McDonald's Corporation v. Moore, Civ. A. No. 4727.

• Court: U.S. District Court — District of South Carolina
• Writing for the Court: T. Sam Means, Jr., Spartanburg, S. C., for plaintiff
• Citation: McDonald's Corporation v. Moore, 237 F. Supp. 874 (D. S.C. 1965)
• Decision Date: 01 February 1965
• Docket Number: Civ. A. No. 4727.
• Parties: McDONALD'S CORPORATION Plaintiff, v. R. L. MOORE, Defendant.

237 F. Supp. 874

McDONALD'S CORPORATION Plaintiff, v. R. L. MOORE, Defendant.

Civ. A. No. 4727.

United States District Court W. D. South Carolina, Spartanburg Division.

February 1, 1965.

T. Sam Means, Jr., Spartanburg, S. C., for plaintiff.

Neville Holcombe, Spartanburg, S. C., for defendant.

WYCHE, District Judge.

Plaintiff in this action seeks the recovery of rental overpayments made to the defendant.

The case was tried before me without a jury.

In compliance with Rule 52(a), Rules of Civil Procedure, I find the facts specially and state my conclusions of law thereon, in the above cause, as follows:

FINDINGS OF FACT

Plaintiff is an Illinois corporation with its principal office in Chicago, and the defendant and landowner is a citizen of South Carolina.

On January 10, 1961, the plaintiff, then known as Franchise Realty Corporation, as lessee, and defendant, as lessor, entered into a thirty-year written lease for a lot in the City of Spartanburg, South Carolina. The first ten years of the lease provided a monthly rental of Three Hundred, Seventy Five ($375.00) Dollars, the second ten years provided a monthly rental of Four Hundred, Twenty Five ($425.00) Dollars, and the last ten years provided a monthly rental of Four Hundred, Fifty ($450.00) Dollars. In addition to the payment of rent plaintiff was obligated to construct certain improvements on the vacant property of the defendant. The improvements were constructed as agreed.

Due to a delay in obtaining a mortgage loan commitment, two months' rent had accrued at the time the plaintiff, at its option, put the lease into effect. Therefore, the first rental check plaintiff sent defendant under the lease was for the months of February and March, 1961, and was paid by the plaintiff in one check for $750.00. The "pegboard" method of accounting was being used by the plaintiff at this time, under which method a carbonized check was used to record the transaction on a subsidiary ledger. In making subsequent disbursements of rental payments, it was the procedure of the employee who wrote the checks to look at the subsidiary sheets, which she had initiated when she wrote the first check, if a check had been written for the prior month, a similar check in a similar amount would be written for the current month. In this instance, the employee saw that on March 23, 1961, a check had been written for $750.00 for the rent, and in April, 1961, when she wrote the check for rent for the month of April, she wrote a check for $750, the amount she had previously written, as shown by Exhibit 4 attached to the deposition of Donald Lear, believing she was paying the rent for one month. After the checks were prepared they were signed either by the Secretary-Treasurer or the Comptroller-Vice-President of the company, believing that the check had been correctly prepared for one month's rent. At the same time each month it was the duty of this same employee to write about one hundred, seventy five checks, as well as the payroll checks, totaling at least two hundred checks, which she did under pressure because of the time element involved.

Each month after March, 1961, plaintiff through an honest mistake mailed to the defendant a check for $750, believing the same to be a check for the monthly rent under the lease, and continued to do so until March, 1964, when an accounting firm who was making an annual certified audit of plaintiff's records, discovered the mistake and the overpayments totaling $13,125.00, and plaintiff thereupon demanded of the defendant a return of the overpayments of rent but defendant refused to make restitution.

The overpayments of rent were made without any claim of right or demand by the defendant and defendant did not claim any right to this overpayment of $375.00 a month at the time they were made.

There is nothing in the rental lease that provides or permits that the monthly rental shall be paid the last ten years of the thirty-year lease in advance, or any other amount in advance. When defendant received the overpayments, in spite of the express terms of the lease, he decided to keep the money. When asked about the April check, the defendant testified, "Q I am asking you about the April check now. It was for $750? A Yes Q And how many months' rent was due under the lease at that time? A Just the one month. Q The one month? A Yes Q In other words, the check was for double the amount of money? A Yes, sir, twice the amount. * * * Q * * * Then, in May of 1961, did you receive a third check? A That's right, sir. Q In what amount? A $750. Q And at that time, how much rent was due under the lease? Or how much — maybe I had better phrase — how much rent had accrued under the lease? A One month. Q And the check was for double that amount? A That's right, sir. * * * A And then what did you do with the excessive payment? A Applied it to the last rental. THE COURT: Applied it where? THE WITNESS: To the last rental. THE COURT: To the last rental? I though you had already applied one to the last rental. THE WITNESS: To the last month — THE COURT: I thought you had already applied one to that. You mean next to the last, don't you? THE WITNESS: Well, next to the last. That would be right. Q Mr. Moore, when you received — THE COURT: Did you make a record of where you applied that to the lease? THE WITNESS: I have the stubs on it. THE COURT: Did you ever notify the company that you had applied it to the last one? Did you ever write them that? THE WITNESS: No, sir, I did not. * * * Q Now, Mr. Moore, each month since May, 1961, until February, 1964, did you receive from McDonald's Corporation a check for $750? A That's right, sir. Q And how did you credit the excessive payment included in each of those checks? A As I have stated, I would apply $375 to the last month's — THE COURT: Have you got a record of that? THE WITNESS: Well, sir, I have a record, yes. THE COURT: I mean, have you got a record where you applied it? THE WITNESS: I don't have a record of that but I have the checks. THE COURT: There's nothing in writing that you did apply it to it? THE WITNESS: No, sir." When the attorney for the plaintiff telephoned the defendant, long-distance, informing him that the records of the plaintiff indicated that there had been rental overpayments to him, the defendant stated "that he was aware that overpayments had been made, and further stated he was wondering when we would wake up in Chicago".

Defendant was aware of the overpayments of rent but did not give any notice thereof to the plaintiff, either by letter, telegram, telephone, or otherwise, and did not attempt to do so, and did not request his lawyer to do so. When asked why he did not write the plaintiff, he replied, "Well, I don't have a typewriter and I don't have a secretary and I don't write very well." Plaintiff had no notice or knowledge of the overpayment until March, 1964, when the mistake was discovered by an accountant who was making a complete audit for the plaintiff.

Defendant knew at the time he received the second check from the plaintiff for $750, that the plaintiff had made a mistake and was overpaying the rent.

Defendant knew that plaintiff was not intentionally overpaying the rent to be applied to the last years of the thirty-year lease. The $375 overpayment each month was not in the amount of the monthly rental provided in the lease for the last ten years of the lease.

John Haran, Vice President in charge of the Real Estate Department of the plaintiff, who handled the negotiations for the lease with the defendant, left plaintiff's employ at the end of 1961. David C. Lee, Jr. with whom the defendant had telephone conversations concerning the lease, also left the company's employ at the end of 1961.

Plaintiff did not agree for the defendant to apply the overpayments to the last ten years of the thirty-year lease, or to any other term of the lease. After the overpayments were discovered by the plaintiff it offered to allow defendant to apply the overpayments to the rent next to accrue which the defendant refused to do. The letter from defendant's attorney to plaintiff dated sometime subsequent to March 11, 1964, was the first time plaintiff knew of defendant's intention or his idea of applying the overpayments to the last years of the thirty-year lease. When defendant was asked why he credited the overpayments to the last ten years of the lease, he replied, "Well, I had an idea that was customary".

Plaintiff did not knowingly or intentionally make overpayments of rent each month, but the overpayments were an honest mistake of a material fact by an employee in the accounting department of the plaintiff.

Plaintiff has continued to pay rent at the rate of $375.00 per month, as called for under the terms of the lease agreement, since the discovery of the overpayments in March, 1964, and defendant has accepted it as the correct amount of rent due under the lease.

Defendant has not been hurt, his position has not been changed, and he has not suffered any loss by the mistaken overpayments and circumstances have not so changed that it would be inequitable to require him to make full restitution.

The payments under the facts of this case were made under an honest mistake of a material fact and were not voluntary payments but were mistakenly made as the result of forgetfulness, inadvertence, oversight and a clerical error in the preparation of a check for $750 instead of $375, erroneously believing the same to be the rent for one month under the lease, constituting a mistake of fact, and are recoverable. The defendant is not entitled thereto and cannot in good conscience retain the overpayments which would result in unjust enrichment of the defendant at the plaintiff's expense.

CONCLUSIONS OF LAW AND OPINION

It is difficult to reconcile the various decisions of the South Carolina Supreme Court cited by counsel upon the questions involved in this controversy. Each case must, however, stand...