times as indebitatus assumpsit, implied assumpsit, and assumpsit), although legal in form, arose from the common-law courts, is founded on the equitable principle that no one ought to unjustly enrich himself at the expense of another, and is a substitute for a suit in equity. Cantrell v. Henry County, 250 Ga. 822, 825 (1) (301 SE2d 870) (1983); Jasper School District v. Gormley, 184 Ga. 756 (193 SE 248) (1937); J. C. Penney Co. v. West, 140 Ga. App. 110 (2) (230 SE2d 66) (1976); Hobbiest Financing Corp. v. Spivey, 135 Ga. App. 353 (3) (217 SE2d 613) (1975).

Thus, although the action is governed by OCGA § 13-1-13, Georgia courts have construed that Code section and its predecessors — and interpreted the action itself — in conjunction with the equitable principles set forth in the Code, including OCGA § 23-2-32 and its predecessors. E.g., Orient Ins. Co. v. Dunlap, 193 Ga. 241, 248 (2) (17 SE2d 703) (1941); Whitehurst v. Mason, 140 Ga. 148 (78 SE 938) (1913); Barton & Ludwig, Inc. v. Thompson, 170 Ga. App. 187, supra, cert. den.; DeKalb County &c. Union v. D. L. Claborn Buick, 162 Ga. *403 App. 631 (292 SE2d 507) (1982); Dept. of Administrative Svcs. v. Pritchett, 160 Ga. App. 294 (287 SE2d 290) (1981); Sun Fed. Savings. &c. Assn. v. Manny, 156 Ga. App. 807, 808 (3) (275 SE2d 661) (1980); J. C. Penney Co. v. West, 140 Ga. App. 110, supra; Dept. of Public Health v. Perry, 123 Ga. App. 816 (182 SE2d 493) (1971); Bill Heard Chevrolet Co. v. Atlantic Discount Co., 120 Ga. App. 388 (170 SE2d 740) (1969); Bass v. Cates, 74 Ga. App. 363, 370 (39 SE2d 550) (1946); Dobbs v. Perlman, 59 Ga. App. 770 (2 SE2d 109) (1939). (The apparent reason for the paucity of cases from this court applying specifically to actions for money had and received is that such an action “is not an equity case within the meaning of the constitutional provision relating to the jurisdiction of this court.” Orient Ins. Co. v. Dunlap, 193 Ga. 241, supra, p. 246.)

Such a construction is proper under the rule of law that “[t]he plaintiff’s right to recover cannot be measured by one equitable statute or section of the Code, since such statute must be construed with reference to other equitable principles of which it forms a part.” Adler v. Leopold Adler Co., 205 Ga. 818, 823 (55 SE2d 139) (1949). “All statutes are presumed to be enacted by the General Assembly with full knowledge of the existing condition of the law and with reference to it, and are therefore to be construed in connection and in harmony with the existing law, and as a part of a general and uniform system of jurisprudence, and their meaning and effect is to be determined in connection, not only with the common law and the Constitution, but also with reference to other statutes and decisions of the courts. [Cits.]” Poteat v. Butler, 231 Ga. 187, 188 (1) (200 SE2d 741) (1973). We have held that the equitable principle in OCGA § 23-2-29, that “[i]f a party, by reasonable diligence, could have had knowledge of the truth, equity shall not grant relief . . . ,” is not inconsistent or conflicting with the equitable principles in OCGA § 23-2-32: “(a) The negligence of the complaining party, preventing relief in equity, is that want of reasonable prudence, the absence of which would be a violation of legal duty, (b) Relief may be granted even in cases of negligence by the complainant if it appears that the other party has not been prejudiced thereby,” the latter principles being a mere amplification of the former one, with an exception in subsection (b) of § 23-2-32. J. Kuniansky, Inc. v. Ware, 192 Ga. 488 (3) (15 SE2d 783) (1941).

OCGA § 13-1-13 by its terms applies “where all the facts are known.” This has been construed to include constructive, as well as actual, knowledge, under such equitable principles as that in OCGA § 23-2-29, supra, and “[i]gnorance of a fact by both parties shall not justify the interference of equity ...” (OCGA § 23-2-29). E.g., Atlanta Coach Co. v. Simmons, 184 Ga. 1, supra, p. 7; White v. Rowland, 67 Ga. 546, 557 (1881); Arnold & DuBose v. Ga. R. &c. Co., 50 Ga. 304, *404 309 (1873); Hawkins v. Travelers Ins. Co., 162 Ga. App. 231, 235 (290 SE2d 348) (1982); Barker v. Federated Life Ins. Co., 111 Ga. App. 171, supra, p. 173; Bohannon v. Manhattan Life Ins. Co., 555 F2d 1205, supra, p. 1212.

Many, and perhaps most, of the cases decided on the basis of the complaining party’s negligence in failing to ascertain the truth, are distinguishable on their facts. E.g., the key case of Atlanta Coach Co. v. Simmons, 184 Ga. 1, supra, involved the payment of filing fees to the clerk of a court under an erroneous interpretation of statute, there being no question of lack of knowledge of all the facts on the part of the payors. Without attempting a case-by-case analysis of this entire line of cases, suffice it to say that whichever cases have failed to take into consideration the applicable equitable principles such as OCGA § 23-2-32, supra, must be treated as merely physical precedents for their particular holdings, rather than as authority to the contrary of what we are here holding.

Even cases applying the constructive-knowledge standard, however, hold that the issue of what is a valid reason for failing to ascertain the truth, is ordinarily a question for the jury. E.g., Hill v. Agnew, 202 Ga. 759, 760 (3) (44 SE2d 653) (1947); Jackson v. Jackson, 202 Ga. 634 (2a) (44 SE2d 250) (1947); J. Kuniansky, Inc. v. Ware, 192 Ga. 488, supra, (1); Central of Ga. R. Co. v. Gortatowsky, 123 Ga. 366 (6) (51 SE 469) (1905); Werner v. Rawson, 89 Ga. 619 (15 SE 813) (1892); Barker v. Federated Life Ins. Co., 111 Ga. App. 171, supra; Bohannon v. Manhattan Life Ins. Co., 555 F2d 1205, supra. “Questions of negligence and proximate cause are peculiarly questions for the jury except in clear, plain, palpable and undisputed cases. [Cit.] Only in the rare case where there is an admission of liability or an indisputable fact situation that clearly establishes liability, should summary judgment be granted. Atlanta Coca-Cola Bottling Co. v. Jones, 236 Ga. 448 (224 SE2d 25) [1976].” Lozynsky v. Hutchinson, 159 Ga. App. 715 (285 SE2d 70) (1981).

Without considering whether a jury issue exists as to the constructive-knowledge question, we find that initially a jury issue exists as to whether the plaintiff was negligent in relying solely on its computer, considering the facts of the current widespread use of computers for the purpose of keeping business records, and that, although the computer here — though negligently programmed by the plaintiffs subsidiary — may not have been known to be inaccurate. (We note here the analogy that a person is held not to have knowledge of facts which are “stored” in his memory, but which have been forgotten. Citizens Bank of Fitzgerald v. Rudisill, 4 Ga. App. 37 (60 SE 818) (1908).)

Another jury issue generally involved in this type of action is the defendant’s good faith. “Even where money is paid under a mistake *405 of fact, or in ignorance of facts, it can not be recovered, unless the circumstances are such that the party receiving it ought not, in equity and good conscience, to be allowed to retain it. [Cit.] The expression, ‘in equity and good conscience,’ as above used, refers only to the acts and intentions of the person receiving the money as affecting the other party to the transaction. If he has acted in good faith and in good conscience with the person paying the money, he is entitled to retain it . . .” Stern v. Howell, 33 Ga. App. 693 (2) (127 SE 775) (1925). This constitutes, in effect, another qualification of the rule codified in OCGA § 13-1-13. It has been stated that, where money belongs to the plaintiff, and the defendant has no right to retain it, it is irrelevant that the defendant may have acted at all times in good faith. Bill Heard Chevrolet Co. v. Atlantic Discount Co., 120 Ga. App. 388, supra, p. 389. This seemingly inconsistent principle, if not obiter dictum, may be considered as an alternative way of saying that the equities between the parties must be weighed. Also, that case did involve “artifice, deception, or fraudulent practice.” OCGA § 13-1-13. In this connection, although the statement of facts in conjunction with the certified question says that “[i]t is uncontested that Folsom did not play any role in this error,” we note that there is evidence in the record here that, at the time he applied for the second series of policy loans, defendant Randall Folsom was President of Folsom Construction Co., knew of the previous loans, had access to information and records about those loans, could have found out where the original policies were located but did not do so, and was accustomed to signing insurance-related documents without reading them. In our opinion, this was sufficient to raise an issue as to the defendant’s diligence, if not good faith.

A further jury issue, in the process of weighing the equities, is whether the plaintiff’s negligence, if any, was “that want of reasonable prudence, the absence of which would be a violation of legal duty.” OCGA § 23-2-32 (a). “If the defendant^] [have] suffered no injury, because [the] money was paid to [them] through a mistake, the [plaintiff has] violated no positive legal duty which [he owes] to [them].” Dobbs v. Perlman, 59 Ga. App. 770, supra, p. 774. This principle is codified in § 23-2-32 (b): “Relief may be granted even in cases of negligence by the complainant if it appears that the other party has not been prejudiced thereby.” This issue may be stated generally to be whether the “circumstances have so changed that it would be inequitable to require full restitution.” Dept. of Administrative Svcs. v. Pritchett, 160 Ga. App. 294, supra, p. 295. There was evidence here tending to prove that the defendants had intended to cancel the insurance policies even before they were informed (by mistake of the plaintiff) that they were entitled to their cash value (which, in actuality, was zero); that defendant Randall Folsom admitted that the de *406 fendants did not change their position in any way because of the circumstances of this case; that the plaintiff had no legal duty to lend the money which was actually paid to the defendants; and that the only harm to the defendants in connection with the transaction was that they had spent the money of the plaintiff which had been mistakenly advanced (which generally does not constitute “prejudice.” Annot., 40 ALR2d 999, 1013-1016.).

The defendants argue before this court that the above issues are rendered moot by the alleged accord and satisfaction between the parties subsequent to the receipt by the defendants of the mistaken payment by the plaintiff. As a general rule, whether there is accord and satisfaction is a question for the jury. All-Ga. Development, Inc. v. Kadis, 178 Ga. App. 37, 41 (3c) (341 SE2d 885) (1986). Thus, even though there may have been no dispute as to the parties’ understanding or agreement, the issue of whether this constituted an accord and satisfaction is one which must be resolved by the trier of fact, considering the evidence of mistake and weighing all the equities between the parties.

We answer the certified question as follows: In an action for money had and received, the plaintiff generally can recover a payment mistakenly made when that mistake was caused by his lack of diligence or his negligence in ascertaining the true facts and the other party would not be prejudiced by refunding the payment — subject to a weighing of the equities between the parties by the trier of fact.

Certified question answered.

All the Justices concur, except Hunt, J., who concurs in part and dissents in part.

"1 In Bonner v. City of Prichard, 661 F2d 1206 (11th Cir. 1981) (en banc), the Eleventh Circuit adopted as precedent the decisions of the Fifth Circuit rendered prior to October 1, 1981.”