#11398 - Restitution - Modern American Remedies 4th Ed. Laycock

Restitution recoveries were available both in law and in equity. So sometimes it is an equitable remedy, other times not

Restitution acts as both a substantive area of law and a remedy

(if d commits a tort, he can be liable in both damages and restitution – but can obviously only recover one or the other)

• Substantive Area of Law: When there is no other cause of action – i.e. mistakenly received a large amount of money. No action in tort or contract for plaintiff, but there will be in restitution.

• Remedy: Acts as a remedy in a tort or contract claim when damages are also available as an alternative

  • Example: someone steals your $200 camera, sells it to a pawn shop for $150 and then bets it all on the blackjack table and it is now worth $1,000. Can sue for the tort of conversion, and the law allows either a damage remedy of around $200 OR a restitutionary remedy measure by the thief’s gains ($1000) [this was the thief does not profit from stealing].

• But most importantly, Restitution is about unjust enrichment. NO RECOVERY absent proof that defendant has been unjustly enriched.

  • As a matter of remedy, restitution gives P an award based on DEFENDANT’S GAINS, NOT PLAINTIFFS LOSSES

    • Benefit is determined by the value conferred to the defendant – if it is a benefit other than money there is a good chance loss to P/gain to D will not be the same – this presents issues

      • Example: a half-built barn is not conferring any benefit on the defendant likely. Plaintiff will have lost the value of the supplies to build the barn and since no benefit to D, no claim in restitution.

        • But, going to be hard to say no benefit for something that can be easily sold and has an ascertainable market value where you can quickly sell it and realize that value.

Difference between Damages v. Restitution: Damages are in the amount that Plaintiff lost, restitution is the unjust benefit (what defendant gained) that defendant received

Unjust Enrichment/Restitution Claims are Attractive to Plaintiffs in Three Groups of Cases:

1. There is no other cause of action

   1. D is innocent, remedies tend to be less dramatic. Usually take his benefit, not necessarily the gains he made from that while he had. If d is a conscious wrongdoer, we will take everything.

2. When defendant’s gain exceeds plaintiff’s loss (stealing purse and gambling hypo)

3. Cases in which defendant is insolvent but plaintiff can identify specific property that defendant wrongly acquired – he is treated as an owner rather than a creditor in bankruptcy.

Three Kinds of Restitution Cases:

1. Nobody did anything wrong – unjust enrichment creates COA

2. Conscious wrongdoer has a profit greater than damages

3. Restitution plaintiff is trying to assert his rights as owner of the property so he does not have to share with creditors (v. wrong doer or third parties)

Mistake: Requires that Plaintiff NOT KNOW they made a mistake at the time they did it.

• If a person is aware of some uncertainty and pays/builds/etc. anyway, she is not making a mistake, she is knowingly taking a risk or settling a dispute.

• RULE: cannot recover restitution for mistake made in the face of uncertainty, sometimes called the “Voluntary Payment Rule”

No Forced Exchanges: Strong presumption against forcing an innocent defendant to pay for benefits she never requested and might not want. Not an issue for cash obviously but this is a serious issue when plaintiff demands a cash payment for a non-cash benefit

• Such forced exchanges create problems of valuation, liquidity, and autonomy

  • That an item has a market value of $1,000 is no evidence that it is worth that much to the recipient (Valuation), that she has the resources to buy it (liquidity), or that she has any desire to buy it (autonomy).

• We do not give D the benefit of the doubt, however, when they are put on notice of the mistaken benefit to come to them. In this case he is accepting a benefit and will have to pay for it – at least for everything done after he discovered it (unless of course he cuts it off quickly and tells them to stop)

  • Simples example of this is D watching the barn go up, then claiming that he does not want it.

Unjust Enrichment (via mistaken payment of money): A person who pays money to another by mistake is entitled to restitution from the payee or other beneficiary of the payment. Elements: 1) someone paid money by mistake and 2) defendant received money [Blue Cross v. Sauer]

• Degree of care P took is irrelevant. Also culpability of D is irrelevant – he is liable in restitution for the money paid regardless whether he was or was not culpable in the receipt of the money

DEFENSE: Change of Position: Affirmative Defense if D spent in reasonable reliance on the mistaken payment (they had no NOTICE [notice def: facts sufficient to make it reasonable to conduct further inquiry] that payment was a mistake and spent the money on something they otherwise would not have). [tried in Blue Cross unsuccessfully]

• Most common example is a widow that receives a life insurance benefit for $25K and spends it on a nicer funeral than she otherwise would have and come to find out there was no coverage or the coverage should have been smaller

• Spending the money on ordinary living expenses is NOT a change of position

Different than when the benefit is money because in some cases D did not want the benefit or values it differently than P

Mistaken Improver: An improver of land who through reasonable mistake of fact and in good faith erects an [improvement] entirely upon the land of another, is entitled to recover the value of the improvements from the landowner

• Courts often give a “Buy-Sell Remedy”: Defendant gets to choose whether to buy the [improvement] or sell the land with the improvements for fair value to the plaintiff. Still a forced exchange but at least plaintiff can pick the option that is more attractive. [Somerville v. Jacobs]

  • Dissent in Somerville would add option to defendant to make plaintiff tear down the building (essentially creating a bilateral monopoly)

    • But neither dissent nor majority would allow D to keep the benefit without paying for it

• Remember – if P did not actually create a mistake and is an “intentional enricher” –cannot recover. Can’t just go around doing benefits and demanding payments.

Anderson v. Schwegel’s rules are codified in §§49-50 of Restatement (Third) of Restitution: