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THE FALLACIES OF \DISCHARGE FOR VALUE\
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THE FALLACIES OF \DISCHARGE FOR VALUE\
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THE FALLACIES OF \DISCHARGE FOR VALUE\
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Journal Article
THE FALLACIES OF \DISCHARGE FOR VALUE\
2025
Overview
Thought to be adumbrated by § 14 of the original Restatement of Restitution2 (Restatement), then adopted as a \"rule\" in the leading New York case of Banque Worms v. BankAmerica International,3 the proposition is that a creditor without notice who receives a mistaken payment on account of the debt is entitled to keep the money, free of what would ordinarily be the restitution claim of the mistaken payor. Because a payee who incurs a detrimental change of position in consequence of the payment already had an unquestioned defense to restitution, \"discharge for value\" operated to protect payees who had not changed position-who would possibly be left unharmed, merely back where they started, if they were required to return a mistaken payment. \"10 And instead of the traditional syndicate of bank lenders, the recipients of the extra money were asset managers representing hundreds of hedge funds.11 Many of these asset managers were already preparing litigation against Citibank, challenging some controversial steps taken earlier that year to refinance (and postpone the maturity of) part of Revlon's outstanding debt.12 Citibank discovered its mistake the next day and asked the recipients to return the mistaken transfers.' Following a bench trial, District Court Judge Jesse M. Furman ruled that the payees who had refused to return the bank's money were entitled to keep it20- making chumps of the payees who had sent back the other $400 million. Judge Furman observed, to begin with, that \"[t]he law generally treats a failure to return money that is wired by mistake as unjust enrichment . . . and requires that the recipient return such money to its sender.
