Restitution

1. Restitution • Basic Premise: • In cases where D has been unjustly enriched at P’s expense, D must return the amount of his/her unjust enrichment • Restitution Is a Hybrid: • It is one of 3 forms of substantive liability • It is also a possible remedy when the source of liability is contract, tort or statute

2. Blue Cross v. Sauer – substantive restitution • Why are the Sauer’s liable for the return of the mistaken payments from Blue Cross? • Did they do anything wrong? How easy would it be to prove? • Assume they had been on an extended vacation & payments were directly deposited – would the court have required them to return the payments? • So what is (would be) the easiest source of their liability forcing them to return the payments from Blue Cross in either situation?

3. Restitutionary Remedial Devices • Why was Sauer so concerned w/ the manner in which restitution occurred? Restitution encompasses many different devices, which effect return in different ways – some examples: • Constructive Trust – P can trace into specific, identifiable property in D’s hands and keep it even if it has increased in value (as long as traceable to wrongfully taken property from P) • Quasi-Contract(aka “Money Had & Received” in Sauer) – results in simple money judgment for value of unjust enrichment to D • For wrongdoers who have receivedmistakenpayments of money, P’s must rely on restitution as substantive cause of action & remedy: • P’s limited to restitutionary devices giving them a simple money judgment

4. Somerville v. Jacob – restitution and innocent improvers • Could Somervilles get restitution if they deliberately improved the Jacob’s land because the Somervilles thought the land really needed it and it would improve the Jacob’s property values? • What remedy if the Somerville’s negligently built a building over the shared property line onto the Jacob’s land? • What are the options when the Somervilles innocently improve the Jacob’s land thinking it is their land and mistake is discovered after improvement is finished? • Somervilles get nothing because they should have known of problem • Jacobs should pay Somervilles for actual cost of improvements • Jacobs should convey land to Somervilles in exchange for value of unimproved land • What does the majority say? Why does the dissent balk?

5. Restitution & Mistake • A truly innocent mistake by P/improver/payor is most likely to result in restitution. • As P’s culpability increases, courts are less likely to grant restitution • Also with a truly innocent victim (D/improvee/payee), courts may “balance the hardships” and refuse to grant restitution if returning the benefit will be hard on D • (But see Somerville) • Bottom line – whether restitution is granted depends on culpability of both parties and hardship on D. (See Restatement 3rd)

6. Measuring the unjust benefit to be returned – innocent wrongdoers • Often there are different ways to measure D’s unjust gain – this isn’t clearly self-defining or there are simply two available measures. • What measure do courts use when the D is innocent(ish)? • Theme throughout restitution with innocentwrongdoers: • When given a choice of measurement of unjust enrichment, courts will usually choose the lower amount (which it believes represents unjust enrichment to innocent D)

7. Grounds for restitution with innocent(ish) wrongdoers • Mistake– see previous slides • Emergency– one who reasonably provides essential goods/services during emergencies is excused from getting promise to pay beforehand • Measurement of U.E. for lives saved – FMV of treatment (NOT value of life saved) • Measurement of U.E. for property saved – lesser of value of services or property damage avoided • Performance of Duties to 3rd Parties – e.g., paying brother’s bills • Measurement of U.E. – reasonable value of services/bills paid for • Joint Ownership of Property – payment ofnecessaryexpenses • Measurement of U.E. – reasonable value of other’s proportionate expenses • Quantum Meruit or Unenforceable Contracts • Four Different Measures - Cost to Plaintiff, Market Value, Agreed Price, or Value in advancing D’s purposes

8. Olwell v. Nye & Nissen Co. • D temporarily converted P’s egg washer (1 day/week for 156 weeks). P offered to sell but D refused to buy. P sued for benefit D gained while using converted egg washer. • http://i01.i.aliimg.com/photo/v0/122600771/NABEL_Egg_Washer.jpg • What are P’s damages if P sues for temporary conversion? • What is the amount of compensation P is awarded as unjust enrichment for D’s conversion? • Is there another way to measure unjust enrichment to D other than the measure used by the court?

9. Why did Olwellchoose the measure for unjust enrichment that it did? • In mistake cases, courts chose the lower measure of compensation as the appropriate measure of restitution. In Olwell, the Court chose the higher measure (aka it required D to disgorge its profits from use of P’s property). Why did the courts choose different measures? • Do these reasons distinguish the outcomes in Edwards (p. 515) (award of profits) and Beck (p. 518) (award of rental value)?

10. Who are conscious wrongdoers? • Under Rstmt (3d), misconduct = “tortious or otherwise wrongful” interference “w/ claimant’s legally protected interest” • Note grounds defined as misconduct at p. 519 n.1 • Disgorgement of profits/gain is appropriate for “misconduct” (aka conscious wrongdoers) • Disgorgement = D must return to P the “net profit attributable to underlying wrong” (p.518 n. 9b) • Profit = use/rental value of property taken, proceeds from sale/exchange of property taken & any consequential gains from use of property • Note that Rstmt(3d)/courts recognize wrongdoers of lesser degree of culpability (p. 519 n.3) • Courts adjust measure of restitution depending on whether they think D is closer to innocent or culpable D