Texas Law of Civil Restitution: Unjust
Enrichment
© David Dittfurth 2012
TABLE OF CONTENTS
I. OVERVIEW
A. Three Major Areas of Civil Liability: Tort, Contract, and Restitution
B. Applying the Law of Restitution
(1) Characteristics of Restitution
(2) Unjust Enrichment as an Independent Cause of Action
(3) Summary
II. DEVELOPMENT OF RESTITUTION
A. Texas Court-Made Law
B. The Common Law and Quasi-Contracts (Contracts Created by Law)
C. Constructive Trust (Trusts Created by Law)
D. The Concept of a Cause of Action
III. LIABILITY FOR UNJUST ENRICHMENT
A. The Emerging Law of Unjust Enrichment
B. Texas Courts and Unjust Enrichment
C. Lower Court Rejection of an Independent Cause
D. Texas Supreme Court Decisions Based on Unjust Enrichment
IV. CONCLUSION
GLOSSARY
RESTITUTION MODEL
I. OVERVIEW
A. Three Major Areas of Civil Liability: Tort, Contract, and
Restitution.
If knowledgeable lawyers were making a comprehensive chart showing
the broad categories of judicially created causes of action, they would
include the major areas of tort, contract, and restitution. However, recent
law graduates might be forgiven if they omitted the last category from their
list. They would have begun law school with required, yearlong courses in
tort and contract, but the typical law school would not require or even offer a
course dedicated solely to restitution.
This omission by law schools will likely become more noticeable with
the publication of the Restatement (Third) of Restitution and Unjust
1
Enrichment (2011). The Reporter for the Restatement (Third), Andrew Kull,
once lamented, as have others, how confused are United States lawyers and
judges in their understanding of the law of restitution.1 That confusion
significantly affects litigants and litigation because one cannot describe civil
liability in our legal system without including the law of restitution.2 The
law of restitution, as does the law of torts or contracts, consists of special
legal rules establishing requirements for civil liability and for the distinctive
nature and measure of its remedies. Unlike torts and contracts, however,
restitution has not benefited from the general acceptance and simplification
of its terms.3
Publication of the Restatement (Third) will aid judges and litigators in
acquiring a better understanding of both the substantive and remedial values
of the broad subject of restitution. One would hope that the Restatement
(Third) thus exercises a gravitational pull on courts, drawing them away
from the complications that currently impede the use of unjust enrichment
claims.4
B. Applying the Law of Restitution
(1) Characteristics of Restitution
A plaintiff must have at least one cause of action under Texas law
before he can legitimately pursue a lawsuit seeking a judicial remedy. The
use of a cause of action asserting a right to restitution depends on three
elements. The defendant must hold a benefit (broadly defined) at the
expense of the plaintiff, and a court must conclude that retention of this
benefit would constitute unjust enrichment. If a plaintiff satisfies these
requirements, he can recover the benefit gained by the defendant. In other
words, he obtains restitution by having that benefit restored to him. If
restitution consists of a monetary award, that award equals the value of the
benefit that would otherwise unjustly enrich the defendant.
The monetary award granted through the remedy of restitution differs
from an award of damages because damages are compensate the plaintiff for
his loss rather than the benefit gained by the defendant. Therefore, a
defendant who has caused the plaintiff harm but who has not obtained
1
Andrew Kull, "Rationalizing Restitution," 83 CAL.L. REV. 1191, 1195 (1995). The
Supreme Court of Texas has, however, done a competent job in applying those principles,
even if it has not helped lower courts avoid the confusion caused by ancient terminology.
2
See id.
3
See id. at 1194.
4
This paper focuses on those complications, which arise both from apparent substantive
differences and from confusing terminology.
2
money or property at his expense cannot be sued in restitution. Some Texas
courts have referred to restitution as a measure of damages. This
characterization misleads to the extent it suggests that restitution merely
provides an additional measure of damages in tort or contract cases.
Restitution and unjust enrichment concern a separate cause of action that
justifies a remedy for the defendant’s unjust retention of plaintiff’s property.
(2) Unjust Enrichment as an Independent Cause of Action
The cause of action for unjust enrichment operates alone or as an
alternative to tort or contract. A plaintiff most often asserts unjust
enrichment alone when the defendant has obtained a benefit because of
plaintiff’s mistake.5 Under those circumstances, the plaintiff may have no
tort claim because the defendant has engaged in no wrongful action. For
example, suppose your client attempted an online transfer of $200,000 to her
local bank account but misstated her account number. She thereby deposited
her money in the account of a lucky recipient, who hurriedly placed his
windfall in certificates of deposit that he stashed in a safety deposit box.
The recipient did not thereby act wrongfully or in breach of any agreement.
He did, however, obtain a benefit at the expense of the plaintiff, and no
justification exists for allowing him to retain that benefit.6
As an addition to a tort claim, the unjust enrichment cause of action
provides what may be an important alternative remedy by seeking the
benefit unjustly held by the defendant. Tort claims allow recovery for the
plaintiff’s loss – that is, damages. Even when the plaintiff’s loss equals the
defendant’s gain, proof of that gain may be more readily available than
evidence of the plaintiff’s loss. In other instances, a conscious wrongdoer
who takes property from the plaintiff that has a significantly enhanced value
“Generally, a party who pays funds under a mistake of fact may recover restitution of
those funds if the party to whom the payment was made has not materially changed his
position in reliance thereon. The purpose of such restitution is to prevent unconscionable
loss to the party paying out the funds and unjust enrichment to the party receiving the
payment.” Bryan v. Citizens National Bank in Abilene, 628 S.W.2d 761, 763 (Tex.
1982) (citations omitted).
6
See Castano v. Wells Fargo Bank, 82 S.W.3d 40 (Tex.App.-San Antonio, 2002, no pet.)
In this case, the plaintiff sued the bank, which then impleaded the recipient of the funds.
The court of appeals affirmed the trial court’s imposition of a constructive trust, which
forced the recipient to return the certificates of deposit to the plaintiff.
5
3
at the time of trial will have to disgorge any profits.7 In this fashion,
restitution can offer a recovery far greater than the plaintiff’s losses.
The Texas Supreme Court has made clear that unjust enrichment and
restitution cannot operate to provide an alternative remedy to a valid and
enforceable contract. The law of contract assumes that a contracting party
may often benefit at the other party’s expense, and contract law would be
undermined if the losing party could ignore his agreement and seek the other
party’s gains. However, contracts may not be valid and enforceable, and a
plaintiff can, and should, assert an unjust enrichment claim as an alternative
in case his contract proves unenforceable.
(3) Summary
Although controversy exists, Texas courts generally recognize and
enforce unjust enrichment claims and provide the wealth of remedies
classified under the title of restitution. Litigators who fail to familiarize
themselves with this field run the risk of missing what could be
extraordinarily valuable remedies or of having their clients surprised by
damaging liabilities. The remedies of restitution and the cause of action
upon which they rest are well entrenched in Texas law. They are, however,
often cloaked by musty fictions and Latinate nonsense. We will all be well
served when the Supreme Court of Texas removes that cloak and insists that
lower courts speak in the terms established through the Restatement (Third).
II. DEVELOPMENT OF RESTITUTION
A. Texas Court-Made Law
Most state judicial systems began adjudicating private disputes by
using some part of the court-made law developed in the common law and
equity courts of England. Those separate judicial systems -- the common
law courts and those of equity -- each created substantive law and their own
distinctive remedies. The courts of the common law, for example, created
the substantive law of tort and contract and the remedy characteristic of
these common law causes of action has long been the award of damages – a
monetary judgment measured by the plaintiff’s losses.
The courts of equity became established in England as an alternative
forum because of the rigidity of the common forms of action and the
problems caused by the use in common law courts of a jury. The courts of
“When property has thus been wrongfully acquired, equity converts the holder into a
trustee, and compels him to account for all gains from such conduct.” Hunter v. Shell Oil
Co., 198 F.2d 485, 489 (5th Circ. 1952).
7
4
equity developed the law of trusts and mortgages and created their own
unique remedy for violation of their substantive law – the injunction. The
injunction provided a powerful remedy when damages were not helpful or
adequate, and unlike a damages judgment the courts of equity punished
violators of their injunctive orders with the powerful sanction of contempt.
As early as 1845, Texas merged the systems represented by the
common law and equity courts.8 Any Texas court could use the pertinent
substantive law and remedy without regard to the system from which these
were derived.9 Moreover, Texas courts never required that pleadings satisfy
one of the common law forms of action, even though they adopted England's
court-made law as rules of decision, except when inconsistent with the
Texas Constitution or with a Texas statute.10
Lawyers today often think of the common law as a reference to courtmade, as opposed to statutory, law. The rules and remedies created in either
the common law courts or in the equity courts were court-made law in this
sense. Although English court-made law differed because of the two
systems, both the common law and the equity courts created substantive law
to prevent the unjust enrichment of a party at the expense of another. In
seeking to achieve this substantive end, however, they each applied their
own characteristic judicial remedies to the endeavor.
B. The Common Law and Quasi-Contracts (Contracts Created by
Law)
By the 17th century, the common law courts had developed the
assumpsit form of action under the writ of case. This form of action initially
allowed enforcement of express contracts but was extended to contracts that
were inferred from the circumstances, the so-called implied-in-fact contract.
This special assumpsit form was later expanded to authorize judicial
enforcement of what had been the action in Debt, which later came to be
8
MICHAEL ARIENS, LONE STAR LAW: A LEGAL HISTORY OF TEXAS 251
(2011).
9
See Rogers v. Daniel Oil & Royalty Co., 110 S.W.2d 891, 894 (Tex. 1937). See also,
Joseph Webb McKnight, "The Spanish Influence on the Texas Law of Civil Procedure,"
38 Tex.L.Rev. 24, 31-32 (1959); Robert W. Stayton, "Texas' Approaches to the Parker
Ideal and Her Shortcomings," 37 Tex.L.Rev. 845, 845 (1959).]
10
See Towner v. Sayre, 4 Tex. 28 (1849); Knebel v. Capital Nat. Bk. of Austin, 505
S.W.2d 628, 631 (Tex.Civ.App. - Austin) aff'd in part, rev'd in part, 518 S.W.2d 795
(Tex.1974). See also, McKnight, 38 Tex.L.Rev. at 26.]
5
called indebitatus assumpsit.11 Although a debt resembles a contract, the
early rules treated it as a property right and required the creditor to bring his
action in Debt only in the Common Pleas court and to prove his case subject
to wager of law.12 Through these expansions, the common law courts
expanded their power to encompass what we know as contract law.
In some cases, however, the defendant gained a benefit at the
plaintiff's expense but had not done so through any sort of agreement. The
common law courts used additional legal fictions in expanding their judicial
authority to provide relief in these cases. For example, one who received
money through a mistaken payment by the plaintiff was made liable for a
fictional debt. The common law courts thus avoided the unjustified
enrichment of a defendant by creating a promise to repay the debt.13 This
fictional promise to pay was then used to create a right resembling the right
derived from actual contracts. This manufactured similarity of these “quasicontracts” was deemed sufficient to fit such cases within the assumpsit form
of action, but the new actions were distinguished by being labeled general
assumpsit.14
A plaintiff used general assumpsit to obtain restitution from a
defendant who unjustly held a benefit gained at the plaintiff’s expense.
Restitution thus resembled the repayment of a debt, except this debt was the
creation of law rather than of the parties. In order to maintain the fiction, the
common law courts referred to this right of restitution as one derived from
an obligation imposed as a matter of law. These rights were, therefore,
implied-in-law quasi-contracts, which is a distinctly legal way of saying that
no true agreement of the parties existed. The common law courts’ remedy
for breach of a quasi-contract was restitution, which was a logical response
to a right of action based on preventing defendant’s unjust enrichment.
More specific forms of action under assumpsit were developed for
certain fact patterns. As a group these became known as the common
counts, and could be divided into what were known as the debt or
indebitatus counts or into the value counts. For example, the debt counts
included suits for money paid for the defendant's use or to the defendant.
These included true contract cases as well as unjust-enrichment cases.15
Under the value counts, plaintiffs could sue for the value of services or for
11
See Dan B. Dobbs, 1 Dobbs Law of Remedies: Damages-Equity-Restitution 578-79
(2d ed. 1993).
12
See id. at 577.
13
See id. at 580.
14
See id. at 579.
15
See id. at 581-82.
6
the value of goods provided the defendant. The quantum meruit count
allowed recovery when services were provided, and quantum valebat was
the count that allowed recovery for goods sold. These counts also included
true contract claims and restitution claims not based on contract.16
C. Constructive Trust (Trusts Created by Law)
In the 13th and 14th centuries, the common law courts had gradually
become less flexible in accepting new forms of action for emerging
problems. They also had experienced problems in particular cases because
of their use of uneducated laymen on juries. As the common law courts
began to provide less adequate relief, their limitations fueled the rise of a
separate court system known as the Court of Chancery. Also known as the
courts of equity, this system operated under the chief law member of the
King's council, the chancellor.17
One of the more significant substantive accomplishments of the equity
courts was their development of the law of trusts. Although trust law began
as a method of holding and transferring land, it developed into a body of
substantive and remedial laws designed to aid in the management of
personal property as well.18 In creating the law of express trusts, the courts
of equity used their principle of good conscience to require a trustee to do
what, in good conscience, he should.19 Trust law thus created a presumption
that protected the beneficiary by placing a burden of good faith on the
trustee. Although the trustee held legal title to trust assets and an everexpanding power over these assets, he was bound by the law as a fiduciary
with a duty of loyalty and prudence.20
The courts of equity were as adept as the common law courts at
expanding their judicial power through the use of legal fictions that created
superficial similarities with established rights. They created equitable
remedies to capture property purchased with trust funds by the trustee,21 and
then extended this injunctive remedy to parties who had not entered an
16
See id. at 583-84.
CANDACE S. KOVACIC-FLEISCHER ET AL., EQUITABLE REMEDIES,
RESTITUTION AND DAMAGES 3 (2011).
18
DAN B. DOBBS, 1 DOBBS LAW OF REMEDIES 75 (2d ed. 1995).
19
See id. at 77.
20
See JOHN H. LANGBEIN, ET AL., HISTORY OF THE COMMON LAW 310 (2009).
21
See Texas Property Code (Texas Trust Code) § 114.008(a)(9) (2006) (As one remedy
for a breach of trust, a court can “impose a lien or a constructive trust on trust property, or
trace trust property of which the trustee wrongfully disposed and recover the property or
the proceeds from the property.”).
17
7
express trust.22 As the common law courts had reached beyond express
contracts, the equity courts created their constructive trust to prevent unjust
enrichment.23 They thus captured property that was unjustly held by a
defendant in the same manner that they retrieved the property wrongly taken
by a trustee of an express trust. In doing so, equity justified restoration to
the plaintiff of the unjustly held benefit by creating a resemblance to the
more established rights arising from trust law. In this fictional, or
constructive, trust, the plaintiff was the beneficiary and the unjustly enriched
defendant was the constructive (implied-in-law) trustee.
D. The Concept of a Cause of Action
This historical development explains the reason for the right of
restitution based on a finding that the defendant has been unjustly enriched.
Unjust enrichment thus became the substantive reason for the court's
imposition of a remedy in restitution. Unjust enrichment therefore is not
merely the theory that justifies restitution; the phrase refers in a much more
descriptive way to the recognized cause of action.
In the 18th century, however, the common law generally provided
remedies only in those cases in which the plaintiff could satisfy the forms of
action accepted in England.24 Today, a judicial system exercises power over
those cases in which the complaining party asserts a right of action
recognized under the law. These rights of action are known in Texas law as
causes of action. The concept of a cause of action has various consequences.
It denotes a limitation of judicial power to grant remedies in civil actions.
One might see this concept as reminiscent of the common law forms of
action, but the modern concept authorizes a much more flexible approach to
judicial power.
Some jurisdictions avoid using the cause of action language because
of procedural burdens that had been attached to the concept during the codepleading era. In the Federal Rules of Civil Procedure, for example, Rule
8(a) describes the allegations needed to assert a “claim for relief.” This
change in terminology does not alter the need for legal authority to support
“A constructive trust is not in reality a trust but is an equitable remedy against unjust
enrichment. … It is not necessary to the establishment of a constructive trust that an
express or conventional trust relationship shall exist between the parties, or that any
promise shall have been made by the one for the benefit of the other.” Hatton v. Turner,
622, S.W.2d 450, 458 (Tex.Civ.App.–Tyler 1981, no writ).
23
See 1 DOBBS at 590.
24
See Anthony J. Bellia, Jr., "Article III and the Cause of Action," 89 Iowa L. Rev. 777,
785-86 (2004).
22
8
judicial remedies. A claim for relief depends, as does a cause of action, on
the existence of both a legal right and of a private remedy in court to enforce
that right.25 Either a cause of action or a claim for relief, which is
recognized as valid in today's legal world, signifies that both requirements
are satisfied.
If neither court-made nor legislative authority supports the judicial
power to provide a civil remedy in a particular fact pattern, the plaintiff
cannot sue. For example, the Supreme Court of Texas has decided that
plaintiffs have no cause of action for negligent infliction of emotional
distress26 or to redress the harm caused by false-light invasions of privacy.27
A litigator considering Texas law in regard to a prospective lawsuit must,
therefore, discover one or more Texas causes of action to fit his client’s facts
and one or more legally approved remedies that best repair the plaintiff’s
injury.
If that litigator finds his client has been deprived of some benefit now
being held by another person, he will consider seeking return of that benefit
through one of the remedies of restitution. Such a remedy must be based on
some basis for liability. Under the modern law of restitution that cause of
action is determined through proof that the other party will be unjustly
enriched if she is able to retain the client’s property. In short, the cause of
action rests on a finding that (1) the defendant has obtained a benefit (2) at
the expense of the plaintiff and (3) that retention of this benefit by the
defendant amounts to unjust enrichment. One might argue that this is an
action in quasi-contract or in assumpsit, but nothing is served by using the
language of ancient fictions or forms of action.
III. LIABILITY FOR UNJUST ENRICHMENT
A. The Emerging Law of Unjust Enrichment
Section 1 of the Restatement (Third) of Restitution and Unjust
Enrichment reads, as follows: "A person who is unjustly enriched at the
25
The legal right typically consists of a legal prohibition against action that harms the
plaintiff, which the law deems wrongful. Tort law, for example, prohibits the defendant
from negligently acting in a manner that harms the plaintiff. Contract law provides a
remedy to one party to a legally binding agreement when the other party fails to comply
with his obligations under that agreement. It thus imposes a legal prohibition against a
breach of contract by imposing the penalty of damages.
26
See Boyles v. Kerr, 855 S.W.2d 593, 595-96 (Tex.1993).
27
See Cain v. Hearst Corp., 878 S.W.2d 577, 578 (Tex.1994).
9
expense of another is subject to liability in restitution."28 Although the
Restatement (Third) does not further establish the specifics of this liability
for restitution, the sentence contains the elements of the general unjustenrichment cause of action. The defendant’s liability for restitution depends
on her acquisition of a benefit at the expense of the plaintiff and on the
court’s conclusion that her retention of this benefit would constitute unjust
enrichment. The Supreme Court of Colorado in its decision in Lewis v.
Lewis explained its unjust-enrichment claim in the following manner:
We have previously determined that a party claiming unjust
enrichment must prove that (1) the defendant received a benefit
(2) at the plaintiff's expense (3) under circumstances that would
make it unjust for the defendant to retain the benefit without
commensurate compensation.29
The three elements of the cause describe, in broad form, the situation that
must exist before the remedies of restitution become available. As noted
earlier, the key feature of the remedy of restitution is the return of that
unjustly held benefit to the plaintiff.
B. Texas Courts and Unjust Enrichment
The Supreme Court of Texas has seemingly adopted a general cause
of action for unjust enrichment. That court has not, however, explicitly
outlined the elements of that cause of action. In the overhead, the elements
suggested for that cause of action follow the pattern implied by § 1 of the
Restatement (Third) and expressed by the Colorado Supreme Court: The
plaintiff must allege and prove: (1) The defendant has acquired a benefit; (2)
This benefit was acquired at the expense of the plaintiff; and (3) Retention
of the benefit by the defendant would constitute unjust enrichment.
The advantage of the general unjust-enrichment cause of action
is that its first two elements can quickly exclude those cases in which
the defendant has not been enriched at the expense of the plaintiff.
The unjust-enrichment element appears open-ended and therefore
troublesome, but in fact that concept is cabined quite effectively by a
set of affirmative defenses that limit its scope.
28
RESTATEMENT (THIRD) RESTITUTION AND UNJUST ENRICHMENT § 1
(2011).
29
189 P.3d 1134, 1141 (Colo. 2008). Although Supreme Court of Texas opinions
support the conclusion that it has approved such a cause of action, the Court has not so
explicitly described the elements of that cause.
10
Acceptance of the general cause also makes superfluous the
special unjust-enrichment claims for money-had-and-received and
quantum meruit. These common-count holdovers from the assumpsit
form of action generally tend to add only confusion.30 Money-hadand-received and quantum meruit claims require proof of unjust
enrichment, but are limited to special circumstances.
Over 50 years ago, the Texas Supreme Court described the
cause of action for money-had-and-received as one that depends on
findings that (1) money held by the defendant (2) belongs to the
plaintiff (3) as a matter of "equity, justice, and law."31 These
elements mimic the general unjust enrichment cause while apparently
limiting the right of recovery to money. This limitation has no
modern justification, and can easily be expanded to include other
forms of property.
The elements of a quantum meruit cause of action are that: (1)
valuable services were rendered or materials furnished; (2) for the
person sought to be charged; (3) which services and materials were
accepted by the person sought to be charged, used and enjoyed by
him; (4) under such circumstances as reasonably notified the person
sought to be charged that the plaintiff in performing such services
was expecting to be paid by the person sought to be charged.32 These
four elements include the three elements of a general unjust
enrichment cause with the addition of what appears to be a form of
the “volunteers” defense to unjust enrichment. For example,
beneficial services provided the defendant voluntarily by the plaintiff
in a manner that circumvents the defendant’s ability to reject those
services bars recovery under quantum meruit.33 A plaintiff who
provides services in that manner also cannot succeed under a general
unjust enrichment cause of action because the plaintiff would be seen
as a volunteer.
30
These claims dealt with particular circumstances that fell under the assumpsit form of
action.
31
Staats v. Miller, 243 S.W.2d 686, 687 (Tex. 1951).
32
Vortt Exploration Co., Inc. v. Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex. 1990).
The Texas Supreme Court's statement of the first element merges the general assumpsit
counts of quantum meruit (claim for services) and quantum valebat (claims for goods).
33
See RESTATEMENT (THIRD) RESTITUTION AND UNJUST ENRICHMENT §
2(3) (2011): “There is no liability in restitution for an unrequested benefit voluntarily
conferred, unless the circumstances of the transaction justify the claimant's intervention
in the absence of contract.”
11
These special causes prevent unjust enrichment and provide restitution
as their remedy. By their terms, however, they apply only to unjust
enrichment when the defendant has received money (money-had-andreceived) or when the defendant has received services or goods (quantum
meruit). If the Supreme Court of Texas were to recognize the general cause
of action, it would replace the need for these special causes, and Texas law
would no longer need to carry the dead weight of the ancient language of
general assumpsit's common counts.
C. Lower Court Rejection of an Independent Cause
Controversy does exist in Texas cases concerning the general unjustenrichment cause of action. When considering the cause of action, most
Texas courts of appeals have stated that no independent cause of action for
unjust enrichment exists in Texas. For example, in Walker v. Cotter Prop.,
Inc., the Dallas court of appeals made the following statement:
Unjust enrichment is not an independent cause of action but
rather characterizes the result of a failure to make restitution of
benefits either wrongfully or passively received under
circumstances which give rise to an implied or quasicontractual obligation to repay.34
The numerous Texas courts of appeal that have cited this language typically
fail to explain the meaning they ascribe to an independent cause of action.
This characterization might imply that restitution works largely to add
alternative remedies to causes in tort or contract. If this meaning were
intended, one would assume that restitution could not be awarded except
where the defendant acquired property through wrongful conduct. This
characterization, if intended, falls in the face of Texas Supreme Court
rulings.35
However, the language used in Walker appears to identify unjust
enrichment as the theory underlying a general claim better labeled as one in
quasi-contract. This characterization would seem to arise from resistance to
34
181 S.W.3d 895, 900 (Tex.App.-Dallas 2006, no petition). That statement has been
copied or quoted by a number of courts of appeals. See, e.g., Foley v. Daniel, 2009 WL
3301738 (Tex.App.-El Paso 2009); Casstevens v. Smith, 269 S.W.3d 222, 229
(Tex.App.-Texarkana 2008, rev. denied); R.M. Dudley Constr. Co. v. Dawson, 258
S.W.3d 694, 703 (Tex.App.-Waco 2008, rev. denied); Argyle Ind. School Dist. Ex rel. Bd
of Trustees v. Wolf, 234 S.W.3d 229, 246 (Tex.App.-Fort Worth 2007, no pet.).
35
See, e.g., Bryan v. Citizens National Bank in Abilene, 628 S.W.2d 761, 762-63 (Tex.
1982) (mistaken payments to an innocent recipient can be recovered through the right of
restitution).
12
the modern language of restitution rather than a rejection of the cause of
action. If so, the discussion concerns a search for the proper language rather
than a challenge to the existence of general liability for unjust enrichment.
In trying to make sense of Texas law on this subject, federal courts have
concluded that lower Texas courts seem to be saying that no unjustenrichment claim exists that is independent of the special unjust-enrichment
claims of quantum meruit and money-had-and-received.36 That conclusion,
however, appears to conflict with the suggestion in Walker that a general
quasi-contract cause of action exists. It also fails to account for the general
language used by the Texas Supreme Court in its decisions.
D. Texas Supreme Court Decisions Based on Unjust Enrichment.
The Supreme Court of Texas has written opinions that are consistent
with an independent unjust enrichment cause of action. In the Myrad v.
LaSalle Bank Nat. Assoc., the court rescinded a trustees' deed because it
concluded "that Myrad will be unjustly enriched if the mistaken deed to [the
purchaser at foreclosure] is enforced."37 The use of unjust enrichment in this
case justified the Court's rescission of the deed even though its error was not
the result of Myrad's wrongful action. Furthermore, the justification for
rescission did not come from a cause of action for money-had-and-received
or for quantum meruit.
In HECI Exploration Co. v. Neels, the Supreme Court spoke in favor
of liability based on a cause of action for unjust enrichment without
requiring tortious conduct by the defendant. Although the court held that
royalty owners could not recover for unjust enrichment, it gave the
following explanation:
We have recognized that, in some circumstances, a royalty
owner has a cause of action against its lessee based on unjust
enrichment, but only when the lessee profited at the royalty
owner's expense. Unjust enrichment was the basis for recovery
in [the Gavenda case] in which we held that division orders
were not binding on a royalty owner when the lessee
erroneously prepared them and then retained for itself the
royalty that should have been paid.38
In Gavenda v. Strata Energy, Inc., the Supreme Court referred to the
problems that arose when erroneous division orders led an operator to
36
See Hancock v. Chicago Title Ins. Co., 635 F.Supp.2d 539, 560 (N.D.Tex.2009).
300 S.W.3d 746, 753 (Tex. 2009).
38
982 S.W.2d 881, 891 (Tex. 1998).
37
13
overpay some and underpay others. In such a case, underpaid royalty
owners have a remedy that allows them to recover from the overpaid royalty
owners. "The basis for recovery is unjust enrichment."39 In Fortune
Production Co. v. Conoco, Inc., the Texas Supreme Court approved the
general rule that "[a] cause of action for unjust enrichment is not available to
recover payments in addition to the contract price the parties agreed upon."40
It then upheld the trial court's judgment that awarded relief on an unjustenrichment cause of action that did not conflict with a contract.41
IV. CONCLUSION
The Texas law of restitution, at least as developed by the Supreme
Court of Texas, differs from the language used in lower Texas courts.
Nevertheless, the Texas Supreme Court has not explicitly adopted a
simplified and generally applicable cause of action for unjust enrichment.
As a result, lower Texas courts seem hesitant to read too much into the
supreme court’s rulings in this area.
The ancient terminology that seems to have captured the lower Texas
courts both fuels their conservative approach and obscures the significant
issues. In this way, terminology hinders the modern development of
restitution in Texas. For example, no one benefits by continuing to identify
special unjust-enrichment claims by the names of the common counts under
the ancient assumpsit form of action.
The common law courts of England expanded their jurisdiction over
contracts to include quasi-contracts – that is, claims not based on actual
agreements but instead on obligations implied as a matter of law. The policy
reason for this expansion was the prevention of unjust enrichment. Having
created the substantive law and remedies of trust law, the courts of equity
enhanced their authority by creating special remedies to prevent unjust
enrichment. They called the primary remedy for unjust enrichment a
constructive trust. The "constructive" nature of this trust means that it is not
a trust relationship created by the parties. No trust need exist, but the equity
courts, like the common law courts, cloaked their new substantive law of
unjust enrichment and this expansion of the constructive trust remedy with a
linguistic disguise. They pretended that it fit under the umbrella of trust law,
39
705 S.W.2d 690, 692 (Tex. 1986).
52 S.W.3d 671, 685 (Tex. 2000).
41
See id.
40
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even as the constructive trust remedy was expanded to cause return of
property held by one who had never agreed to be a trustee.
Modern courts have no need for the linguistic cover provided by
quasi-contracts or constructive trusts. This language offers no clue to its
modern substantive and procedural meaning; that meaning must be provided
by interpretations that often rely on further unhelpful terms. Using language
that has more to do with obsolete procedural forms and fictional
rationalizations for the jurisdiction-enhancing efforts of ancient courts leaves
courts and lawyers dependent on what amounts to a secret code.
Deciphering this code should not be the burden of judges and lawyers who
have better things to do.
Texas courts do recognize a general cause of action for the right to
restitution. The Supreme Court of Texas labels this general cause one for
unjust enrichment, while lower Texas courts refer to it as one arising from
quasi-contract, an implied in law contract, or merely as a right to restitution.
For the time being, a lawyer may need to follow the terminology of the
appropriate court of appeals while recognizing the three elements of unjust
enrichment that must be proved. The Supreme Court of Texas has
frequently consulted the original Restatement of Restitution (1937) for
information about the subject, and we can expect it to use the new
Restatement (Third) for the same purpose. To the extent that happens, the
Texas Supreme Court is likely to establish more clearly the general unjust
enrichment cause of action. When that happens, lawyers in Texas will have
a straightforward and helpful cause of action to deal with a host of cases.
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GLOSSARY
ASSUMPSIT: The English common law courts required complaining parties
to satisfy certain forms of action that each required particularized
allegations. The assumpsit form of action expanded first to encompass what
we now know as contract law and later became the procedural vehicle for
cases seeking protection against unjust enrichment. The common law courts
rationalized their inclusion of unjust enrichment cases by referring to these
new cases as quasi-contracts or contracts implied in law. In other words, the
common law courts presented unjust enrichment cases as ones that
resembled contract cases so the assumpsit form of action could serve as a
vehicle for these new claims.
COMMON COUNTS: As it developed, the assumpsit form of action came
to include even more particularized forms. These were called the common
counts largely because they represented the forms used most frequently
under the general label of assumpsit. Two of the common counts were
known as quantum meruit and quantum valebat. One brought a quantum
meruit claim when the complaining party sought payment for services
provided the defendant who was not strictly bound to pay under a contract.
Similarly, a complaining party seeking payment for goods provided the
defendant sued in quantum valebat. Another of the common counts was the
claim for money that the defendant held, which rightfully belonged to the
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plaintiff. This was the money-had-and-received common count. Although
Texas courts have collapsed the two “quantum” counts into one (quantum
meruit), they continue to recognize causes of action using these names.
CONSTRUCTIVE TRUST: This remedy consists primarily of an injunctive
order commanding the immediate transfer of title or of property from the
defendant (constructive trustee) to the plaintiff (beneficiary). This remedy
requires the plaintiff to trace property taken from him to the tangible
property now being held by the defending party. Equity courts created this
as a remedy to prevent unjust enrichment, but used trust language to create
the fiction that this new liability fell within their existing authority over
trusts.
EQUITABLE LIEN: This remedy consists primarily of the court's
imposition of a lien on property held by the defendant. The remedy requires
the plaintiff to trace property taken from him to tangible property now being
held by the defending party. An equitable lien gives the plaintiff the ability
to foreclose and satisfy his claim from this property with priority over other
creditors. The equitable lien differs from the constructive trust in that the
former gives the plaintiff only a right against part of the property but the
latter allows the plaintiff to take all of the traced property.
IMPLIED-IN-LAW CONTRACT: This is not a contract; instead, it refers to
the legal fiction that allowed the common law courts to give monetary relief
to prevent unjust enrichment. The legal obligation of an implied-in-law
contract does not depend on the agreement of parties and does not have its
basis in a real contract. True contracts are either expressed in words
sufficient to show agreement or implied-in-fact, which means the agreement
can be derived from actions taken by the parties.
LEGAL AND EQUITABLE RESTITUTION: The court-made law of civil
restitution arises from both sides of the bifurcated system of English courts.
Both common law and equity law provided a substantive basis for liability,
and each supplied their own unique remedies to accomplish restitution.
Although courts tend to label as equitable issues concerning restitution,
some part of the law of restitution derived from the common law.
Commentators refer to concepts derived from the common law as legal
restitution and to those derived from the courts of equity as equitable
restitution. The primary significance of this distinction arises in federal
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court because the Seventh Amendment right to a civil jury trial applies only
in cases at common law.
QUASI-CONTRACT: The common law courts rationalized their extension
of power over cases based on unjust enrichment by creating a fiction that
these claims were based on an "implied-in-law" contractual obligation.
These courts imposed liability not because of an agreement of the parties,
found in either an express contract (written or oral contract) or an impliedin-fact contract (circumstances prove a contract), but because unjust
enrichment would occur in the absence of restitution. In other words, a
quasi-contract means that no contract exists. As a matter of law, the
existence of a valid and enforceable contract bars enforcement of an
implied-in-law contract.
RESCISSION: Although a valid contract bars recovery in restitution, a court
can rescind a contract to avoid unjust enrichment. Courts typically order
rescission when a contract was entered on the basis of fraud or mutual
mistake or when one party has failed to perform a material obligation under
the contract. Once a court rules in favor of rescission, it can order restitution
to require the return of property or money provided by the plaintiff in
performance of his obligations.
RESTITUTION: Restitution requires those who have been unjustly enriched
to return the benefit to the party from whom it was acquired. The defending
party "must either restore the benefit in question (or its traceable product), or
else pay money in the amount necessary to eliminate unjust enrichment."
RESTATEMENT (THIRD) OF RESTITUTION AND UNJUST
ENRICHMENT § 1, cmt a (2011). Because of their nature, the particular
remedies of restitution apply only to cases in which the defending party has
acquired some benefit at the expense of the claiming party, and has no sound
basis to retain it.
UNJUST ENRICHMENT: This term refers to the basis of liability for which
restitution provides the remedy. But-for the well-established nature of this
term, the RESTATEMENT (THIRD) OF RESTITUTION AND UNJUST
ENRICHMENT § 1, cmt b (2011) would have pressed for use of the term
"unjustified enrichment." The latter term does not lend support to the belief
that restitution is based on an open-ended decision about the morality of a
transfer. Instead, it makes the point more clearly that restitution remedies
transfers of money or property for which there exists no adequate legal basis.
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RESTITUTION MODEL
GENERAL CAUSE OF ACTION
FOR UNJUST ENRICHMENT
Elements of Liability:
The plaintiff must allege and prove:
1. The defendant has acquired a benefit.
2. That benefit was acquired at the expense of the
plaintiff.
3. And retention of that benefit by the defendant
would constitute unjust enrichment.
AFFIRMATIVE DEFENSES TO LIABILITY
 Laches and limitations
 Volunteers
 Voluntary payment
 Change of position
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 Bona fide payee
 Unclean hands (estoppel)
REMEDIES OF RESTITUTION
 Monetary Award
 Reformation of Documents
 Constructive Trust--Traced Property
 Equitable Lien--Traced Property
 Equitable Subrogation--Traced to Lien Removal
 Equitable Accounting
Alternative to Remedies in:
 Tort—Yes
 Contract--No, unless contract rescinded
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