Summary
In Kern, the voluntary payment at issue was made under a mistake of fact, not law. After observing that recoupment is generally allowed in a mistake of fact scenario, the Kern Court then noted that, under equitable principles, an exception to the rule would apply to preclude recoupment when the person receiving the money had changed his position in reliance on the payment.
Summary of this case from Progressive Michigan Insurance v. UwlicOpinion
Docket No. 59919.
Decided April 18, 1983.
Morrissey, Bove Ebbott (by William H. Morrissey), for plaintiffs.
James Whalen, City Attorney (by Patrick H. Hynes, of counsel), for defendant.
Defendant appeals from a judgment entered in favor of plaintiffs after a bench trial in an equity action.
Plaintiff Charles Kern was employed in May, 1974, by the City of Flint as a police officer with approximately 23 years of service. In late May, Mr. Kern met with James Swidorski of the city's Department of Finance to discuss early retirement options. Mr. Swidorski presented plaintiff with various options, one of which indicated that Mr. Kern could receive $688.98 per month if he retired with 23 years of service. Mr. Kern discussed the matter with his wife and with his insurance agent and it was determined that he would require at least $700 per month in pension benefits in order to retire. Mr. Swidorski informed Mr. Kern that, since he would have over 23 years of service accumulated on the date he proposed to retire, the benefits received under the option described above would exceed the $688.98 figure. Mr. Kern elected to retire under the foregoing option effective July 27, 1974.
Mr. Kern began receiving monthly retirement benefits from the city in the amount of $734.17 immediately after he retired and continued to receive such benefits until April, 1976, when the city informed him that his benefits had been miscalculated and that he was entitled to receive only $647.06 per month. The city withheld a portion of Mr. Kern's pension benefits in succeeding months until it had recouped the $1,753.82 it claimed to have overpaid Mr. Kern. Thereafter, it issued monthly payments of $647.06.
Plaintiffs commenced this action to recover the amount withheld and to compel defendant to pay the amount originally represented. They also sought to recover consequential damages.
The trial court denied plaintiffs' claim for consequential damages. However, it found that, although the amount of monthly benefits Mr. Kern was entitled to receive, using the correct formula, was only $647.06, defendant's finance officer had represented to Mr. Kern that he would receive a larger amount and that Mr. Kern would not have retired at that time had he known that he would receive less than $700 per month. Therefore, the court ordered defendant to begin paying plaintiffs $700 per month in benefits and permitted plaintiffs to recover an amount from the city equivalent to the amount they would have received had defendant been paying $700 per month in benefits from the time Mr. Kern retired.
In equity cases, this Court reviews the record de novo, with due deference given to the findings of the trial court. This Court will sustain the trial court's findings unless convinced that it would have reached a contrary result. Groveland Twp v Jennings, 106 Mich. App. 504, 509-510; 308 N.W.2d 259 (1981).
It appears that the reason the finance officer miscalculated the benefits to which Mr. Kern was entitled was because he applied a formula which was based on the average salary of Mr. Kern using the best three years out of a five-year period of Mr. Kern's employment. The correct formula involved calculations based on the best five years out of a ten-year period. Mr. Swidorski used the best three out of five formula because an offer had been presented to the union which represented Mr. Kern to switch to that formula. Mr. Swidorski anticipated that the union would accept the offer. However, after Mr. Kern retired, the union rejected the offer.
It should be noted that the three out of five formula was accepted in a contract entered into one year after Mr. Kern retired and applied to police officers retiring thereafter.
We agree with defendant's contention that generally the rule in this jurisdiction is that where one pays money to another by mistake, that person is entitled to recover the amount of the overpayment even if the mistake is due to lack of investigation. Montgomery Ward Co v Williams, 330 Mich. 275, 284; 47 N.W.2d 607 (1951); Couper v Metropolitan Life Ins Co, 250 Mich. 540, 544; 230 N.W. 929 (1930). However, an exception to the rule exists where the party receiving the money has changed his position in reliance upon his receipt of it so that it would be inequitable to permit recovery. Lake Gogebic Lumber Co v Burns, 331 Mich. 315, 319; 49 N.W.2d 310 (1951). This exception comports with the general principles of estoppel which apply to the actions of municipal officials:
"Generally, estoppel may arise pursuant to the positive acts of municipal officials which induced plaintiff to act in a certain manner, and where plaintiff relied upon the official's actions by incurring a change of position or making expenditures in reliance upon the officials' actions. 9 McQuillin, Municipal Corporations (3d ed), § 27.56, pp 755-757. The circumstances of each case will determine whether estoppel is to be applied against a local government, and:
"`If under all the circumstances, the acts of the public body have created a situation where it would be inequitable and unjust to permit it to deny what it has done or permitted to be done, the doctrine of estoppel will be applied to the municipality.' 2 Antieau, Municipal Corporation Law, § 16A.01, p 16A-6." Parker v West Bloomfield Twp, 60 Mich. App. 583, 591-592; 231 N.W.2d 424 (1975).
In the present case, we are of the opinion that the trial court properly applied the doctrine of estoppel. We find without merit defendant's claim that Mr. Kern should have known of the proper formula to apply in calculating his benefits. Defendant's finance officer was in a superior position to ascertain the applicable data and Mr. Kern was justified in relying on the information provided.
Affirmed. No costs, a public question being involved.