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AMI 2445 Issues—Unjust Enrichment—Restitution Implied in Fact

Arkansas Supreme Court Committee On Jury Instructions-Civil

Ark. Model Jury Instr., Civil AMI 2445
Arkansas Model Jury Instructions-Civil
December 2023 Update
Arkansas Supreme Court Committee On Jury Instructions-Civil
Chapter 24. Contracts
AMI 2445 Issues—Unjust Enrichment—Restitution Implied in Fact
(Plaintiff) claims that (defendant) has been unjustly enriched to (plaintiff)'s detriment and has the burden of proving four essential elements:
First, that (plaintiff) provided (describe the services, good, or money) to (defendant), who received the benefit of such [services][goods][or][money];
Second, that the circumstances were such that (plaintiff) reasonably expected to be paid the value of such [services][goods][or][money] by (defendant);
Third, that (defendant) was aware that (plaintiff) was providing such [services][goods][or][money] with the expectation of being paid and accepted the [services][goods][or][money]; and
Fourth, the reasonable value of such [services][goods][or][money] received by the defendant.
[One who is free from fault is not unjustly enriched merely because [he][she][it] has chosen to exercise a legal or contractual right. One is not unjustly enriched by receipt of that to which [he][she][it] is legally entitled.]
[If you find that the (plaintiff) has proved each of these propositions, then your verdict should be for (plaintiff). If, however, (plaintiff) has failed to prove any one or more of these propositions, then your verdict should be for (defendant).]
Use this instruction when the claim corresponds to the common law action of quantum meruit (services had and received), quantum valebat (goods had and received), or money had and received, and the obligation to make restitution is implied from the conduct of the parties. Because the value of the benefit received by the defendant is the fourth element in this instruction, do not use AMI 2442 (expectancy damages for breach of contract) with this instruction.
Do not use this instruction when the obligation to make restitution is implied by law.
This instruction may be used in the alternative to AMI 2401 and 2404, which require the jury to find that all elements of a contract were agreed upon or implied from the conduct of the parties for the recovery of expectancy damages under AMI 2442, although a recovery may not be obtained on both claims.
Use the first bracketed paragraph when supported by the evidence.
Do not use the last bracketed paragraph if the case is submitted on interrogatories.
This instruction is based on Dews v. Halliburton Indus., Inc., 288 Ark. 532, 536–37, 708 S.W.2d 67, 69 (1986) (describing the unjust enrichment claim); Woodhaven v. Kennedy Sheet Metal Co., 304 Ark. 415, 417–18, 803 S.W.2d 508, 510–11 (1991) (discussing measure of damages in quantum meruit cases); City of Damascus v. Bivens, 291 Ark. 600, 603, 726 S.W.2d 677, 679 (1987) (“[T]he award is measured by the value of the benefit conferred on the party unjustly enriched.”). See also Sparks Reg'l Med. Ctr. v. Blatt, 55 Ark. App. 311, 316–17, 935 S.W.2d 304, 307 (1996) (describing the unjust enrichment claim); Farmer v. Riddle, 2011 Ark. App. 120, at 2–4 (describing the unjust enrichment claim).
This instruction was prompted by First Nat'l Bank of Dewitt v. Cruthis, wherein the court held that a claim for restitution under the principle of unjust enrichment may be tried by a circuit court at law to a jury under Amendment 80 to the Arkansas Constitution, where the allegation corresponds to the common law action of assumpsit for money had and received. 360 Ark. 528, 535–37, 203 S.W.3d 88, 93–94 (2005) The supreme court in Cruthis further observed that the common law action for assumpsit is for the recovery for the non-performance of a simple contract, which may be express or implied. Therefore, the action is ex contractu. Id. 306 Ark. at 535, 203 S.W.3d at 93. Although unjust enrichment is an equitable claim, the court held that the claim may be heard by a jury because it derives from the contractual action of assumpsit. Id. at 536–37, 203 S.W.3d at 94. However, the court actually reversed the submission of the claim of unjust enrichment to the jury because an equitable lien was sought as an additional remedy for the claim. Id. 306 Ark. at 537, 203 S.W.3d at 94.
Few cases involving claims of unjust enrichment that were submitted to juries have reached the Arkansas appellate courts. In Ark. Nat'l Bank v. Martin, the supreme court affirmed a judgment on a jury verdict in favor of a plaintiff who sued the defendant bank to recover the amount of a check drawn on the plaintiff's out of state bank. 110 Ark. 578, 163 S.W. 795 (1914). The plaintiff had been induced to give his check through a “swindling device” of two men who operated a gaming house in Hot Springs where they received bets on fake horse races. The defendant bank accepted the check for payment, and before the check had cleared the defendant's correspondent bank, the plaintiff instructed the defendant in a telegram not to pay the check. The defendant ultimately paid the check despite the telegram. The supreme court stated, “[t]he question, whether the bank was put upon notice as to plaintiff's ownership [of the funds drawn in the check] was fairly submitted to the jury, and the verdict is conclusive on that question.” Id. at 5-84, 163 S.W. at 7-97. The court based the defendant bank's liability to the plaintiff not upon any wrong done by it, “but upon an implied promise to account to plaintiff for his funds which the bank had in its possession.” Id. at 589, 163 S.W. at 798.
Knowledge of circumstances from which an obligation to pay could be implied also resulted in the supreme court affirming a jury verdict against a defendant on a claim for unjust enrichment in Fite v. Fite, 233 Ark. 469, 345 S.W.2d 362 (1961). In Fite, the plaintiff had loaned her son $7,500 to purchase a home in Little Rock. The son purchased the home and received title as a tenant by the entirety with his wife. A few months later, the son died. Title to the home passed to the son's widow outside of probate, and there were insufficient assets in the son's probate estate to repay his mother. The widow refused the mother's request for repayment, and the mother sued the widow, alleging that the advance of funds was a loan and that the widow knew of the mother's intent to make a loan when she accepted the funds and joined in the purchase of the house. Id. at 470–73, 345 S.W. 2d at 363–65. The court observed that while the principle of unjust enrichment was most frequently applied in courts of equity, it was also recognized in courts of law. The court described the claim as implying a promise to pay “only when under the circumstances and proof it would be the duty of the defendant to make such as promise.” Id. at 473–74, 345 S.W.2d at 365. The court then observed that the “vital question” for the jury was whether the defendant widow had knowledge of the source and purpose of the advance of the funds for the purchase of the home and that if she did “then she was undoubtedly obligated to repay.” The supreme court held that the evidence supported the verdict against the defendant. Id. at 474, 476, 345 S.W.2d at 365–66. One Justice dissented, arguing that a promise to pay should not “be implied from bare knowledge, unaccompanied either by affirmative conduct or by inaction that is equivalent in the circumstances to affirmative conduct.” Id. at 478, 345 S.W.2d at 367–68. The dissenting justice also cautioned against a “sweeping [jury] instruction” that would permit a verdict for the plaintiff because of her “unhappy predicament.” Id. at 476, 345 S.W.2d at 367.
Arkansas law has long recognized that contracts may be formed by express agreement or by implied agreement, where the contract is implied from the course of dealing or actions of the parties. The two types of contract are not inconsistent, the elements of each are the same, and claims involving either may be submitted to a jury. See K.C. Props. of N.W. Ark., Inc. v. Lowell Inv. Partners, LLC, 373 Ark. 14, 28–29, 280 S.W.3d 1, 34 (2008); Steed v. Busby, 268 Ark. 1, 7, 593 S.W.2d 34, 38 (1980); AMI 2404 (instructing the jury that a contract may be implied from the parties' conduct and dealings). This instruction for the quasi-contractual claim of unjust enrichment is drafted for use in those instances when the obligation to make restitution may fairly be implied from the conduct of the parties but no agreement, express or implied, has been formed. The elements of the quasi-contractual claim for unjust enrichment when the obligation to make restitution is implied by law are discussed below under a separate heading.
The benefit for which the plaintiff seeks restitution may under some circumstance be provided indirectly from the plaintiff to the defendant. See Frigillana v. Frigillana, 266 Ark. 296, 307, 584 S.W.2d 30, 35 (1979) (no privity or express contract or agreement is required); Smith v. Whitener, 42 Ark. App. 225, 229, 856 S.W.2d 328, 329–30 (1993) (defendant was unjustly enriched because his mortgage was satisfied by creditor's liquidation of the plaintiff's collateral). Consequently, in cases involving an indirect benefit from the plaintiff, the first and third elements of this instruction should be modified. Additionally, restitution may be recovered for services performed in good faith although the services were not requested by the recipient. See Dews v. Halliburton, 288 Ark. at 537, 708 S.W.2d at 69. The value of the benefit conferred on the defendant is the reasonable value of the goods, services, or products furnished. Woodhaven v. Kennedy Sheet Metal, 304 Ark. at 417, 803 S.W.2d at 510. In Farmer v. Riddle, supra, the defendants argued that the plaintiff's improvements to their garage apartment had “no value to them.” 2011 Ark. App. 120, at 5. The plaintiff had sold her home and paid $62,085 for the conversion of the defendants' garage into an apartment in which plaintiff alleged she had been invited to live for the rest of her life. Id. at 2–3. The defendants' appraiser testified that the defendants' property had not been enhanced by the improvements to the garage because zoning ordinances prohibited the rental of the garage as an apartment. The appellate court affirmed the trial court's award in quantum meruit of $47,719, based on the value of the living space in the garage apartment, by square footage. Id. at 3–5. However, where neither party submits evidence regarding the amount by which the plaintiff's improvements enhanced the value of the defendant's property, the cost of the improvements is evidence of the enhanced value, and judgment in favor of the plaintiff may be entered for the costs expended. Jones v. Bourassa, 2011 Ark. App. 369, at 8 (daughter awarded judgment for $29,108.46, which was the amount she advanced toward her father's cost of constructing a house in which the daughter alleged she was to live in return for moving from Texas to Arkansas to work in father's business).
Tortious or fraudulent conduct is not a condition to an unjust enrichment claim. See Frigillana, 266 Ark. at 306, 584 S.W.2d at 34 (1979) (“the question is: Did [defendant], to the detriment of someone else, obtain something of value to which he was not entitled”); Smith v. Whitener, 42 Ark. App. at 228, 856 S.W.2d at 330 (“Even an innocent party who has been unjustly enriched may be compelled to surrender the fruits to another more deserving party”). But see Colonia Ins. Co. v. Associated Ins. Mgmt. Corp., 13 F. Supp. 2d 891, 900 (W.D. Ark. 1998) (“in the realm of unjust enrichment, the word ‘unjust’ means ‘unlawful’”).
The absence of culpability in a claim based on unjust enrichment limits the recovery of the plaintiff to the direct benefit to the defendant of the plaintiff's money or property. The law of restitution provides for the recovery of the defendant's profits and consequential gains from the money or property of the plaintiff, but the enhanced recovery is based on the equitable remedy of disgorgement. See Restatement (Third) of Restitution & Unjust Enrichment, ch. 5, topic 1, intro. note &§§ 40–44 (Tentative Draft No. 4, 2005). A conscious wrongdoer may be required to disgorge all gains, including consequential gains, which exceed the direct benefit of the money or property taken. Id. A right to jury trial, however, would not attach to the equitable remedy of disgorgement. A request for an equitable remedy may preclude a right to jury trial on the claim for unjust enrichment. See Cruthis, 360 Ark. at 537, 203 S.W.3d at 94 (recognizing the right to jury trial on a claim for money had and received but reversing the submission of the claim to the jury on the basis that an equitable lien was sought as an additional remedy for the claim).
A person who is free from fault cannot be held to be unjustly enriched merely because he has chosen to exercise a legal or contractual right. Deutsche Bank Nat'l Trust Co. v. Austin, 2011 Ark. App. 531, at 7. In this case, the appellee had purchased property from a couple who was indebted to the appellant bank, and the purchase contract specifically referenced the couple's deed of trust to the bank's predecessor. The appellee continued making improvements to the property even though he knew the couple was not paying their debt to the bank. The court held that because the bank had a superior interest in title to the appellee's property, the bank was not unjustly enriched by repairs the appellee had made, and the bank could foreclose on the property without reimbursing the appellee. Id. A trial court may refuse “to award unjust enrichment for improvements that might have enhanced the property's value when the [claimant] ha[s] undertaken them at his own risk.” Id. See also Hatchell v. Wren, 363 Ark. 107, 118, 211 S.W.3d 516, 522 (2005) (exercise of a legal right does not create unjust enrichment).
In general, the law does not imply a contract when the parties have made a specific one on the same subject matter. Glenn Mech., Inc. v. S. Ark. Reg'l Health Ctr., Inc., 101 Ark. App. 440, 445, 278 S.W.3d 583, 587 (2008) (a written subcontract covered the dispute). However, this general rule is subject to several exceptions, including the rescission at law of the contract, the discharge of the contract by impossibility or frustration of purpose, the charge of an unlawful fee under the contract, mutual mistake of material fact, a disputed performance compelled under protest, and the existence of a contract that fails to address, or fully address, a subject so that the contract is too indefinite on the subject to be enforceable. See Campbell v. Asbury Automotive, Inc., 2011 Ark. 157, at 21–24 (where the seller in a sale contract allegedly charged the buyer an unlawful fee, the claim of unjust enrichment should not have been dismissed as a matter of law); QHG of Springdale, Inc. v. Archer, 2009 Ark. App. 692, at 9–13 (a written contract did not preclude an implied claim for unjust enrichment because the written contract between a physician and hospital required “some call rotation” but did “not fully address rotating call” and provided “no yardstick for measuring the damages” where the physician was required to provide almost non-stop call coverage); Friends of Children, Inc. v. Marcus, 46 Ark. App. 57, 62, 876 S.W.2d 603, 606 (1994) (a written placement agreement for the adoption of a child did not preclude an implied claim for restitution of the adoption fee following the agreed dissolution of the interlocutory decree of adoption and return of the child to the adoption agency). A contingency fee agreement between an attorney and her client does not preclude the attorney who is discharged without cause from suing the client for recovery in quantum meruit. In fact, the recovery in quantum meruit of a reasonable fee for services, rather than a claim for damages for breach of contract, is the only common law remedy available to an attorney discharged without cause. Emery Hughes Corp. v. Audrianna Grisham, P.A., 2011 Ark. 230, at 1–2 (stating that the statutory remedy provided in the attorney's lien statute, Ark. Code Ann. § 16-22-304, is also available to an attorney discharged without cause).
All legal and equitable grounds for retaining the goods, services, or money provided by the defendant may be asserted as a defense to a claim of unjust enrichment. Whitley v. Irwin, 250 Ark. 543, 551, 465 S.W.2d 906, 911 (1971) (“No recovery … can be based on unjust enrichment when the recipient can show a legal or equitable ground for keeping it.”). See also Merchants & Planters Bank & Trust Co. of Arkadelphia v. Massey, 302 Ark. 421, 425, 790 S.W.2d 889, 891 (1990) (unclean hands successfully asserted as a defense to the claim).
Further development of Arkansas law regarding this claim is likely. The case law of other states already presents circumstances that may preclude an unjust enrichment instruction or require modification of this instruction or additional instructions. See, e.g., Peerless Packing Co. v. Malone & Hyde, Inc., 376 S.E. 2d 161, 164 n.4 (W. Va. 1988) (holding that “absent truly egregious circumstances verging on actual fraud,” an unjust enrichment claim is not applicable in a case arising under Article 9 of the UCC); Greer v. White Oak State Bank, 673 S.W.2d 326 (Tex. App. 1984) (addressing non-exclusivity of the remedy in UCC § 4-212 against bank customer, whether defendant had materially changed position in reliance on payment, and whether jury should have been instructed to effect that unjust enrichment has not occurred when money is paid voluntarily with full knowledge of facts); Ninth Dist. Prod. Credit Ass'n. v. Ed Duggan, Inc., 821 P.2d 788 (Colo. 1991) (considering availability of unjust enrichment claim brought by unsecured creditor in circumstances in which claim would upset priority of claims under UCC Article 9 by creditors holding perfected security interests).
Restitution Implied by Law
The quasi-contractual claim that is now known as unjust enrichment evolved for those exceptional circumstances when neither the law of contract nor the law of tort provided redress, but “in equity and good conscience” redress was required. Dan B. Dobbs, Law of Remedies§ 4.1(1) at 370 (1993). In keeping with the equitable and remedial nature of this claim, the Arkansas courts have not necessarily limited the claim of unjust enrichment to those instances when an obligation to make restitution may be implied from the parties' conduct. The Arkansas courts have implied in law an obligation to make restitution in the following additional contexts: void contract, impossibility of performance, legal rescission, failure of consideration, fiduciary relationship, confidential relationship, double recovery, duress, mistake of fact, deceit, extortion, and unlawful conduct. See Howard W. Brill, Arkansas Law of Damages§ 31:2 at 568–69 (5th ed. 2004). In these contexts, the obligation to make restitution is created by law without regard to implied assent of the parties on the ground that restitution is “dictated by reason and justice.” Sparks Reg'l Med. Ctr., 55 Ark. App. at 316, 935 S.W.2d at 307 (the obligation to make restitution rests “on the equitable principle that a person shall not be allowed to enrich himself unjustly at the expense of another”); Dews, 288 Ark. at 536, 708 S.W.2d at 69 (“Quasi-contracts … are legal fictions, created by the law to do justice.”); Friends of Children, 46 Ark. App. at 63, 876 S.W.2d at 606 (“the implied-in-law contract, or quasi-contract, is indeed no contract at all; it is simply a rule of law that requires restitution to the plaintiff”).
The elements of a claim for unjust enrichment that is implied by law may differ from the elements of the claim that is implied from the parties' conduct. The common elements of the claim implied by law, as they appear in the cases arising from chancery courts that involve one of the predicate contexts, such as void contract, impossibility of performance, duress, mistake of fact, deceit, etc., are:
  • That Defendant received [money][or][the equivalent of money] to which [he][she][it] was not entitled and which should be restored;
  • That there was some operative act, intent, or situation that made the enrichment of Defendant unjust and inequitable;
  • That the unjust enrichment of Defendant was at the expense of [to the detriment of] Plaintiff; and
  • The amount by which Defendant was unjustly enriched.
See Hatchell v. Wren, 363 Ark. 107, 117, 211 S.W.3d 516, 522 (2005) (summarizing the law of several cases arising from chancery courts); Guar. Nat'l Ins. Co. v. Denver Roller, Inc., 313 Ark. 128, 138, 854 S.W.2d 312, 317 (1993) (declaratory judgment action arising in chancery court).
Guidance as to the specific elements of claims of unjust enrichment that are implied by law is lacking in Arkansas jurisprudence. The submission of an instruction that requests the jury to determine whether enrichment of a defendant is “unjust and inequitable” seems to contravene the admonition of one learned Justice against “sweeping” instructions that allow a jury to award restitution for anyone in an “unhappy predicament.” See Fite, 233 Ark. at 477, 345 S.W.2d at 367 (Smith, J., dissenting). A similar concern has prompted a proposal that the elements of unjust enrichment claims be drawn from, and limited to, the categories of circumstances for which unjust enrichment is recognized in the Restatement (Third) of Restitution & Unjust Enrichment. See John C. Calhoun, Jr., & William A. Waddell, Jr., Unjust Enrichment: A Suggested Approach for Instructing Juries in Claims at Law,The Arkansas Lawyer Fall 2008, at 10, 11. (“the failure to identify essential elements for the jury to consider, can result in a restitution claim being decided on nothing more than a particular jury panel's view of what is ‘unjust’ or what it views as ‘equity and good conscience’”). For a discussion of the right to jury trial for the claim of promissory estoppel, which includes a similar “injustice” element, see AMI 2444, Comment.
The Committee awaits guidance from the courts regarding the categories of unjust enrichment claims to be submitted to juries, as well as the elements of those claims, before drafting additional instructions in this area.
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