Wilson v. Moore , 153 Ill. App. 3d 15 ( 1987 )

PRESIDING JUSTICE KARNS

delivered the opinion of the court:

Defendants, C. W. and Mary Jo Moore, husband and wife, are builders and vendors of houses. Plaintiff, Paul Wilson, is a real estate broker and salesman. Defendants and plaintiff entered into an oral agreement whereby plaintiff would attempt to sell a new house built by defendants. Defendants were to pay plaintiff a commission on sale. Plaintiff procured buyers for the property, Charles and Sue Phemister. At closing, the buyers tendered their personal check for the purchase price. Plaintiff accepted the check and gave defendants a check drawn on his escrow account for the sale proceeds less his commission. The buyer’s check was dishonored. Plaintiff brought this action against defendants to recover the amount of his check. After a bench trial in the circuit court of Williamson County, judgment was entered for defendants. Plaintiff appeals.

The trial court made detailed findings of fact and concluded that there was no disagreement between the parties as to the essential facts; we agree.

Plaintiff was a broker of much experience. The sales contract between the defendants and the Phemisters was procured by Helen Eeay Greenwood, a salesperson who worked in plaintiff’s business. Plaintiff and Greenwood had both sold other houses for defendants. A form “listing agreement” was filled out but not signed, and neither party contends the written terms of that form set forth the agreement of the parties. The agreed commission for sale of the real estate in question was $5,000.

In September of 1983, Greenwood located prospective purchasers, Charles and Sue Phemister, who stated they wanted the house for Mrs. Phemister’s mother and grandmother. On September 20, 1983, the Phemisters and defendants signed a contract for sale of the real estate, providing for closing on September 30, 1983. The contract provided for the Phemisters’ deposit of $5,000, and required defendants to make certain alterations in the house, including two additional doors and one additional concrete walkway. The Phemisters’ $5,000 check was never cashed because the Phemisters stated at the time of delivery that there were not sufficient funds in the Phemisters’ account to cover the check but funds would be shortly forthcoming.

The Phemisters were not able to close on September 30, 1983, nor on many subsequent agreed closing dates. Greenwood had the most contact with the Phemisters, especially Mrs. Phemister, and Greenwood relayed the Phemisters’ various excuses to plaintiff and defendants. Greenwood had attended high school with both of the Phemisters, but she knew Mrs. Phemister better than Mr. Phemister, who was older, and the trial court found she “vouched for the integrity of the Phemisters.” According to Greenwood, in September of 1983 the Phemisters told her they had won a lawsuit and were to receive millions of dollars, from which funds they would purchase the house. The Phemisters blamed much of the subsequent delay on court proceedings and legal problems delaying distribution of their funds. Many of the excuses in retrospect would appear fanciful, but they need not be detailed here. At one point the Phemisters agreed to pay defendants their interest costs from October 1, 1983, to closing, in exchange for keeping the house available to them.

Mrs. Moore kept a written record of the Phemisters’ excuses, communicated to defendants by Greenwood and by the Phemisters. Near the end of February 1984, Mrs. Phemister phoned Mr. Moore and told him they would miss another closing date because Mr. Phemister could not fly out of St. Louis to New York (apparently to pick up the Phemisters’ funds) as the airport was closed because of snow and Mr. Phemister was on stand-by for the next-day flight. Mrs. Moore testified she phoned the airport and was told there were flights to New York that day, with plenty of seats and no stand-by list. This was the only attempt on anyone’s part to verify the numerous excuses offered by the Phemisters.

At this point defendants insisted the Phemisters pay for the house by March 16, 1984. However, the sale of houses was slow in the area at that time, and defendants ultimately agreed to meet the Phemisters for a closing on March 22, 1984. On that date plaintiff, Greenwood, defendants, and Mrs. Phemister met at plaintiff’s office. Mrs. Moore testified when Greenwood phoned and told her to come to the office that day, she, Mrs. Moore, asked Greenwood whether she had asked the Phemisters if they had a cashier’s check, to which Greenwood replied she had not asked. According to defendants they did not trust the Phemisters at this point. Because of the many delays and excuses, the defendants had insisted repeatedly to plaintiff that the Phemisters pay with cash or cashier’s check or else that they be paid directly by plaintiff.

At the March 22, 1984, closing, Mrs. Phemister told the others present that her husband was waiting for a phone message that their funds had been transferred to a local bank in Mt. Vernon from New York. After Mr. and Mrs. Phemister spoke on the phone several times, Mrs. Phemister reported the funds had not been wired from New York prior to bank closing time, so the funds would not be at their disposal the next day, Friday, but would be available Saturday or Monday at the latest. Notwithstanding this announcement, the parties agreed to close. Defendants executed a deed transferring the real estate. Mrs. Phemister produced her checkbook and asked whom the payee should be. Mrs. Moore said to plaintiff, “Aren’t you supposed to write us a check?” insisting, as she had for some time, that she receive cash or a cashier’s check from the Phemisters or else plaintiff’s check. Plaintiff said that was correct. Mrs. Phemister wrote plaintiff a check for $128,671.02, representing $120,000 purchase price, $5,000 broker’s commission, $3,121.02 interest costs incurred by defendants since October 1, 1983, and $550 closing costs. Plaintiff wrote defendants a check for $123,121.02, the purchase price plus interest since October 1, 1983, which plaintiff said could be cashed the next day. Plaintiff told defendants they could consider the house sold and could pay their creditors now. Plaintiff also told defendants to cancel their insurance on the house and have the utilities taken out of their names. The next day, Friday, plaintiff saw Mr. Moore at the bank, paying off his debts.

The Wednesday following the closing, Mrs. Phemister phoned Greenwood and told her there was no money and had never been any, and “this whole thing had been a hoax.” Greenwood informed plaintiff. On April 4, 1984, plaintiff asked defendants for his money back. Plaintiff testified he returned the deed and other documents executed by defendants to defendants, who refused to return the “proceeds of sale.” Mr. Moore testified he now considers plaintiff the owner of the real estate. Mr. Moore testified on one occasion he was contacted regarding unmowed weeds on the property. Plaintiff has not received a deed to the real estate, although defendants have at all times been willing to execute any document necessary to place title in plaintiff’s name.

Plaintiff commenced this action against defendants seeking “$123,121.02 together with interest thereon.” After a trial, the court, in a considered opinion, found plaintiff failed to prove a mutual mistake of fact such as would entitle plaintiff to a refund of the money as the parties knew there was no money in the Mt. Vernon bank at time of closing and it is “speculation that money would eventually find its way into the bank in Mt. Vernon to satisfy the check.”

The general rule under which plaintiff brings this action is that money paid under a mistake of fact, which would not otherwise have been paid had the facts been known to the payor, may be recovered. That the person to whom the money was paid under a mistake of fact was not guilty of deceit or unfairness, and acted in good faith, does not prevent recovery of the sum paid, nor does negligence of the payor preclude recovery. (Bank of Naperville v. Catalano (1980), 86 Ill. App. 3d 1005, 1008, 408 N.E.2d 441, 444); the rule, however, as expressed in Bank of Naperville and numerous cases, applies only where the person receiving payment is not entitled to payment, as for instance in the cited case where the person paid had no account at the bank and the payment was charged to the account of a depositor with the same name.

The plaintiff has presented the issue as one involving mutual mistake of fact, that the Phemisters would make good on their promise to have adequate funds in the local bank in Mt. Vernon to cash the check given to plaintiff. However, the majority of this court does not view this as a case involving mistake of fact.

What this cause really involves is an unfortunate business transaction that did not meet the expectations of the parties, or at least one of the parties. The plaintiff here was simply willing to rely on the credit of the Phemisters in order to conclude a business transaction wherein he would earn a $5,000 real estate commission. The defendants made it clear to all parties throughout these protracted negotiations that they were not willing to rely on the Phemisters’ promise to pay and would not extend them credit by accepting their personal check.

We are not dealing with a mistake of present or past fact but with the future expectation on the part of the plaintiff that the Phemisters would honor their promise to pay. Plaintiff knew that the Phemisters had no funds in their account in the Mt. Vernon bank at the time he accepted their personal check.

There was no mistake of existing fact at the time of closing. The subject matter of the real estate sales contract, the house, was in existence; good title was vested in defendants, and they had the ability to convey and did convey in accordance with the terms of the contract. At closing plaintiff stated that the matter was concluded; no escrow was established, although plaintiff testified he was well acquainted with this device. Plaintiff stated to defendants they were entitled to cash his check the next day and pay their debts associated with the construction of the house, which they did.

This is not a case involving money paid to another under a mistaken belief that the payee was entitled to the money. Thus in Bank of Naperville v. Catalano (1980), 86 Ill. App. 3d 1005, 408 N.E.2d 441, the bank was allowed to recover in restitution money paid to a customer who had no right to receive it. The rules governing money paid by mistake are set out in sections 15 to 28 of the Restatement of Restitution (Restatement of Restitution secs. 15 through 28 (1937)). No example is given where a payor is entitled to restitution who relies on the credit of another and received a benefit in the form of consideration flowing to himself in the transaction and where the payee is entitled to receive payment.

We believe the rule is, before the payor may recover money paid by mistake, there must have been a mistaken belief that the money was due the payee when in fact it was not, or a mistaken belief that the payor had some legal obligation to make the payment. While no Illinois case can be found paralleling these somewhat unusual facts, support can be found in the case law of other jurisdictions. (See e.g., Merchant’s Insurance Co. v. Abbot (1881), 131 Mass. 397; Union Central Life Insurance Co. v. Glasscock (1937), 270 Ky. 750, 110 S.W.2d 681.) We would emphasize, however, we do not view this as a case involving mistake of fact notwithstanding plaintiff’s attempt to cast it in that mold by focusing our attention on the existence of the Phemisters’ money in the bank in New York as a mutual mistake of fact. It turned out to be an error in judgment for plaintiff to rely on the credit of the Phemisters, something the defendants consistently refused to do. Reliance on future payment is not a present mistake of fact. It is certainly not a case of unjust enrichment, another traditional ground for restitution, as defendants were entitled to receive payment and substantially altered their position to their detriment upon receipt of payment, a matter we need not address for purposes of our decision.

The judgment of the circuit court of Williamson County is affirmed and the cause is remanded for the entry of appropriate ancillary relief to ensure that appellees execute any documents necessary to place title to the subject property in appellant.

Affirmed and remanded.

HARRISON, J., concurs.