Alexander Hamilton Life Ins. Co. of America v. Lewis

• Decision Date: 22 April 1977
• Citation: 550 S.W.2d 558
• Parties: ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA, Appellant, v. Edwin H. LEWIS and Ida B. Lewis, his wife, Appellees. Edwin H. LEWIS and Ida B. Lewis, his wife, Cross-Appellants, v. ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA, Cross-Appellees.
• Court: United States State Supreme Court — District of Kentucky

Page 558

550 S.W.2d 558

ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA, Appellant, v. Edwin H. LEWIS and Ida B. Lewis, his wife, Appellees.

Edwin H. LEWIS and Ida B. Lewis, his wife, Cross-Appellants, v. ALEXANDER HAMILTON LIFE INSURANCE COMPANY OF AMERICA,

Cross-Appellees.

Supreme Court of Kentucky.

April 22, 1977.

William T. Warner, Wood, Pedley, Stansbury, Rice & Warner, Louisville, for appellant and cross-appellees.

H. Douglas Rouse, Shepherd & Rouse, Carrollton, for appellees and cross-appellants.

PALMORE, Justice.

This is a second appeal in the same proceeding. In Alexander Hamilton Life Insurance Company v. Lewis, Ky., 500 S.W.2d 420 (1973), a final order of the trial court denying the insurance company's CR 60.02 motion to vacate a 1970 judgment awarding the Lewises $14,436.79 was reversed and the cause was remanded for further proceedings.

The background is that after their daughter had disappeared and her whereabouts had been unknown for over seven years the Lewises brought suit against the insurance company for the face amount of two insurance policies on her life, relying on KRS 422.130 (Presumption of Death). A judgment was entered in their favor and was paid by the insurance company. Then the daughter was discovered alive and the company filed its CR 60.02 motion to set the judgment aside. Following a denial of that relief this court held that the company was entitled to it under both CR 60.02(2) (newly discovered evidence) and CR 60.02(6) ("reason of an extraordinary nature justifying relief").

After setting aside the order denying relief the trial court received evidence bearing on the disposition of the money by the Lewises and upon their present financial condition and entered a "judgment of restitution" directing them to repay $7218.40, being half of the money collected under the original judgment, without interest. The company appeals and the Lewises cross-appeal.

It is an accepted principle that money paid in obedience to a judgment that is later set aside must be repaid. Fitch v. Kentucky-Tennessee Light & Power Co., 308 Ky. 652, 215 S.W.2d 91, 92 (1948); Turner v. Ewald, 295 Ky. 764, 174 S.W.2d 431, 438 (1943); Drury v. Franke, 247 Ky. 758, 57 S.W.2d 969, 972, 88 A.L.R. 917 (1933); Morgan v. Hart, 48 Ky. (9 B.Mon.) 79, 80 (1848).

"A person who has conferred a benefit upon another in compliance with a judgment . . . is entitled to restitution if the judgment is reversed or set aside, unless restitution would be inequitable. . . ." (Emphasis added.) Restatement, Restitution, § 74.

The company insists that it is entitled to restitution in full. The Lewises rely on the portion of the Restatement, Restitution, § 74, that we have italicized, contending that in the name of "equity" restitution may be denied wholly or in part, as the circumstances warrant, and that in their situation it should be denied entirely. We see no just reason to deny any part of it.

The theory of restitution as a basis for recovery is about as old as the law itself. Though often assumed to be purely an equitable remedy, some of the earliest proceedings both at common law and in equity were founded upon it and were amplified in the course of time. Restatement, Restitution, Chapter 1, Introductory Note. The obvious justification for it is that one should not be unjustly enriched at the expense of another. Id., § 1.

In Bridges v. McAlister, 106 Ky. 791, 51 S.W. 603, 21 KLR 428, 45 LRA 80, 90 Am.St.Rep. 267 (1899), the accountability of a party for actions taken under authority of a judgment later set aside was discussed at some length. Among other things the court concluded as follows: "When a judgment is reversed, restitution must be made of all that has been received under it, but no further liability should in any case be imposed." Id., 51 S.W. at p. 605. Our attention has not been directed to any precedent in this jurisdiction for relieving a party of the duty to restore all of the money paid to him under a judgment subsequently vacated. Understandably, of course, the receipt and disbursement of money by someone in a fiduciary capacity could very well present a different case, but when the party who received the money by authority of the judgment has spent some or all of it at his own volition and for his own ends, we find it difficult to accept the proposition that equity diminishes his accountability.

In this instance the Lewises spent $1935 to pay off a note, $1800 for improvements on their house, $3,000 for educating their son, $3155 for automobiles, and about $4800 for medical expenses and care of the returned daughter. They now have only about $6,000 in cash deposits, but their net worth substantially exceeds the amount received under the judgment against the insurance company.

According to § 142(1) of the Restatement, Restitution, "The right of a person to restitution from another because of a benefit received is terminated or diminished if, after the receipt of the benefit, circumstances have so changed that it would be inequitable to require the other to make full...