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case study with questions regarding the Hallasz v. Maglica case which needs to be answered. There are two parts to the quiz and it is worth 20 marks. The case study is provided in the below attachment with the questions that need to be answered.
MAGLICA v. MAGLICA
Court of Appeal, Fourth District, Division 3,
California.
Claire MAGLICA, Plaintiff and Respondent, v. Anthony MAGLICA,
Defendant and Appellant.
No. G016463.
Decided: August 31, 1998
Wasser, Rosenson & Carter, Dennis M. Wasser, Los Angeles, Lyon & Lyon,
Robert C. Weiss, Roy L. Anderson, Los Angeles, Crosby, Heafey, Roach & May,
Peter W. Davis, San Francisco, and James C. Martin, Los Angeles, for
Defendant and Appellant. Keker & Van Nest, John W. Keker, Karin Kramer, San
Francisco, Wendy J. Thrum and Helene M. Linker for Plaintiff and Respondent.
OPINION
i. Introduction
This case forces us to confront the legal doctrine known as “quantum meruit”
in the context of a case about an unmarried couple who lived together and
worked in a business solely owned by one of them.
Quantum meruit is a
Latin phrase, meaning “as much as he deserves,” 1 and is based on the idea
that someone should get paid for beneficial goods or services which he or
she bestows on another.2
The trial judge instructed the jury that the reasonable value of the plaintiff’s
services was either the value of what it would have cost the defendant to
obtain those services from someone else or the “value by which” he had
“benefitted [sic ] as a result” of those services.
The instruction allowed the
jury to reach a whopping number in favor of the plaintiff-$84 million-because
of the tremendous growth in the value of the business over the years.
As we explain later, the finding that the couple had no contract in the first
place is itself somewhat suspect because certain jury instructions did not
accurately convey the law concerning implied-in-fact contracts.
However,
assuming that there was indeed no contract, the quantum meruit award
cannot stand.
The legal test for recovery in quantum meruit is not the value
of the benefit, but value of the services (assuming, of course, that the services
were beneficial to the recipient in the first place).
In this case the failure to
appreciate that fine distinction meant a big difference.
People who work for
businesses for a period of years and then walk away with $84 million do so
because they have acquired some equity in the business, not because $84
million dollars is the going rate for the services of even the most workaholic
manager.
In substance, the court was allowing the jury to value the
plaintiff’s services as if she had made a sweetheart stock option deal-yet such
a deal was precisely what the jury found she did not make.
So the $84
million judgment cannot stand.
On the other hand, plaintiff was hindered in her ability to prove the existence
of an implied-in-fact contract by a series of jury instructions which may have
misled the jury about certain of the factors which bear on such contracts.
The instructions were insufficiently qualified.
They told the jury flat out that
such facts as a couple’s living together or holding themselves out as husband
and wife or sharing a common surname did not mean that they had any
agreement to share assets.
That is not exactly correct.
Such factors can,
indeed, when taken together with other facts and in context, show the
existence of an implied-in-fact contract.
At most the jury instructions should
have said that such factors do not by themselves necessarily show an
implied-in-fact contract.
Accordingly, when the case is retried, the plaintiff
will have another chance to prove that she indeed had a deal for a share of
equity in the defendant’s business.
II. Facts
The important facts in this case may be briefly stated.
Anthony Maglica, a
Croatian immigrant, founded his own machine shop business, Mag Instrument,
in 1955.
He got divorced in 1971 and kept the business.
Claire Halasz, an interior designer.
That year he met
They got on famously, and lived together,
holding themselves out as man and wife-hence Claire began using the name
Claire Maglica-but never actually got married.
And, while they worked side
by side building the business, Anthony never agreed-or at least the jury found
Anthony never agreed-to give Claire a share of the business.
When the
business was incorporated in 1974 all shares went into Anthony’s name.
Anthony was the president and Claire was the secretary.
equal salaries from the business after incorporation.
They were paid
In 1978 the business
began manufacturing flashlights, and, thanks in part to some great ideas and
hard work on Claire’s part (for example, coming out with a purse-sized
flashlight in colors), the business boomed.
Mag Instrument is now worth
hundreds of millions of dollars.
In 1992 Claire discovered that Anthony was trying to transfer stock to his
children but not her, and the couple split up in October.
In June 1993 Claire
sued Anthony for, among other things, breach of contract, breach of
partnership agreement, fraud, breach of fiduciary duty and quantum meruit.
The case came to trial in the spring of 1994.
The jury awarded $84 million
for the breach of fiduciary duty and quantum meruit causes of action, finding
that $84 million was the reasonable value of Claire’s services.
iII. Discussion
A. The Jury’s Finding That There Was No Agreement To Hold Property for
One Another Meant There Was No Breach of Fiduciary Duty
Preliminarily we must deal with the problem of fiduciary duty, as it was an
alternative basis for the jury’s award.
We cannot, however, affirm the
judgment on this basis because it is at odds with the jury’s factual finding
that Anthony never agreed to give Claire a share of his business.
Having
found factually that there was no contract, the jury could not legally conclude
that Anthony breached a fiduciary duty.
The reason is that fiduciary duties are either imposed by law or are
undertaken by agreement, and neither way of establishing the existence of a
fiduciary duty applies here.
As to the former, the fact that Claire and
Anthony remained unmarried during their relationship is dispositive.
California specifically abolished the idea of a “common law marriage” in 1895
(see Elden v. Sheldon (1988) 46 Cal.3d 267, 275, 250 Cal.Rptr. 254, 758 P.2d
582) and that, if it is not too harsh to say it, was clearly the substance of
Claire and Anthony’s relationship.
They had a common law marriage.
As our Supreme Court said in Elden, “[f]ormally married couples are granted
significant rights and bear important responsibilities toward one another
which are not shared by those who cohabit without marriage.” (Ibid.) The
court noted, in that context, that a variety of statutes impose rights and
obligations on married people.
One set of such imposed rights and
obligations, for example, is Family Code sections 1100 through 1103, which
both establish a fiduciary duty between spouses with regard to the
management and control of community assets (Fam.Code, § 1100, subd. (e))
and provide for remedies for a breach of that duty (Fam.Code, § 1101).
It would be contrary to what our Supreme Court said in Elden and to the
evident policy of the law to promote formal (as distinct from common law)
marriage to impose fiduciary duties based on a common law marriage.
Indeed, in the context of this case the potential for anomalous results is
readily apparent.
For example, in family law matters involving dissolution of
marriage, punitive damages are not available to remedy breaches of fiduciary
duty in the management and control of community property (though there
are, of course, other remedies).
Punitive damages, however, are sometimes
available in other breach of fiduciary duty cases. (See, e.g., Heller v. Pillsbury
Madison & Sutro (1996) 50 Cal.App.4th 1367, 1390, 58 Cal.Rptr.2d 336.)
It is
unthinkable, given California’s abolition of common law marriage, that an
unmarried, cohabiting partner should have a more powerful remedy than a
spouse.
That leaves contract, and the jury found there was no contract.
Claire,
despite the closeness of their relationship, never entrusted her property to
Anthony; she only rendered services.
And without entrustment of property,
or an oral agreement to purchase property together, there can be no fiduciary
relationship no matter how “confidential” a relationship between an unmarried,
cohabiting couple. (Toney v. Nolder (1985) 173 Cal.App.3d 791, 796, 219
Cal.Rptr. 497.)
Indeed, as the Toney decision points out, it takes clear and
convincing evidence of such entrustment or an agreement to buy property
together (ibid., citing Evid.Code, § 662) to overcome the presumption of titleand, as previously mentioned, there is no dispute that title to the stock of
Mag Instrument was taken solely in Anthony’s name.
Here, because the
jury affirmatively found there were no such agreements, we need not even
address the question of whether the evidence was “clear and convincing.” 3
B. Quantum Meruit Allows Recovery For the Value of Beneficial Services, Not
The Value By Which Someone Benefits From Those Services
The absence of a contract between Claire and Anthony, however, would not
preclude her recovery in quantum meruit: As every first year law student
knows or should know, recovery in quantum meruit does not require a
contract.
(See 1 Witkin, Summary of Cal. Law (9th ed.
1987) Contracts, §
112, p. 137; see, e.g., B.C. Richter Contracting Co. v. Continental Cas. Co.
(1964) 230 Cal.App.2d 491, 499-500, 41 Cal.Rptr. 98.) 4
The classic formulation concerning the measure of recovery in quantum
meruit is found in Palmer v. Gregg, supra, 65 Cal.2d 657, 56 Cal.Rptr. 97, 422
P.2d 985.
Justice Mosk, writing for the court, said: “The measure of
recovery in quantum meruit is the reasonable value of the services rendered
provided they were of direct benefit to the defendant.” (Id. at p. 660, 56
Cal.Rptr. 97, 422 P.2d 985, emphasis added; see also Producers Cotton Oil Co.
v. Amstar Corp. (1988) 197 Cal.App.3d 638, 659, 242 Cal.Rptr. 914.)
The underlying idea behind quantum meruit is the law’s distaste for unjust
enrichment.
If one has received a benefit which one may not justly retain,
one should “restore the aggrieved party to his [or her] former position by
return of the thing or its equivalent in money.” (See 1 Witkin, Summary of
Cal. Law (9th ed.
1987) Contracts, § 91, p. 122.)
The idea that one must be benefited by the goods and services bestowed is
thus integral to recovery in quantum meruit; hence courts have always
required that the plaintiff have bestowed some benefit on the defendant as a
prerequisite to recovery. (See Earhart v. William Low Co., supra, 25 Cal.3d 503,
510, 158 Cal.Rptr. 887, 600 P.2d 1344 [explaining origins of quantum meruit
recovery in actions for recovery of money tortiously retained; law implied an
obligation to restore “ ‘benefit,’ unfairly retained by the defendant”].)
But the threshold requirement that there be a benefit from the services can
lead to confusion, as it did in the case before us.
It is one thing to require
that the defendant be benefited by services,5 it is quite another to measure
the reasonable value of those services by the value by which the defendant
was “benefited” as a result of them.6 Contract price and the reasonable value
of services rendered are two separate things; sometimes the reasonable
value of services exceeds a contract price. (See B.C. Richter Contracting Co.,
supra, 230 Cal.App.2d at p. 500, 41 Cal.Rptr. 98.)
And sometimes it does not.
At root, allowing quantum meruit recovery based on “resulting benefit” of
services rather than the reasonable value of beneficial services affords the
plaintiff the best of both contractual and quasi-contractual recovery.
Resulting benefit is an open-ended standard, which, as we have mentioned
earlier, can result in the plaintiff obtaining recovery amounting to de facto
ownership in a business all out of reasonable relation to the value of services
rendered.
After all, a particular service timely rendered can have, as
Androcles was once pleasantly surprised to discover in the case of a particular
lion, disproportionate value to what it would cost on the open market.
The facts in this court’s decision in Passante v. McWilliam (1997) 53
Cal.App.4th 1240, 62 Cal.Rptr.2d 298 illustrate the point nicely.
In Passante,
the attorney for a fledgling baseball card company gratuitously arranged a
needed loan for $100,000 at a crucial point in the company’s history;
because the loan was made the company survived and a grateful board
promised the attorney a three percent equity interest in the company.
The
company eventually became worth more than a quarter of a billion dollars,
resulting in the attorney claiming $33 million for his efforts in arranging but
a single loan.
This court would later conclude, because of the attorney’s
duty to the company as an attorney, that the promise was unenforceable.
(See id. at pp. 1247-1248, 62 Cal.Rptr.2d 298.)
Interestingly enough, however,
the one cause of action the plaintiff in Passante did not sue on was quantum
meruit; while this court opined that the attorney should certainly get paid
“something” for his efforts, a $33 million recovery in quantum meruit would
have been too much.
Had the services been bargained for, the going price
would likely have been simply a reasonable finder’s fee. (See id. at p. 1248,
62 Cal.Rptr.2d 298.)
The jury instruction given here allows the value of services to depend on
their impact on a defendant’s business rather than their reasonable value.
True, the services must be of benefit if there is to be any recovery at all;
even so, the benefit is not necessarily related to the reasonable value of a
particular set of services.
makes the difference.
Sometimes luck, sometimes the impact of others
Some enterprises are successful; others less so.
Allowing recovery based on resulting benefit would mean the law imposes an
exchange of equity for services, and that can result in a windfall-as in the
present case-or a serious shortfall in others.
Equity-for-service compensation
packages are extraordinary in the labor market, and always the result of
specific bargaining.
To impose such a measure of recovery would make a
deal for the parties that they did not make themselves.
If courts cannot use
quantum meruit to change the terms of a contract which the parties did make
(see Hedging Concepts, Inc., supra, 41 Cal.App.4th at p. 1420, 49 Cal.Rptr.2d
191), it follows that neither can they use quantum meruit to impose a highly
generous and extraordinary contract that the parties did not make.
The cases relied on by Claire for an equity measure of the value of her
services are inapposite. Earhart v. William Low Co., supra, 25 Cal.3d 503, 158
Cal.Rptr. 887, 600 P.2d 1344 concerned the nature of the benefit requirement.
The court merely held, relaxing the benefit requirement as set out in a
previous case (Rotea v. Izuel (1939) 14 Cal.2d 605, 95 P.2d 927), that where
the defendant urged the plaintiff to render services to a third party (the third
party owned a parcel of property which was being developed along with
defendant’s parcel) the plaintiff could still be compensated in quantum meruit
for those services. Gray v. Whitmore (1971) 17 Cal.App.3d 1, 24-25, 94
Cal.Rptr. 904 involved the reasonable value of storage costs incurred by a
holdover tenant.
To the degree that the court opined on the measure of
value of storage costs, the Gray court made the unremarkable observation
that a court could look to either the amount a landlord pays to have property
stored offsite in a regulated warehouse, or the comparable charge he would
pay if the landlord did not use a regulated warehouse. (Id. at p. 25, 94
Cal.Rptr. 904.)
Watson v. Wood Dimension, Inc. (1989) 209 Cal.App.3d 1359, 257 Cal.Rptr.
816 (Watson) is a little closer, because it allowed a recovery based on a
contemplated commission.
But it is still off the mark because the
commission was specifically agreed to by the parties.
In Watson a stereo speaker manufacturer hired the friend of a lost customer
to wine and dine the customer’s general manager.
The parties orally agreed
that the friend would be paid three percent commission, but they didn’t agree
on how long the commission might extend after the plaintiff was terminated
from employment.
As this court noted, there is no reason a court may not
consider an agreed price when ascertaining the reasonable value of services.
(Id. at p. 1365, 257 Cal.Rptr. 816.)
Of course, in the case before us, there was
no agreement and no agreed price.
The same applies to the attorney contingent fee cases, of which Cazares v.
Saenz (1989) 208 Cal.App.3d 279, 256 Cal.Rptr. 209 features most prominently
in Claire’s argument.
As in Watson, a recovery of what was a share of an
enterprise passed muster because the parties had already agreed to such
valuation.
In Cazares it was a standard one-third contingency fee which had
to be shared between the attorneys who made that deal with the client and
other attorneys with whom they later associated. “Fortunately, when an
attorney partially performs on a contingency fee contract,” said the court, “we
already have the parties’ agreement as to what was a reasonable fee for the
entire case.” (Cazares, supra, 208 Cal.App.3d at p. 288, 256 Cal.Rptr. 209.)
Telling the jury that it could measure the value of Claire’s services by “[t]he
value by which Defendant has benefited as a result of [her] services” was error.
It allowed the jury to value Claire’s services as having bought her a de facto
ownership interest in a business whose owner never agreed to give her an
interest.
On remand, that part of the jury instruction must be dropped.
C. Claire’s Quantum Meruit Claim Is Not Barred by the Statute of Limitations
The statute of limitations for quantum meruit claims is two years (see Code
Civ. Proc., § 339 [action upon an “obligation” ․ not founded upon an
instrument of writing] ), but Claire seeks payment for services rendered since
1971.
Anthony contends that her claim for all but the last two years’ worth
of services must necessarily fail in light of that fact; Claire argues that the
statute of limitations only began to run with the termination of her services.
The problem presents the challenge of parsing the exact nature of the
circumstances in a particular case (see Robinson v. Chapman (1929) 98
Cal.App. 278, 281, 276 P. 1081), since fine gradations can lead to wildly
divergent results, as illustrated by two very similar cases to this one from a
bygone era, Mayborne v. Citizens T. & S. Bank (1920) 46 Cal.App. 178, 188 P.
1034 and Corato v. Estate of Corato (1927) 201 Cal. 155, 255 P. 825.
Claire is
not the first person without a contract or marriage to devote his or her efforts
to a fellow cohabitant and later seek compensation for them.
In Mayborne, the plaintiff cared for a well-to-do gentleman with the
understanding that she would get paid the reasonable value of her services
upon their termination and the gentleman’s death. (See Mayborne, supra, 46
Cal.App. at p. 181, 188 P. 1034.)
The statute of limitations did not restrict
her claim because the parties’ understanding showed an expectation of
payment upon termination. (Id. at p. 181, 188 P. 1034.) 7 Hence she could
sue for the lot.
By contrast, the lack of an expectation of payment on termination made all
the difference in Corato, where the plaintiff worked in her cohabitant’s board
and lodging house, with no expectation of payment on termination.
Rather,
the plaintiff regularly sought immediate payment for her services, but would
end up going away mollified with an indication that she would get paid
“sometime.”
(See Corato, supra, 201 Cal. at p. 160, 255 P. 825.)
on for something like 20 years, until the cohabitant died.
This went
Under those
circumstances, said the high court, the presumption that an employee is hired
by the month controlled, and therefore any right of action accrued with each
passing month, hugely reducing the plaintiff’s recovery. (Id. at pp. 160-161,
255 P. 825.)
The plaintiff was entitled to only the last two years’ worth.
As one might guess, Anthony stresses the applicability of the Corato decision
to the case before us while Claire trumpets Mayborne.
On reflection, Claire
has the better part of this argument, as illustrated by yet a third case,
Lazzarevich v. Lazzarevich (1948) 88 Cal.App.2d 708, 200 P.2d 49.
While the
fact that Claire had a “common law marriage” is fatal to her fiduciary duty
claims, Lazzarevich demonstrates why any expectation of compensation for
her efforts would be at the termination of the relationship.8
In Lazzarevich, a couple got married, then the husband filed for a divorce, but
there was a reconciliation.
However, without the husband’s knowledge a
final decree of divorce was entered.
When the couple finally did split up, the
wife sought recovery for the reasonable value of the services she rendered
her husband during the period she lived with him under the mistaken belief
that they were still married. (See Lazzarevich, supra, 88 Cal.App.2d at p. 713,
200 P.2d 49.)
The trial court awarded her only the last two years, but the
appellate court modified the judgment to increase her recovery fourfold.
(See id. at pp. 722-723, 200 P.2d 49.) 9 The core of the court’s reasoning was
that because the plaintiff had rendered her services under the mistaken belief
that her marriage was valid, it was “obvious” that any cause of action could
not have accrued until she discovered her marriage was invalid. (See id. at
pp. 721-722, 200 P.2d 49.)
The fictitious implied promise to pay for the
services inherent in the relationship entailed another fictitious implied promise
to pay at termination of the services.
(See ibid.)
Lazzarevich reflects the contours of Claire and Anthony’s own relationship
here.
They might not have been married, but they certainly acted married.
While the special solicitude the law shows for formal marriage and putative
relationships (i.e., where a person believes, in good faith, that he or she is
married) means that Claire did not acquire the same substantive rights as a
married person (see Elden v. Sheldon, supra, 46 Cal.3d at p. 275, 250 Cal.Rptr.
254, 758 P.2d 582), the “common law marriage” nature of her relationship
with Anthony certainly shows that, like a married person, any need to sue to
assert whatever rights she did have would be expected to accrue at the
termination of the relationship, not when some hypothetical paycheck might
ordinarily come due.
Any other result simply does not accord with the reality of the situation as the
parties experienced it.
Accordingly, on remand, the statute of limitations will
not limit Claire’s quantum meruit claim.
D. Certain Jury Instructions May Have Misled the Jury Into Finding There
Was No Implied Contract When In Fact There Was One
As we have shown, the quantum meruit damage award cannot stand in the
wake of the jury’s finding that Claire and Anthony had no agreement to share
the equity in Anthony’s business.
But the validity of that very finding itself is
challenged in Claire’s protective cross-appeal, where she attacks a series of
five jury instructions, specially drafted and proferred by Anthony.10 These
instructions are set out in the margin.11 We agree with Claire that it was error
for the trial court to give three of these five instructions.12 The three
instructions are so infelicitously worded that they might have misled the jury
into concluding that evidence which can indeed support a finding of an
implied contract could not.
The problem with the three instructions is this: They isolate three
uncontested facts about the case: (1) living together, (2) holding themselves
out to others as husband and wife, (3) providing services “such as” being a
constant companion and confidant-and, seriatim, tell the jury that these facts
definitely do not mean 13 there was an implied contract.
True, none of these
facts by themselves and alone necessarily compels the conclusion that there
was an implied contract.
But that does not mean that these facts cannot, in
conjunction with all the facts and circumstances of the case, establish an
implied contract.
In point of fact, they can.
Unlike the “quasi-contractual” quantum meruit theory which operates
without an actual agreement of the parties, an implied-in-fact contract entails
an actual contract, but one manifested in conduct rather than expressed in
words. (See Silva v. Providence Hospital of Oakland (1939) 14 Cal.2d 762, 773,
97 P.2d 798 [“The true implied contract, then, consists of obligations arising
from a mutual agreement and intent to promise where the agreement and
promise have not been expressed in words.”]; McGough v. University of San
Francisco (1989) 214 Cal.App.3d 1577, 1584, 263 Cal.Rptr. 404 [“An implied-infact contract is one whose existence and terms are manifested by conduct.”];
1 Witkin, Summary of Cal. Law (9th ed.1987), Contracts, § 11, p. 46 [“The
distinction between express and implied in fact contracts relates only to the
manifestation of assent; both types are based upon the expressed or
apparent intention of the parties.”].) 14
In Alderson v. Alderson (1986) 180 Cal.App.3d 450, 461, 225 Cal.Rptr. 610, the
court observed that a number of factors, including
– direct testimony of an agreement;
– holding themselves out socially as husband and wife;
– the woman and her children’s taking the man’s surname;
– pooling of finances to purchase a number of joint rental properties;-joint
decision-making in rental property purchases;
– rendering bookkeeping services for, paying the bills on, and collecting the
rents of, those joint rental properties; and
– the nature of title taken in those rental properties
could all support a finding there was an implied agreement to share the
rental property acquisitions equally.
We certainly do not say that living together, holding themselves out as
husband and wife, and being companions and confidants, even taken
together, are sufficient in and of themselves to show an implied agreement to
divide the equity in a business owned by one of the couple.
However,
Alderson clearly shows that such facts, together with others bearing more
directly on the business and the way the parties treated the equity and
proceeds of the business, can be part of a series of facts which do show such
an agreement.
The vice of the three instructions here is that they
affirmatively suggested that living together, holding themselves out, and
companionship could not, as a matter of law, even be part of the support for
a finding of an implied agreement.
That meant the jury could have
completely omitted these facts when considering the other factors which
might also have borne on whether there was an implied contract.
On remand, the three instructions should not be given.
The jury should
be told, rather, that while the facts that a couple live together, hold
themselves out as married, and act as companions and confidants toward
each other do not, by themselves, show an implied agreement to share
property, those facts, when taken together and in conjunction with other facts
bearing more directly on the alleged arrangement to share property, can
show an implied agreement to share property.
disposition
The judgment is reversed.
The case is remanded for a new trial.
At the
new trial the jury instructions identified in this opinion as erroneous shall not
be given.
In the interest of justice both sides will bear their own costs on
appeal.
FOOTNOTES
1.
See Black’s Law Dictionary (5th ed.1979) at page 1119.
2.
See, e.g., Earhart v. William Low Co. (1979) 25 Cal.3d 503, 518, 158
Cal.Rptr. 887, 600 P.2d 1344 (“Where one person renders services at the
request of another and the latter obtains benefits from the services, the law
ordinarily implies a promise to pay for the services.”); Palmer v. Gregg (1967)
65 Cal.2d 657, 660, 56 Cal.Rptr. 97, 422 P.2d 985 (“The measure of recovery in
quantum meruit is the reasonable value of the services rendered, provided
they were of direct benefit to the defendant.”); Hedging Concepts, Inc. v.
First Alliance Mortgage Co. (1996) 41 Cal.App.4th 1410, 1419, 49 Cal.Rptr.2d
191 (“A quantum meruit or quasi-contractual recovery rests upon the
equitable theory that a contract to pay for services rendered is implied by law
for reasons of justice․ ”).
3.
Claire attempts to distinguish Toney on the ground that the plaintiff
there did not seek damages, but to establish his rights in a particular piece of
real property.
It is a distinction without a difference.
The Toney court
relied on section 662 of the Evidence Code, which consists of two sentences,
neither of which are limited to just real property: “The owner of the legal title
to property is presumed to be the owner of the full beneficial title.
This
presumption may be rebutted only by clear and convincing proof.”
There is
no difference, in substance, between asserting that an unmarried partner has
breached a fiduciary duty to hold property-not just real property-in trust for
the other and asserting direct rights in that property.
In either case, the
critical feature is whether the unmarried partner ever agreed to act as trustee
in the first place.
On that point the jury sided with Anthony, not Claire.
Claire never quite explains how Anthony could breach a fiduciary duty to her
without first having a contract to either hold property on her behalf or to own
property jointly with her.In Weiner v. Fleischman (1991) 54 Cal.3d 476, 286
Cal.Rptr. 40, 816 P.2d 892, the Supreme Court distinguished Toney from a
case of fraudulent concealment. (Id. at p. 486, 286 Cal.Rptr. 40, 816 P.2d 892.)
In the case before us there is no fraudulent concealment because Anthony
never agreed to hold property for Claire.
4.
The doctrine can become trickier when an actual contract is involved.
See Hedging Concepts, Inc. v. First Alliance Mortgage Co., supra, 41
Cal.App.4th 1410, 1419-1420, 49 Cal.Rptr.2d 191 (quantum meruit recovery
cannot conflict with terms of actual contract between parties, lest the court in
effect impose its own ideas of a fair deal on the parties).
5.
Or, as the case may be, goods.
However, in the present case we are
only dealing with Claire’s services.
6.
Here is the exact language of the plaintiff’s jury instruction at
issue:“Plaintiff may be compensated for the reasonable value of services
rendered to Defendant and Mag Instrument, Inc. either by awarding Plaintiff:
[¶] 1. The reasonable value of what it would have cost Defendant to obtain
the services Plaintiff provided from another person; or [¶] 2. The value by
which Defendant has benefited as a result of the services rendered by
Plaintiff.”
7.
One typical scenario for payment on termination is when services are
rendered to an elderly person with the expectation that recompense will come
from the person’s estate.
In such cases the statute of limitations does not
begin to run until termination. (E.g., O’Brien v. Fitzsimmons (1960) 183
Cal.App.2d 231, 234, 6 Cal.Rptr. 627; Robinson v. Chapman, supra, 98 Cal.App.
at pp. 280-281, 276 P. 1081.)
8.
The domestic and familial nature of the relationship in this case
distinguishes it from cases like Johnstone v. E & J Mfg. Co. (1941) 45
Cal.App.2d 586, 114 P.2d 658, which held that the obligation to pay for
certain professional and technical services rendered by a bought-out former
partner began to accrue as the services were rendered. (See id. at p. 588,
114 P.2d 658.)
9.
The trial court had conveniently made findings as to the value of the
plaintiff’s services during the relevant period.
10.
We are aware of no standard jury instructions dealing directly with
implied contracts arising out of cohabitation between unmarried people.
11.
Here are the five:1. NO CONTRACT RESULTS FROM PARTIES
HOLDING THEMSELVES OUT AS HUSBAND AND WIFEYou cannot find an
agreement to share property or form a partnership from the fact that the
parties held themselves out as husband and wife.
The fact that unmarried
persons live together as husband and wife and share a surname does not
mean that they have any agreement to share earnings or assets.2. NO
IMPLIED CONTRACT FROM LIVING TOGETHERYou cannot find an implied
contract to share property or form a partnership simply from the fact that the
parties lived together[.]3. CREATION OF AN IMPLIED CONTRACT․The fact
the parties are living together does not change any of the requirements for
finding an express or implied contract between the parties.4.
COMPANIONSHIP DOES NOT CONSTITUTE CONSIDERATIONProviding
services such as a constant companion and confidant does not constitute the
consideration required by law to support a contract to share property, does
not support any right of recovery and such services are not otherwise
compensable.5. OBLIGATIONS IMPOSED BY LEGAL MARRIAGEIn California,
there are various obligations imposed upon parties who become legally and
formally married.
These obligations do not arise under the law merely by
living together without a formal and legal marriage.
12.
The third and fifth instructions in footnote 11 are simple truisms.
13.
The first instruction says “does not” mean there is an agreement, the
second says the jury “cannot find” an “implied” agreement, and the fourth
says “does not support any right.”
14.
Because an implied-in-fact contract can be found where there is no
expression of agreement in words, the line between an implied-in-fact
contract and recovery in quantum meruit-where there may be no actual
agreement at all-is fuzzy indeed.
that fuzziness here.
We will not attempt, in dicta, to clear up
Suffice to say that because quantum meruit is a theory
which implies a promise to pay for services as a matter of law for reasons of
justice (Hedging Concepts, supra, 41 Cal.App.4th at p. 1419, 49 Cal.Rptr.2d
191), while implied-in-fact contracts are predicated on actual agreements,
albeit not ones expressed in words (Silva, supra, 14 Cal.2d at p. 773, 97 P.2d
798; McGough, supra, 214 Cal.App.3d at p. 1584, 263 Cal.Rptr. 404), recovery
in quantum meruit is necessarily a different theory than recovery on an
implied-in-fact contract. (Cf. 1 Witkin, Summary of Cal. Law (9th ed.
1987)
Contracts, § 112, pp. 137-138 [noting uncertainty created by decisions which
were not clear about whether quantum meruit was based on implied-in-law
or implied-in-fact contracts].)Neither do we address the quantum of proof
necessary to support recovery on a quantum meruit theory or attempt to
divine the dividing line between services which may be so gratuitously
volunteered under circumstances in which there can be no reasonable
expectation of payment and services which do qualify for recovery in quantum
meruit.
These matters have not been briefed and may be left for another
day.
SILLS, Presiding Justice.
WALLIN and CROSBY, JJ., concur.
Case Study Business Law ECON 301
NAME: ________ SID#__________ SEC __
Case: Hallasz v. Maglica
{TOTAL 20 marks}
Part One. Case-Based questions (requiring the use of the case to answer the questions) [1 ½ mark/question]
[1] What is the jurisdiction of the case? (Identify in one or two words)
[2] Identify the five theories of the case of action of this case. (List. Do not explain them.)
[3] How does Anthony attempt to limit his liability to Claire using the Statute of Limitations and does the Judge accede to his
attempt? Explain in two sentences._________________________________________________________________________
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[4] What procedural matter, at the lower court level, does the judge address in the current appellate court case?
(Identify the procedural matter in ten words or less) _____________________________________________________
[5] Is this a final adjudication of the substantive law claim contained in the case? Answer YES or NO and Explain in one
sentence. ________________________________________________________________________________________
Part Two. For the following questions assume that the Common Law jurisdiction in the case is that of England & Wales (UK)1
I. Suppose that Anthony upon releasing Claire offered her £8,000,000 for past services in product
development previously rendered and an ex gratia payment of £4,000,000. [3 marks]
1. Make arguments for and against past consideration in this case (in which case Claire would be denied
recovery beyond the salary she already collected).
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2. Identify two cases having precedential value to this case. Limit to relevant cases from the course.
• ____________________________________________________(case name only)
• ____________________________________________________(case name only)
3. Why is stipulating the jurisdiction is England & Wales critical for answering 2 (above)?
_____________________________________________________________________________________________
_____________________________________________________________________________________________
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II.
1
2
Suppose that Claire worked for Anthony as a contractor, from the formation of the corporation in 1974 onward,
upon receipt of a letter of intent2 that Anthony provided Claire (that Claire never acknowledged) to provide
product development services …
1. without ever subsequently negotiating a draft agreement. Would Claire be entitled to recover on the basis
of breach of contract or unjust enrichment? Explain briefly. [1/2 mark]
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2. while subsequently negotiating a draft agreement. Would Claire be entitled to recover on the basis of
breach of contract or unjust enrichment? Explain briefly. [1/2 mark]
Assume the absence of a Common Law marriage between the parties.
In that letter of intent Anthony declared an intent to pay Claire £1000 per month in return for consulting services.
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I.
Suppose that Claire cohabited with (but was not married to) Anthony, who made promises to Claire
contained in I (above).
[2 marks]
1. Explain which rebuttable presumption would apply: Circle or Highlight either RP#1 or RP#2.
(provide no explanation)
2. After having identified the correct rebuttable presumption to use [RP#1 or RP#2]:
a. Which party is prejudiced by the presumption? Circle or Highlight either Claire or Anthony.
(provide no explanation)
b. What evidence, if any, can that party present to rebut that rebuttable presumption?
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________________________________________________________________________
II.
Suppose that Claire lived separately from and was not married to Anthony, who made promises to Claire
contained in I (above).
[2 marks]
1. Explain which rebuttable presumption would apply: Circle or Highlight either RP#1 or RP#2.
(provide no explanation)
2. After having identified the correct rebuttable presumption to use [RP#1 or RP#2]:
a. Which party is prejudiced by the presumption? Circle or Highlight either Claire or Anthony.
(provide no explanation)
b. What evidence, if any, can that party present to rebut that rebuttable presumption?
____________________________________________________________________________________
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III.
1.
Assume that the judge, agreeing with the finding of a jury, that Anthony was unjustly enriched by the
services of Claire, decides to calculate compensation for Claire on the basis of quantum meruit.
In the space below, calculate the award to Claire in British pounds (£). [ 2 ½ marks]
Calculations:
2. Explain your calculations. [Hint: start your discussion with the definition of quantum meruit (reasonable
remuneration goods supplied and/or services rendered)] being sure not to repeat the error the jury made in
the original case].
[2 marks]
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