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19 January 1984, BGHZ 89, 376

Bundesgerichtshof (Seventh Civil Senate) 19 January 1984, BGHZ 89, 376

In 1978, the defendants (a community of heirs) entered into a lease agreement for a public house with the H brewery. The plantiff, a bank, transferred rent payments amounting to DM 1,000 per month to the defendants under a standing order issued by the H brewery. By letter of 22 February 1980, the H brewery informed the defendants that it would discontinue the lease payments due to alleged defects in the premises of the public house. At the same time, the brewery cancelled the standing order by a letter to the plaintiff dated 3 March 1980.

The plaintiff inadvertently continued to pay under the standing order for another thirteen months, and now claims from the defendant return of those DM 13,000 plus interest. Landgericht and Oberlandesgericht have disallowed the action. The appeal was admitted, but without success.

Reasons

The Appeal Court takes the view that the plantiff has no direct enrichment claim against the defendants. In the Appeal Court’s view, in cases involving payment orders, the payor always has a direct claim against the payee if a valid payment order has been lacking ab initio. However, if a standing order has been carried out in the past, but has meanwhile been cancelled, the recipient of the payment must be protected against an enrichment claim by the bank. By issuing the standing order, the debtor has created a situation on which the recipient of the payment is entitled to rely, following a legal policy expressed in §§ 170, 171 II, 172 II, 173 BGB. Such a reliance situation exists in the present case. From the view of the defendants, payments by the plaintiff were to be seen as continued performance by those who instructed the bank. In spite of the communication by the H brewery that they were to cancel payments due to defects in the leased object, the defendants were entitled to presume from the continuous receipt of payment that the lessee had refrained from acting upon its announcement to terminate payments, and had not cancelled the standing order. The mistake by which the bank ignored the [cancellation of the] standing order is rooted in the relationship between the bank and its customer, and for that reason the general rules for return of enrichment in triangular relationships are to apply.

The appeal does not succeed in its objections against these considerations.

1. The Appeal Court is right to assume that payments which a bank makes towards a third party under a standing order issued by a customer are a case of performance by order (Leistung kraft Anweisung). By its standing order, the H brewery instructed its bank (the plaintiff) to pay in monthly installments to the defendants the rent which it owed. By this, a cover relationship (Deckungsverhältnis) was created between the H brewery and the plaintiff, according to which the plaintiff rendered its own performance toward the H brewery, i.e. by transferring the rent to the defendants, at the expense of the H brewery. In addition, a value relationship (Valutaverhältnis) existed between the H brewery and the defendants, within which the H brewery effectuated its own performance towards the defendants (i.e., by having the plaintiff transfer the rent).

2. The Appeal Court is furthermore right to state that, in cases involving performance by order, return of the enrichment must, as a principle, occur within each relationship of performance. Therefore, if the cover relationship between the party which issues the order and the party which receives it is deficient, return of the enrichment must occur within this relationship. If, on the other hand, the value relationship between the party which issues the order and the party which receives the ordered performance is deficient, return of the enrichment must be carried out within that relationship (cf. BGHZ 40, 272 [= Markesinis, Lorenz and Dannemann, The German Law of Obligations, Vol. I: The Law of Contracts and Restitution, case no. 134; BGHZ 87, 393; other references omitted).

On the other hand, this Senate has, on several occasions, expressed the view that mechanical solutions must not be applied when sorting out unjustified enrichment in situations which involve more than two parties. Attention must be given to the specific circumstances of the individual case, which must be taken into account in order to find an adequate way of undoing the enrichment (BGHZ 87, 393; other references omitted).

One case before this Senate concerned an order which initially had been validly issued and made known to the recipient by handing over a cheque. Subsequently, the order was cancelled without knowledge of the recipient, before the recipient’s account had been credited or the sum paid out. In this case, the Senate decided that the bank, which nevertheless honoured the cheque, had no direct enrichment claim against the holder of the cheque, and must turn towards its client for any enrichment claim (BGHZ 61, 289). Likewise, the Second Civil Senate has held that a bank, which has inadvertently credited the account of a recipient with a certain transfer amount after cancellation of the transfer order, has no direct enrichment claim against the recipient, whereas the transfer was based on a claim which the recipient had against the person who ordered the transfer, this person had given advance notice of the transfer to the recipient, and the recipient was unaware of the cancellation (BGHZ 87, 246).

On the other hand, this Senate has decided that a bank, which mistakely effectuates payment under a cancelled order, does have a direct enrichment claim against the recipient of the payment, if this person knew of the cancellation of the order when receiving the payment (BGHZ 87, 393).

Finally, this Senate has left open what the legal situation would be if a valid order is lacking from the outset (BGHZ 61, 289, 292; BGHZ 88, 232).

This jurisdiction has gained approval by academic writing, at least as far as the results are concerned (references omitted). This Senate adheres to this jurisdiction. Accordingly, the plaintiff has no direct enrichment claim against the defendants, since the defendants had no knowledge that the H brewery had cancelled its standing order to the plaintiff. Additionally, where a standing order is cancelled, one cannot assume that a valid order had been lacking from the outset.

(a) The Appeal Court rightly assumes that the defendants were unaware that the H brewery had notified the plaintiff of its cancellation of the standing order. It is true that the H brewery had notified the defendants by letter of 22 February 1980 that it hoped the defendants could understand that “due to those defects, for which we are not accountable, we will terminate payment of the rent, because we in turn cannot obtain any rental payments”. However – as the Appeal Court is right to point out – this letter was only to be understood as announcing a future termination of payment. As the rent continued to be transferred to the defendants’ account regularly and for a year, the defendants were allowed to believe that the H brewery – for whatever reasons – would continue to make montly payments to them, and would find another way of clarifying the differences in opinion which had arisen. While the defendants’ knowledge of cancellation of a standing order could have given rise to a direct enrichment claim of the plaintiff against the defendants, no such knowledge can be imputed from the 22 February 1980 letter by the H brewery.

(b) Furthermore, it can still be left open whether a bank has a direct enrichment claim against the recipient of a payment if, from the outset, there was no valid order by the bank’s client upon which the bank could have acted. For the legal situation which arises if a standing order is cancelled corresponds to the situation which exists if an order has initially been validly issued and notified to the recipient by handing over a cheque, but where the order has been cancelled in good time, i.e., before the amount is credited or paid out (BGHZ 61, 289).

It is true that in a situation such as the present (as well as where a cheque is cancelled) there is no valid order at the time when the third party receives payment. However, until the moment when the standing order is cancelled, such an order exists as beetween the person who has issued and the person who has received the order, and within an intact legal relationship. The relationships of performance, which are decisive for the way in which enrichment is returned, are determined by what initially were the concurrent intentions of all parties concerned. It is true that a person who has issued a standing order does express by its cancellation towards the instructed bank that he no longer wishes the bank to effectuate benefits to accrue to the recipient at his (the instructing person’s) expense. If the bank still performs, because it has overlooked the cancellation of the standing order, the bank nevertheless intends to perform only towards its customer. The recipient, whose viewpoint is decisive (BGHZ 40, 272 [= Markesinis, Lorenz and Dannemann, op. cit., case no. 134]; other references omitted]) will share this view, based on the purpose which the instructing party attributes to the issuing of the standing order. The recipient need not be concerned about whatever happens within the cover relationship, i.e. between his contractual partner and that party’s bank. The mistake which occurs when the bank ignores the cancellation of the standing order finds its roots in the legal relationship between the bank and its customer. While the bank is not allowed to act under a customer’s standing order once its cancellation has been validly declared, the reasons for this are to be found solely in the legal relationships which exist between the bank and its customer. It is, in principle, within these legal relationships that mistakes have to be sorted out (BGHZ 87, 393; other reference omitted). This Senate continues to see no reason to distinguish between a transfer from a current account and the issuing of a cheque, which is nothing but a specific case of an order (BGHZ 61, 289, 293; but see Lieb JZ 1983, 960, 962). Therefore, the plaintiff has no direct enrichment claim against the defendants.

The opposite view (cf. OLG Düsseldorf WM 1975, 875) treats a transfer under a standing order after it has been cancelled in the same way as a transfer for which there was no valid order from the outset. However, this fails to take into account the performance relationship as determined by the parties concerned when the standing order was issued. In particular, this view overlooks the fact that the bank, by effectuating the transfer, only wishes to perform towards its customer, and that the recipient understands the payment which he receives in the same way. Therefore, a cancelled standing order cannot be treated in the same way as an order which was lacking from the outset.

4. This result is also appropriate and conforms with the interests involved. It is true that the customer of a bank deserves protection for his interest not to be affected by benefits which his bank confers on third parties after he has cancelled an order which he initially has issued. For this reason, this Senate has decided that the bank which overlooks the cancellation of an order must bear the risk which stems from this mistake, at least in the case where the customer has notified the third party of the cancellation, and therefore has done everything to avert the consequences of a mistaken payment (BGHZ 87, 393). However, if the customer cancels a standing order and does not afterwards notify the recipient of the cancellation – as is presently the case -, and tolerates without protest for thirteen months that deductions are made from his account, it is justified to refer the bank to its customer for the return of the amounts transferred. In contrast to the case where the recipient knows of the cancellation, in this case the recipient merits protection of his reliance. He relies on the continued existence of the standing order and does not know that the payments are based on a mistake by the bank (references omitted).