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Plaintiff Fails To Submit Evidence Supporting The Return Of Funds In Money Had And Received Case

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  • Posted on: Sep 15 2017

The claim of assumpsit (from the Latin indebitatus assumpsit) was “developed to redress circumstances involving unjust enrichment or to ‘prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep.’” Tri-State Chem., Inc. v. Western Organics, Inc., 83 S.W.3d 189, 193-94 (Tex. App.-Amarillo 2002, pet. denied) (citation omitted); Parsa v. State of New York, 64 N.Y.2d 143, 148 (1984). “It encompassed an obligation imposed by law on one to pay a sum of money or to deliver specific property to another.” Tri-State Chem., 83 S.W.3d at 193-94. Over time, assumpsit was divided into various categories, two of which lawyers know today as money had and received and quantum meruit. Id. at 194.

Money had and received is a common law claim in which the plaintiff seeks the return money from another on equitable grounds. Parsa, 64 N.Y.2d at 148; New York v. Park, 204 A.D.2d 531 (2d Dept. 1994). All the plaintiff need show is that the defendant holds money, which in equity and good conscience, belongs to him. Staats v. Miller, 150 Tex. 581, 584, 243 S.W.2d 686, 687-88 (1951) (citation omitted). As the U.S. Supreme Court has observed, a cause of action for money had and received is “less restricted and fettered by technical rules and formalities than any other form of action. It aims at the abstract justice of the case, and looks solely to the inquiry, whether the defendant holds money which . . . belongs to the plaintiff.” United States v. Jefferson Elec. Mfg. Co., 291 U.S. 386, 402-03 (1934).

The Law in New York

A claim for money had and received requires a showing that: (1) the defendant received money belonging to the plaintiff; (2) the defendant benefited from the receipt of the money; and (3) under principles of good conscience the defendant should not be allowed to retain that money. Litvinoff v. Wright, 150 A.D.3d 714 (2d Dept. 2017).

On August 17, 2017, Justice Scarpulla of the Supreme Court, New York County, Commercial Division, dismissed a claim for money had and received because the plaintiff failed to establish that the defendant retained or benefitted from the receipt of the money. 413 W. 48th St. Housing Development Fund Corp. v. Saparn Realty, Inc., 2017 NY Slip Op. 31773(U) (Sup. Ct., N.Y. Co. Aug. 17, 2017).

413 W. 48th St. Housing Development Fund Corp. v. Saparn Realty, Inc.

Background

In May 2012, the plaintiff, 413 West 48th Street Housing Development Fund Corporation (“HDFC”), retained the defendant, Saparn Realty, Inc. (“Saparn”), as the managing agent for its property. As part of Saparn’s responsibilities, it was required to collect and deposit funds in a separate bank account as agent of HDFC, without commingling them with any other funds collected from other properties managed by Saparn. Saparn was also required to provide copies of bank statements to HDFC every month.

In October 2012, HDFC implemented a policy requiring that at least $200,000 be kept in its reserve account, to be used for emergency purposes only. HDFC communicated that policy to Saparn.

Over time, Saparn stole funds from HDFC’s reserve account. In August 2013, HDFC learned that its bank accounts with Saparn were closed out, and its reserve fund had “vanished.” To conceal the theft of funds, Saparn delivered false reports to HDFC, containing altered bank statements showing a balance of more than $200,000 in the reserve account.

HDFC investigated and discovered that Saparn had been transferring money out of HDFC’s bank accounts since May 2013. HDFC reported the theft to the New York District Attorney and informed other building owners defrauded by Saparn, including The Oaks at La Tourette Condominium Section II (“Oaks”), one of the defendants in the action.

HDFC commenced the action against Saparn and its principals to recover the money that was stolen from it. Thereafter, it discovered that approximately $91,000 of the money taken from the reserve account was deposited into two bank accounts held by Oaks. HDFC had no dealings with Oaks, so there was no agreement or obligation pursuant to which that payment was made. HDFC informed Oaks of its findings and demanded the return of its funds in March 2014, and again in September 2014. Oaks refused to return any of the money demanded by HDFC. Thereafter, HDFC sued Oaks for the funds.

HDFC moved for summary judgment on, among other things, its cause of action for money had and received against Oaks. HDFC argued that its money was wrongfully deposited into Oaks’ bank accounts, thereby conferring a benefit on Oaks. HDFC argued that, even though Oaks did not participate in the wrongdoing, it could not retain the windfall.

Oaks also moved for summary judgment, arguing that because it was a victim just like HDFC, it should not have to lose money twice by having its own money stolen and then having to pay another of Saparn’s victims. One victim of a fraudulent scheme should not be permitted to recover from another victim.

Oaks further claimed that Saparn admitted to moving funds between accounts and creating false bank statements, so it could not be established that any money Oaks had in its account belonged to HDFC. The Oaks account was used as a vehicle to move money between other third parties. The money deposited into its account from HDFC could have just as easily been transferred out.

The Court’s Decision

The Court held that HDFC failed to meet its burden of establishing “that Oaks benefitted from the receipt of HDFC’s money,” finding that “any factual conclusion to that effect could only be made on speculation.” The Court agreed with Oaks that “[b]oth parties were victims of Saparn’s fraud.”

While HDFC has demonstrated that Oaks received money from HDFC’s account, HDFC has not made a prima facie showing that Oaks either retained or benefitted from the receipt of that money. HDFC has not provided any forensic report of its own, or any expert analysis of Oaks’ accounts. There is simply no probative evidence submitted to establish that Oaks benefitted from the receipt of HDFC’s money, and any factual conclusion to that effect could only be made on speculation. Both parties were victims of Saparn’s fraud.

Accordingly, the Court dismissed HDFC’s claim for money had and received.

Takeaway

Money had and received is a category within the common law cause of action of assumpsit. The remedy for the claim is restitution, or the return of money, to restore the plaintiff to his/her original position. 413 W. 48th St. Housing Development Fund Corp. teaches that even where a plaintiff can demonstrate that a third party received money belonging to the plaintiff, the plaintiff must nevertheless make a prima facie showing of entitlement to the relief requested. As HDFC learned that showing cannot be based on speculation.  It must be based on evidence.

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