contracts - quasi contracts and restitution

1 WITSUM Ch. I, § 1013 Page1 Witkin, Summary 10th (2005) Contracts , § 1013, p. 1102

Supplement

Copyright (c) 2005, 2008 B.E. Witkin Article Sixth Testamentary Trust

WitkinSummary of California Law, Tenth Edition

B.E. Witkin and Members of the Witkin Legal Institute

Chapter I. ContractsXX. QUASI-CONTRACTS AND RESTITUTION

A. In General.

1. [§ 1013] Nature of Restitution.

The right to restitution or quasi-contractual recovery is based upon unjust enrichment. Where a person obtains a benefit that he or she may not justly retain, the person is unjustly enriched. The quasi-contract, or contract “implied in law,” is an obligation (not a true contract; see supra, §103) created by the law without regard to the intention of the parties, and is designed to restore the aggrieved party to his or her former position by return of the thing or its equivalent in money. (See Philpott v. Superior Court (1934) 1 C.2d 512, 517, 36 P.2d 635; McCall v. Superior Court (1934) 1 C.2d 527, 531, 36 P.2d 642; Ghirardo v. Antonioli (1996) 14 C.4th 39, 51, 57 C.R.2d 687, 924 P.2d 996, 4 Summary (10th), Security Transactions in Real Property, §215 ; Petersen v. Lyders (1934) 139 C.A. 303, 305, 33 P.2d 1030; Branche v. Hetzel (1966) 241 C.A.2d 801, 807, 51 C.R. 188, quoting the text; Kossian v. American Nat. Ins. Co. (1967) 254 C.A.2d 647, 651, 62 C.R. 225, infra, §1016; First Nationwide Savings v. <<* p.1103>> Perry (1992) 11 C.A.4th 1657, 1662, 15 C.R.2d 173, infra, §1023; Maglica v. Maglica (1998) 66 C.A.4th 442, 449, 78 C.R.2d 101, quoting the text; Lectrodryer v. SeoulBank (2000) 77 C.A.4th 723, 726, 91 C.R.2d 881 [bank was unjustly enriched when it refused to honor prepaid letter of credit and retained funds after allowing letter to expire]; California Med. Assn. v. Aetna U.S. Healthcare of Calif. (2001) 94 C.A.4th 151, 170, 114 C.R.2d 109, citing the text [where health care plan delegated payment obligation to intermediaries who were then required to reimburse doctors who had furnished services to plan's enrollees, plan was not unjustly enriched even though it would benefit from in -termediaries' actions]; Desert Healthcare Dist. v. PacifiCare FHP (2001) 94 C.A.4th 781, 786, 114 C.R.2d 623 [same]; Rest., Restitution §1; Rest.2d, Contracts §4, Comment b; 1 Corbin (Rev. ed.), §1.20.; 1 Williston 4th, §1:6; 83 Cal. L. Rev. 1191 [liability based on unjust enrichment]; 19 Hastings L. J. 991 [symposium on restitution, with extensive bibliography]; 36 Loyola L.A. L. Rev. 777 [symposium on restitution]; 66 Am.Jur.2d (2001 ed.), Restitu-tion and Implied Contracts §1 et seq.; Cal. Civil Practice, 3 Business Litigation, §34:1 et seq.)

However, “[t]he mere fact that a person benefits another is not of itself sufficient to require the other to make restitution therefor.” (Rest., Restitution §1, Comment c; see Marina Tenants Assn. v. Deauville Marina Dev. Co. (1986) 181 C.A.3d 122, 134, 226 C.R. 321.)

Restitution may also be awarded in contract actions, where it often follows rescission (which typically applies only in contract actions). However, restitution is also available as a remedy to redress statutory violations. And in a statutory action, rescission is not a prerequisite to granting restitution. (People v. Beaumont Inv. Ltd. (2003) 111 C.A.4th 102, 132, 3 C.R.3d 429 [in unfair competition law action involving leases that violated particular ordinance, it was not necessary to rescind leases before ordering restitution for unfair competition]; on rescission, see supra, §930 et seq.)

The cause of action, just as one based on true contract, is assignable and provable in bankruptcy. (Rest., Resti-tution §§5, 149.)

West's Key Number Digest, Implied and Constructive Contracts 4

© 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.


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1 Witkin, Summary 10th (2011 supp.) Contracts , § 1013, p. 165

1. [§ 1013] Nature of Restitution.

See Ajaxo v. E*Trade Group (2005) 135 C.A.4th 21, 54, 37 C.R.3d 221 [in action by developer of wireless stock trading technology against Internet stock trading company for breach of mutual nondisclosure agreement, evi -dence of money saved by trading company when it breached agreement amply demonstrated that trading company was unjustly enriched by breach, and owed restitution to developer]; 1 Williston 4th (2007 ed.), §1:6; C.E.B., Law of Contracts §11.66 et seq.; 60 Hastings L. J. 853 [specific restitution]; 42 Loyola L. A. L. Rev. 131 [restitutionary disgorgement for opportunistic breach of contract and mitigation of damages].

Contents Index and Tables

1 WITSUM Ch. I, § 1013

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Supplement





A. In General.

2. [§ 1014] Practical Distinctions.

The distinction between rights of action based upon contract and quasi-contract may be of importance in the de-termination of a number of substantive and procedural rights and defenses:

(1) The statute of frauds applies to true contracts only. (Mayborne v. Citizens Trust & Savings Bank (1920) 46 C.A. 178, 190, 188 P. 1034;<<* p.1104>> First Nationwide Savings v. Perry (1992) 11 C.A.4th 1657, 1670, 15 C.R.2d 173, citing the text.)

(2) The defendant's lack of capacity may be a defense to contractual liability, e.g., where the defendant is a mi-nor or incompetent; but this does not bar quasi-contractual recovery against him or her. (See Rest., Restitution §139; Estate of Doyle (1932) 126 C.A. 646, 647, 14 P.2d 920 [recovery for reasonable value of necessaries furnished an incompetent person]; Dorris v. Crowder (1938) 26 C.A.2d 49, 51, 78 P.2d 1039 .)

(3) The accrual and period of the statute of limitations may be different. (See Long v. Rumsey (1938) 12 C.2d 334, 342, 84 P.2d 146; 3 Cal. Proc. (4th), Actions, §§480 , 507 et seq., 599 et seq.)

(4) In an action in quasi-contract to recover for money or benefits conferred under mistake, a demand is ordinar-ily a necessary prerequisite, for the defendant is entitled to reasonable time after notice of the facts to make restitu-tion. (Mitchell v. California-Pac. Title Ins. Co. (1926) 79 C.A. 45, 52, 248 P. 1035; Rest., Restitution §63; 15 Cal. L. Rev. 64.)

(5) However, for the purposes of awarding prejudgment interest, an action in quasi-contract is one “based upon a cause of action in contract” within the meaning of C.C. 3287(b), and interest may be allowed. (See supra, §893.) Also, prejudgment interest may be allowed from the time the duty to make restitution arose, if the action is to re-cover a definite sum of money paid under mistake or wrongfully withheld. (Rest., Restitution §156; see Petersen v. Lyders (1934) 139 C.A. 307, 309, 33 P.2d 1030 .)

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2. [§ 1014] Practical Distinctions.

p. 1104:

(3) Statute of limitations:

Cross-Reference: 3 Cal. Proc. (5th), Actions , §§514 , 546 et seq., 656 et seq.<<*Supp. p.166>>

(6) (New) Damages versus restitution: Restitution differs from damages in that the latter is designed to put the injured party in as good a position as he or she would have occupied had the contract been fully performed, while the purpose of restitution is to require the wrongdoer to restore what he or she has received and thus put the injured party in as good a position as that occupied before the contract was made. (Ajaxo v. E*Trade Group (2005) 135 C.A.4th 21, 56, 37 C.R.3d 221.)



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A. In General.

3. [§ 1015] Restatement of Restitution.

The Restatement of Restitution, which covers quasi-contracts and constructive trusts, was published in 1937, with California Annotations in 1940. It goes beyond the usual scope of quasi-contracts by including restitutionary rights enforceable in equitable proceedings, and the right to follow property or its proceeds by means of constructive trust, equitable lien, or subrogation. But it does not cover the following: (1) Restitution on breach of or nonperfor-mance of contract or trust (treated in Restatements of Contracts and Trusts). (2) Actions on a judgment. (3) Actions based on duty to pay money created by custom or statute. (See Notes, Rest., Restitution, pp. 1-4, 595.)

The “Underlying Principles” set forth at page 11 of the Restatement may be invoked where no specific provi-sion is found. (See Kossian v. American Nat. Ins. Co. (1967) 254 C.A.2d 647, 651, 62 C.R. 225, infra, §1016; First Nationwide Savings v. Perry (1992) 11 C.A.4th 1657, 1670, 15 C.R.2d 173, citing the text.)<<* p.1105>>



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A. In General.

4. [§ 1016] Unjust Enrichment Alone.

One of the “Underlying Principles” of the Restatement is that “[a] person who has been unjustly enriched at the expense of another is required to make restitution to the other.” (Rest., Restitution §1; see 66 Am.Jur.2d (2001 ed.), Restitution and Implied Contracts §9.) This is in harmony with the opening sentence: “The Restatement of this Sub-ject deals with situations in which one person is accountable to another on the ground that otherwise he would un-justly benefit or the other would unjustly suffer loss.” (Rest., Restitution, p. 1.) Where the facts do not come within a specific section, a court may base recovery on this underlying principle or even the opening sentence.

Thus, in Kossian v. American Nat. Ins. Co. (1967) 254 C.A.2d 647, 62 C.R. 225, defendant held a deed of trust on R's hotel. After a fire, R engaged plaintiff to remove debris for $18,900, and plaintiff did the work. R became a bankrupt, the trustee abandoned the premises and any interest in the insurance policies, and R assigned his interest in them to defendant. Defendant made its claim against the insurers for $160,000, including $18,000 as the estimated cost of removing debris. The insurers paid defendant a compromise figure of $135,620. Plaintiff then sought restitu-tion of the value of his work or such part of it as the insurers paid defendant. Held, judgment for defendant reversed.

(a) Defendant had no relationship with plaintiff, and did not induce him to enter into the contract. Hence, if de -fendant, on foreclosure of its trust deed, had simply taken the property improved by plaintiff's efforts, the benefit re -ceived would not have been unjust enrichment. (254 C.A.2d 649, citing Griffith Co. v. Hofues (1962) 201 C.A.2d 502, 19 C.R. 900, infra, §1020.)

(b) Here, however, defendant claimed from the insurers the value of work done by plaintiff. Defendant would be unjustly enriched if indemnified twice for the same loss, while plaintiff lost the benefit of his labor and materials. Hence, plaintiff was entitled to reimbursement out of the insurance proceeds paid defendant. On retrial, the court could determine what part (if only part) of the settlement covered debris clearance costs, and plaintiff could recover pro tanto. (254 C.A.2d 651.)




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B. [§ 1017] Defenses to Quasi-Contract Actions.

The following are the defenses most commonly asserted by the defendant in an action for restitution:

(1) Benefit voluntarily conferred. (See infra, §1020.)<<* p.1106>>

(2) No benefit conferred on the defendant. (See infra, §1018.)

(3) Money paid under mistake actually discharged a valid debt or released a valid claim. (See infra, §1025.)

(4) Plaintiff, seeking recovery for money paid under mistake, had assumed the risk of the mistake by entering into a compromise or settlement. (See Rest., Restitution §11.) But negligence of the plaintiff is ordinarily not a bar to recovery for mistake, because the defendant is only being compelled to make restitution to the extent of the bene -fit received. (See Rest., Restitution §59.)

(5) Plaintiff's wrongful conduct. Thus, where a contract or transaction is seriously illegal, and the plaintiff is in pari delicto, quasi-contractual recovery is denied. (See Rest., Restitution §140; Shenson v. Fresno Meat Packing Co. (1950) 96 C.A.2d 725, 732, 216 P.2d 156; supra, §§436, 438 et seq.)

(6) Plaintiff's failure to restore consideration or to reimburse defendant for beneficial expenditures, in situations where this is required. (See Rest., Restitution, §§65, 66, 67, 158, 159; 12 Summary (10th), Real Property, §458 et seq.)

(7) Defendant's status is sometimes a defense; e.g., where he or she is a bona fide purchaser. (See Rest., Restitu-tion §§13, 14, 22, 123.) And where the defendant is a governmental body, e.g., a municipality, which cannot be li-able unless there has been strict compliance with the statutory requirements such as competitive bidding or form of contract, quasi-contract recovery will be denied. (See supra, §647; and see generally, on quasi-contractual liability of municipality, 47 Harv. L. Rev. 1143.)

(8) Defendant's change of position or other change in circumstances making restitution inequitable. (See Rest., Restitution §§60, 142, 143; Doyle v. Matheron (1957) 148 C.A.2d 521, 522, 306 P.2d 913; Bank of America v. Sa-nati (1992) 11 C.A.4th 1079, 1084, 14 C.R.2d 615, citing the text.)/sec





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Supplement





C. Necessity of Benefit to Defendant.

1. [§ 1018] Benefit Ordinarily Required.

In the usual case, the loss suffered by the plaintiff is roughly equivalent to a benefit received by the defendant, as where money is paid or property transferred under fraud or mistake. (See Rest., Restitution §1.) And ordinarily quasi-contractual recovery depends upon the defendant's receiving some benefit. (See Rotea v. Izuel (1939) 14 C.2d 605, 611, 95 P.2d 927; Rowell v. Crow (1949) 93 C.A.2d 500, 503, 209 P.2d 149 <<* p.1107 >> [plaintiff architect prepared plans for building far exceeding cost limit set by client in their agreement, and plans were not used except for purpose of obtaining bids]; Major-Blakeney Corp. v. Jenkins (1953) 121 C.A.2d 325, 340, 263 P.2d 655; True-stone v. Simi West Industrial Park II (1984) 163 C.A.3d 715, 724, 209 C.R. 757; Lauriedale Associates, Ltd. v. Wil-son (1992) 7 C.A.4th 1439, 1449, 9 C.R.2d 774 [condominium directors who failed to collect adequate assessments were not entitled to restitution from unit owners, who were persons harmed thereby]; Unilogic v. Burroughs Corp. (1992) 10 C.A.4th 612, 627, 12 C.R.2d 741, citing the text; Dunkin v. Boskey (2000) 82 C.A.4th 171, 196, 98 C.R.2d 44, 10 Summary (10th), Parent and Child, §206 , citing the text [unmarried woman's breach of contract in which she granted man paternity, visitation, and custody rights to child conceived by artificial insemination with anonymous donor gave rise to damages for economic loss suffered by man under unjust enrichment theory, but woman was entitled to offset to extent her conduct conferred incidental benefit on man's economic interest that was harmed]; Hirsch v. Bank of America (2003) 107 C.A.4th 708, 721, 132 C.R.2d 220 [unjust enrichment cause was stated based on banks' unjustified charging of excessive fees to title companies, when fees were passed through to plaintiff landowners; banks received financial advantage—excessive fees—that they unjustly retained at expense of plaintiffs, who absorbed coverage]; 28 Cal. L. Rev. 528 [Rotea]; 21 Cal. Western L. Rev. 149 [quasi-contract in churning cases (stockbroker's excessive sale of securities); problems with limiting client's recovery to broker's com-missions]; 66 Am.Jur.2d (2001 ed.), Restitution and Implied Contracts §§13, 14.)

In Young v. Bank of California (1948) 88 C.A.2d 184, 198 P.2d 543, plaintiff, a real estate broker, unsuccess-fully sought a written authorization from defendant vendor, but nevertheless proceeded on defendant's oral assur-ance that it would pay his commission. Defendant eventually completed the sale itself. Held, plaintiff had no right to sue in contract, the statute of frauds being a bar; and no quasi-contractual recovery was possible because plaintiffs had not consummated the sale and hence had not conferred any benefits on defendant. (88 C.A.2d 187.) (On whether a contract may validly provide against quasi-contractual recovery by a promisor whose performance does not ex -actly meet the terms of the contract, see 37 Cal. L. Rev. 503.)

A subcontractor in no direct contractual relationship with a property owner ordinarily cannot recover from the



owner for benefits conferred on the property. (Rogers v. Whitson (1964) 228 C.A.2d 662, 673, 39 C.R. 849; see 62 A.L.R.3d 288 [right of subcontractor who has dealt only with primary contractor to recover against property owner in quasi-contract]; Truestone v. Simi West Industrial Park II, supra.)<<* p.1108>>

For a benefit to be conferred, it is not essential that money be paid directly to the recipient by the party seeking restitution. Further, a transferee with knowledge of the circumstances surrounding the unjust enrichment may be ob -ligated to make restitution. (Solano v. Vallejo Redevelopment Agency (1999) 75 C.A.4th 1262, 1277, 90 C.R.2d 41 [action for unjust enrichment brought by county against city arising from redevelopment agency's payments to retire city school district's bonds using money contractually earmarked for county; agency's payments resulted in benefit to city in amount at least equal to sum agency failed to pay county, and because of agency's payments, development fees generated in part of city where school was located went to city instead of being used to develop school].)


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1. [§ 1018] Benefit Ordinarily Required.

See Peterson v. Cellco Partnership (2008) 164 C.A.4th 1583, 1593, 80 C.R.3d 316 [unlicensed cellular phone insurance seller did not retain benefit at expense of customers, as would support customers' unjust enrichment claim, absent allegation that customers could have bought same policy elsewhere for lower price; customers received bene-fit of bargain, having obtained bargained for insurance at bargained for price]; Hernandez v. Lopez (2009) 180 C.A.4th 932, 938, 103 C.R.3d 376 [recovery under unjust enrichment theory, for benefit gained by prospective buy-ers who sold restaurant to third party without having bought it from prospective sellers, was available to prospective sellers who asserted cause of action against prospective buyers for breach of contract; sellers did not need to amend pleading to seek compensation under unjust enrichment theory].



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C. Necessity of Benefit to Defendant.

2. [§ 1019] Exceptions.

In some situations, the defendant may be liable for loss although he or she receives no benefit at all, e.g.:

(1) Where the defendant is an innocent agent who sells goods that his or her principal has converted. (Swim v. Wilson (1891) 90 C. 126, 129, 27 P. 33; Rest., Restitution §128, Comment f; see 3 Summary (10th), Agency and Em - ployment , §201 .)

(2) Where an agent obtains money by fraud or mistake and pays it over to his or her principal with knowledge of the plaintiff's right of restitution. (Millsap v. National Funding Corp. (1943) 57 C.A.2d 772, 781, 135 P.2d 407; Rest., Restitution §143, Comment c; Rest.2d., Agency §339, Comment f; see 3 Summary (10th), Agency and Em - ployment , §203 .)

(3) Where the defendant is a wilful wrongdoer. (Rest., Restitution §151; see Elliott v. Elliott (1964) 231 C.A.2d 205, 210, 41 C.R. 686, 13 Summary (10th), Trusts, §323 .)

(4) Where the services are requested. (See dissent in Coleman Engineering Co. v. North Amer. Aviation (1966) 65 C.2d 396, 419, 55 C.R. 1, 420 P.2d 713, supra, §155; Earhart v. Low Co. (1979) 25 C.3d 503, 515, 158 C.R. 887, 600 P.2d 1344, infra, §1039; Rest., Restitution §1, Comment b [“benefit” includes performance of services “at the request of the other”].)<<* p.1109>>



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Chapter I. ContractsXX. QUASI-CONTRACTS AND RESTITUTIOND. Benefits Voluntarily Conferred: Officiousness.

1. [§ 1020] General Rule.

An important limitation on quasi-contractual recovery is found in the rule that one who confers benefits on an-other officiously, i.e., by unjustified interference in the other's affairs, is not entitled to restitution. It must ordinarily appear that the benefits were conferred by mistake, fraud, coercion, or request; otherwise, though there is enrich-ment, it is not unjust. (Rest., Restitution §§2, 112; see Shelley v. Board of Trade of San Francisco (1927) 87 C.A. 344, 349, 262 P. 403 [plaintiff voluntarily made payment under agreement unenforceable because consideration was past, but no mistake or duress; held voluntary payment, not recoverable]; Myers v. Calipatria (1934) 140 C.A. 295, 299, 35 P.2d 377; 74 Harv. L. Rev. 817, 1073 [European law]; 87 Harv. L. Rev. 1409 [The Self-Serving Intermed-dler]; 66 Am.Jur.2d (2001 ed.), Restitution and Implied Contracts §§14, 44; 22 A.L.R.5th 800 [landowner's alleged unjust enrichment based on adjoining landowner's work on commonly used highway, street, or bridge]; cf. 74 Cal. L. Rev. 85 [proposal that nonprofessional rescuer injured during successful nonnegligent rescue be entitled to re-cover out-of-pocket expenses from rescuee].)

It is even more obvious that, where the plaintiff acts in performance of his or her own duty or in protection or improvement of the plaintiff's own property, any incidental benefit conferred on the defendant is not unjust enrich-ment. (See Rest., Restitution §106 [no right to contribution]; Major-Blakeney Corp. v. Jenkins (1953) 121 C.A.2d 325, 341, 263 P.2d 655 [citing Rest., Restitution §106]; cf. Griffith Co. v. Hofues (1962) 201 C.A.2d 502, 506, 19 C.R. 900 [plaintiff did paving work on property under express contract with N, believing N the owner when he was only purchaser who ultimately defaulted; defendant owner not liable]; California Med. Assn. v. Aetna U.S. Health-care of Calif. (2001) 94 C.A.4th 151, 174, 114 C.R.2d 109, citing the text [no grounds existed for quasi-contractual action where performance of express contract served to benefit third party].)

In Dinosaur Dev. v. White (1989) 216 C.A.3d 1310, 265 C.R. 525, plaintiff and defendants owned adjoining parcels of unimproved property that were landlocked, i.e., lacking access to and from the nearest thoroughfare for vehicular traffic. Plaintiff applied to the county development department for approval of a subdivision map for con-struction of three single-family residences with an access road from the thoroughfare to the center of plaintiff's prop-erty. Defendants successfully demanded that the department require, as a condition of approval of the map, that plaintiff<<* p.1110>> ensure access to defendants' property; but they refused to pay any part of the cost. Plaintiff then brought this action seeking recovery for the increased value of defendants' property as a result of compliance with the condition, and for the costs to plaintiff of improvements benefiting defendants. Held, judgment for defen-dants on demurrer affirmed.



(a) The complaint, in essence, sought restitution based on unjust enrichment. But the mere fact that a person benefits another is not of itself sufficient to require restitution: “It must ordinarily appear that the benefits were con -ferred by mistake, fraud, coercion or request; otherwise, though there is enrichment, it is not unjust.” (216 C.A.3d 1316, quoting the text.)

(b) Plaintiff argued that there was a request from defendants routed through the department, but there was no di-rect request to plaintiff, and plaintiff acted for its own benefit in improving its property. (216 C.A.3d 1316.)

(c) Plaintiff also contended that there was coercion from the department, in that it acted solely in response to de-fendants and in such a manner as to benefit no one but defendants. But the department's conduct did not constitute coercion: the Government may impose conditions on the grant of permits or privileges, and these conditions do not amount to compulsion, because the property owner remains free either to accept or reject them. (216 C.A.3d 1318.)

“Viewed from this perspective, the issue of whether defendants have been benefited at plaintiff's expense must be subordinated to the cold hard fact of governmental power that has been deployed to safeguard defendants' right of access to the nearest public thoroughfare. … Once that power is conceded, the question of precisely how or by whom it is triggered becomes irrelevant. … If plaintiff complies with the Department's condition for approval of the subdivision, defendants will benefit. But because the benefit will be incidental to plaintiff's proposed development, it will not be unjust enrichment requiring defendants to make restitution.” (216 C.A.3d 1319.)




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Chapter I. ContractsXX. QUASI-CONTRACTS AND RESTITUTIOND. Benefits Voluntarily Conferred: Officiousness.

2. [§ 1021] Exception: Performing Defendant's Duty.

An exception is recognized where the plaintiff acts for the protection of the defendant; e.g., he or she performs the defendant's common law or statutory duty to supply necessaries to a child or spouse. (Rest., Restitution §112, Comment b, §113; Family. C. 3950; Davis v. Fyfe (1930) 107 C.A. 281, 282, 290 P. 468; 66 Am.Jur.2d (2001 ed.), Restitution and<<* p.1111>> Implied Contracts §§14, 44.) Similarly, recovery is allowed for necessaries furnished to an incompetent person for the support of the incompetent person or his or her family. (C.C. 38; Rest., Restitution §113; see Estate of Doyle (1932) 126 C.A. 646, 647, 14 P.2d 920; Dorris v. Crowder (1938) 26 C.A.2d 49, 51, 78 P.2d 1039 [plaintiff attorney appointed by judge to represent defendant, an insane person, in murder trial, held enti-tled to recover reasonable value of services, though defendant had attempted to decline the offer of counsel and pleaded guilty]; Estate of O'Donnell (1948) 85 C.A.2d 1, 12, 192 P.2d 94 [incompetent's estate liable for reasonable value of services rendered in locating him as missing heir].)

This exception was held inapplicable in Union of Amer. Physicians & Dentists v. Santa Clara (1983) 149 C.A.3d 45, 196 C.R. 602, where emergency medical services were provided by plaintiff physicians to indigents al-legedly eligible for county services under Welf.C. 17000. Plaintiffs' claim against a county must rest on more than principles of restitution; the claim must be specifically authorized by statute, and this was not. If a county fails to perform its duty, the remedy is not to impose liability for individual claims, but to seek mandamus to compel the county to fulfill its obligations to the class of indigents intended to be benefited by Welf.C. 17000. (149 C.A.3d 50, 53.)

Where the plaintiff mistakenly satisfies some obligation of the defendant, e.g., if the plaintiff believes that he or she is the owner of property or liable for obligations imposed upon it, and pays money in taxes or in discharge of a lien upon it, the unjust enrichment of the defendant seems clear, for the defendant would have had to make the pay -ment himself or herself. Hence, the Restatement allows recovery. (Rest., Restitution §§43, 54.) But California denies it, holding that the plaintiff is a mere volunteer unless he or she is forced to pay to protect some interest of his or her own. (McMillan v. O'Brien (1934) 219 C. 775, 780, 29 P.2d 183; Dinkins v. Lamb (1951) 108 C.A.2d 175, 179, 238 P.2d 630; see 13 Summary (10th), Equity, §186 .)



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Supplement





E. Benefits Conferred Under Mistake or Fraud.1. Payment of Money.

a. [§ 1022] General Rule.

A person who pays money under the mistaken belief that he or she is under a duty to do so may recover it. (See Burckard v. Smith (1926) 80<<* p.1112>> C.A. 104, 107, 251 P. 663; Wenzler v. Municipal Court (1965) 235 C.A.2d 128, 133, 45 C.R. 54, 8 Cal. Proc. (4th), Extraordinary Writs, §79 ; Rest., Restitution §16; Corbin (Rev. ed.), §28.49; 19 Hastings L. J. 993 [restitution of distributions by fiduciary to which recipient was not entitled]; 11 U.C.L.A. L. Rev. 653 [mistake and unjust enrichment]; 66 Am.Jur.2d (2001 ed.), Restitution and Implied Contracts, §19 et seq.; 7 Cal. Civil Practice, 3 Business Litigation, §34:9 et seq.; BAJI, No. 10.70 [money had and received]; and see infra, §1042, on restitution where express contract fails.) (On change of position as a defense, see Doyle v. Matheron (1957) 148 C.A.2d 521, 523, 306 P.2d 913; First Savings & Loan Assn. v. Bank of America (1970) 4 C.A.3d 393, 395, 84 C.R. 532.)

Thus, if the plaintiff pays the purchase price of property, and it develops that the defendant had no title or inter-est therein, the payment is recoverable. (Mitchell v. California-Pac. Title Ins. Co. (1926) 79 C.A. 45, 50, 248 P. 1035; see Rest., Restitution §24; cf. 57 A.L.R.2d 350 [right of tenant to recover rentals previously paid to one mis-takenly believed to be owner of property].) (On recovery by bank of money paid out to customer by mistake, see 10 A.L.R.4th 524.)

The same is true where money is obtained by false representations as to its intended use. (Long v. Harrison (1931) 113 C.A. 321, 322, 298 P. 148; Berg v. King-Cola (1964) 227 C.A.2d 338, 342, 38 C.R. 655 [inducement by false representation of fiduciary]; Rest., Restitution §28].) (On possible recovery by Government against public offi-cer receiving money by breach of fiduciary obligations (“sale of influence”), see 37 So. Cal. L. Rev. 550.)

In Pioneer Title Ins. Co. v. Guttman (1959) 175 C.A.2d 116, 345 P.2d 577, plaintiff title company's escrow agent mistakenly paid defendant vendors money, without making a certain deduction for third persons giving a quit -claim deed. After unsuccessful attempts to gain reimbursement from defendants, plaintiff paid the third party and brought this action for money expended on behalf of defendants. Held, plaintiff had a legal obligation as escrow holder to pay, defendants were unjustly enriched, and recovery was proper. (175 C.A.2d 119.)

Under the modern view, both in contract and quasi-contract actions recovery may be had for payment under mistake of law as well as mistake of fact. (See First Savings & Loan Assn. v. Bank of America, supra, 4 C.A.3d 395;



Bridges v. Cal-Pac. Leasing Co. (1971) 16 C.A.3d 118, 124, 93 C.R. 796; 7 Corbin (Rev. ed.), §28.49; 19 Hastings L. J. 1225; on contract actions, see supra, §272 et seq.)

However, where the plaintiff and the defendant are equally to blame, or equally innocent, for the mistake under which the money was paid,<<* p.1113>> restitution is not available if the payee has altered his or her position. (American Psychometric Consultants v. Work. Comp. App. Bd. (1995) 36 C.A.4th 1626, 1647, 43 C.R.2d 254 [resti-tution denied to workers' compensation carriers for payments of medical-legal fees to medical lien claimants more than 2 years earlier, even though claimants submitted bills without complying with Workers' Compensation Act, where carriers were equally chargeable with knowledge of changes in law and paid bills without protest and after negotiating reductions in them].) (On reimbursement of medical-legal expenses under Workers' Compensation Act, see 2 Summary (10th), Workers' Compensation, §§273 , 274.)


****SUPPLEMENT****


a. [§ 1022] General Rule.

See Supervalu v. Wexford Underwriting Managers (2009) 175 C.A.4th 64, 78, 96 C.R.3d 316 [excess workers' compensation insurer that mistakenly paid workers' compensation claim was entitled to reimbursement from em-ployer under theory of unjust enrichment, despite existence of contractual relationship between insurer and em-ployer].

p. 1112:

Wenzler case:

Cross-Reference: 8 Cal. Proc. (5th), Extraordinary Writs , §80 .<<*Supp. p.167>>

Correction: Page 1112, third line from top of page, citation to Corbin should be 7 Corbin (Rev. ed.), §28.49.



END OF DOCUMENT








b. [§ 1023] Mistaken Reconveyance of Deed of Trust.

In First Nationwide Savings v. Perry (1992) 11 C.A.4th 1657, 15 C.R.2d 173, the court held that the beneficiary of a deed of trust could recover from a nonassuming grantee of a purchase money deed of trust, where the trustee mistakenly reconveyed the deed of trust and the grantee sold the property and obtained its proceeds.

In 1983, Madden borrowed $146,000 from plaintiff, First Nationwide Savings (FNS), for the purchase of a sin-gle-family residence. The note was secured by a deed of trust in which Madden conveyed for the benefit of FNS a power of sale of the residence. Madden subsequently sold the property, and the purchaser took it subject to FNS's deed of trust.

In January 1986, a trustee's sale was held under the nonjudicial foreclosure of a deed of trust junior to the FNS deed of trust, and Sunrise Trust purchased the property subject to the FNS deed of trust. In May 1986, the trustee on the FNS deed of trust mistakenly executed a reconveyance. Hence, when Sunrise subsequently sold the property, FNS did not receive any of the proceeds of the sale.

FNS sued Madden on the theory of unjust enrichment, and the trial judge gave judgment for Madden on demur -rer. Held, reversed.

(a) Unjust enrichment cause of action.

(1) The fact that one person benefits another is not, by itself, sufficient to require restitution. The person receiv-ing the benefit is required to make restitution only if, under the circumstances, it is unjust for him or her to retain it. Policy considerations may dictate that the person making the mistake assume the risk of the error; and restitution may be denied against an innocent transferee or beneficiary, if the innocent transferee or beneficiary has changed his or her position after the transaction. (11 C.A.4th 1663.)<<* p.1114>>

(2) “By contrast, a transferee with knowledge of the circumstances giving rise to an unjust enrichment claim may be obligated to make restitution.” (11 C.A.4th 1663.) Accordingly, Sunrise's knowledge is an important consid-eration in determining the validity of FNS's unjust enrichment claim. (11 C.A.4th 1663.)

(b) Purchase money deed of trust. Sunrise argued that, under security transactions law, FNS could not recover the difference between the debt and sale proceeds if the purchase money deed of trust had been foreclosed, and that



the same rule prevents FNS from stating a claim for unjust enrichment. This reasoning is unsound:

(1) The difference between the debt and the foreclosure proceeds is not at stake; there can be no foreclosure, be-cause the lien on the property has been extinguished. And any unjust enrichment recovery could not exceed the property value. (11 C.A.4th 1664.)

(2) Equitable principles may outweigh the reasons for prohibiting deficiency judgments, and in appropriate cir -cumstances an action for unjust enrichment can be stated against a nonassuming grantee under a purchase money deed of trust. (11 C.A.4th 1665.)

(c) California Fed. Bank v. Matreyek distinguished. In California Fed. Bank v. Matreyek (1992) 8 C.A.4th 125, 10 C.R.2d 58, infra, §1025, the plaintiff made the mistake; here the trustee was responsible. In that case, the borrow-ers did not know about the mistake; here the borrowers did know. In that case, the recipient of the benefit gave con -sideration in exchange for obtaining the advantage; here no such consideration was given. (11 C.A.4th 1667.)

(d) Sunrise's knowledge. If Sunrise should not have known about the reconveyance, and should not have real-ized that it was not entitled to all of the sale proceeds, it would not necessarily be unjust to permit it to retain those proceeds. FNS did not allege this knowledge, but it should be given an opportunity to amend its complaint to allege it. (11 C.A.4th 1669.) (See Ghirardo v. Antonioli (1996) 14 C.4th 39, 51, 57 C.R.2d 687, 924 P.2d 996, 4 Summary (10th), Security Transactions in Real Property, §215 [citing First Nationwide Savings, and holding that real property seller who, through mistake of fact, understated amount of payoff demand to purchasers for satisfaction of promis-sory note underlying deed of trust and, upon payment of demand, reconveyed deed, could recover amount omitted from demand on principles of unjust enrichment].)



END OF DOCUMENT








c. [§ 1024] Payment of Support Due to Mistaken Belief of Biological Fatherhood.

In McBride v. Boughton (2004) 123 C.A.4th 379, 20 C.R.3d 115, plaintiff, having been told by B that he was the father of her child, agreed<<* p.1115>> to support B and the child for approximately 1 year and then to act as caretaker when B returned to work. When the child was about 2 1/2 years old, B announced that she was moving to San Francisco with the child and that plaintiff's visitation would be limited to two weekends per month. Plaintiff then filed a paternity proceeding seeking custody of the child, but paternity tests done in connection with that pro-ceeding excluded plaintiff as the biological father. After abandoning his efforts to seek custody, plaintiff instituted the present action against B and D (the alleged biological father) seeking money damages and claiming, as an issue of first impression, that defendants had been unjustly enriched by his payment of support for B and the child. Having sustained defendants' demurrer, the trial judge entered judgment dismissing the complaint. Held, affirmed.

(a) Nagy v. Nagy (1989) 210 C.A.3d 1262, 258 C.R. 787, 5 Summary (10th), Torts , §792 , and Richard P. v. Su-perior Court (1988) 202 C.A.3d 1089, 249 C.R. 246, 6 Summary (10th), Torts , §792 , held that a man who paid sup-port as a result of being told by a child's mother that he was the biological father could not recover general damages for the emotional impact of the mother's conduct. However, Richard P. expressly declined to foreclose the possibil-ity that a man in this position might be able to recover, on an equitable theory for reimbursement such as unjust en -richment, actual out-of-pocket costs incurred in supporting another man's child. “Thus, this case calls upon us to de-cide the question we noted, but left open, in Richard P.” (123 C.A.4th 387.)

(b) The unjust enrichment doctrine focuses on the unjust nature of the enrichment. Accordingly, restitution will be denied where application of the doctrine would involve a violation or frustration of the law or opposition to pub -lic policy. Here, two of the most fundamental public policies of this state, i.e., the enforcement of parents' obliga-tions to support their children, and the protection of children's interest in the stability of their family relationships, preclude requiring B to make restitution to plaintiff based on his claim of unjust enrichment. Under the circum-stances presented here, granting plaintiff the right to restitution from the child's biological parents, who retain re-sponsibility for her support, would give priority to plaintiff's desire to be made financially whole, to the potential detriment of the child's ongoing needs. (123 C.A.4th 389.) “More importantly, at least from the child's perspective, by declining to recognize an unjust enrichment claim, we create a disincentive for an unmarried man to form a parental bond with a child if the bond is likely to be severed upon the child's proving to be another man's genetic off-spring. The potential emotional and psychic costs to the child of such a rupture are far more significant than any fi -nancial injury a grown man might suffer from<<* p.1116>> mistakenly supporting another man's child for a tempo-rary period.” (123 C.A.4th 390.)



(c) Holding that it is not unjust enrichment for a mother to retain child support that she has received serves an important public policy by sending the message to unmarried putative fathers that they should verify their paternity at an early stage if there is any doubt about the matter. (123 C.A.4th 391.)

(d) Determining whether B was unjustly enriched would involve inquiring into the very subjects which Nagy and Richard P. held that public policy requires courts to avoid. Issues of this type include (1) the extent to which plaintiff's expenditures exclusively benefited the child, rather than B personally, and if so, the effect of that fact on the equities of plaintiff's restitution claim against B and D; (2) if restitution is owed, whether its amount should be reduced by the value of any benefit, emotional or financial, that plaintiff received from his relationship with the child; and (3) how, if at all, the equities of plaintiff's restitution claim may be affected by his decision to end his rela-tionship with the child rather than pursuing any rights he may have had under Family C. 7611(d) (proving natural fa-ther status by receiving child into home and openly holding out child as his; see 10 Summary (10th), Parent and Child , §39 ). (123 C.A.4th 391.)

(e) Dunkin v. Boskey (2000) 82 C.A.4th 171, 196, 98 C.R.2d 44, 10 Summary (10th), Parent and Child , §206 , which allowed the plaintiff to recover under an unjust enrichment theory, damages for economic loss caused by breach of a contract granting the plaintiff parental rights to a child to be conceived through artificial insemination, is distinguishable. The equities favored the plaintiff in Dunkin because he had voluntarily agreed to assume a support responsibility that he would not otherwise have had, in exchange for the opportunity to enjoy a parental relationship that was later unilaterally severed by the child's mother, in breach of her agreement. Here, by contrast, plaintiff sup-ported the child in the belief that he was her biological father (thus making it his legal responsibility to do so), with-out taking any steps to ascertain whether or not this was actually the case. On these facts, the equities fall in the child's favor, and her interest in defendants' continuing ability to support her trumps plaintiff's interest in obtaining restitution. Moreover, in Dunkin, the plaintiff was aware from the start that the child whom he agreed to support would not be biologically his, and his claim against the child's mother was not based on any misrepresentation to the contrary. Rather, his claim was based on the mother's breach of an express contractual promise to treat him as the child's father. Here, however, plaintiff alleges that he agreed to support the<<* p.1117>> child merely because B told him that the child was biologically his, and having found out that this was untrue, he is now asking the court to imply a quasi-contract giving rise to a right of restitution in his favor. “For the reasons of public policy that we have already discussed, we decline to do so.” (123 C.A.4th 394.)



END OF DOCUMENT



Supplement






d. [§ 1025] Satisfaction of Own Obligation.

If the money is paid in satisfaction of an obligation actually owed by the plaintiff, he or she is obviously not en -titled to restitution even though the performance was induced by mistake or fraud. (See Rest., Restitution §60.) And the same is true where the payment is made on a debt that is unenforceable by reason of the statute of frauds, statute of limitations, or a discharge in bankruptcy. (See Rest., Restitution §61.)

In California Fed. Bank v. Matreyek (1992) 8 C.A.4th 125, 10 C.R.2d 58, defendants obtained a loan from plaintiff bank containing a prepayment penalty provision. Plaintiff assigned the loan to a national mortgage associa -tion, under an agreement requiring plaintiff to continue to service the loan and to collect and pay to the national as -sociation a prepayment penalty in the event of an early payoff. Defendants, relying on plaintiff's incorrect but good faith advice that they would incur no prepayment penalty, paid off the loan and obtained substitute financing at a lower rate of interest. As a result of its mistake, plaintiff was required to pay to the national association a prepay -ment penalty of nearly $654,000. When defendants refused to repay this amount, plaintiff bought this action for un-just enrichment and equitable subrogation. Held, judgment for defendants on demurrer affirmed.

(a) Defendants were not unjustly enriched. For plaintiff to be entitled to restitution, it must establish that it con-ferred upon defendants a benefit that it would be unjust for them to retain. Plaintiff clearly conferred a benefit upon defendants by sparing them the expense of the prepayment penalty. (8 C.A.4th 132, citing Sanguansak v. Myers (1986) 178 C.A.3d 110, 223 C.R. 490, supra, §773.) However, for the following reasons, retention of the benefit would not be unjust:

First, by repaying the loan earlier than they were required to do, thereby sparing plaintiff from any risk of loss and freeing up the funds for other purposes, defendants gave valuable consideration for plaintiff's promise to forgo the prepayment penalty. (8 C.A.4th 133.)

Second, had plaintiff not agreed to forgo the prepayment penalty, defendants would have had no reason to refi-nance and repay the loan early, because the amount of the prepayment penalty exceeded the net economic benefit to defendants of refinancing. (8 C.A.4th 133.)<<* p.1118>>

Third, there was no allegation that defendants engaged in any impropriety or that they knew of plaintiff's mis-



take and took unfair advantage. Defendants specifically asked plaintiff whether they could pay early without incur-ring the prepayment penalty. Hence, as between the parties, plaintiff was in a superior position to know whether it would insist on collecting the penalty, and defendants were entitled to rely on plaintiff's response. (8 C.A.4th 134.)

Fourth, the status quo cannot be restored. In repaying the loan early, defendants entered into substitute financing with another lender. If plaintiff were to recover the penalty from defendants, that amount would erase any benefit to defendants from the refinancing, while plaintiff would still retain the benefit of the early payoff of the loan. Under these circumstances recovery by plaintiff would be inequitable. (8 C.A.4th 134.)

(b) Plaintiff not entitled to equitable subrogation. The doctrine of equitable subrogation applies where a person, not acting as a mere volunteer or intruder, pays another person's debt that in equity should have been discharged by the latter. Here, however, plaintiff did not pay a debt for which defendants were primarily liable. By repaying the principal and accrued interest, defendants performed fully, and plaintiff agreed to and accepted that repayment as in -dicated by its cancellation of the note and the issuance of a reconveyance. Hence, when plaintiff subsequently paid the prepayment penalty to the national association, it acted to fulfill its own obligation to the association, not to sat -isfy defendants' debt, which had been extinguished. (8 C.A.4th 134.)

****SUPPLEMENT****


d. [§ 1025] Satisfaction of Own Obligation.

See Durell v. Sharp Healthcare (2010) 183 C.A.4th 1350, 1370, 108 C.R.3d 682, quoting the text [unjust en-richment theory was inapplicable to uninsured patient's action against hospital owner, where patient failed to allege that he paid in excess of reasonable value for services he received].



END OF DOCUMENT








e. [§ 1026] Satisfaction of Invalid but Honest Claim.

Where the payment was in satisfaction of an honest claim, advanced in good faith, restitution may be denied even though the claim was actually unenforceable. (See Rest., Restitution §45; cf. Rest., Restitution §§46, 47; 45 Harv. L. Rev. 336; for an analogous rule on compromise of a disputed claim as consideration for a promise, see in-fra, §§211, 215.)

Thus, fees paid under a statute, voluntarily and without protest, were held not to be recoverable when the statute was subsequently declared unconstitutional. (Wingerter v. San Francisco (1901) 134 C. 547, 548, 66 P. 730; Camp-bell v. Rainey (1932) 127 C.A. 747, 750, 16 P.2d 310 .)

West's Key Number Digest, Implied and Constructive Contracts 61<<* p.1119>>



END OF DOCUMENT








f. [§ 1027] Satisfaction of Third Person's Obligation.

The general principle allowing quasi-contractual recovery to one who performs a duty that he or she does not owe is subject to another exception based on the equitable doctrine of bona fide purchase. If the defendant receives money or property for value without fraud or notice of the circumstance that a third person and not the plaintiff was liable therefor, both parties are innocent and the plaintiff is not entitled to restitution. (See Rest., Restitution §§13, 14.)

Thus, in Hilliard v. Bank of America (1951) 102 C.A.2d 730, 228 P.2d 327, C (a car thief or transferee from a thief), borrowed $1,000 from defendant bank, gave a note and chattel mortgage on the car, and then sold it to plain -tiff dealer for $1,250. Plaintiff, to clear the title, paid defendant bank the mortgage debt and later sold the car to W. When the true owner discovered the car, plaintiff was forced to reimburse him for its value ($1,400) in order to make W's title good. Thereafter, plaintiff sought to recover from defendant bank the amount paid to clear the mort -gage. Held, no restitution. The mortgage was invalid (because C had no title to the car) but the debt was good and enforceable by the bank against C. Hence, when plaintiff paid the bank its good debt, the bank was not unjustly en-riched. Both parties were mistaken, but both were equally innocent, and plaintiff had no more right to restitution than if he had paid C the money directly and C had then paid the bank. (102 C.A.2d 733.)

The defense of “discharge for value” (Rest., Restitution §14) “arises where there is a preexisting liquidated debt or lien owed to the beneficiary by the originator of the payment. If the originator or some third party erroneously gives the beneficiary funds at the originator's request, and the beneficiary in good faith believes the funds have been submitted in full or partial payment of that preexisting debt or lien and is unaware of the originator's or third party's mistake, the originator or third party will not be entitled to seek repayment from the beneficiary of the erroneously submitted funds.” (Bank of America v. Sanati (1992) 11 C.A.4th 1079, 1084, 14 C.R.2d 615, citing the text), and Hilliard.)



END OF DOCUMENT



Supplement






g. [§ 1028] Gambling Losses.

Illegal gambling gives rise to two kinds of problems of contract and quasi-contract:

(1) The winner cannot enforce the loser's promise to pay the gambling debt, because the contract is based on an illegal consideration. (See supra, §630.)<<* p.1120>>

(2) The loser cannot recover the money that he or she has lost. (See Wallace v. Openhanded (1946) 73 C.A.2d 25, 26, 165 P.2d 709; 38 Am.Jur.2d (1999 ed.), Gambling §215 et seq.)

A few states with special statutes follow the qualification that, if the winner cheats, the loser is not in pari delicto, and is entitled to quasi-contractual recovery on the theory of money paid under mistake or fraud. (See 39 A.L.R.2d 1213 [recovery of money or property lost through cheating or fraud in gambling or game].) But California denies recovery in all cases because of public policy against the activity. (Wallace v. Openhanded, supra, 73 C.A.2d 28 [“where money or property is lost in a transaction between the parties which is prohibited by law, neither of the parties has standing in a court of law or equity to recover his losses”]; Bradley v. Doherty (1973) 30 C.A.3d 991, 994, 106 C.R. 725 [court cannot distinguish between degrees of turpitude of persons knowingly engaged in illegal gambling].)

In Kelly v. First Astri Corp. (1999) 72 C.A.4th 462, 84 C.R.2d 810, plaintiff, who banked a blackjack game at an Indian reservation casino, sued to recover gambling losses against managers and employees of the casino who al-legedly used marked cards. The trial court granted summary judgment for defendants. Held, affirmed.

(a) California has a strong, long-standing public policy against judicial resolution of civil claims arising out of gambling contracts or transactions. This public policy, absent a statutory right to bring gambling claims, applies to both actions for recovery of gambling losses and actions to enforce gambling debts. (72 C.A.4th 476, discussing nu -merous cases and declining to follow Crockford's Club Ltd. v. Si-Ahmed (1988) 203 C.A.3d 1402, 250 C.R. 728, supra, §89, to extent it is contrary.)

(b) Here, plaintiff's losses occurred while he was “banking” games of twenty-one at the casino and he “banked” those games by collecting from the losers and paying the winners, such that he had a stake in each hand. On these



undisputed material facts, plaintiff's action is barred as a matter of law and strong public policy. (72 C.A.4th 488.) Further, the claims are barred whether the games of blackjack in which plaintiff participated as “banker” were pro-scribed games of twenty-one within the meaning of P.C. 330 (defining illegal gaming), or whether they were lawful under federal statutory law governing gaming on California Indian lands. (72 C.A.4th 490.)

(c) Plaintiff's claims are also barred under the in pari delicto doctrine. The form of blackjack in which he and defendants participated at the casino is proscribed by P.C. 330 if played in California, even if the playing of that game at the Indian casino were lawful under federal Indian gaming<<* p.1121>> law. In any event, under the In-dian Gaming Regulatory Act (25 U.S.C., §2701 et seq.), the game is, in fact, illegal on California Indian lands be-cause it is illegal in California. Under the in pari delicto doctrine, neither courts of law nor courts of equity will aid or assist a plaintiff to recover money lost in a gambling game that is prohibited by law, regardless of where it is played and even if the loss resulted from cheating, absent a statute authorizing recovery of the gambling losses. (72 C.A.4th 490.)

****SUPPLEMENT****


g. [§ 1028] Gambling Losses.

See 38 Am.Jur.2d (2010 ed.), Gambling §§150 et seq., 161 et seq.; 87 Proof of Facts 3d 347 [enforceability of international gambling debts].

Correction: Page 1120, lines 2 and 9, “Wallace v. Openhanded” should be “Wallace v. Opinham”.



END OF DOCUMENT







E. Benefits Conferred Under Mistake or Fraud.

2. [§ 1029] Services Rendered.

Recovery for services rendered another under mistake depends upon different principles from those discussed in the preceding section. Money or property received can usually be returned; services cannot. And, while the plaintiff may suffer if not compensated for the services, the defendant may likewise suffer if compelled to pay for services not requested or desired. Hence, the situations in which recovery is permitted are narrowly restricted. Generally speaking, some fault on the part of the defendant is necessary to make him or her liable for the value of the un-wanted services; e.g., fraud or innocent material misrepresentation, or acceptance of the services after knowledge of the mistake without attempting to inform plaintiff of it. (See Rest., Restitution §§40, 41, 42; Wal-Noon Corp. v. Hill (1975) 45 C.A.3d 605, 611, 119 C.R. 646, 12 Summary (10th), Real Property, §618 [no recovery by lessee for cost of repairs made, based on lessor's covenant to repair, where lessor was not notified and had no opportunity to ob-ject]; 66 Am.Jur.2d (2001 ed.), Restitution and Implied Contracts §50.) (On recovery where services are performed at request of the defendant, see infra, §1036 et seq.)

As in the case of money paid, there can be no restitution for services performed in satisfaction of an existing en-forceable obligation, or one barred by the statute of frauds, limitations, or bankruptcy, etc. (Rest., Restitution §§60, 61.)

West's Key Number Digest, Implied and Constructive Contracts 30 et seq.



END OF DOCUMENT







F. Benefits Conferred Under Coercion.1. In General.

a. [§ 1030] Rule and Situations.

Benefits, such as payment of money or transfer of property, conferred under duress, undue influence, or any other form of coercion, may ordinarily be recovered in a quasi-contract action. In other words, coercion has <<* p.1122>> the same effect, in giving rise to a right of restitution, as fraud. (Rest., Restitution §70.) (See 66 Am.Jur.2d (2001 ed.), Restitution and Implied Contracts §113 et seq.)

The Restatement sets forth three broad classes of situations giving rise to a right of restitution on the theory of coercion:

(1) Institution or threat of legal or administrative proceedings. (Rest., Restitution §71 et seq.)

(2) Discharge by the plaintiff of a duty also owed by another; the plaintiff may be entitled to indemnity or con -tribution. (Rest., Restitution §76 et seq.; see 13 Summary (10th), Equity, §178 et seq. )

(3) Satisfaction by the plaintiff of a duty owed by another where this is done to protect the plaintiff's property. (Rest., Restitution §103 et seq.)



END OF DOCUMENT







F. Benefits Conferred Under Coercion.1. In General.

b. [§ 1031] Duress and Illegal Business Compulsion.

A narrow theory of duress, confining it to unlawful acts, as distinguished, e.g., from breach or threat of breach of contract, is usually applied in the cases dealing with contractual consent. (See supra, §315.) A more liberal view has developed in late cases dealing with quasi-contract, and some of the later contract cases (supra, §314).

As the court observed in Lewis v. Fahn (1952) 113 C.A.2d 95, 99, 247 P.2d 831, infra, §1032: “[D]uress is to be tested, not by the nature of the threats, but rather by the state of mind induced thereby in the victim. The means used to produce that condition, the age, sex, state of health, and mental characteristics of the alleged injured party, are all evidentiary, merely, of the ultimate fact in issue, of whether such person was bereft of the free exercise of his will power. … His resisting power, under all the circumstances of the situation, and not any arbitrary standard, is to be considered in determining whether there was duress.” And the opinion adds: “A reading of the California cases of later vintage leads us to believe that the relaxed and modern rule of the subjective test of duress … is the controlling rule in California and particularly is this so we think in respect of that form of duress with which we are here con-cerned and which has sometimes been termed ‘illegal business compulsion.’ ” (113 C.A.2d 100.) (See Leeper v. Bel-trami (1959) 53 C.2d 195, 203, 1 C.R. 12, 347 P.2d 12, infra, §1032 [“[u]nder modern law duress is not limited to threats against the person. It may also consist of threats to business or property interests”]; 66 Am.Jur.2d (2001 ed.), Restitution and Implied Contracts §§122, 123; 40 Cal. L. Rev. 425; cf. Fuhrman v. California Satellite Systems (1986) 179 C.A.3d 408, 426, 225 C.R. 140 [recognizing<<* p.1123>> theory of recovery but holding it inapplicable where plaintiff never paid any money but sued in tort for damages for emotional distress].)



END OF DOCUMENT







F. Benefits Conferred Under Coercion.2. Legal Proceedings Without Probable Cause.

a. [§ 1032] Suit or Threat of Suit.

Recovery in quasi-contract may be based upon a benefit conferred under threat or institution of a suit on an un -justified claim. (See 66 Am.Jur.2d (2001 ed.), Restitution and Implied Contracts §§124, 125.)

Thus, in Steffen v. Refrigeration Discount Corp. (1949) 91 C.A.2d 494, 205 P.2d 727, defendant mortgagee held three notes and mortgages on three pieces of property. On default of plaintiff mortgagor, defendant invoked the ac-celeration clause, claimed interest unearned and not due, and threatened foreclosure. Plaintiff, to avoid foreclosure, sold one piece of property and obtained refinancing on the others, and to release the properties from the mortgages (so as to consummate the sale and refinancing) paid the excessive claims. In this action to recover the excessive pay-ments, defendant contended that they were voluntary because plaintiff could have litigated the merits of the claims before paying. Held, the payments were made under “illegal business compulsion,” for no prospective purchaser or lender would have waited through the period of litigation. (91 C.A.2d 497, 498.) (On illegal business compulsion, see supra, §1031.)

In McNichols v. Nelson Valley Bldg. Co. (1950) 97 C.A.2d 721, 218 P.2d 789, the complaint alleged that plain-tiff had a deal pending in escrow to purchase property by exchanging 10 of his own lots. Defendants, fraudulently claiming a partnership with him, filed a complaint for dissolution, recorded a lis pendens, and thus clouded his title. When the escrow holder refused to furnish title insurance, plaintiff yielded to defendants' demand to convey four of the lots worth $6,000. Held, a cause of action for duress or business compulsion was stated. (97 C.A.2d 723, 724.)

In Lewis v. Fahn (1952) 113 C.A.2d 95, 247 P.2d 831, plaintiffs were in possession under a lease, by the terms of which the rental was stated as $725 per month, but only $575 until the lessees completed remodeling to be done by them. Nevertheless, under defendant lessors' threat to cancel the lease and evict them, plaintiffs paid the full rental of $725 before the remodeling. This suit was to recover the money paid. Held, a cause of action was stated. “Indeed, given an unlawful demand, a threat of groundless litigation unless the unlawful demand be met presents a situation where courts should not too readily listen to a claim by the party extorting<<* p.1124>> the payment that his victim ought to have been a braver man and should have resisted his attack. … Of course it is difficult to see how this compulsion could have persisted to the degree necessary to make out payment under duress over the long period of time involved, and many other difficulties of proof can easily be foreseen. But it cannot be said that proof is im -possible when we remember the sensitiveness of credit arrangements to attacks upon business, and the disastrous re -sults that even an unjustified attack upon the very basis and foundation of a business not strongly organized may have.” (113 C.A.2d 101.)



In Leeper v. Beltrami (1959) 53 C.2d 195, 1 C.R. 12, 347 P.2d 12, the complaint alleged the following facts: Plaintiff wife was liable for a $10,000 bail bond, and execution was threatened on her home. Defendants B and S, falsely plotting to make her pay a $10,150 mortgage debt that had already been satisfied, filed suit to foreclose the mortgages (on Sacramento and Sutter ranch properties), and filed lis pendens against both properties. As a result, plaintiff could not sell the Sutter ranch for $18,000 (title clouded and defendants refused to withdraw claims), and was forced to sell the Sacramento ranch for $10,760, a third of its value, to S. Held, judgment on demurrer reversed. One who falsely clouds title to real property, and then seeks some consideration to remove the cloud, is guilty of a wrongful act and may be compelled to restore the consideration. (53 C.2d 203.)

The court examined and rejected the following defenses:

(a) Defendants were merely seeking the legal remedy of foreclosure of a mortgage. But the complaint alleged that B and S knew that the claim was false, and legal prosecution of the false claim was duress. (53 C.2d 204.)

(b) Defendants' acts were not the proximate cause of plaintiff's injuries because the threat of execution was from a third person. But the primary cause of the payment was defendants' false claim; the other factors merely created the situation that made the pressing of the false claim successful. (53 C.2d 204.)

(c) Plaintiff could have allowed her home to be sold, then contested defendants' foreclosure suit. But to allow one's home to be sold at a foreclosure sale is not necessarily a reasonable alternative; hence under the allegations of the complaint, plaintiff had no reasonable alternative. (53 C.2d 204, 205.)

(d) Plaintiff paid the money to defendants in settlement of the suit and the judgment was res judicata. But any judgment by consent or of dismissal can be attacked by a showing of extrinsic fraud, and “[d]uress is a species of fraud.” (53 C.2d 205.)<<* p.1125>>




END OF DOCUMENT







F. Benefits Conferred Under Coercion.2. Legal Proceedings Without Probable Cause.

b. [§ 1033] Enforcement or Threatened Enforcement of Judgment.

A payment made pursuant to enforcement or threatened enforcement of an invalid or reversed judgment is an-other common basis of quasi-contract recovery. (See Levy v. Drew (1935) 4 C.2d 456, 459, 50 P.2d 435; Pentz v. Kuppinger (1973) 31 C.A.3d 590, 594, 107 C.R. 540 [judgment obtained from Mexican court by extrinsic fraud]; Rest., Restitution §§72(2), 73, 74; cf. Wake Dev. Co. v. O'Leary (1931) 118 C.A. 131, 135, 4 P.2d 802 [payment to release property from improper execution, in order to carry through a sale].)



END OF DOCUMENT







F. Benefits Conferred Under Coercion.

3. [§ 1034] Other Illustrations of Recovery.

In Young v. Hoagland (1931) 212 C. 426, 298 P. 996, plaintiff stockholder, to avoid forced sale of his stock, paid an illegal assessment. Held, his payment was not voluntary and he could recover. The court approved the rule that “where, by reason of the peculiar facts a reasonably prudent man finds that in order to preserve his property or protect his business interests it is necessary to make a payment of money which he does not owe and which in equity and good conscience the receiver should not retain, he may recover it.” (212 C. 431.) (See 40 Cal. L. Rev. 425.)

In Millsap v. National Funding Corp. (1943) 57 C.A.2d 772, 135 P.2d 407, an employee turned notary fees col-lected over to her employer under threat of discharge. Held, this was “illegal business compulsion,” and the pay-ments were recoverable. (57 C.A.2d 781.) (But cf. Marshall v. Packard-Bell Co. (1951) 106 C.A.2d 770, 236 P.2d 201, infra, §1035 [employer had right to discharge at any time, and threat to do what one has power to do is not co-ercion].)

The right to restitution of money paid under an invalid tax or assessment is comprehensively regulated by statute, and is considered elsewhere. (See 9 Summary (10th), Taxation, §284 et seq. )



END OF DOCUMENT



Supplement





F. Benefits Conferred Under Coercion.

4. [§ 1035] Cases Denying Recovery.

In Western Gulf Oil Co. v. Title Ins. & Trust Co. (1949) 92 C.A.2d 257, 206 P.2d 643, over a period of 208 days plaintiff, lessee under an oil lease, disputed the lessor's right to certain payments, but nevertheless made them after the lessor threatened forfeiture of the lease. Then the<<* p.1126>> lessee sued to recover the payments. Held, the payments were voluntary, for plaintiff could have sued immediately for a declaration of rights under C.C.P. 1060, and could have asked for temporary relief from forfeiture pending the action. Though the correctness of the result is debatable, the case stands for little in view of the observation that whether the plaintiff acted reasonably in making the payments was a question of fact for the trial court. (92 C.A.2d 266.)

In Draper v. Grant (1949) 91 C.A.2d 566, 205 P.2d 399, petitioner pleaded guilty in an inferior court and paid a fine though the crime was beyond the jurisdiction of the court; he then sought mandamus against the judge and city treasurer to compel return of the money. After properly holding that the extraordinary writ did not lie, the court made the dubious suggestion that even in a proper action recovery would be “problematical,” apparently because the payment was voluntary, under mistake of law. (91 C.A.2d 571.) It is difficult to see how payment of a fine, to escape an illegal jail sentence, is “voluntary.”

In Brahs v. Katcher (1951) 106 C.A.2d 657, 235 P.2d 619, defendant owed an apparently disputed balance of $3,000 on a contract of sale, after having given several dishonored drafts. Plaintiff phoned from the district attor -ney's office stating that he could prosecute but would rather collect the money. Defendant paid. Held, there was no duress. To render the payment involuntary and recoverable, “there must be an actual or threatened exercise of power possessed or supposed to be possessed by the party receiving payment. … The threat must be clear and direct. It is not sufficient that a threat might possibly be inferred.” (106 C.A.2d 659.) Here, the testimony at most showed a statement of power possessed, rather than a threatened exercise of it. (106 C.A.2d 659.)

In Marshall v. Packard-Bell Co. (1951) 106 C.A.2d 770, 236 P.2d 201, plaintiff, distributor for defendant, al-leged that he agreed to and did contribute a percentage of his monthly billings to an advertising fund for the com-pany's products, under threat of loss of his exclusive distributorship. Held, he could not recover the money paid. De-fendant had the right to terminate his distributorship contract at any time, and “it does not constitute duress or coer -cion to threaten to do that which a party has a legal right to do.” (106 C.A.2d 774.)

In Reynolds v. San Francisco (1975) 53 C.A.3d 99, 125 C.R. 673, plaintiff paid a filing fee of $346.05 as a can-



didate for municipal court judge. Thereafter, the California Supreme Court held the fee requirement unconstitutional (see 7 Summary (10th), Constitutional Law, §261 ), and he sued for a refund. Held, he was not entitled. The fee was paid without protest; i.e., there was no compulsion by governmental authorities, but only a mistaken belief of plain -tiff that the law was valid. (53 C.A.3d 102.)<<* p.1127>>

****SUPPLEMENT****


4. [§ 1035] Cases Denying Recovery.

See Steinman v. Malamed (2010) 185 C.A.4th 1550, 1555, 111 C.R.3d 304 [payment made by debtor under set-tlement agreement was made voluntarily and could not be recovered even though debtor had disputed amount that was due at time of making payment and stated that it would make payment “under protest,” absent showing that creditor had accepted payment knowing that its claim to amount of payment was false].



END OF DOCUMENT



Supplement





G. Services Performed at Request.

1. [§ 1036] Theory of Recovery.

Where one person renders services to another from which the latter derives benefit, ordinarily an obligation arises to pay their reasonable value. The California courts have permitted recovery on implied contract or quantum meruit for services rendered, without always clearly indicating whether the contract was implied in fact or implied in law. In general, however, it would seem that whenever there is an invalid or unenforceable express contract, and re-covery is nevertheless allowed, the basis of the recovery is quasi-contractual. (See Rotea v. Izuel (1939) 14 C.2d 605, 608, 95 P.2d 927; Bogan v. Wiley (1946) 72 C.A.2d 533, 536, 164 P.2d 912; Murdock v. Swanson (1948) 85 C.A.2d 380, 383, 193 P.2d 81 [services and goods furnished]; Shive v. Barrow (1948) 88 C.A.2d 838, 844, 199 P.2d 693 [services and money furnished]; Drvol v. Bant (1960) 183 C.A.2d 351, 356, 7 C.R. 1 [services for decedent in reliance on promise to devise home, will denied probate; recovery in quantum meruit]; Beley v. Municipal Court (1979) 100 C.A.3d 5, 8, 160 C.R. 508, infra, §1042, citing the text; 66 Am.Jur.2d (2001 ed.), Restitution and Im-plied Contracts §38 et seq.; Cal. Civil Practice, 3 Business Litigation, §34:21 et seq.; BAJI, No. 10.71 [reasonable value of services (quantum meruit)]; and see generally 12 Hastings L. J. 408 [breach of oral contract to perform ser-vices in exchange for compensation by will].) (On restitution for life salvage at sea, see 30 Hastings L. J. 227, 240; on quasi-contractual recovery for services rendered in a nonmarital relationship, see Marvin v. Marvin (1976) 18 C.3d 660, 134 C.R. 815, 557 P.2d 106, 11 Summary (10th), Community Property, §275 ; on statute of limitations, see 3 Cal. Proc. (4th), Actions, §§480 , 508, 509.)

The uncertainty in classification is increased by decisions treating the “existence of an implied contract” as “a question of fact for the trial court.” In Medina v. Van Camp Sea Food Co. (1946) 75 C.A.2d 551, 171 P.2d 445, the United States Government, when war was declared, requisitioned defendants' fishing boats. The fish in defendants' boats were loaded on plaintiff's boats and delivered to canneries, which paid defendants. Defendants then refused to compensate plaintiff for the reasonable cost of transporting the fish, contending that they (defendants) had acted un -der compulsion of law, without freedom to accept or reject the services, and hence no contract could be implied. Held, under the facts, the trial court properly concluded that defendants did have freedom of choice, and judgment for plaintiff should accordingly be affirmed. (75 C.A.2d 555, 556.) But the opinion does not clearly indicate whether the decision rests on contract implied in fact or quasi-contract.<<* p.1128>>

For purposes of recovery in quantum meruit, although there must be a benefit to the defendant from the services rendered, the reasonable value of the services may not be measured by the amount of the benefit. (See Maglica v. Maglica (1998) 66 C.A.4th 442, 449, 78 C.R.2d 101, citing the text [action by woman for services rendered to busi-



ness of man she had cohabited with for 20 years; jury instruction that value of services could be measured by benefit received by defendant improperly allowed jury to value services as having bought plaintiff de facto ownership inter-est in business, even though defendant never agreed to transfer any interest in his business to plaintiff].)


****SUPPLEMENT****


1. [§ 1036] Theory of Recovery.

Invalid or unenforceable contract: Where a written agreement or licensure is required, a party may not recover in quantum meruit for that which cannot be recovered on a contract. (Castillo v. Barrera (2007) 146 C.A.4th 1317, 1328, 53 C.R.3d 494) [alleged manager of professional boxer, who did not have license to manage as required by Boxing Act and whose contract was oral instead of written, was not entitled to recover, by means of quantum meruit, compensation for any managerial services he performed for boxer; to allow recovery under these circum-stances would subvert purpose of Boxing Act and supporting regulations].

Statute of limitations:<<*Supp. p.168>>

Cross-Reference: 3 Cal. Proc. (5th), Actions , §§514 , 547, 548.



END OF DOCUMENT








2. [§ 1037] Intention To Compensate.

To entitle the plaintiff to recover, the circumstances must be such as to warrant the inference that it was the ex-pectation of both parties during the time that the services were rendered that compensation should be made. Proof may be made that they were actually intended to be gratuitous; or special circumstances such as kinship may be shown, from which it may sometimes be inferred that no payment was contemplated. (See Mayborne v. Citizens Trust & Savings Bank (1920) 46 C.A. 178, 187, 188 P. 1034 [invalid will, left by party to whom the services were rendered, admissible in evidence to show the intention to compensate]; Shaad v. Hazelton (1948) 72 C.A.2d 860, 865, 165 P.2d 517 [married daughter performed services for mother, with whom she and her husband and child lived; presumed gratuitous]; Rest., Restitution §107; 7 Cal. L. Rev. 357; 21 A.L.R.3d 30 [price for services fixed in contract unenforceable under statute of frauds admissible for purpose of proving that services were not gratuitous]; 92 A.L.R.3d 726 [establishment of “family” relationship to raise presumption that services were rendered gratu-itously, as between persons living in same household but not related by blood or affinity]; 94 A.L.R.3d 552 [recov-ery for services rendered by persons living in apparent relation of husband and wife without express agreement for compensation]; BAJI, No. 10.71 [reasonable value of services (quantum meruit)].)



END OF DOCUMENT








3. [§ 1038] Necessity of Benefit.

It has been suggested that recovery may be allowed for services requested, regardless of whether the defendant is actually benefited. (See dissent in Coleman Engineering Co. v. North Amer. Aviation (1966) 65<<* p.1129>> C.2d 396, 419, 55 C.R. 1, 420 P.2d 713, supra, §155; BAJI, No. 10.71 [reasonable value of services (quantum meruit)].)

But where there is no request for the particular acts, there can be no recovery without benefit. Thus, in Palmer v. Gregg (1967) 65 C.2d 657, 56 C.R. 97, 422 P.2d 985, decedent asked plaintiff to come from her home in Palm Springs to Los Angeles to take care of him. Held, (a) she could recover for the reasonable value of her services as practical nurse and housekeeper, but (b) she could not recover for the expense she incurred for the services of a gar -dener to take care of her Palm Springs home while she was away. (65 C.2d 661.) (See Day v. Alta Bates Med. Cen-ter (2002) 98 C.A.4th 243, 248, 119 C.R.2d 606 [attorney representing client in unsuccessful malpractice action brought quantum meruit action against hospital where client had been treated, asserting that he had performed ser-vices for defendant in connection with lien it had filed against malpractice action; attorney established neither that defendant requested services nor that it benefited from them]; 55 Cal. L. Rev. 1167.)




END OF DOCUMENT








4. [§ 1039] Services to Third Person.

In Rotea v. Izuel (1939) 14 C.2d 605, 95 P.2d 927, plaintiff, at the request of decedent, rendered services to decedent's sister, for which decedent orally agreed to pay. Recovery was denied. The court declared that, where ser-vices are performed for a third person to whom the defendant or decedent owes a legal duty of support (e.g., child or spouse), the right to restitution arises, but that, in the absence of this legal duty, there is no unjust enrichment. (14 C.2d 608.) (See McClenahan v. Keyes (1922) 188 C. 574, 580, 206 P. 454; Zumwalt v. Schwarz (1931) 112 C.A. 734, 736, 297 P. 608; 66 Am.Jur.2d (2001 ed.), Restitution and Implied Contracts §43; 34 A.L.R.3d 176 [medical services].)

This view was criticized on the theory that pecuniary benefit to the defendant personally should not be the test, and that it should be sufficient that the defendant obtain from the plaintiff some performance that he or she expressly requested. (See 28 Cal. L. Rev. 528; dissent in Coleman Engineering Co. v. North Amer. Aviation (1966) 65 C.2d 396, 419, 55 C.R. 1, 420 P.2d 713, supra, §155.) (See BAJI, No. 10.71 [reasonable value of services (quantum meruit)].)

The limitations of Rotea v. Izuel, supra, were repudiated in Earhart v. Low Co. (1979) 25 C.3d 503, 158 C.R. 887, 600 P.2d 1344. Plaintiff contractor and defendant landowner entered into negotiations for construction of a mo-bilehome park, partly on land owned by defendant and<<* p.1130>> partly on land owned by P (which defendant intended to buy). The construction contract did not become binding because of unfulfilled conditions (defendant to obtain financing, plaintiff to secure a bond). However, in order to keep a permit alive for the construction on P's land, defendant requested that plaintiff commence performance. Plaintiff did so, and after a week's work submitted a progress bill. Defendant refused to pay, revealing that he had signed a construction contract with another firm. In this action in quantum meruit, the trial judge gave judgment for plaintiff, but limited the recovery to the reasonable value of the work done on defendant's land. As to the work done on P's land, the judge, considering himself bound by Rotea, denied any recovery. Held, reversed.

(a) Reexamination of Rotea holding. The result reached in Rotea was understandable in the light of the mutual exchange of familial support; but the broad statement that the satisfaction of obtaining compliance with one's request will not support recovery has been criticized as harsh, and the requirement of “direct benefit” to the defendant has been described as purely “historical.” (25 C.3d 510.) Moreover, the Restatement of Restitution (§1, Comment b) rec-ognizes that performance of services at another's request may itself constitute “benefit.” (25 C.3d 511.)

(b) Later cases. Two later Court of Appeal decisions support the Restatement view. (25 C.3d 511, citing Bod-



mer v. Turnage (1951) 105 C.A.2d 475, 233 P.2d 157, and Williams v. Dougan (1959) 175 C.A.2d 414, 346 P.2d 241.) And Chief Justice Traynor, dissenting in Coleman Engineering, supra, argued that the “benefit” limitation was unconscionable and should be abandoned. (25 C.3d 512, 513.)

(c) Analogous contract doctrines. Several parallel contract doctrines support this view: part performance to sat-isfy the statute of frauds, estoppel to set up the statute of frauds, and promissory estoppel. (25 C.3d 514.)

(d) Conclusion. In view of the equitable considerations underlying these doctrines, “compensation for a party's performance should be paid by the person whose request induced the performance.” (25 C.3d 515.) Two justices joined in a dissent, criticizing the result, and arguing that the majority's rule is too broad. (25 C.3d 516.)



END OF DOCUMENT



Supplement





H. Waiver of Tort.

1. [§ 1040] In General.

A tort normally gives rise to an action for damages; but in certain situations, where the defendant acquires ben-efits by his or her wrongful<<* p.1131>> act, the plaintiff may “waive the tort,” i.e., elect to sue in quasi-contract for restitution instead of for damages. The following are illustrations:

(1) Conversion. The action may be brought as for goods sold and delivered. (Corey v. Struve (1915) 170 C. 170, 172, 149 P. 48; Bank of America v. Hill (1937) 9 C.2d 495, 499, 71 P.2d 258; Armstrong v. Kubo & Co. (1928) 88 C.A. 331, 336, 263 P. 365; Glantz v. Freedman (1929) 100 C.A. 611, 614, 280 P. 704; Shahood v. Cavin (1957) 154 C.A.2d 745, 748, 316 P.2d 700; H. Russell Taylor's Fire Prevention Service v. Coca Cola Bottling Corp. (1979) 99 C.A.3d 711, 719, 160 C.R. 411; Rest., Restitution §128 and Note, p. 522; see 3 Cal. Proc. (4th), Actions, §160 ; 4 Cal. Proc. (4th), Pleading, §517 .)

In California, the action for the value of the goods will lie regardless of whether they have been sold and con -verted into money. (Los Angeles Drug Co. v. Superior Court (1936) 8 C.2d 71, 74, 63 P.2d 1124 .) (See Frederick-sen v. Harney (1962) 199 C.A.2d 189, 194, 195, 18 C.R. 562, citing the text [dictum that materialman whose prop-erty was tortiously incorporated in structure could waive tort and enforce mechanic's lien].)

(2) Wrongful Occupation of Real Property. The action may be brought for the reasonable value of the use. (Tag-gart v. Shepherd (1932) 122 C.A. 755, 758, 10 P.2d 808; Samuels v. Singer (1934) 1 C.A.2d 545, 554, 36 P.2d 1098, 37 P.2d 1050; Meyer v. Parobek (1953) 119 C.A.2d 509, 513, 259 P.2d 948 .) (On denial of restitution where tort remedy is adequate, see infra, §1041.)

(3) Wrongful Appropriation of Literary Property. The same theory is applied to an action by the creator of a lit-erary or dramatic property against one wrongfully appropriating it. The tort of plagiarism may be waived, and quasi-contract recovery given in the amount of the reasonable value of the property. (See Weitzenkorn v. Lesser (1953) 40 C.2d 778, 256 P.2d 947; Desny v. Wilder (1956) 46 C.2d 715, 734, 299 P.2d 257; Fink v. Goodson-Todman Enter-prises, Ltd. (1970) 9 C.A.3d 996, 1013, 88 C.R. 679; 27 So. Cal. L. Rev. 124, 290; 4 U.C.L.A. L. Rev. 524, 547; 23 A.L.R.2d 244 [infringement of literary and artistic rights in connection with motion pictures, radio, and television].)

(4) Fraud. Where the defendant has been enriched by his or her fraud, recovery may be had in the amount of the unjust enrichment, and exemplary damages may also be awarded, in a quasi-contract action. (Ward v. Taggart



(1959) 51 C.2d 736, 743, 336 P.2d 534, 6 Summary (10th), Torts, §1713 ; see Arcturus Mfg. Corp. v. Rork (1961) 198 C.A.2d 208, 210, 17 C.R. 758 [recovery of secret profits fraudulently made by agent]; Haurat v. Superior Court (1966) 241 C.A.2d 330, 334, 50 C.R. 520 [same].) (For discussions of Ward, see 48 Cal. L. Rev. 342; 11 Hastings L. J. 183; 12<<* p.1132>> Stanf. L. Rev. 270; 7 U.C.L.A. L. Rev. 147; on recovery of profit from tortfeasor, see 19 Hastings L. J. 1071.)

****SUPPLEMENT****


1. [§ 1040] In General.

p. 1131:

(1) Conversion.

Cross-References: 3 Cal. Proc. (5th), Actions , §164 ; 4 Cal. Proc. (5th), Pleading , §556 .



END OF DOCUMENT







H. Waiver of Tort.

2. [§ 1041] Where Tort Remedy Is Adequate.

Restitution under this theory (supra, §1040) is denied where there is an adequate tort remedy. In Ramona Manor Convalescent Hosp. v. Care Enterprises (1986) 177 C.A.3d 1120, 225 C.R. 120, plaintiff, a prospective lessee of a nursing home, sued defendants, the holdover operating lessees of the home, for intentional interference with prospective economic advantage. (See 5 Summary (10th), Torts, §741 .) The jury, contrary to the judge's instruction, returned special verdicts on both the tort and unjust enrichment theories, by including in the unjust enrichment award profits earned by defendants during the period of wrongful possession. Held, this was error.

(a) The Restatement of Restitution (§129) states that “A person who tortiously has taken possession of another's land without the other's consent is not thereby under a duty of restitution to the other for its value or use.” The Com-ment explains: “The liability of a trespasser or of a dispossessor in an action of tort … is normally as great as would exist if an action for restitution were allowed, since the person entitled to possession is entitled not only to be given possession if he does not have it, but also to damages for the deprivation, which ordinarily are determined by the value of the use of the land during the unlawful occupation, and in addition to damages for any harm done to the land.” (177 C.A.3d 1139.)

(b) Thus, restitution may be allowed in some situations where there has been no tort, but it is not allowed in cases of wrongful dispossession of land, because the remedy of tort damages is adequate. “This, of course, is fully consistent with the general principle of equity that equitable relief will not be afforded when the plaintiff's remedies at law are adequate.” (177 C.A.3d 1140.) Here, plaintiff can obtain full redress for its loss of profits under its tort cause of action. (177 C.A.3d 1140.)



END OF DOCUMENT







I. [§ 1042] Restitution Where Contract Fails.

There are a number of situations in which one who has paid money or given other consideration under a con-tract that turned out to be void, voidable, or otherwise ineffective may have restitution:

(1) Money paid may be recovered where the consideration has wholly failed. (Richter v. Union Land & Stock Co. (1900) 129 C. 367, 373, 62 P. 39; Mahony v. Standard Gas Engine Co. (1921) 187 C. 399, 405, 202 P. 146.)<<* p.1133>>

(2) Money paid may be recovered after rescission for fraud, failure of consideration, illegality, etc. (Philpott v. Superior Court (1934) 1 C.2d 512, 518, 36 P.2d 635; Longway v. Newbery (1939) 13 C.2d 603, 608, 91 P.2d 110; Fontaine v. Lacassie (1918) 36 C.A. 175, 178, 171 P. 812; Fitzhugh v. University Realty Co. (1920) 46 C.A. 198, 200, 188 P. 1023; Landry v. Marshall (1966) 243 C.A.2d 170, 176, 177, 52 C.R. 119; Porter v. Arthur Murray (1967) 249 C.A.2d 410, 424, 57 C.R. 554; see Rest.2d, Contracts §§375, 376; 18 Cal. L. Rev. 75; 81 A.L.R.2d 587 [recovery of money paid in reliance on unenforceable promise to accept bill of exchange]; 33 A.L.R.3d 397 [right to recover back payments made under contract violating competitive bidding statute]; 74 A.L.R.3d 637 [recovery of money paid to unlicensed person required by law to have occupational or business license or permit to make con -tract]; supra, §§438, 937.) Recovery may be denied, however, if the contract is illegal and the parties are equally in the wrong. (See supra, §436.)

(3) A minor may disaffirm a voidable express contract for his or her services and recover their reasonable value. (Abdullah v. Abdullah (1920) 50 C.A. 115, 119, 194 P. 511; see supra, §31.)

(4) Where a contract between an employer and his or her employee is void for uncertainty, or unenforceable by reason of the statute of frauds, the employee may sue for the value of services rendered, as if the express contract had never been made. (Brown v. Crown Gold Milling Co. (1907) 150 C. 376, 383, 89 P. 86.)

(5) Where a valid express contract for services lacks a definite provision for compensation, the reasonable value of the services may be recovered. (Elconin v. Yalen (1929) 208 C. 546, 548, 282 P. 791.) The same is true where ser-vices are performed for a consideration that turns out to be impossible of performance or unenforceable; e.g., shares in a corporation that cannot be issued because of lack of a permit. (McGillycuddy v. Los Verjels Land & Water Co. (1931) 213 C. 145, 147, 2 P.2d 19, supra, §420.)

(6) The reasonable value of services and materials may be recovered despite technical violation of a regulatory statute. Thus, in Beley v. Municipal Court (1979) 100 C.A.3d 5, 160 C.R. 508, plaintiff building contractor per-



formed services and furnished materials in remodeling defendants' home. However, the contract was subject to the home solicitation contract statute, and did not contain the required notice giving the buyer the right to cancel within 3 days (see 4 Summary (10th), Sales , §329 ). Defendants' right to cancel was therefore extended indefinitely, and they exercised it after the work was substantially completed and sought to retain the benefits conferred without any payment. Held, although by reason of violation of the statute plaintiff could not recover on<<* p.1134>> the ex-press building contract, there was nothing improper about the contract or the performance under it; hence, he was entitled to recover in quantum meruit for the reasonable value of the improvements. (100 C.A.3d 8.) (See Gardiner Solder Co. v. SupAlloy Corp. (1991) 232 C.A.3d 1537, 1543, 284 C.R. 206 [out-of-state manufacturer was entitled to restitution for goods supplied to purchaser, even though contract was voidable on ground that manufacturer had not qualified to do business in California]; cf. Louis Luskin & Sons v. Samovitz (1985) 166 C.A.3d 533, 537, 212 C.R. 612, 4 Summary (10th), Sales , §330 [recovery denied where, contrary to owner's instructions, contractor began work immediately after contract was signed and had completed significant portion within 3-day cancellation period]; on owner's right to recover for services or materials expended on own real property in reliance on unenforceable contract for its sale or rental, see 64 A.L.R.3d 1191.)

(7) A party who improves the property of another in the performance of a contract that he or she later breaches may recover the reasonable value of the services, but not the increased value of the property. In Lesny Dev. Co. v. Kendall (1985) 164 C.A.3d 1010, 210 C.R. 890, involving a contract to sell undeveloped land, plaintiff purchaser fulfilled its obligation to obtain approval of its tentative tract map, but breached the contract in other respects. Plain -tiff was awarded damages of $60,000 as compensation for the increase in the property's value due to its efforts, and $18,750 as the reasonable value of the 250 hours it allegedly expended in obtaining approval of the tract map. Held, this was error.

(a) Under the applicable principles of unjust enrichment, plaintiff was entitled to recover only “its reasonable costs or the reasonable value to it of its services, not the increase in value to the property that may have resulted from its services.” (164 C.A.3d 1021.) Although there are no cases directly on point, plaintiff's position is similar to that of a person who improves the property of another under the reasonable, but mistaken, belief that he or she is the owner or is under an obligation to do so. Under Rest., Restitution §42, such an improver is entitled to recover the lesser of the value of the services or the resulting increase in the value of the property. (164 C.A.3d 1022.)

(b) In order to recover the value of its services, plaintiff was required to show that the services benefited defen-dant sellers, i.e., that they were expended in satisfying the contractual obligation of obtaining approval of the tenta -tive tract map. (164 C.A.3d 1021.) However, the evidence established that only 50 of the 250 hours were expended for this purpose; the rest were used on projects that would benefit plaintiff had it acquired the property, and are not recompensable. (164 C.A.3d 1023.) Hence, plaintiff's recovery must be reduced to $4,690, i.e., 50 hours of service at $75<<* p.1135>> per hour, plus the $940 plaintiff paid for the application for approval of the map. (164 C.A.3d 1025, footnote 2.)

West's Key Number Digest, Implied and Constructive Contracts 4<<* p.1136>>



END OF DOCUMENT


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