Gulf Life Ins. Co. v. Folsom

• Decision Date: 22 October 1986
• Docket Number: No. 43691,43691
• Citation: 349 S.E.2d 368,256 Ga. 400
• Court: Georgia Supreme Court
• Parties: GULF LIFE INSURANCE COMPANY v. FOLSOM et al.

Page 368

349 S.E.2d 368

256 Ga. 400

GULF LIFE INSURANCE COMPANY v. FOLSOM et al.

No. 43691.

Supreme Court of Georgia.

Oct. 22, 1986.

Reconsideration Denied Nov. 6 and 12, 1986.

H. Holcombe Perry, Jr., Perry, Walters & Lippitt, Albany, Wright & Wright, Cordele, for Gulf Life Ins. Co.

David N. Rainwater, Rainwater & Christy, Cordele, for Sydney M. Folsom et al.

John A. Helms, Francis J. Mulcahy, Jr., Sarah M. Hogsette, amici curiae.

MARSHALL, Chief Justice.

The United States Court of Appeals for the Eleventh Circuit certified the following question to this court pursuant to OCGA § 15-2-9, 794 F.2d 1487. "... Statement of the facts. Between March 1974, and March, 1977, four $100,000 insurance policies were issued by the appellant, Gulf Life Insurance Co. (Gulf) on the life of appellee Sydney M. Folsom, the ex-president of appellee Folsom Construction Co. (Folsom). A total of $17,396 in premiums was paid for these policies. Folsom became the owner of these policies and on June 16, 1981, applied to Gulf for the maximum amount available under the policies based upon their cash value. Later in June, 1981, Folsom received a total of $56,530.65 from Gulf representing the cash value of the policies. A year later, on June 15, 1982, Folsom again sought the maximum value of the policies and received $62,425.39 from Gulf.

"At the time that Folsom made its second application for the maximum value of the policies, they actually had no value. The second payment of over $60,000 was the result of a computer mistake. This mistake occurred when the premiums that were due on the policies in March of 1982 were not paid on their due date or within the grace period. Because the premiums were not paid, Gulf's computer automatically checked the cash value of the policies to determine if there was any cash value remaining. When the computer checked the Folsom policies, it found that there was no cash value and therefore recorded a lapse of those policies. Subsequently, the premiums on the policies were paid and the policies were reinstated, but in the course of reinstating the policies, the computer did not pick up the 1981 loans as part of the information relating to these policies. It is undisputed that this error stemmed from Gulf's programming system, which had been prepared by one of its subsidiaries. Thus, when Folsom applied for the second maximum loan, the loans made in 1981 were not disclosed by the computer and the computer printed out checks for the loan value as if there had been no pre-existing loans on these policies. It is uncontested that Folsom did not play any role in this error. Furthermore, Gulf had in its possession the file on the policy which contained the correct information, and a clerk checking the file manually would have discovered the 1981 requests.

"In early 1983, agents of Gulf called Randall M. Folsom, the insured's son, suggesting that the coverage be converted to a different type of policy. The premiums for the upcoming year were not yet paid and Folsom had to decide whether or not to keep paying the premiums on the policies. Sydney Folsom, the insured, was no longer the president of the company. Randall Folsom, as the new president of Folsom, asked Gulf's agent to determine the outstanding cash surrender value of the policies. He was told that their value was $3,500. This information was incorrect, because it was based upon the same computer mistake that resulted in the second payment of the maximum loan value of the policies. Randall Folsom decided not to pay the premiums for the next year, but instead sought the cash surrender value of the policies. As a result of the signing of these cash surrender agreements, each policy was immediately cancelled.

"Randall Folsom never received the $3,500, so he contacted one of Gulf's agents. The agent said he did not understand the problem, but he would check on the matter. On September 8, 1983, Folsom received a letter from Gulf stating that the loan value of the policies had been overpaid and that Folsom owed Gulf $45,326.84. In addition, Gulf refused to pay Folsom the $3,500 that represented the mistaken cash surrender value of the policies. After Folsom did not return the money, Gulf instituted this action for money had and received in the United States District Court for the Middle District of Georgia. Gulf claimed that it was entitled to the $45,326.84 that had been mistakenly paid to Folsom. Folsom filed a counterclaim seeking to recover the $3,500 which it alleges Gulf is obligated to pay because of the cash surrender agreements. The district court granted Folsom's motions for summary judgment as to both Gulf's claim for money had and received and Folsom's counterclaim. The district court found that the overpayment was caused solely by Gulf's negligence, and therefore OCGA § 13-1-13 dictated the grant of summary judgment to the defendant.

"OCGA § 13-1-13 provides the following: 'Payments of claims made through ignorance of the law or where all the facts are known and there is no misplaced confidence and no artifice, deception, or fraudulent practice used by the other party are deemed voluntary and cannot be recovered unless made under an urgent and immediate necessity therefor or to release person or property from detention or to prevent an immediate seizure of person or property ...' Georgia courts have held that this section applies not only when one pays money with knowledge of all the facts but also when one pays by mistake without a valid reason for failing to ascertain the truth. See e.g., Atlanta Coach Co. v. Simmons, 184 Ga. 1 (1937); Barker v. Federated Life Ins. Co., 111 Ga.App. 171 (1965). See also Bohannon v. Manhattan Life Ins. Co., 555 F2d 1205, 1212 (5th Cir.1977). ¹ In addition, Georgia courts have placed the burden on the party seeking recovery to prove that the payment was not made voluntarily because at the time of the payment, material facts were not known, or because a valid reason existed for the failure to ascertain the truth. New York Life Ins. Co. v. Williamson, 53 Ga.App. 28 (1936). Relying on this interpretation of OCGA § 13-1-13, the district court concluded that Gulf could not recover its overpayment to Folsom, because there was no valid reason for Gulf's failure to ascertain the true value of Folsom's policies.

"There is another Code section, however, that sheds doubt upon this conclusion. OCGA § 23-2-32(b) provides that '[r]elief may be granted even in cases of negligence by the complainant if it appears that the other party has not been prejudiced thereby.' It is clear that this Code section applies to actions for money had and received. See Barton & Ludwig, Inc. v. Thompson, 170 Ga.App. 187 (1984); J.C. Penney Co. v. West, 140 Ga.App. 110 (1976). There appears to be a conflict between OCGA § 23-2-32(b) and OCGA § 13-1-13, and we have been unable to find a Georgia case that resolves this conflict.

"... Question to be Certified. In an action for money had and received, can the plaintiff recover a payment mistakenly made when that mistake was caused by his lack of diligence or his negligence in ascertaining the true facts and the other party would not be prejudiced by refunding the payment?

"The particular phrasing used in this certified question is not intended to restrict the Supreme Court's consideration of the issue in its analysis of the record certified in this case. This latitude extends to the Supreme Court's restatement of the issue or issues and the manner in which the answers are given. See Martinez v. Rodriquez, 394 F2d 156, 159, n. 6 (5th Cir.1968)." Held:

An action for money had and received (formerly known at various times as indebitatus assumpsit, implied assumpsit, and assumpsit), although legal in form, arose from the common-law courts, is founded on the equitable principle that no one ought to unjustly enrich himself at the expense of another, and is a substitute for a suit in equity. Cantrell v. Henry County, 250 Ga. 822, 825(1), 301 S.E.2d 870 (1983); Jasper School District v. Gormley, 184 Ga. 756, 193 S.E. 248 (1937); J.C. Penney Co. v. West, 140 Ga.App. 110(2), 230 S.E.2d 66 (1976); Hobbiest Finance Corp. v. Spivey, 135 Ga.App. 353(3), 217 S.E.2d 613 (1975).

Thus, although the action is governed by OCGA § 13-1-13, Georgia courts have construed that Code section and its predecessors--and interpreted the action itself--in conjunction with the equitable principles set forth in the Code, including OCGA § 23-2-32 and its predecessors. E.g., Orient Ins. Co. v. Dunlap, 193 Ga. 241, 248(2), 17 S.E.2d 703 (1941); Whitehurst v. Mason, 140 Ga. 148, 78 S.E. 938 (1913); Barton & Ludwig, Inc. v. Thompson, 170 Ga.App. 187, 316 S.E.2d 786, supra, cert. den.; DeKalb County, etc., Union v. D.L. Claborn, etc., 162 Ga.App. 631, 292 S.E.2d 507 (1982); Dept. of Administrative Serv. v. Pritchett, 160 Ga.App. 294, 287 S.E.2d 290 (1981); Sun. Fed. Svgs., etc., Assn. v. Manny, 156 Ga.App. 807, 808(3), 275 S.E.2d 661 (1980); J.C. Penney Co. v. West, 140 Ga.App. 110, 230 S.E.2d 66, supra; Dept. of Public Health v. Perry, 123 Ga.App. 816, 182 S.E.2d 493 (1971); Bill Heard Chevrolet Co. v. Atlantic Discount Co., 120 Ga.App. 388, 170 S.E.2d 740 (1969); Bass v. Cates, 74 Ga.App. 363, 370, 39 S.E.2d 550 (1946); Dobbs v. Perlman, 59 Ga.App. 770, 2 S.E.2d 109 (1939). (The apparent reason for the paucity of cases from this court applying specifically to actions for money had and received is that such an action "is not an equity case within the meaning of the constitutional provision relating to the jurisdiction of this court." Orient Ins. Co. v. Dunlap, 193 Ga. 241, supra, p. 246, 17 S.E.2d 703.)

Such a construction is proper under the rule of law that "[t]he plaintiff's right to recover cannot be measured by one equitable statute or section of the Code, since such statute must be construed with reference to other equitable principles of which it forms a part." Adler v. Leopold Adler Co., 205 Ga. 818, 823, ...