Goal of Restitution as a Remedy
“Person unjustly enriched at the expense of another must make restitution”
○ Goal: return DEFENDANT to “rightful position”
○ Defendant focused (not P), Benefit focused (not loss)
Analysis for Restitution
QUALIFY
○ UNJUST ENRICHMENT: D’s culpability & gain
○ PROCEDURAL DEVICE: Quasi-K, Quantum Meruit, Rescission
○ ADD: Constructive Trust, Equitable Lien, Accounting of Profits
MEASURE
○ What: D’s gain, advantage, benefit
○ How: profits, cost savings, Monetary Value
○ ADD: Specific restoration and tracing
COA: Unjust Enrichment
ENRICHMENT: D Acquires Benefit
○ Unsolicited – P gives (mistake, subrogation)
○ Solicited - at D’s Request – (e.g. contract)
○ Wrongfully Acquired – D commits tort
UNJUST = wrongful acquisition
○ NOT Voluntary / NOT gift
○ Culpability: D’s wrongful behavior [Unlawful act (tort); Keeps benefit wrongfully gained]
Why choose Restitutiton
CLAIM of Unjust Enrichment
○ Restitution is only source of liability
ELECTION to recover D’s gains
○ Alternative claim UE (Waive tort, sue assumpsit)
○ D’s Gains more than losses, -OR- easier to prove
SPECIFIC Restoration
○ Want specific thing/$ back; Tracing (creditors, bankruptcy, appreciation)
Qualifying for Rescission of K
● Fraud
● Substantial Breach of K (Earthinfo)
● An opportunistic breach/ breaching w bad intent, not sufficient to look at the loses of Plaintiff - Measured by gain to D
● Mistake [Mutual mistake of material fact OR Unilateral mistake known to other side]
● Duress [felt like had no other option but to enter the k, pressured, other party acted in bad faith]
● Defenses: Laches – P waited too long; Unclean Hands – P has also committed a wrongful act
Reformation
Rewrite K to conform to original understanding (meeting of the mind)
○ return unjust benefit from mistaken K
● Qualify: Valid original K; Mistake in writing, “scrivener’s error”
● Measurement: restore (reform) original K
● Defenses: Laches; Unclean Hands
Constructive Trust v. Equitable Lien
Constructive Trust: where a trust is created which compels that title to specific property be re-conveyed back to P.
Equitable Lien: grants the P a lien, or security interest in specific property held by D.
○ Both are subject to equitable defenses.
Why Use Equitable Restitution?
Specific Restoration
■ Tracing – follow P’s money through conversions or subsequent transactions
● Advantage in bankruptcy, insolvency, creditors; may allow for appreciation (Const. Trust); may allow for P to reach property that is “exempt”
Want “equitable” remedy
■ Statutory (ex. ERISA & many other fed statues ONLY allow for equitable remedy)
■ Bench trial (no $; specific remedy so no rt. to jury trial)
Criminal Restitution
General monetary fine paid to victim (rather than the state) / $$ ordered in criminal case
To punish D OR $ pay for victim’s loss (damages)
Quasi-Contract
Define: legal fiction of “implied at law” K (court-created)
Distinguish from Implied in Fact K!!!
○ Implied in Fact – facts, behavior establish K [there is a k bc of behavior] (THIS CREATES EXPECTANCY REMEDY)
○ Implied in Law (Quasi-K) – FACT PATTERNS FOR QUASI-K: no actual K but court creates “fictional” K
- Recovery based on D’s gains or FMV of services rendered [or a failed k]
OR - there is a valid contract, and the breaching party is trying to recover based upon the benefit they conferred to the non-breaching party
Quantum Meruit
“As much as he has deserved”
- Special subset of quasi-K where “price” was never discussed
Define: Implied K to recover value of services performed/rendered
Measurement: “Value” of services → Fair Market Value; Replacement Costs
Equitable Lien
- Wrongful act
- D has legal title to the property
- Inadequate legal remedy
- Specific property has been acquired by wrongdoer AND that property can be traced to the wrongful behavior
Constructive Trust
- Wrongful act
a. fraud, embezzlement, conversion leading to D’s UE - D must have legal title to convey
- Inadequate legal remedy?
- Specific property has been acquired by wrongdoer and that property can be traced to the wrongful behavior
a. P owned property previously (has superior claim to property)
Ex. D steals $100 from P and buys a home for $100k cash.
Equitable Lien: Tracing
Specific property has been acquired by wrongdoer & that property can be traced to the wrongful behavior
- OK if not solely traceable to the new property
- Lowest intermediate balance rule applies to commingled funds:
○ Once traced proceeds are withdrawn, they are gone
Constructive Trust Tracing
Specific property has been acquired by wrongdoer & that property can be traced to the wrongful behavior
- Must be solely traceable to the new property
○ Ex. D embez. $100k and bought house for $100k.
○ NOT – D embez. $100k and use to fix kitchen of a house already owned (could get an EL on the house for the $100 but not the house) - Lowest intermediate balance rule applies to commingled funds:
○ Once traced proceeds are withdrawn, they are gone unless can show D’s intent to ‘replenish”
○ E.g., D appropriates $100 and puts it into account with $0
§ Spends/ withdraws $50, then $100 of his own money
§ If P sues, D will say no money was in account to start with, and the most tracing can show is $50 in the account ($50 withdrawn, so gone, and $100 not Plaintiffs) - Plaintiff gets the benefit of an increase in value
CT: Bona Fide Purchaser
BFP is one who
○ Took for value
○ Without notice of the facts giving rise to the CT
- Mortgage holder can be a BFP
- BFP with legal title WILL prevail over plaintiff
- Plaintiff will prevail over unsecured creditors
- Cannot get a CT against BFP
EL: Bona Fide Purchaser
BFP is one who
○ took for value ($)
○ without notice of the facts (fraud, embezzlement etc.) giving rise to the EL
- Note: Mortgage holder can be a BFP
- Plaintiff will prevail over unsecured creditors
