Can You Recover an Overpayment That’s Already Been Spent?
Suppose you discover that a vendor, a utility, or a government agency has been overcharging you for years. When you ask for the money back, the answer is some version of “Sorry, that money is gone. We already used it to pay our own bills.” Does the fact that the recipient no longer holds your overpayment let it off the hook? A recent Michigan Court of Appeals decision, Jeffrey Eisenberg v. George Kuhn Drainage District, says no, and the reasoning is worth understanding before you write off a refund as unrecoverable.
What Is an Unjust Enrichment Claim?
Unjust enrichment is an equitable claim that lets you recover a benefit that someone else holds when it is unfair to allow them to keep it. A written contract is not required. However, two things must be shown: that the other party received a benefit from you, and that it would be inequitable, as between the two of you, to let them retain it. The remedy is restitution, meaning the recipient has to return the benefit or pay its reasonable value.
Is Having Spent the Money a Defense to Paying It Back?
Generally, no. The court drew a clear line between two different questions. The first is whether you have stated a valid claim at all. The second is whether the recipient has a defense. Spending the money you overpaid does not erase the claim, because an expenditure of funds, without more, is not a defense. A recipient may later argue “changed circumstances,” meaning it would now be inequitable to require full repayment because its position has shifted. But that is an affirmative defense the recipient has to prove, not a reason to throw the case out at the pleading stage. Restitution can require paying the equivalent value of the benefit even when returning the exact dollars is no longer possible.
What Happened in the Case?
A property owner alleged that the drainage district running the regional sewer system had overcharged the city for stormwater disposal for years, and that the city passed those charges on to residents. The district argued it could not be unjustly enriched because it had handed the money along to a regional water authority to pay its own bills. The Michigan Court of Appeals rejected that, holding that the owner had alleged a benefit received and retained, and that spending it later did not defeat liability as to the claim.
Practical Takeaways:
If you have overpaid and want to recover your money, do not be deterred by the argument that the money is already spent. Whether the recipient kept the funds in its account or used them to cover its own obligations, the claim can still proceed, and the burden of proving that repayment would now be unfair sits with the recipient. If you are the one holding a disputed payment, passing the money along does not insulate you; documenting a genuine change in your position is what the law will ask you to prove.