Milliken & Michaels Inc v. Fred Netterville Lumber Co

IN THE SUPREME COURT OF MISSISSIPPI
NO. 92-CA-01153-SCT
MILLIKEN & MICHAELS, INC.
v.
FRED NETTERVILLE LUMBER COMPANY
DATE OF JUDGMENT: 10/20/92
TRIAL JUDGE: HON. RICHARD T. WATSON
COURT FROM WHICH APPEALED: WILKINSON COUNTY CIRCUIT COURT
ATTORNEY FOR APPELLANT: GARY DALE THRASH
ATTORNEY FOR APPELLEE: R. L NETTERVILLE
NATURE OF THE CASE: CIVIL - CONTRACT
DISPOSITION: REVERSED AND RENDERED - 6/20/96
MOTION FOR REHEARING FILED:
MANDATE ISSUED: 7/11/96
BEFORE PRATHER, P.J., PITTMAN AND SMITH, JJ.
PRATHER, PRESIDING JUSTICE, FOR THE COURT:
¶1. Milliken & Michaels, Inc. appeals the October 20, 1992, decision of the Wilkinson County Circuit
Court, wherein summary judgment was granted to Fred Netterville Lumber Co. The trial judge ruled
that Netterville did not owe the money Milliken claimed was erroneously paid to it, and imposed Rule
11 sanctions against Milliken. Milliken raises the following issues on appeal:
I.
WHETHER THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT
IN FAVOR OF THE APPELLEE, FRED NETTERVILLE LUMBER COMPANY AND
DENYING SUMMARY JUDGMENT IN FAVOR OF APPELLANT, MILLIKEN &
MICHAELS, INC.
II.
WHETHER THE TRIAL COURT ERRED IN AWARDING SANCTIONS PURSUANT
TO RULE 11, OF THE MISSISSIPPI RULES OF CIVIL PROCEDURE IN FAVOR OF
APPELLEE, FRED NETTERVILLE LUMBER COMPANY AGAINST MILLIKEN &
MICHAELS, INC.
STATEMENT OF THE CASE
¶2. On March 24, 1992, Milliken & Michaels, Inc., a collection agency, filed a complaint against
Netterville Lumber Company, a former client, seeking reimbursement of an incorrect payment of $4,
250.00, along with attorney's fees in the amount of $1,416.67 plus interest. In its answer, Netterville
requested Rule 11 sanctions, asserting that the suit was frivolous.
¶3. On June 29, 1992, Milliken filed a Motion for Summary Judgment, to which Netterville
responded with its own summary judgment motion. The trial court granted summary judgment to
Netterville, finding that Milliken did not act with the utmost good faith and loyalty under principles of
agency law. Following this decision, Milliken timely perfected this appeal.
STATEMENT OF THE FACTS
¶4. Milliken & Michaels, Inc. is a Louisiana corporation which is in the business of collecting
delinquent accounts for creditors. On April 6, 1991, Rutland Lumber Company (Rutland) engaged
Milliken's services with regard to a delinquent account from Bacon Lumber Company (Bacon) in the
amount of $11,586.38. On April 22, 1991, Fred Netterville Lumber Company also procured
Milliken's services with regard to an additional delinquent account from Bacon in the amount of $23,
105.23.
¶5. Milliken met with some success in its collection efforts, and on April 26, 1991, Bacon remitted a
$5,000.00 payment designated as partial payment for the Netterville account. Milliken subtracted its
$750.00 collection fee and sent the balance to Netterville. On May 20, 1991, Bacon remitted another
$5,000.00 as partial payment for the Rutland account. Milliken subtracted its collection fee, but
mistakenly sent the $4,250.00 check to Netterville rather than Rutland. Netterville duly credited
Bacon for two payments on its delinquent account in the amount of $10,000.00, even though the
check clearly indicated that it was intended as payment for Rutland. Milliken, realizing its mistake,
notified Netterville of the error and asked that the payment be returned.
¶6. Netterville responded by closing its account with Milliken and refusing to return the payment.
Fred Netterville testified at the summary judgment hearing that he did not know that Milliken had
been collecting for Rutland. He stated that Netterville would not have employed Milliken had it
known that Milliken was representing other businesses in collecting from Bacon. Netterville also
stated that he terminated the contract with Milliken because Milliken acted irresponsibly, because
their attitude reflected a lack of interest in Netterville, and because he felt that there was a conflict of
interest in Milliken's representing the two lumber companies.
¶7. After Netterville refused to return the payment, Milliken filed suit in the Wilkinson County
Chancery Court, seeking reimbursement of the second $4,250.00 check it sent to Netterville. Milliken
claimed that it erroneously paid Netterville and that Netterville was unjustly enriched by Milliken's
mistake. Netterville admits that it received two payments, less the commission fee charged by
Milliken for collection services. According to Netterville in its answer, Milliken solicited their
company and was hired to collect on the Bacon account "promising to use reasonable diligence and
to act as agent and would act solely in the interest of Netterville." Netterville was successful on the
summary judgment motion based on an agency theory.
ANALYSIS OF THE LAW
¶8. Both parties assert that there are no issues of fact, but rather only issues of law to be decided,
thus making a summary judgment decision appropriate. Netterville asserts that Milliken was hired in
an agent capacity, and that this case should thus be decided according to principles of agency law.
Milliken, on the other hand, contends that this case should be decided under principles of basic
contract law. Summary judgment is appropriate where the "pleadings, depositions, answers to
interrogatories and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of
law." Pearl River City Bd. of Supervisors v. South East Collections Agency, Inc., 459 So. 2d 783,
784-5 (Miss. 1984) (citing M.R.C.P. 56).
I.
WHETHER THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT
IN FAVOR OF THE APPELLEE, FRED NETTERVILLE LUMBER COMPANY AND
DENYING SUMMARY JUDGMENT IN FAVOR OF APPELLANT, MILLIKEN &
MICHAELS, INC.
¶9. Netterville asserts that, under agency law, an agent may not act for two principals if the interests
of one conflict with the other, and that he must act with the utmost good faith and loyalty. (citing
Judge Griffith, Outlines of the Law, 340 (1949)). While this may be true, Milliken's breach of that
duty, if any, does not justify Netterville's retention of funds paid it by mistake.
¶10. Milliken laments that Netterville is unjustly enriched. This is not to be confused with unjust
enrichment in contract cases, which applies to situations "where there is no legal contract but where
the person sought to be charged is in possession of money or property which in good conscience and
justice he should not retain . . ." Koval v. Koval, 576 So. 2d 134, 136 (Miss. 1991)[citations omitted]
.
¶11. The most helpful case available in our jurisprudence proves to be U.S.F. & G. v. Newell, 505
So. 2d 284 (Miss. 1987), as cited by Milliken. Netterville complains that this case involves an
overpayment between an insurer and an insured and has "nothing to do with the principal and agent
relationship." Newell, however, does contain many similarities with the present case and, as such, is
entitled to substantial weight in this opinion. In Newell, U.S.F. & G. made a mistake in calculations
and paid its insured $2,091.72 above the actual cash value of a wrecked vehicle. Newell, 505 So. 2d
at 286-87. This Court reversed a jury verdict in favor of the insured, declaring that Newell was not
entitled to keep the money.
¶12. Although Newell concerns an insurer/insured relationship, its principles can be easily applied
between the parties in the case sub judice. Netterville received money from Milliken by mistake and
should have not be entitled to profit by this mistake. Newell quotes at length from Bessler Movable
Stairway Co. v. Bank of Leakesville, 140 Miss. 537, 106 So. 445 (1925) which states:
Money paid to another by mistake of fact, although such mistake may have been caused by
payor's negligence, may be recovered from the person to whom it was paid, in an action for
money had and received. [cites omitted] The ground on which recovery is allowed is that one
receiving money paid to him by mistake should not be allowed to enrich himself at the expense
of the party who paid the money to him by retaining it, but in equity and good conscience
should refund it. In order that this rule may apply, the party to whom the payment mistake was
made must be left in the same situation after he refunds it as he would have been left had the
payment not been made. [cite omitted].
Id. at 287.
¶13. Newell and Bessler are not entirely on point, given that, in this case, Netterville was actually
owed the money which was mistakenly paid to it. As such, this Court is not faced with a clear-cut
case of unjust enrichment, given that Netterville arguably had a right to the money paid to it.
Nevertheless, this Court finds that the $ 4,250 payment mistakenly made to Netterville should have
been returned, given that a debtor such as Bacon should be able to choose to which creditors it pays
which amounts of money. The check clearly indicated on its face that it was intended as payment by
Bacon for his debt owed to Rutland, and, as such, should have put Netterville on notice that the
payment was not intended for them. It is undisputed that Bacon intended that the money in question
be paid to Rutland, and this Court is unwilling to endorse the transfer of property by mistake or
accident.
¶14. Netterville did not present any evidence at the hearing or in its affidavit that it had relied upon
the extra $4,250.00 nor that it would suffer any special damages should it have to remit the money to
Milliken. Nor did Netterville's establish that it was damaged in any way, whatever, by Milliken's
supposed conflict of interest. An entity is entitled to a directed verdict for the restitution of money
unless it can be shown that the other significantly changed its position in reliance on the overpayment.
Bank of Belmont v. Judson Lumber Co., 143 Miss. 86, 108 So. 440, 441 (1926). Netterville is
unable to make such a showing, and, as such, Milliken, rather than Netterville, should have been
granted summary judgment.
¶15. Netterville cites Van Zandt v. Van Zandt, 86 So. 2d 466 (Miss. 1956), which cites Corpus
Juris Secundum, "Agency" § 159 for the proposition that:
It is the duty of an agent who has received or collected money for his principal to notify the
latter at once, and ordinarily he should pay over such money to the principal as soon as, or
within a reasonable time after, it is received or collected, or apply and dispose of it according to
the directions of the principal.
¶16. Clearly, this correct statement of agency law does not apply to the facts of the present case. In
this case, the money was collected not for Netterville, but rather for Rutland. The fact that the money
ended up in the hands of Netterville was due to a mistake on the part of Milliken, and accordingly,
the aforementioned Mississippi cases dealing with mistaken payments are applicable. This Court thus
finds that the trial court was in error in directing a verdict for Netterville and not for Milliken.
Accordingly, the judgment of the trial court is reversed.
II.
WHETHER THE TRIAL COURT ERRED IN AWARDING SANCTIONS PURSUANT
TO RULE 11, OF THE MISSISSIPPI RULES OF CIVIL PROCEDURE IN FAVOR OF
APPELLEE, FRED NETTERVILLE LUMBER COMPANY AGAINST MILLIKEN &
MICHAELS, INC.
¶17. Trial courts possess the power to impose sanctions upon parties and their attorneys when, in the
opinion of the court, the suit filed is "frivolous or filed for the purpose of harassment or delay."
M.R.C.P. Rule 11. "[A] pleading or motion is frivolous within the meaning of Rule 11 only when,
objectively speaking, the pleader or movant has no hope of success." Tricon Metals & Services, Inc.
v. Topp, 537 So. 2d 1331, 1335 (Miss. 1989). The purpose behind Rule 11 sanctions is to keep
frivolous suits at a minimum because they impose unnecessary costs on individuals, the courts, and
the public as a whole. Tricon, 537 So. 2d at 1135. Obviously, given that this Court has reversed the
trial court in favor of Milliken, we also reverse with regard to the granting of Rule 11 sanctions. Rule
11 sanctions were inappropriate in this case because it is conceivable that Milliken thought it had an
arguable claim, and the granting of said sanctions by the trial court is therefore reversed.
¶18. REVERSED AND RENDERED.
LEE, C.J., PITTMAN, BANKS, ROBERTS, SMITH AND MILLS, JJ., CONCUR.
SULLIVAN, P.J., CONCURS WITH SEPARATE WRITTEN OPINION JOINED BY LEE,
C.J., BANKS AND MILLS, JJ. McRAE, J., DISSENTS WITH SEPARATE WRITTEN
OPINION.
SULLIVAN, PRESIDING JUSTICE, CONCURRING:
¶19. I concur with the conclusion reached by the majority. I write separately to clarify potentially
misleading language contained in the majority opinion.
¶20. The cases relied upon by the majority to reach its conclusion are U.S.F. & G. v. Newell, 505
So. 2d 284 (Miss. 1987), and Bessler Movable Stairway Co. v. Bank of Leakesville, 140 Miss. 537,
106 So. 445 (1926). Both cases deal with money mistakenly paid and the action upon which the
parties, an action based upon quasi-contract. Although not expressly stated, the majority is holding
that Milliken stated an action sufficient to establish a common-law action of assumpsit, ex contractu,
for money had and received under an implied contract. While this may not be the majority's intent, I
write separately to clarify any confusion today's opinion may engender.
¶21. The majority states that "this Court is not faced with a clear-cut case of unjust enrichment . . ."
alluding to the fact that the cases it relied on, Newell and Bessler, are cases of unjust enrichment.
Newell relied on Bessler which was a case of money had and received, a different action at law than
unjust enrichment. Although the remedy of "restitution" encompasses, among others, theories of
unjust enrichment, and money had and received, they are two different types of restitution. The
application of unjust enrichment is guided by the equitable principle of avoiding unjust enrichment at
the expense of another, Cablevision of Breckenridge v. Tannhauser Condominium Ass'n, 649
P.2d 1093 (Colo. 1982), while an action for money had and received will lie when one has received
money that in good conscience and equity ought to be paid over to another. Wheeler v. Wilkin, 58
P.2d 1223 (Colo. 1936).
¶22. "The assumpsit action for money had and received is in quasi-contract." R.R. Tway v.
Oklahoma Tax Comm'n, 910 P.2d 972, 980 (Okla. 1995) (citing Winey v. Dailey, 636 A.2d 744,
751 (Vt. 1993); Williams v. Khalaf, 802 S.W.2d 651, 656 (Tex. 1990); Boldt v. State, 305 N.W.2d
133, 138 (Wis. 1981); Town of Westport v. Bossert Corp., 335 A.2d 297, 299 (Conn. 1973); United
States Fidelity and Guaranty Ins. Co. v. Hartsook, 487 S.W.2d 649, 651 (Tenn. 1972); Witmer v.
Estate of Brosius, 336 P.2d 455, 458-59 (Kan. 1959); Ames, The History of Assumpsit, 2 Harv. L.
Rev. 1, 63-64 (1888)). The principle of a quasi-contract is that it is a contract implied by law. The
elements of a quasi-contract are: 1) a benefit conferred upon the defendant by the plaintiff, 2)
appreciation by the defendant of the fact of such benefit, 3) acceptance and retention by the
defendant of the benefit, under circumstances such that it would be inequitable to retain the benefit
without payment of its value. Seegers v. Sprague, 236 N.W.2d 227 (Wis. 1975). See also Maloney
v. Therm Alum Indus., Corp., 636 So. 2d 767 (Fla. 1994); Columbia Wholesale Co. v. Scudder
May N.V., 440 S.E.2d 129 (S.C. 1993); Employers Ins. of Wausau v. Crane Co., 904 S.W.2d 460
(Mo. Ct. App. 1995); Bailey-Allen Co. v. Kurzet, 876 P.2d 421 (Utah Ct. App. 1994); Robinowitz
v. Pozzi, 872 P.2d 993 (Or. Ct. App. 1994).
¶23. "In an action for money had and received, the plaintiff need only allege and show that the
defendant holds money which in equity and good conscience belongs to the plaintiff." Dorsey
Mississippi Sales v. Newell, 251 Miss. 77, 91, 168 So. 2d 645, 651 (1964) (citing Pascagoula
Hardwood Co. v. Chisholm, 164 Miss. 242, 144 So. 710 (1932)). Although this form of action is
ordinarily one at law, it is governed by equitable principles.
¶24. Accordingly, I concur with the majority's ultimate disposition of this case. I write only to clarify
the basis for which I believe the majority came to the just conclusion.
LEE, C.J., BANKS AND MILLS, JJ., JOIN THIS OPINION.
McRAE, JUSTICE, DISSENTING:
¶25. In this case, the collection agency, acting as agent for both Rutland Lumber Co. and Netterville
Lumber Co., was collecting from the same debtor without advising either principal. The agent,
therefore, was in the position of determining when and how much of the debt collected each of its
principals should receive -- a matter that should have been left to Rutland and Netterville to resolve
between themselves. It was only when Netterville accidentally received a check intended for Rutland,
however, that Netterville learned that Milliken & Michaels represented another principal with
competing interests. Because an agent cannot serve two principals whose interests conflict without
advising them of its roles, I dissent.