## Facts

- A brokerage partnership (Estabrook & Co.) maintained a securities trading account for customer Norman L. Silverman.
- Silverman owned 1,000 shares of Saturn Industries, Inc. in the account; at his request, the brokerage transferred all 1,000 shares to another firm in April 1967, and Silverman received the full benefit of disposing of them through that firm.
- Due to a bookkeeping error, the brokerage removed only 300 shares from its records and continued to list 700 Saturn shares as held for Silverman.
- Monthly statements from May 1967 through May 1968 continued to show 700 Saturn shares in Silverman’s account.
- In May 1968, the brokerage recorded and credited to Silverman’s account proceeds of $11,705.51 from a purported sale of the 700 shares, even though those shares had already been transferred away in 1967.
- Silverman’s tax filings reflected duplicate reporting of capital gain tied to the same Saturn shares; he admitted the later gain report duplicated the earlier one.
- The brokerage sued to recover the $11,705.51 as restitution for money paid by mistake; Silverman asserted an equitable change-of-position defense and counterclaimed.
- After a bench trial, the Superior Court entered judgment for the brokerage and rejected Silverman’s counterclaim, excluding Silverman’s proffered evidence offered to show a material change of position in reliance on the payment.

## Issues

1. Whether the trial court erred by excluding evidence offered to support the defendant’s change-of-position defense in an action seeking restitution of money paid by mistake.
2. Whether, given the equitable nature of restitution, a payee must be allowed to present evidence that repayment would be inequitable due to a good-faith, material change of position.

## Decision

- The Supreme Court reversed the judgment and remanded for further proceedings.
- The Court held the trial justice committed reversible error by excluding evidence relevant to the change-of-position defense.
- The Court directed that the defendant be allowed to present change-of-position evidence and that the restitution claim be reconsidered on a full record.

## Legal Principles

- Money paid under a mistake of fact is generally recoverable in restitution to prevent unjust enrichment.
- Restitution may be limited or denied where the recipient, acting in good faith, materially changes position in reliance on the payment such that repayment would be inequitable.
- The payee bears the burden to prove the alleged change of position.
- Because the defense is equitable and fact-dependent, a court must admit relevant evidence supporting the defense and then weigh it; excluding such evidence prevents proper adjudication and is error.

## Conclusion

The court required a new hearing because the trial court barred evidence central to an equitable defense, holding that restitution for a mistaken payment cannot be ordered without allowing the payee to attempt to prove a good-faith, material change of position that would make repayment unjust.


Jonklaas v. Silverman, 370 A.2d 1277 (R.I. 1977)