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
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?
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 received mistaken payments 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
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?
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)
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 innocent wrongdoers:
◦ 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)
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 of necessary expenses
◦ 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
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_Wash
er.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?
Why did Olwell choose 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)?
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