The U.S. Bankruptcy Court for the Eastern District of California cited and quoted Restatement Third, Restitution and Unjust Enrichment § 18 in a recent opinion granting restitution of garnished funds due to the reversal of a judgment on which the garnishments were premised.
That case, In re Borsos, arose after the court had previously found that a debt owed by a Chapter 7 bankruptcy debtor was nondischargeable, and had ordered garnishment of the debtor’s wages to satisfy the debt. The judgment was subsequently reversed as a result of a separate decision by the U.S. Supreme Court, but not before over $15,000 had been garnished from the debtor’s wages. The debtor consequently filed a motion seeking restitution.
In discussing the equitable right to restitution, the Court looked to § 18, stating that “[t]he most recent Restatement reflects the federal precedents and may be taken as an accurate statement of federal law.” As supported by the Restatement, the Court found that, when a judgment had been overturned, restitution of damages paid in satisfaction of that judgment was “virtually automatic” where, as here, it was “sought from the judgment creditor (as opposed to a third party), and where both parties [were] before the court.”
The Court also cited the Restatement heavily when addressing the issue of unjust enrichment, finding that “preventing the law from stultifying itself by compelling payment of a claim that the law says may not be compelled ‘constitutes an important reason for restitution that is independent of the individualized equities of the parties.’”