In Buel v. Boughton,[1] the plaintiff made a contract, which, in consequence of a mutual mistake, failed to require the payment of interest; and when the obligation matured, he, by mistake, paid principal and interest. It was held that he could not recover back. It is true that the defendant could say in this case that there was no unjust enrichment; but it is also true that the enrichment was not at plaintiff’s expense, as it was a contract which could have been reformed in equity, so as to call for the payment of interest. This principle[2] was inequitably applied in Jackson v. McKnight, where the plaintiff, who was indebted to the defendant on an overdue bond, secured by mortgage, paid to the defendant an amount claimed by the defendant as interest. The defendant afterwards assigned the bond and mortgage, and the plaintiff, discovering that no interest was due at the time of said payment, brought an action to recover the money paid under mistake.
It was held that he could not recover. “The difficulty,” says Learned, J., delivering the opinion of the Court, “is, that at the time when the plaintiff made this payment he was owing a very much larger amount, overdue and payable, on the very obligation upon which the payment was made. Clearly, if he, the plaintiff, had handed to the defendant $230, to apply on the bond and mortgage, he could not have recovered the sum. But in the present case he claims to recover, because it was intended as a payment of interest, which had in fact been paid, and not as a payment of principal, which had not. The payment, however, was really made on the debt. The plaintiff is, and always will be, entitled to a credit for so much paid thereon. The defendant and the defendant’s assignee can enforce the bond and mortgage only for what is payable after crediting this and all other payments. . . . The action to recover money paid by mistake is sustained, because, otherwise, the party would suffer an unjust loss. It should not be extended to cases where the relief is not necessary. It is not necessary in the present case, because the plaintiff can protect himself whenever he is sued on the bond and mortgage.”
It is submitted that a different result should have been reached in this case. The money had not been received as part of the principal debt, but as interest, and whatever right the defendant had to apply it in payment pro tanto of the principal debt, if he did not so apply it, but sold the bond and mortgage as a debt
