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Case:
BGHZ 89, 376 VII. Civil Senate (VII ZR 110/83)
Date:
19 January 1984
Judges:
Professor B.S. Markesinis
Copyright:
Mr Raymond Youngs

I Landgericht Karlsruhe

II Oberlandesgericht Karlsruhe

The defendants - a community of joint heirs - concluded a lease in 1978 with the brewery H in respect of a public house. The monthly rent in the sum of 1000 DM was transferred to them on the basis of a standing order by the claimant, the brewery H's bank. By a letter of the 22nd February 1980 the brewery H informed the defendants, referring to alleged defects in the rooms in the public house, that it would stop the lease payments. At the same time it revoked the standing order by a letter of the 3rd March 1980 sent to the claimant.

The claimant, which inadvertently implemented the revoked standing order for a further 13 months, demands by the claim repayment of 13,000 DM transferred, together with interest. The Landgericht and the Oberlandesgericht have rejected the claim. The appeal in law, which was admitted, was unsuccessful.

Reasons:

The appeal court is of the view that the claimant is not entitled to a direct claim for enrichment against the defendants. Admittedly in the payment order cases the payer always had a direct claim against the recipient of the payment if an effective payment order was lacking from the outset. In the case of a standing order which was revoked but had been implemented in the past, the recipient of the payment, was however to be protected from an enrichment claim by the bank. By giving a standing order the debtor had created a situation in which the recipient of the payment was allowed to place his trust according to the legal concepts in §§ 170, 171 para 2, 172 para 2, 173 of the BGB. A trust situation of this nature was present here. The claimant's payment appeared from the defendants' viewpoint to be the continuation of the performance of the person giving the payment order. The defendants would, in spite of the communication from the brewery H that the payment was being stopped because of defects in the subject matter of the lease, have been allowed, having regard to the further rent received, to assume that the tenant had not carried out its announcement about stopping the payment and not revoked the payment order to the bank. As the mistake which the claimant made by not having regard to the standing order was rooted in the relationship of the bank to its customer, the restoration principles had to be left to be dealt with in the three cornered relationship.

The appeal in law is directed against this, but without success.

1. The appeal court correctly proceeds on the basis that payments by a bank to a third party on the basis of a standing order given to the bank by a customer represent a case of performance by virtue of instructions. By the standing order the brewery H instructed its bank - the claimant - to pay the rent owed to the defendants monthly. A cover relationship (Deckungsverhältnis) therefore arose between the brewery H and the claimant on the basis of which the claimant effected its own performance in favour of the brewery H, namely transfer of the rent to the defendants at the cost of the brewery H. Besides this a value relationship (Valutaverhältnis) existed on the basis of the lease between the brewery H and the defendants in which the brewery H - by the transfer of the rent undertaken by the claimant - effected a performance of its own in favour of the defendants.

2. It is also necessary to agree with the appeal court that the enrichment settlement in cases of performance by virtue of instructions takes place in principle within the particular performance relationship. In the case of mistakes in the cover relationship between the person giving instructions and the person given instructions, the enrichment settlement is thus to be undertaken in this relationship. If on the other hand the value relationship between the person giving instructions and the recipient of the subject matter of the instructions reveals mistakes, the settlement of the enrichment is to be conducted in this relationship (references omitted).

Admitedly the senate has repeatedly stated that, for the treatment in enrichment law of events in which more than two persons participate, any mechanical solution is forbidden. It always depends on the special features of the individual case which must be considered for the proper dismantling in enrichment law of events of this kind (references omitted). Thus the senate has, in a case in which instructions had at first been effectively given and made known to the recipient by the handing over of a cheque, but then revoked before crediting or payment without knowledge of the recipient, decided that the bank which has nevertheless cashed the cheque has no direct enrichment claim against the holder of the cheque, but must a seek a possible enrichment settlement with their customer (reference omitted). Likewise the second senate has accepted that a bank which has inadvertently credited a transferred sum to the account of the recipient of the transfer, after revocation of the order to transfer, has no direct enrichment claim against the recipient, if the basis of the transfer was a claim by the recipient of the payment against the person giving the order for the transfer and the recipient to whom the transfer was announced by the person giving the order did not know of its revocation (reference omitted).

On the other hand the senate has decided that a bank which makes a payment by mistake on the basis of revoked instructions has a direct enrichment claim against the recipient of the payment if this person knew of the revocation of the instructions on receipt of the payment (reference omitted).

Finally the senate has left open what the legal position is if effective instructions are absent from the start (references omitted).

3. This case law has also found agreement in the literature, at least as to its outcome (references omitted). The senate adheres firmly to it. According to it, the claimant does not have a direct enrichment claim against the defendants. This is because the defendants had no knowledge of the revocation of the standing order by the brewery H directed to the claimant. Also, in the case of revocation of a standing order which has been given, it is not possible to assume that effective instructions were absent from the outset.

a) The appeal court correctly assumes that the revocation of the standing order notified by the brewery H to the claimant was not known to the defendants. It is true that the brewery H said to the defendants by a letter of the 22nd February 1980 that it asked for understanding for the fact "that we are stopping the rent payments on the basis of these defects for which we are not responsible, as we ourselves can obtain no rent". But this letter was to be understood - and the appeal court correctly refers to this - only as an announcement that payment was stopping. After the rent was regularily transferred to the defendants in the ensuing period for over a year, they could assume that the brewery H - on whatever ground - wanted to continue to pay the monthly rent to them and clear up in some other way the differences in opinion which had arisen. Knowledge by the defendants of the revocation of the standing order, which according to the case law of the senate could found a direct enrichment claim by the claimant against the defendants, cannot therefore be assumed on the basis of the letter of the brewery H of the 22nd February 1980.

b) It can also further be left open whether the bank which was given instructions then has a direct enrichment claim against the recipient of the payment, if valid instructions by the person giving them to the person receiving them were lacking from the outset. This is because the legal position after the revocation of a standing order corresponds to that which exists in the case of instructions given effectively at first and made known to the recipient by the handing over of a cheque, but then revoked in time (before credit or payment) (reference omitted).

Admittedly - as with a revoked cheque - valid instructions are lacking after revocation of the standing order at the time of receipt of the payment by the third party. Until the revocation of the standing order, however, such instructions existed by the person giving them to the person receiving them, within a legal relationship which is intact. The performance relationships which are definitive for the enrichment settlement are prescribed according to the original agreed intention of all participants, in the three-cornered relationship formed by the instructions. The customer giving the standing order admittedly, by his revocation of it as directed to the authorised bank, states that he no longer desires the bank to give effect to a benefit to the recipient of the payment and charge it against the customer. If the bank pays in spite of this, because it overlooks the revocation of the standing order, it thereby nevertheless intends merely to effect a performance to its customer. The recipient, whose view of the matter is decisive (references omitted), also regards it in this way, on the basis of the purpose determined by the customer with the giving of the standing order. Events within the cover relationship between his contractual partner and that person's bank do not need to concern him. The mistake which the bank made by not paying attention to the revocation is "rooted" in the legal relationship between the bank and its customer. The bank is admittedly not permitted to comply with the standing order given by its customer in the case of an effectively declared revocation. But the grounds for this only lie in the legal relationships existing between the bank and its customer; and it is within these relationships that the mistakes must also in principle be resolved (references omitted). To make a difference in this respect between a giro transfer and the issue of a cheque which is only a special case of instructions (reference omitted) is still not considered by the senate to be justified (reference omitted). The claimant does not therefore have a direct enrichment claim against the defendants.

The view which equates a transfer after revocation of a standing order with a transfer for which effective instructions were not present from the start (reference omitted) does not have regard to the performance relationships as they were fixed on the giving of the standing order by the participants. In particular it ignores the fact that the transferring bank intends merely to effect a performance to its customer by the transfer and the recipient also regards the payment received in this manner. The revoked standing order can therefore not be treated like instructions which were lacking from the start.

4. This result is also proper and appropriate to the interests involved.

It is true that the customer of a bank has an interest worthy of protection in not being harmed by payments of his bank made to third parties even though he has effectively revoked an instruction which he gave in the first place. The senate has therefore decided that the bank, if it overlooks a revocation of instructions, must in any case bear the risk arising from the mistake alone, if the customer has notified the third party of the revocation and thereby done everything to avoid the consequences of a mistaken payment (reference omitted). If the customer of the bank has however - as in the case in dispute - not informed the recipient of the payment about the revocation of the standing order after its revocation and for 13 months has suffered the debiting of his account without protest, referring the bank to its customer for repayment of the transferred sum is justified. In this case the recipient of the payment - otherwise than in the case of knowledge of the revocation - deserves the protection of trust, because - trusting in the continued existence of the standing order - he does not know that the payments to him are based on a mistake by the bank (references omitted).

5. The senate does not thereby put itself in contradiction with the case law of the Bundesgerichtshof so far. The judgment of the second civil senate of the 29th May 1978 (reference omitted) in which a direct enrichment claim by the bank against the recipient of the payment was affirmed concerns an inadvertent double credit on the basis of a transfer. It is not a question of that here.

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