## Facts

- John and Nancy Augustine contracted with a builder to construct a house; their promise to pay and the builder’s promise to build were reciprocal obligations.
- The Augustines received a check representing construction funds and John endorsed it to the builder as an advance; Nancy did not endorse.
- The builder later went bankrupt and did not build the house.
- The depository bank accepted the check for deposit/negotiation despite the missing co-payee endorsement and obtained payment from the payor bank, which mistakenly honored the item.
- The payor bank sued the depository bank and recovered the check amount for wrongful payment.
- The depository bank filed a third-party claim against the Augustines seeking to shift the loss; the trial court entered judgment for the depository bank against the Augustines.
- On appeal, the court reversed the third-party judgment; on rehearing, the depository bank argued unjust enrichment and, alternatively, estoppel.

## Issues

1. Whether the evidence supported holding the Augustines liable to the depository bank under unjust enrichment based on the mistaken payment.
2. Whether the Augustines were estopped from denying liability due to John Augustine’s endorsement and related conduct.

## Decision

- The court denied rehearing and reaffirmed reversal of the judgment against the Augustines.
- The court held the Augustines were not liable to the depository bank on unjust enrichment because they owed no enforceable “debt” to the builder when the builder failed to perform.
- The court held estoppel did not apply because the endorsement did not represent the builder had earned the funds and the bank’s loss resulted from paying despite a missing endorsement, not from reasonable reliance on the Augustines’ conduct.
- The judgment requiring the depository bank to reimburse the payor bank for the wrongful payment remained intact.

## Legal Principles

- A “debt” requires a specific sum presently due with a creditor’s enforceable right to receive payment; conditional, executory contract promises do not create such a debt before performance.
- In bilateral contracts with mutually dependent promises, one party’s nonperformance discharges the other’s obligation to perform, preventing an enforceable right to payment from arising.
- Unjust enrichment generally fails where the alleged “benefit” is framed as discharge of a supposed obligation that was not enforceable at the time of payment.
- Estoppel requires a representation or conduct inducing reasonable reliance and resulting detriment; a bank’s loss caused by honoring an item despite a missing endorsement is not attributable to a payee’s endorsement absent misleading representation.

## Conclusion

The court refused to shift the loss from a depository bank that obtained payment on a check lacking a required co-payee endorsement to the homeowners, because the builder’s nonperformance meant no enforceable debt existed and the bank could not establish unjust enrichment or estoppel.


Am. Nat'l Bank & Tr. Co. v. St. Joseph Valley Bank, 391 N.E.2d 685 (Ind. Ct. App. 1979)