The plaintiffs is a company specialising in professional liability insurance. In a previous court action, its client, an architect, had been held liable for damages. The insurance company had paid out to a shareholder of a limited liability company (W. GmbH), the successful claimant of the first action. According to the company's structure the shareholder was , as against the other shareholders, unreservedly liable for the company's debts and he had actually made payments for the company which experienced financial difficulties. Now, and by this second action, the claimant (the insurance company) demands repayment of the insurance sum for reasons of unjust enrichment by alleging that a) the defendant (the shareholder) and the architect had fraudulently led the insurance company to believe that there had indeed been an event insured against, and b) that the defendant had not been entitled to receive insurance payments, since these could only have been due to the W. GmbH, not the defendant, since the W. GmbH had not assigned their claim for damages to the defendant, which, in any case, should have been lower.

The Landgericht rejected the claim. According to its findings, the defendant did not know of any reason why the insurance claim should have been lower. The claim for unjust enrichment failed because the plaintiff knew of the circumstances on which the defendant based his right to receive payments. The plaintiff's appeal was unsuccessful in so far as it was directed against the defendant of the previous action, i. e. the architect. On appeal, the Oberlandesgericht found in favour of the plaintiff. The defendant's further appeal is unsuccessful for the following

Reasons

I. the appeal court rightly held that the plaintiff has a claim for unjust enrichment against the defendant. This claim is based on para. 812 I 1 BGB (condictio indebiti).

1. The transfer of the indemnity payments amounting to DM 44,456.26 constitutes a performance by the plaintiff to the defendant.

The appeal court held that it was not the plaintiff but rather the former second defendant (the architect) who carried out the obligation. He used the plaintiff merely as "recipient of his order". This opinion cannot be shared. There was no order to make payments to a third person (see the BGH decision of 20 June 1990, BGHZ 111, 382).

According to the appeal court's correct and unopposed findings, the plaintiff intended, by his payments, to meet an obligation which the architect had to the W GmbH, i.e. to settle a claim based on his third party liability. The insurer thought that he was bound to indemnify his client because of the valid underlying insurance contract. As is normal for third party liability insurers who pay creditors, the insurance company did not pay its own debt to the recipient but rather paid in respect of the insured person's obligation.....

Contrary to the appeal court's opinion, this does not mean that the plaintiff made payment as a result of an instruction from the architect, who only informed him that the defendant demanded damages; in other words, he notified his insurance company that an event had occurred for which he had obtained insurance cover. The architect had stated that in his opinion the claim for damages was justified. This does not amount to a formal order, nor even to an instruction.The insured has no right to give such instruction and the insurer would not need to comply. It is up to the insurer, prior to making payments to a third person (the creditor), to check the insurance contract and to investigate the legitimacy of the creditor's claim against the insured The insurer meets his client's obligation only once the investigation of this underlying debt relationship establishes that the creditor has in fact a claim as made. This was the case here. When the architect informed his insurer of the defendant's claim for damages, the plaintiff investigated the existence of that claim. He had doubts in respect of the defendant's entitlement. After the defendant had provided additional information, the plaintiff had no further qualms and decided to pay the defendant.

2. The defendant received payments without legal justification.......

According to the court's findings, the plaintiff made the payments as a performance of the architect's own obligation under third party liability. Performance of an obligation could not take place if the architect was in fact under no such obligation towards the W.GmbH. But if such obligation in fact existed, the defendant, i.e. the shareholder would only have a claim against the architect, where the original claim of the W. GmbH had been assigned to him, the shareholder, making him the creditor of the claim for damages. According to the defendant's own submissions, this was not the case here.

a) Where a personally liable shareholder of a limited liability company (GmbH) which experiences financial difficulties is called upon to provide cover for instance for the company's banking debts because of his joint liability under the law of obligations, this does not have the effect that company claims against third persons are legally transferred to that shareholder.

The appeal court correctly held that payments made by the plaintiff to the defendant did not bring about the intended result, i.e. that the claim for damages held by the W. GmbH was met, either because no such claim existed or because the claim did not belong to the defendant. The defendant received payments without legal justification.

3. As a result, the preconditions for a claim for unjust enrichment against the defendant under para. 812 I 1 BGB are here fulfilled.....

In the absence of an order (see above under 1), restitution under the rules on unjust enrichment is not subject to the established rules for cases or orders for payment but rather is subject to the rules which apply for other types of payments by third persons. In the case of performance by a recipient of an order for payment, the order to indemnify a third person for a claim which the third person, the creditor,has against the debtor, i. e. the instructing party, originates from the debtor. In this case, however, it is the third person, the payer, who decides to meet the claim. He alone performs the obligation.

Payment by a third person as set out by para. 267 BGB is also made where the person who makes the payments in respect of another person's liability deems himself to be obliged so to pay the debtor (MünchKomm/Lieb, 2. ed., para. 812, n. 100). In such a case, payment is made, as here by the third party liability insurer, solvendi causa, i.e. in respect of the claim for damages (Valutaschuld) (see Staudinger/Lorenz, BGB, 12. ed., para. 812, n. 45). By payment to the creditor, the third party liability insurer normally pays off another person's debt, although he thereby also performs his own obligation to indemnify the insured person (underlying contractual relationship). he makes payments in respect of a third person's obligation, i.e. his insurance client's duty to pay damages. (On the relationship of third party insurance and claims for damages see the BGH decision of 8 October 1969, IV ZR 633/68 - NJW 1970, 134). This is one of the important practical cases of payments made in respect of a third party's debts (Drittzahlung auf fremde Schuld) (see Lorenz, JuS 1968, 441, 446 et seq.).

According to the predominant legal opinion, restitution under the law of unjust enrichment in cases of payments made by third parties is governed by the principle that the person who made the payment has a direct claim for restitution against the supposed creditor, where in fact there was no underlying obligation to pay (extensive references). This result applies at least where, as here, the prerequisite is met that the supposed debtor did not at all, or not in a way which makes him liable, order the payer to make the payments (references)....

A person who performs another person's obligation has a direct condictio indebtii, i.e. a claim for unjust enrichment against the recipient, if and in so far as there has been no underlying obligation. The fact that the obligation was met without an order from the "debtor" whose debt did not in fact exist, is insufficient reason for the assumption that payment was made not by the payer but rather by the debtor himself. There is therefore no reason why the debtor should become involved in the restitution.

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