Remedies

REMEDIES Outline

Analysis for Exam:

  1. Determine cause of actions based on types of remedies desired
    1. Ex: If a tort is committed against you, you may seek damages, restitution, or an injunction
    2. Ex: If a breach of contract occurs, you may seek damages, restitution, or specific performance
  1. Sometimes you will get punitive damages, and other times only compensatory – which is important to consider when evaluating which cause of action to bring
  1. Determine the elements required to obtain that remedy

DAMAGES

To place the person in the same position as they would have been if the K had never happened

There are 3 elements (or limitations) in establishing damages:

  1. The damages must be foreseeable
    1. POLICY: fairness; encourages people to enter into Ks without fear of needing to breach; economic efficiency
    2. Foreseeability = contemplation of parties; if he would have considered the question, he would – as a reasonable man – have concluded that the type of lossin question was liable to result
    3. Must be AT THE TIME of K formation
    4. JUDGE determines foreseeability – NOT the jury
    5. TWO rules: Hadley rule and Tacit Agreement Test
  2. The damages must be reasonably certain, and NOT speculative
  1. Mostly important in cases of special damages/lost profits
    1. New Business RULE: per se rule of NON-recoverability of lost profits when businesses were NOT open before the breach b/c damages would be too speculativeand uncertain b/c there is no track record
  1. This is a Minority Rule
    1. Evidentiary RULE: regardless of whether business is new or not, the plaintiff gets an opportunity to provide evidence as to the lost profits using expert testimony, economic and financial data, market surveys, business records of similar enterprises and more
  1. Insufficient to evidence profits of a mom and pop store with franchise data
    1. Plaintiff Friendly Rule: court breaks certainty into 2 elements: (1) Whether there was a loss AND (2) what the amount of the loss was; the higher the degree of certainty the less the court requires a high degree of certainty in terms of the amount
  1. The damages must be unavoidable (NOT avoidable consequences)
    1. It is not so much that the plaintiff has a duty to mitigate, it is simply that plaintiff cannot recover for losses that could have been avoided
    2. It is the defendant’s burden to prove mitigation (except landlords as plaintiffs must prove that they mitigated)
    3. General TEST: what would a reasonable person have done to minimize the loss at the time of the breach
  1. For surgical situations: the jury should consider whether the surgery imposes (1) peril to life, (2) undue health risks, (3) anguish that goes beyond the bounds of reason
    1. Hall case: doesn’t have to undergo surgery if there is a recognized risk – UNLESS the recognized risk is clearly remote – However the recognized risk need not be significant or even probable
    2. Does not have to do if not within financial means or the expenditure would be disproportionate to the loss sought to be avoided
    1. Mitigation is judged at the time of the breach; foreseeability is judged at the time of K formation
    2. This is NOT an all or nothing rule; if the court finds that the plaintiff failed to mitigate then she just doesn’t get the damages that she could have avoided

General Damages =

  • Harm that arises naturally and regularly from the breach of the type of K breached
  • Deemed foreseeable as a matter of Law
  • Example: A hires B to paint A’s house and they have a K; A pays B; then B breaches and A finds a replacement painter and that replacement painter costs more; the difference in cost is a general damage
    • The breacher does NOT need to anticipate the exact price

Specific or Consequential Damages =

  • Those damages that arise from special circumstances in the particular situation regarding the plaintiff
  • This is when foreseeability becomes an issue
  • Defendant does NOT have to pay for special damages UNLESS it was contemplated by the parties that such damages would be possible or there was enough information for the defendant to have recognized the liability
  • Example: B and A have a K to sell coffee to A for 2.00 per lb. but he breaches and A had to buy coffee for 2.75 per lb. Also, A had a K to re-sell the coffee, which he was unable to do b/c of B’s breach. The price difference in A’s purchase of the coffee would be the general damages. The money lost from not being able to re-sell the coffee would be a special damages and foreseeability could only be proven if B knew or should have known that A would re-sell the coffee.

Minority Damages RULE:

  • Tacit Agreement Test: Must prove (1) at the time of contracting defendant had reason to foresee the possibility of the type of loss that actually resulted, AND (2) defendant “tacitly agreed” to assume liability for such loss
    • Lamkin: guy ordered tractor and it arrived without lights so he couldn’t work at night and therefore claimed lost profits when he stopped paying the payments and was sued; court said that there was NO tacit agreement b/c the missing part was only $20 and the lost profits was a huge amount
    • UCC and 2nd Restatement of K rejects this test b/c a “tacit agreement” clause can be put into a K – however the restatement says that the judge can limit damages to avoid disproportionate compensation

Damages re: TORTS =

  • Foreseeability:
    • When causation is established, then the damages element of foreseeability is established; therefore it is merely part of the prima facie case
    • There is NO issues as to the amount of damages b/c of the “eggshell doctrine” where you take the plaintiff as you find them; therefore amount doesn’t have to be foreseeable
  • Certainty:
    • All bets are off in torts b/c when a 3 year old dies the juries can do whatever they want to speculate on what the child would have done and made during their lifetime
  • Unavoidable Consequences:
    • Most courts say that the plaintiff’s unreasonable conduct occurring before or contemporaneously with the defendant’s negligence is relevant to the issue of comparative negligence, whereas the plaintiff’s conduct subsequent to the injury is relevant to the issue of mitigation of damages

Policy for the different damages rules b/w Torts and Contracts:

  • Tort causes of action involve involuntary relations whereas contracts involve voluntary causes of action
  • We want to encourage contracts BUT we don’t want to encourage torts
  • There are deterrence and punishment reasons involved with torts, but not contracts

Liquidated Damages or Agreed Remedies

  • ONLY for contracts
  • POLICY reasons for allowing Agreed Remedies:
    • Eliminates obstacles created for plaintiffs by the foreseeability and certainty requirement
    • Eliminates spiraling costs of litigation
    • Economically efficient
  • Disadvantages of Agreed Remedies:
    • Removes judges power over remedies
    • Agreed amount is rarely accurate
    • A high agreed remedy throws off economic efficiency b/c it forces defendants to perform
    • If defendant is unable to perform, an agreed remedy pay perform a more punitive action than compensatory
  • Courts WILL enforce liquidated damages clause, BUT NOT a penalty clause
    • There are 2 different Tests courts use:
      • 2 Prong Test: It is NOT enforceable UNLESS (1) the amount is a reasonable forecast of actual damages AND (2) damages must be incapable or very difficult to accurately estimate
        • Southwest (CAN get liquidated damages even if there is NO actual damage) and 1st Restatement
          • Norwalk: CANNOT get liquidated damages when there were NO actual damages
        • Balancing Approach: Clause is enforceable IF the amount is reasonable in light of anticipated or actual harm and the difficulties of proof of loss
          • UCC – reasonableness factor
          • 2nd Restatement – difficulties of proof of loss
        • CA RULE: clause is valid unless the provision was unreasonable under the circumstances existing at the time the K was made

PUNITIVE DAMAGES

Serves a deterrence and punishment function, as well as a strong educative function

The effectiveness of these goals depends upon:

  1. Whether the law in fact regularly catches and punishes persons who flagrantly violate the rights of other persons, AND
  2. Whether potential offenders understand that the law proscribes, and that enforcers are likely to punish their contemplated behavior

Problems with Punitive Damages:

  • These awards seem arbitrary
  • Lacks a lot of procedural safeguards
    • Sometimes juries determine punitive damages based on the wealth of the defendant; the solution for this is to bifurcate trials
      • In CA they bifurcate trials
      • Also, in discovery π must first make a showing of liability before they can begin discovering defendant’s net worth
    • Evidentiary problems
    • Fairness to other plaintiffs with the same claim that come after the first plaintiff

Policy arguments of Punitive Damages made in Wangen v. Ford Motor Company (1980)

U.S. Supreme Court uses 3 Guideposts to determine if punitive damages are grossly excessive and therefore a substantive due process violation:

  • Degree of reprehensibility
    • Reflects the idea that some acts are more blameworthy than others
    • Balancing TEST with factors:
      • Physical v. Economic harm (physical worse)
      • Whether plaintiff was vulnerable
      • Intentional or accidental
      • Callous diregard?
    • Ratio b/w the harm suffered and punitive damages award
      • Exemplary damages must bear a “reasonable relationship” to compensatory damages
      • The LIMIT is 9 to 1 b/c anything in double digits would look suspicious, but this is not a bright line rule
    • Sanctions for Comparable Misconduct
      • Look at fines for comparable types of behavior and compare
      • Downplayed b/c court doesn’t find it particularly helpful

RULE: There are NO punitive damages for breach of K claims, no matter whether the breach is intentional or unintentional

  • EXCEPTION: when the breach of K amounts independently to a tort for which the assessment of punitive damages would be appropriate under tort law
    • “Punitive damages are NOT recoverable for a breach of K unless the conduct constituting the breach is also a tort which punitive damages are recoverable”
    • Courts are inconsistent as to whether the evidence must establish each element of the tort or whether “tort-like” behavior justifies punitive damages
      • Example: Fraud or Misrepresentation

RULE: NO punitive damages for a Breach of the Covenant of Good Faith and Fair Dealing

  • EXCEPTION: When there is a special relationship b/w the parties, then the breach of this covenant (which is implied in every K) WILL get you punitive damages
    • Most special relationships are for insurer and insured
      • (In CA, ONLY insurer/insured are recognized as special)
    • POLICY for the exception:
      • The unequal bargaining power with insurance companies;
      • The boilerplate Ks;
      • There is a greater concern for health than market efficiency;
      • When people buy insurance they pay for peace of mind;
      • Gov’s require insurance by law, so they should protect the consumers that enter into those required Ks

Like punitive damages, non-pecuniary damages are NOT typically given in breach of K cases

  • Non-pecuniary = emotional distress, annoyance, inconvenience
    • EXCEPTIONS:
      • Ks of carriers and their passengers
      • Ks of innkeepers and their guests
      • Ks dealing with the disposition of dead bodies
      • Ks for the delivery of messages concerning death
    • Recently, some courts have allowed emotional distress damages in Ks involving sale or construction of residential real property

Interest and Prejudgment Inflation and Atty Fees & Costs

These are the THREE ways that Plaintiffs are often undercompensated

RULE: Damages are calculated as of the date of breach

Prejudgment interest = time between the breach and the judgment

Post judgment interest = time b/w the judgment and when the plaintiff actually pays

Policies for plaintiff gaining interest:

  • Damages are assessed at time of breach and after that time the prices of things could have changed
  • Plaintiff could have used that money during that time to make more money
  • Defendants can earn the money for the judgment in interest during that time and therefore makes it worth prolonging the litigation

RULE: Plaintiff gets prejudgment interest when there is a definite sum (means you can look at the K or do a calculation based on the K and tell how much plaintiff deserves)

  • Ex: ∆ promises to pay π $1000 for a car, but then breaches [definite sum]
  • Ex: ∆ promises to pay $50 for each bushel of wheat delivered; by mathematical calculation we can determine the sum [definite sum]
  • Ex: ∆ promises to pay price of wheat on Chicago Board of Trade [definite sum]

Plaintiffs RARELY get to recover PREjudgment interest

Inflation = when the value of money (purchasing power of money) goes down over time; this happens between breach and judgment

  • Plaintiffs are often NOT entitled to collect inflation because it is not foreseeable and it is easier for the court (however it is easy to calculate using the consumer price index)
  • If inflation increases excessively the court may choose to calculate damages as of the date of trial, as opposed to the date of breach
    • When a court does take inflation into account they value the damages as of the date of breach and then add a percentage for inflation
    • In Ancorage Asphalt, the court granted damages as of date of trial and therefore did NOT give prejudgment interest

US RULE for ATTY FEES = Each party bears their own atty fees; the prevailing party does NOT get to collect their atty fees

  • EXCEPTIONS:
    • When the K provides for atty fees:
      • When the K provides for only 1 party to get fees, the courts in CA will apply that clause to BOTH parties and therefore allow the prevailing party to collect atty fees no matter who wins
    • Common Fund cases: if one plaintiff brings a litigation and recovers a bunch of money for a bunch of people, then the plaintiff can collect atty fees before the money is dispersed to everyone
    • Private Atty General fees: if a lawsuit creates new law that benefits a large group of people in a jdx, then the plaintiff can request that the state pay the atty fees since the state benefited
    • Parties guilty of bad faith conduct in the course of litigation

Policies in favor of US rule:

  • Discourages litigation

Policies in favor of English system where prevailing parties can recover atty fees:

  • The recoverable fees are reasonable and not necessarily what the atty charges
  • Attys will take indigent clients
  • Only legitimate cases will be litigated

Why haven’t the US adopted the English System?

  • It would discourage Attys from taking cases that could go either way – it discourages poor people from wanting to take the gamble

Rem1

Rem2

Wrongful Death Claim:

  • Damages are generally limited to compensating and pecuniary loss to survivors PLUS medical expenses and any pain or suffering experienced by the victim before death
    • Pecuniary Loss = victim’s lost earnings minus his living expenses
      • CA allows recovery for loss of comfort, care and protection that the victim provided the survivors; these are called “pecuniary in a sense”
        • BUT, CANNOT recover for sadness, grief, or sorrow

Under common law, if the victim died, then there was NO recovery.

Survival Action is when the estate brings a claim on behalf of the decedent. The estate may recover medical expenses prior to death, funeral expenses, and pain and suffering prior to death.

The rules encourage shopping for an expert witness:

  • How?
    • Under the work product rule anything the atty shares with the expert is confidential until 70 before trial when the expert must be designated
  • Why?
    • We want shopping to encourage hearing adverse opinions that may encourage settlement
    • It also allows an atty to find an expert with good communication skills to explain things to the jury
    • Also, they are very expensive

Collateral Source RULE = a collateral source is payment from any entity other than the defendant; if an injured party receives some compensation for his injuries from a source wholly independent of the tortfeasor, such payment should not be deducted from the damages which would otherwise be collected from the tortfeasor

  • This rule IS applied in CA

The Impact of a Damages Award on Income Tax

Generally, damages received on account of personal injury are exempt from tax. Psychological injuries and punitive damages are excluded from this exemption.

When we compute lost income, should we take income tax into account?

  • Majority = pretend that the plaintiff would get to keep it all
    • For Federal Employer Liability Act, U.S. court has stated that we should take tax into account b/c it is no more difficult or speculative than anything else considered
    • Plaintiff’s argument is that if tax is taken into account for future lost earnings then it should also be taken into account when “discounting to present value” and therefore the discount should be less [not law yet, but court agreed with argument]

Should we tell the jury that plaintiff will NOT have to pay income taxes on the lump sum awarded?

  • Courts are split
  • Pros: Cannot do harm and can prevent juries from overcompensating plaintiffs
  • Cons: Congress was trying to confer a benefit on the π and now it is being given to the defendant

Equitable Remedies

Types of Equitable Remedies:

  • Specific Performance
  • Injunctions (Temporary and Permanent)
    • Equity will NOT enjoin a crime
  • Restitution

The Equitable Hurdles:

  1. The nature of the interest must NOT be trivial
  2. The remedy at law must NOT be adequate
    1. In mortgages and trust cases, inadequacy doesn’t need to proven b/c they are originally “equity” court issues
    2. Courts tend to find legal remedies inadequate when:
  1. The good is unique and cannot be replaced on the open market (property)
  2. The harm imposed on the π will be continuous and cannot be redressed other than by multiple lawsuits
  • If the ∆ is insolvent AND there is some specific fund that the plaintiff is entitled to, then plaintiff can claim the money in equity
  1. Damages are so speculative and difficult to ascertain that the remedy will be ineffective
  1. The equitable remedy MUST be capable of being enforced
    1. Court considers: (1) feasibility and practicality AND (2) Limitations of Judicial Resources
    2. Often comes into play when party seeks specific performance of a K to build
  2. The balance of equities and hardships MUST favor plaintiff
    1. Court considers equities of both parties and hardships of both parties
    2. Often comes into play when people try to enforce covenants not to compete in employment or business contracts
    3. For balance of hardships to apply so as to deny π of the equitable remedy, the harm must not have been caused by a willful defendant (∆ must be innocent)
  3. The plaintiff must come to equity with “clean hands”
    1. Doctrine of Unclean Hands = bars relief to the person who seeks intervention of equity to vindicate her rights in a transaction in which the person was herself guilty of some unethical conduct
  1. Unethical conduct = any willful act concerning the cause of action which rightfully can be said to transgress equitable standards of conduct; must relate to the situation; “they shall have acted fairly and without fraud or deceit as to the controversy in issue”
  2. Majority RULE: bars relief in courts of equity only
    1. Minority RULE: Bars relief in equity and legal courts
    1. Sometimes if Public policy requires it, then the court will grant the equitable remedy despite unclean hands
    2. In Pari Delicto = this defense is available when (1) as a direct result of his own actions, the plaintiff bears at least substantially equal responsibility for the violations he seeks to redress, AND (2) preclusion of suit would not significantly interfere with the public interest
  1. Plaintiff filed an injunction against the defenant for having his cows go onto his land, but plaintiff has been working on his land and caused the fence to fall. The court used this defense to bar euitable and legal remedies. [They could have used contributory neg. or unclean hands]
  1. The plaintiff’s claim CANNOT be brought too late, or plaintiff’s conduct CANNOT have prejudiced the defendant
    1. Equitable Estoppel = prevents a party who has misrepresented a fact from denying his misrepresentation regarding that fact
  1. Some jdx require that the person misrepresenting the fact think the facts aren’t true, but others do not require “intent”
  2. At one time equitable estoppel arguments were prohibited against the government, BUT now this rule is relaxed
  • What is required for equitable estoppel?
    1. Communication either by words, conduct, or silence
    2. The communication is misleading in that it is at variance with the true facts
    3. Someone relies on that communication
    4. The person relying on the communication will be materially harmed if the one who made the communication is later permitted to assert a claim or defense inconsistent with his earlier communication
    1. Doctrine of Laches = bars a claim due to unreasonable delay in pursuing a claim in equity which prejudices the adversary; similar to a bar for statute of limitations, though the statute doesn’t have to have run; ONLY bars equitable remedies
  1. There are 2 elements: (1) Unreasonable delay in bringing the suit, AND (2) the delay prejudices the adversary
  2. When does prejudice occur?
    1. If ∆ incurred substantial expense and will now have to incur additional expense to undo what it has done
    2. Loss of evidence
    3. Loss of another means of defense
  • It NEVER lengthens the statute of limitations, only shortens it

Right to a Jury Trial

In actions at law there is a right to a jury trial under the 7th amendment of the U.S. Constitution.  BUT, often court deal will actions in equity and law – so there are 2 approaches to determining whether a jury is required.

  • Historical Approach: It is a 2 part analysis
    • First: Whether the cause of action was one tried at law at the time of the origin of the constitution, or is at least sufficiently analogous to one that was AND, if so
    • Second: Whether the particular trial decision must fall to the jury in order to preserve the substance of the common law right as it existed at the origin of the constitution
      • This approach is used primarily by state courts
      • You don’t consider the remedy, but merely the “gist” of the action
        • Gist is determined by the nature of the rights involved and the facts of the particular case
      • This has the effect of limiting jury trials, which judges like b/c they don’t have to impanel juries and the juries are too unpredictable
    • Federal Approach: (prefers juries)
      • Equitable issues that do not depend upon factual issues determined by a jury may be decided separately by a judge – otherwise the court tries to find a reasons for a jury trial
      • Ex: Ross v. Bernhard

Contempt for Violation of Court’s Equitable Decree

There are two types of “contempt” that a court may use to enforce an equitable remedy:

  • Criminal: If a court holds someone in contempt to (1) protect the dignity of the court OR (2) punish defendant for disobeying an order then it is criminal contempt
    • The court MUST find intent in order to order a criminal contempt (therefore negligence is a defense)
    • Ex: When defendant is fined $1000 and sentenced to 5 days in jail for violating the order then it is criminal contempt
  • Civil: If a court holds a person in contempt to (1) compel compliance with a court order, which is the coercive function OR (2) compensate plaintiff for past violation of court order then it is civil contempt
    • Prison for civil contempt is limited to 12 months
    • You cannot throw people in jail for failing to pay a debt
      • It is not considered a debt if it is reflected in a court order (ex: child support must be paid or party can be thrown in jail for failure to pay)
      • Settlements are merely debts unless they are incorporated into a court order
    • Ex: When defendant is fined $1000 per day until he complies then it is a civil contempt
    • Ex: When defendant is put in jail until he complies it is civil
    • Ex: When defendant is ordered to pay plaintiff the value of real property he sold to a third party in violation of a court order to convey it to plaintiff

Why does it matter which contempt is used?

  • If it is criminal, a jury trial is required
  • The burden of proof standard will change depending on criminal or civil

Inability to Comply with the Order?

  • Sometimes “an ability to comply” is treated as an element to finding an equitable remedy, but other times it is seen as an affirmative defense
  • If the inability is self induced, then it is still a defense for civil contempt BUT not for criminal contempt

REQUIREMENT: The equitable decree MUST be specific

Interlocutory Injunctions:

  • Temporary Restraining Orders (lasts 10 days): generally not appealable OR
    • Preliminary Injunctions (lasts until trial): a noticed motion, where the opposing party is given notice and there is a hearing in a courtroom with exhibits and oral arguments; they are appealable
  • Factors to determine whether a temporary injunction is granted:
    • Irreparable injury to plaintiff if prelim injunction is NOT granted
    • Likelihood plaintiff will prevail on the merits at the trial as to the permanent injunction
    • Balance of hardships to plaintiff vs. hardships to defendant
      • In regards to TROs look at: the irreparable injury to plaintiff before the hearing on a prelim injunction if the TRO is denied, versus the risk of harm to ∆ if the TRO is granted and the court at the prelim injunction is denied
    • Public Interest
  • 9th 2-Prong Test for Injunctions: (1) probably success on the merits and the possibility of irreparable injury OR (2) A serious question is raised on the merits and the balance of hardships tips sharply in plaintiff’s favor
  • CA Test: (1) Is plaintiff likely to suffer greater injury from a denial of the injunction than defendant is likely to suffer from its grant? AND (2) Is there a reasonable probability of plaintiff prevailing on the merits?
  • Courts are more reluctant to prohibit an ongoing behavior than a behavior that has not been engaged in yet
  • Most courts require plaintiff to buy a bond before getting a TRO or prelim injunction
    • Bond is good b/c it makes courts more confident in providing injunctions, BUT it lessens the amount of people that can get one b/c it requires $
    • TEST for recovery of the bond:
      • Majority: collected by defendant if the defendant wins on the merits
      • Minority: defendant collects only if he can show that the injunction was a mistake

Can you hold someone in contempt based on an injunction that they were NOT a party to?

  • YES, when:
    • They had actual notice of the injunction, AND they acted in “concert” with the parties to the injunction

Modification of an equitable decree:

  • RULE: nothing less than a clear showing of grevious wrong evoked by new and unforeseen conditions (changed circumstances) should lead the court to change what was decreed
    • Ask: what new has happened form the original order that makes it more equitable to modify it?
  • The most common types of orders modified include: custody agreements and support payments from a divorce

Restitution

Can be in Equity or in Law

Unjust enrichment is the cause of action and restitution is the remedy. The point is to focus on the benefit to the defendant conferred by the plaintiff and give the value of that benefit back to the plaintiff.

When is a person unjustly enriched?

When a person confers a benefit upon another if he performs beneficial services OR when he performs services at the request of the other

How do you measure the value of the benefit conferred?

  • Objective standard: What is the benefit worth?
    • Increase in fair market value
    • Cost of labor and materials
  • Subjective standard: What is the value of the particular benefit specifically to the ∆?

Defendant’s enrichment is NOT justified where (1) plaintiff expressly or by inference intended to be compensated for her services with the inference substantially influenced by prevailing social norms of the time AND (2) compensation to the π will NOT impinge on ∆’s right of choice and marginal utility

RULE: Whenever services are rendered and received, then a K for hiring is presumed – thus making in an action for restitution at law

  • Elements of a Quasi Contract:
    • A benefit conferred upon defendant by plaintiff
    • Appreciation by defendant of such benefit
    • Acceptance and retention by defendant of such benefit without payment of the value thereof

RULE: When a plaintiff sues for restitution at law, the court usually requires that plaintiff make prior restoration or at least a tender of restoration as a condition precedent to her legal right to restitution although that tender could be conditional on defendant’s making restitution to plaintiff

  • Exception: If seeking only monetary restitution and is obligated to restore only money and not some specific thing
  • Exception: When the good plaintiff received has become worthless or where it is established that the defendant would have refused a proffered tender

RULE: If plaintiff seeks rescission and restitution in equity, prior restoration is NOT required

Restatement §117: Factors to consider when determining restitution for a person who saved another’s property from destruction or damage:

  • Rescuer was in lawful possession of the property
  • Reasonably necessary to act before the owner could be contacted
  • Rescuer did not have any reason to believe the owner did not desire such assistance
  • The rescuer intended to charge for the services
  • The property has been accepted by owner
    • When can someone get restitution under the restatement?
      • If someone, who attempts to charge, is acting in order to save someone else’s property AND they receive a benefit (emergency) before the owner has been able to make a choice as to whether they want it
      • The Restatement honors the “choice” principal

RULE: Generally the court does NOT find in favor of Plaintiff when they rescue/preserve property. The big exception is in Maritime law where rescuers are often compensated.

Restitution for Preservation of Life or Medical Services

  • Restatement § 116: Elements required to grant restitution for medical services
    • He acted unofficiously and with intent to charge, AND
    • The things or services were necessary to prevent the other from suffering serious bodily harm or pain, AND
    • Doctor had no reason to know that defendant would not consent, AND
    • Impossible for defendant to give consent
  • Restatement § 114:
  • Restatement § 113:
  • Restatement § 112:

Difference b/w emergency and non-emergency: As soon as the emergency is over, then the rescuer would no longer be eligible for restitution for any of the services provided after the emergency

  • HYPO: Minor severally injured in car accident and surgeon cares for her immediately and for the following week, and at kid’s request does not call the parents.
    • Surgeon would be eligible for restitution for the services provided immediately, but not for anything subsequently b/c he could have gotten consent from the parents and it was no longer an emergency.

Restitution for Payment of Another’s Debt of Performance of Another’s Obligation

RULE: Courts are reluctant to grant restitution to one who voluntarily discharges another’s obligation or debt

  • Exception: Restitution is granted if the obligation or debt is discharged by mistake
  • Exception: Restitution is granted if someone paid the debt to protect their own interest
  • Exception: Restitution is granted if there was an opportunity to reject the benefit

Affirmative Defenses to Restitution

Estoppel, Illegality, in pari delicto, and change of position

  • These are the same defenses as those for all equitable remedies

Equitable Remedies to Unjust Enrichment

  • Subrogation:
  • Constructive Trust: the court pretends that the ∆ is holding the trust for the plaintiff and the one job of the ∆ as trustee is to convey the property to the plaintiff
    • If the title of the property has already been conveyed through a purchase and the purchaser doesn’t know of the fraud, then they are protected from a constructive trust (BFPs are NOT subject to constructive trusts)
    • In regards to Constructive Trusts it is almost per se that the legal remedy is inadequate, so they DON’T analyze it – BUT, the Restatement suggests considering it in some circumstances
    • When can you get a Constructive Trust?
      • Even when the defendant took the property by mistake, as opposed to being a wrongdoer
      • When there is “sweat equity” the court will NOT give a constructive trust and instead will provide an equitable lien
        • Defendant stole paints and canvas but then made a work of art worth millions
        • Savy investments are NOT sweat equity
      • Sometimes, case law says that you cannot impose a constructive trust on a thief b/c it is only for “legal title” situations like someone
    • Benefits of a Constructive Trust:
      • You can follow the property to a 3rd party and impose a constructive trust on them, even though they were not the wrongdoer
      • You can trace the money from one property to another, even if it is not the same type of property
      • A constructive trust gives the trustee preference over other creditors
      • Able to get specific property back
      • Easier remedy to effectuate
      • No jury trial
      • Don’t need to prove an inadequate legal remedy
  • Equitable Lien: π is granted a lien on the property, as opposed to actually being granted the property; it is a money judgment secured by a lien on whatever property the plaintiff’s property can be traced to
    • When you file for an equitable lien, you may also want to file for a lis pendens to cloud title in order to make sure no one else will be a BFP

If the asset has gone DOWN in value then you DON’T want a constructive trust, get the equitable lien b/c while only the secured judgment is the worth of the asset you will still have the rest of the unsecured judgment to go after.

Tracing Issues with Equitable Restitution:

  • Rule of Clayton’s Case or First In, First Out:
    • The 1st money that goes into the account is the 1st money that comes out
    • This is a minority rule
  • Hallets Estate:
    • This rule pretends that the wrongdoer acted correctly to the extent that he could – meaning he took his own money form the account, before taking the stolen money
  • Oatway:
    • This rule is a middle ground where the plaintiff has an option to use a straight Hallet, or get a constructive trust over something that was previously purchased, but AFTER the money was taken
      • CA follows this approach
      • About 1/5 of Hallet jdx use this approach

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