Can a creditor double their money after a default by joint debtors?
<p>Can a creditor double their money after a default by joint debtors?</p>

<p>In other words, lets say that two people jointly owe a bank $100,000 and both are fully responsible for the loan. The loan goes into default.</p>

<p>Now, obviously the bank (or other creditor) can sue both of the debtors separately if the bank wishes. This could potentially result in two judgements, each for $100,000 against both of the debtors. Thus, it would appear that the bank has doubled its money. Is there anything that can stop this from happening?</p>

<p>This is called <strong>double recovery</strong>, <strong>double compensation</strong> or <strong>over-recovery</strong>, and it is usually prohibited. The rule against double recovery is also known as the <strong>one-satisfaction rule</strong>. Courts may give effect to the rule by:</p>

<ul>
<li><p>refusing to enforce a judgment under the relevant civil procedure rules to the extent that it has already been recovered from a co-defendant,</p></li>
<li><p>deducting damages already recovered from the amount awarded in any subsequent lawsuit, or</p></li>
<li><p>ordering the <a href="https://en.wikipedia.org/wiki/Restitution" rel="noreferrer">restitution</a> of doubly-recovered payments under the doctrine of <a href="https://en.wikipedia.org/wiki/Unjust_enrichment" rel="noreferrer">unjust enrichment</a>.</p></li>
</ul>

<p>The rule is an ancient principle of <a href="https://en.wikipedia.org/wiki/Equity_(law)" rel="noreferrer">equity</a> which developed over many centuries. The precise way in which the rule will be applied today depends on the jurisdiction and the nature of the claim. I'll outline two 18<sup>th</sup> century cases which establish the basic principle. For further information, consult a civil procedure textbook in your jurisdiction.</p>

<h2>Two early cases establishing the unjustness of double recovery</h2>

<p>In <em>Moses v Macferlan</em> (1760) <a href="https://books.google.com.au/books?id=cj8ZAAAAYAAJ&amp;pg=PA1005" rel="noreferrer">2 Burrow 1005</a>, Moses and Macferlan settled a debt of £26 by agreeing that Moses would pay Macferlan £20 and <a href="https://en.wikipedia.org/wiki/Negotiable_instrument" rel="noreferrer">indorse over four promissory notes</a> to the value of 30s each (£6 total). Macferlan agreed to release Moses from liability as an indorser, but when Macferlan failed to recover the value of the notes from the issuer, he sued Moses in the Court of Conscience. Because that court's jurisdiction was limited to debts of up to 40s, it could not consider the terms of the £26 settlement and held Moses liable. Moses paid the £6, but successfully recovered it in the Court of King's Bench. Lord Mansfield said (at <a href="https://books.google.com.au/books?id=cj8ZAAAAYAAJ&amp;pg=PA1009" rel="noreferrer">1009</a>):</p>

<blockquote>
  <p>Money may be recovered by a right and legal judgment; and yet the iniquity of keeping that money may be manifest, upon grounds which could not be used by way of defence against the judgment.</p>
</blockquote>

<p>In <em>Bird v Randall</em> (1762) <a href="https://books.google.com.au/books?id=1D8ZAAAAYAAJ&amp;pg=PA1345" rel="noreferrer">3 Burrow 1345</a>, a <a href="https://en.wikipedia.org/wiki/Journeyman" rel="noreferrer">journeyman</a> (Burford) contracted to work for a silk dresser (Bird) for five years. After just over a year, Burford left. Bird sued and obtained a judgment against Burford. Bird then sued Randall for 'enticing and seducing' Burford out of his service. After the case against Randall was commenced, but before it went to trial, Burford paid the first judgment. Randall then argued that Bird's action could not be maintained. Lord Mansfield said (at <a href="https://books.google.com.au/books?id=1D8ZAAAAYAAJ&amp;pg=PA1353" rel="noreferrer">1353</a>):</p>

<blockquote>
  <p>[T]he plaintiff must recover upon the justice and conscience of his case, and upon that only ... the penalty recovered by him from the servant was actually received by him before the present action came on to be tried; without any sort of difficulty ... [this] is against conscience ... If he had actually recovered it, through the defendant's not knowing "that the penalty had been paid," an action would lie against him, for money had and received: like the case out of the court of conscience, not long since determined in this court [<em>Moses v Macferlan</em>].</p>
</blockquote>

<h2>The double recovery rule in the modern United States</h2>

<p>In the scenario posed in the question, any attempt at double recovery is likely to be rejected without the need for detailed legal argument. Such a straightforward case would probably be settled without litigation, on terms providing for the debt to be apportioned between the joint debtors. But assuming that this doesn't happen, in a federal case, <a href="https://www.law.cornell.edu/rules/frcp/rule_60" rel="noreferrer">rule 60(b)(5) of the Federal Rules of Civil Procedure</a> would apply:</p>

<blockquote>
  <p>On motion and just terms, the court may relieve a party or its legal representative from a final judgment, order, or proceeding for the following reasons ... <strong>the judgment has been satisfied</strong>, released, or discharged[.]</p>
</blockquote>

<p>Different rules and procedures apply in the various State jurisdictions, but the underlying principles are generally similar. The theoretical and historical basis of the rule against double recovery, as an aspect of the law of restitution and unjust enrichment, continues to attract a great deal of academic and judicial attention in Commonwealth countries, although it seems to be of less interest to American lawyers: Saiman, '<a href="https://digitalcommons.law.villanova.edu/cgi/viewcontent.cgi?params=/context/wps/article/1081/" rel="noreferrer">Restitution in America: Why the US Refuses to Join the Global Restitution Party</a>' (2008) 28(1) <em>Oxford Journal of Legal Studies</em> 99–126.</p>

<p>The creditor can try to double their profit through penalties that are as extreme as government regulation will allow. However, the debt of 100,000 cannot be turned into two debts owed of 100,000 each, even upon default. 
The law doesn’t allow a creditor to turn one principal debt owed into two principal debts owed. It can pursue multiple parties responsible for the one principle debt owed until its awarded the principal, interest, penalties, fees, costs, etc.</p>

<blockquote>
  <p><strong>Reference:</strong></p>
  
  <p><strong>FAIR DEBT COLLECTION PRACTICES ACT</strong>
  <em>As amended by Pub. L. 111-203, title X, 124 Stat. 2092 (2010)</em></p>
  
  <p><strong>§808. Unfair practices</strong>
  A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limit- ing the general application of the foregoing, the following conduct is a violation of this section:
  **(1)**The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obli- gation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law</p>
  
  <p><strong>§810. Multiple debts</strong>
  If any consumer owes multiple debts and makes any single payment to any debt collector with respect to such debts, such debt collector may not apply such payment to any debt which is disputed by the consumer and, where applicable, shall apply such payment in accordance with the consumer’s directions</p>
  
  <p><strong>§1691d. Applicability of other laws</strong>
  **(c)**State laws prohibiting separate extension of consumer credit to husband and wife. Any provision of State law which prohibits the separate extension of consumer credit to each party to a marriage shall not apply in any case where each party to a marriage voluntarily applies for separate credit from the same creditor: Provided, That in any case where such a State law is so preempted, each party to the marriage shall be solely responsible for the debt so contracted.
  **(d)**Combining credit accounts of husband and wife with same creditor to determine permissible finance charges or loan ceilings under Federal or State laws
  When each party to a marriage separately and voluntarily applies for and obtains separate credit accounts with the same creditor, those accounts shall not be aggregated or otherwise combined for purposes of determining permissible finance charges or permissible loan ceilings under the laws of any State or of the United States.
  **(e)**Election of remedies under subchapter or State law; nature of relief determining applicability
  Where the same act or omission constitutes a violation of this subchapter and of applicable State law, a person aggrieved by such conduct may bring a legal action to recover monetary damages either under this subchapter or under such State law, but not both. This election of remedies shall not apply to court actions in which the relief sought does not include monetary damages or to administrative </p>
</blockquote>

united-states debt civil-judgment