Opinion ID: 2570465
Heading Depth: 1
Heading Rank: 8

Heading: Restitutionary Damages

Text: The court awarded $67,500 for loss of use, based on $2,500 per month for 27 months between the date of conversion (October 1996) and the date of trial (January 1999). In effect, this is an award of restitution requiring the tortfeasor to disgorge the amount by which he was unjustly enriched by his wrongdoing. Appellant complains that this determination is legally erroneous, as this amount exceeds the quantum of Berg's injury. Wyoming recognizes that there are several methods for computing conversion damages. Valuation of property is a question of fact, and there is no universal standard for such a determination. Thus, the question is left to the trier of fact to be decided on the basis of the facts and circumstances of each case. O's Gold Seed Co. v. United Agri-Products Financial Services, Inc., 761 P.2d 673, 676 (Wyo.1988). In computing damages, the primary objective [is] to determine the amount of loss, applying whatever rule is best suited to that purpose. Id. Although actions in replevin are restitutionary in character, they are classified as tort actions. Ablah v. Eyman, 188 Kan. 665, 365 P.2d 181, 190 (1961). Restitutionary damages may be an appropriate remedy for the tort of conversion where other methods of computing damages are inadequate. For some types of tort actions and for certain kinds of breaches of contract, the injured party has an option of seeking restitutionary recovery. In these cases, damages are measured by the benefits received by the defendant rather than the losses sustained by the plaintiff. 22 Am.Jur.2d Damages § 34 (1988) (footnotes omitted). See also Restatement, Restitution, §§ 150-154. The plaintiff may waive the tort and sue in assumpsit, meaning that the plaintiff can have a restitutionary recovery for the gains the defendant made by converting the chattel. For example, if the chattel was worth $10 when it was converted by the defendant, and he later sells it for $20, the plaintiff would choose this option. Dobbs, The Law of Torts § 67 (2000). Historically, there has been much confusion about assumpsit and restitutionary remedies. At common law, assumpsit was a form of action whereby a legal obligation was implied at law. See Arthur L. Corbin, Waiver of Tort and Suit in Assumpsit, 19 Yale L.J. 221 (1910). One British jurist noted that the whole history of this particular form of action has been what I may call a history of well-meaning sloppiness of thought. Holt v. Markham, 1 K.B. 504, 513 (1923). Restitution based upon unjust enrichment cuts across many branches of the law, including contract, tort, and fiduciary relationship, but it also occupies much territory that is its sole preserve. G. Palmer, Law of Restitution § 1.1 at 2 (1978). Unjust enrichment is an indefinable idea in the same way that justice is indefinable. But many of the meanings of justice are derived from a sense of injustice, and this is true of restitution since attention is centered on the prevention of injustice. Not all injustice but rather one special variety: the unjust enrichment of one person at the expense of another. This wide and imprecise idea has played a creative role in the development of an important branch of modern law. Id. at 5 (footnotes omitted). In modern terms, an action of assumpsit is not technically a waiver of tort, but rather it is the choice of one of two alternative remedies. Ablah v. Eyman, 365 P.2d at 192. One whose money or property is taken by fraud or embezzlement, or by conversion, is entitled to restitution measured by the defendant's gain if the victim prefers that remedy to the damages remedy. Dobbs, Law of Remedies § 4.1(1) p.553 (1993). In civil jurisprudence, Wyoming has adopted and still employs the English common law as modified by decision. Wyo. Stat. Ann. § 8-1-101 (Lexis 1999); see State v. Foster, 5 Wyo. 199, 38 P. 926 (1895). Restitutionary damages for conversion have been long recognized in the law: It is obvious that the owner of property, which has been wrongfully converted, should possess a right to institute such a suit for the injury as will afford him an ample indemnification. If the wrong doer hath sold, or used and then sold the property, the owner may waive the tort, and in assumpsit recover the net proceeds received both for the use and by the sale. Cowp. 371, Hambly vs. Trott; 10 Mass. Rep. 436. The amount recoverable in assumpsit cannot, upon general principles, operate unfavorably to the trespasser. In an action ex contractu, nothing can be obtained from him except what has in fact been received for the use and by sale of the property: while in one ex delicto, he may be subjected vindictively to pay much more than the real value of the article converted. Considering him, therefore, in the words of Jackson, J., in Cummings et al. vs. Noyes, 10 Mass. R. 436, as a purchaser, or agent, or a bailee, gives him no just cause of complaint, because it visits on him no actual loss; the amount recovered being merely the amount obtained as the fruits of the trespass. Chauncy v. Yeaton, 1 N.H. 151, 154-55 (1818) (emphasis supplied). Wyoming has recognized that restitutionary damages are historically related to, yet distinct from, the equitable cause of action termed unjust enrichment: The plaintiff's claim, as set out in his complaint, is for the benefit gained by the joint tortfeasors' action. If a benefit is derived by the wrongdoers, recovery may be had on the basis of a promise implied in law and the benefit recovered. Ablah v. Eyman, 1961, 188 Kan. 665, 365 P.2d 181, 90 A.L.R.2d 766; Creach v. Ralph Nichols Co., 1953, 37 Tenn.App. 586, 267 S.W.2d 132; Swope v. Pageton Pocahontas Coal Co., 1947, 129 W.Va. 813, 41 S.E.2d 691; Olwell v. Nye & Nissen Co., 1946, 26 Wash.2d 282, 173 P.2d 652, 169 A.L.R. 139; Felder v. Reeth, 9 Cir.1929, 34 F.2d 744. See also the discussion in Restatement of the Law, Restitution, on recovery of benefits tortiously acquired, beginning at p.522, and Oleck, Damages to Persons and Property, 1961, § 206, p.371, et seq. The touchstone of the rule is the moral obligation arising out of unjust enrichment to the tortfeasor. The principle is of ancient origin. It has lost its early common law fictions and is firmly entrenched as a cause of action with only its historical echoes remaining. Western Nat'l Bank of Casper v. Harrison, 577 P.2d 635, 641-642 (Wyo.1978) (footnote omitted). Thus, restitution is an appropriate remedy for some tortious conduct. See also, Colo. Interstate Gas v. Natural Gas Pipeline Co., 661 F.Supp. 1448, 1479 (D.Wyo. 1987), rev'd on other grounds 885 F.2d 683, 697 (10th Cir.1989). Despite the historic limitation on the assertion of equity jurisdiction, the availability of the legal restitution remedy is not dependent upon inadequacy of alternative remedies. G. Palmer, Law of Restitution § 1.6 at 33-34 (1978). [2] The phrase unjust enrichment is used in law to characterize the result or effect of a failure to make restitution of, or for, property or benefits received under such circumstances as to give rise to a legal or equitable obligation to account therefor. It is a general principle, underlying various legal doctrines and remedies, that one person should not be permitted unjustly to enrich himself at the expense of another, but should be required to make restitution of or for property or benefits received, retained, or appropriated, where it is just and equitable that such restitution be made, and where such action involves no violation or frustration of law or opposition to public policy, either directly or indirectly. Rocky Mountain Turbines, Inc. v. 660 Syndicate, Inc., 623 P.2d 758, 763 (Wyo.1981) (quoting 66 Am.Jur.2d Restitution and Implied Contracts § 3, (1973) p.945); see also Roberts v. Roberts, 64 Wyo. 433, 196 P.2d 361 (1948), reh. denied 64 Wyo. 433, 197 P.2d 697. Where wrongfully detained property has a value for use, the measure of damages is the value of such use during the detention period. 66 Am.Jur.2d Replevin § 120 (1973) (citing, inter alia, Ablah v. Eyman, 188 Kan. 665, 365 P.2d 181 (1961)). Commentators have also termed the restitutionary measure an accounting of profits: An accounting of profits usually has three basic justifications: (1) it represents compensation to plaintiff for sales that were improperly diverted from plaintiff to defendant because of defendant's acts; (2) it prevents unjust enrichment by a defendant; and (3) it deters willful violations of law. An accounting may be ordered even if defendant actually lost money on a prohibited transaction, or made no profit at all. Cerillo, Proving Business Damages § 143 (2nd ed.1991). The unjust enrichment accounting approach is more appropriate where the defendant's conduct is especially egregious: Such an unjust enrichment approach is especially appropriate where strict application of some other standard would not adequately compensate plaintiff in a case where an injustice has taken place, or to deter willful violations in the future. An accounting is also useful where plaintiff may have difficulty proving lost profits because it is a new business without an operating history. If a defendant's profits as a result of an improper interference exceed what plaintiff would have realized if there were no breach of contract, i.e., defendant's profits exceed plaintiff's losses, some courts still assess damages based on the amount of the profits defendant has obtained. The purpose of this is to prevent inequity. See National Merchandising Corp. v. Leyden, 370 Mass. 425, 348 N.E.2d 771, 775 (1976) (holding an accounting of defendant's profits an acceptable basis of damages because an intending tortfeasor should not be prompted to speculate that his profits might exceed the injured party's losses, thus encouraging commission of the tort ...). Unless an accounting is made of defendant's profits, parties will be tempted to engage in the conduct at which the tort is aimed in the hope that they may profit from their own wrongdoing. See also Phillips Chemical Co. v. Morgan, 440 So.2d 1292 (Fla.Dist.Ct. App.1983), petition for review denied, 450 So.2d 486 (Fla.1984); Schechter v. Friedman, 141 N.J.Eq. 318, 57 A.2d 251 (1948). Cerillo, § 534. The district court in this case found that Cross' conduct was certainly egregious, but did not rise to the level of misconduct necessary to support attorney's fees or punitive damages. Although there are some overlapping policies underlying the doctrines supporting punitive damages and the unjust enrichment remedy, they are not the same. One purpose of tort damages is to compensate the plaintiff for his loss, but the measurement of such loss is not always an exact science. Since restitution may exceed mere compensation to the plaintiff without exceeding the defendant's unjust gain, it is not punitive. Dobbs, Law of Remedies § 4.1(4). In the context of conversion, courts have recognized the legitimacy of restitutionary damages: However plausible, the appellant cannot be heard to say that his wrongful invasion of the respondent's property right to exclusive use is not a loss compensable in law. To hold otherwise would be subversive of all property rights since his use was admittedly wrongful and without claim of right. The theory of unjust enrichment is applicable in such a case. Developers Three v. Nationwide Ins. Co., 64 Ohio App.3d 794, 582 N.E.2d 1130, 1136 (1990) (quoting Olwell v. Nye & Nissen Co., 26 Wash.2d 282, 173 P.2d 652, 654 (1946)). Thus, the unjust enrichment remedy is not punitive but is one method of compensating the plaintiff's loss. Id. at 1135-36. This remedy is particularly appropriate where the plaintiff's loss is more difficult to measure than the defendant's unjustly saved avoidance costs. See S. Levmore, Unifying Remedies: Property Rules, Liability Rules, and Startling Rules, 106 Yale L.J. 2149, 2157 (1997). Thus, while inadequacy of the damage remedy is not a prerequisite to restitution, the fact of inadequacy strengthens the case for restitution. G. Palmer, § 1.6 at 39. Certainly, an award of restitution can be harsh and is not appropriate in all cases, but where a tortfeasor consciously and wrongfully misappropriates another's property, he should expect to be dealt with harshly: The remedy in restitution rests on the ancient principle of disgorgement. Beneath the cloak of restitution lies the dagger that compels the conscious wrongdoer to disgorge his gains. Disgorgement is designed to deprive the wrongdoer of all gains flowing from the wrong rather than to compensate the victim of the fraud. In modern legal usage the term has frequently been extended to include a dimension of deterrence. Disgorgement is said to occur when a defendant is made to `cough up' what he got, neither more nor less. From centuries back equity has compelled a disloyal fiduciary to disgorge his profits. He is held chargeable as a constructive trustee of the ill-gotten gains in his possession. A constructive trustee who consciously misappropriates the property of another is often refused allowance even of his actual expenses. Where a wrongdoer is shown to have been a conscious, deliberate misappropriator of another's commercial values, gross profits are recoverable through a restitutionary remedy. Warren v. Century Bankcorporation, Inc., 741 P.2d 846, 852 (Okl.1987) (emphasis in original; footnotes omitted). Even Judge Posner, guru of the law and economics movement, has recognized that restitution has a rightful place in intentional tort cases: to make the tort worthless to the tortfeasor and thereby channel resource allocation through the market. R. Posner, Economic Analysis of the Law 194 (3 rd ed.1986). [3] In the case at bar, it would be difficult to calculate Berg's loss in terms of opportunity costs. Also, by converting and concealing the grader and then lying about its whereabouts, Cross engaged in willfully deceptive misconduct that should be discouraged. For these reasons, application of the unjust enrichment remedy is appropriate. The question remains, how does one measure the amount to be disgorged? There are five factors that assist in measuring restitution: 1. the increased assets in the hands of the defendant from the receipt of property; 2. the market value of services or intangibles provided to the defendant, without regard to whether the defendant's assets were actually increased; that is, the amount which it would cost to obtain similar services, whether those services prove to be useful or not; 3. the use value of any benefits received, as measured by (i) market indicators such as rental value or interest or (ii) actual gains to the defendant from using the benefits, such as the gains identified in item (5) below; 4. the gains realized by the defendant upon sale or transfer of an asset received from the plaintiff; 5. collateral or secondary profits earned by the defendant by use of an asset received from the plaintiff, or, what is much the same thing, the savings effected by the use of the asset. Dobbs, Law of Remedies § 4.5(1) (footnotes omitted). The damages awarded in this case are supported by the second factor, the market or rental value of the grader (even if the grader did not prove to be useful); the third factor, the use value of the grader; and the fifth factor, the savings effected by using the grader. This measure of damages can be termed negative unjust enrichment, i.e., the defendant was unjustly enriched by not having to rent a road grader. A benefit is conferred upon the defendant where, by tortiously using the plaintiff's property, he saves expense or loss that might otherwise be incurredbenefit is any form of advantage. Ablah, 365 P.2d at 190. Thus, to measure negative unjust enrichment or recoverable profit, courts may consider saving of expense. See Tilghman v. Proctor, 125 U.S. 136, 146, 8 S.Ct. 894, 899, 31 L.Ed. 664 (1888); Telex Corp. v. International Business Machines Corp., 510 F.2d 894, 932 (10th Cir.1975). Unjust enrichment can occur when a defendant uses something belonging to the Plaintiff in such a way as to effectuate some kind of savings which results in or amounts to a business profit. Branch v. Mobil Oil Corp., 778 F.Supp. 35, (W.D.Okl. 1991) (citing D. Dobbs, Handbook on the Law of Remedies § 4.5 at 278 (1973); Tilghman v. Proctor, 125 U.S. at 146, 8 S.Ct. at 899; Olwell v. Nye & Nissen Co., 26 Wash.2d 282, 173 P.2d 652). Historically, tort and contract have been the primary fonts of civil liability at common law; yet restitution based on unjust enrichment is also a vital legal theory. G. Palmer § 1.1 at 1-2. Not every circumstance demands application of the disgorgement principal; but in certain cases, where justice so requires, the law empowers judges and juries with this important tool to remedy wrongdoing. This is such a case.