Federated Mutual Ins. Co. v. Good Samaritan Hospital, 39012

• Decision Date: 31 January 1974
• Docket Number: No. 39012,39012
• Citation: 191 Neb. 212,214 N.W.2d 493
• Parties: FEDERATED MUTUAL INSURANCE COMPANY, Appellant, v. GOOD SAMARITAN HOSPITAL, Appellee.
• Court: Nebraska Supreme Court

Page 493

214 N.W.2d 493

191 Neb. 212

FEDERATED MUTUAL INSURANCE COMPANY, Appellant, v. GOOD SAMARITAN HOSPITAL, Appellee.

No. 39012.

Supreme Court of Nebraska.

Jan. 31, 1974.

Syllabus by the Court

A creditor who has innocently received payment of a debt from a third party is under no duty to make restitution to the third party if it is later discovered that the third party had no responsibility to make the payment and payment was made solely because of the third party's mistake.

Tye, Worlock, Tye, Jacobsen & Orr and Kenneth C. Fritzler, II, Kearney, for appellant.

William T. Oakes, Robert F. Craig, of Kennedy, Holland, DeLacy & Svoboda, Omaha, Ward W. Minor, Kearney, for appellee.

Heard before WHITE, C.J., McCOWN, and NEWTON, JJ., and LYNCH and WARREN, District Judges.

WARREN, District Judge.

This is a suit by Federated Mutual Insurance Company against the Good Samaritan Hospital, Kearney, Nebraska, to recover an $1,959.17 overpayment on group hospital insurance policies paid directly by plaintiff to the defendant hospital pursuant to assignments by plaintiff's insured. The parties stipulated to the facts and each moved for summary judgment. The trial court found generally for the defendant hospital and dismissed plaintiff's petition. Plaintiff has appealed. We affirm.

The parties stipulated to all the facts. The defendant hospital performed hospital and medical services for plaintiff's insured, Gary Bemis, between October 7, 1968, and April 13, 1969, of the reasonable value of $13,915.20. Plaintiff's insured assigned his policy benefits to defendant and the total of those policy benefits was $12,047.30. Due to its own mistake, plaintiff paid defendant directly by three drafts a total of $19,822.78, which was $7,775.48 more than plaintiff's total liability to its insured under its group health and accident and major medical insurance policies. The last payment to defendant was made by draft dated July 9, 1969. In the latter part of 1969, plaintiff requested that the defendant hospital refund the $7,775.48 overpayment. In response, defendant did on January 19, 1970, remit the sum of $5,816.31 to plaintiff, but retained the net policy overpayment of $1,959.17 already applied to the balance of the Gary Bemis hospital bill.

The stipulation of facts establishes several points which narrow the scope of the question involved, namely: (1) The overpayment by plaintiff was made solely due to plaintiff's own mistake and lack of care; (2) the defendant hospital made no misrepresentation to induce the overpayment; (3) defendant acted in good faith without prior knowledge of the mistake in receiving the overpayment; and (4) there is no evidence that defendant, in reliance upon the mistaken payment, changed its position to its detriment.

Plaintiff contends that under the general principle that a person wrongly deprived of his property is entitled to restitution, it is well settled that an insurer is entitled to restitution of payments made under a mistake, and cites as the general rule: 'An insurer who made a payment under a mistake of fact may, as a rule, recover such payment, even if its mistake was due to its lack of care, unless the payee has so changed his position that it would be unjust to require a refund.' Annotation, 167 A.L.R. 472 (1947). 'A person who has entered into a contract binding upon him and has paid money to the other party thereto under an erroneous belief induced by a mistake of fact that the terms of the contract required such payment, is entitled to restitution from the other, except where the mistake is only as to the time of payment.' Restatement, Restitution, § 18, p. 82 (1937).

We have no quarrel with those broad principles. The controlling factor here, however, is that in cases involving payments on insurance policies we must distinguish between mistaken payments made to the insured from whom the insurer seeks to recover, and those payments made by the insurer to an innocent third party creditor of the insured.

An earlier A.L.R. note covers the specific point. 'It is also settled that where money is paid to another under a mistake of fact, that is, on the mistaken supposition of the existence of a specific fact which would entitle the other to the money, and would not have been paid had it been known to payor that the fact was otherwise, it may be recovered. The ground on which this rule rests is that money paid through misapprehension of facts, in equity and good conscience, belongs to the person who paid it. 21 R.C.L. p. 164. * * * But according to numerous cases this rule as to recovery of payments made under a mistake of fact does not apply where, as a result of a mistake or fraud between the original parties, money is paid by one of them on account of the other to a third party (directly or through the intervention of the other), who receives the same in good faith without knowledge of the mistake or fraud, in payment of a claim by him against the latter. In such case, by the overwhelming weight of authority, no...