Quantum meruit is an equitable remedy allowing recovery of the reasonable value of services rendered, even in the absence of an express contract.
To establish a claim for quantum meruit in California, the plaintiff must demonstrate:
- Performance of Services: The plaintiff performed work or provided services to the defendant.
- Expectation of Payment: The plaintiff reasonably expected to be compensated for the services at the time they were provided.
- Acceptance of Services: The defendant knowingly accepted or benefited from the services provided.
- Reasonable Value of Services: The services rendered have a calculable and reasonable value that should be compensated.
Case Law Reference: Maglica v. Maglica, 66 Cal.App.4th 442, 449-450 (1998).
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 Cos. 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.)
105*105 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. Sometimes luck, sometimes the impact of others makes the 106*106 difference. 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 onethird 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.
