Vol. 73, No. 2, February 2000

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Written Contract
Alternatives

As ridiculous as this scenario may be, there are many cases where contractors have performed work only to find out later that they performed the services for the wrong person or on the wrong property. In cases where the "inadvertent beneficiary" of the services indeed received a benefit, the contractor may rely on restitution via unjust enrichment as a way to get paid (assuming the court determines that the "equities" warrant such a result). In other words, a contractor may be compensated for a "good deed," albeit the result of mistake or imprudence, assuming that his or her acts have benefited the property owner. While Grass may have an argument that his lawn care services were valuable to Home, he cannot say the same about his felling of Home's personal forest. As such, the absence of benefit sounds the death knell for an unjust enrichment claim by Grass for the tree-cutting services.

Case Law Insight on Unjust Enrichment. A classic example of a hasty contractor's futile attempt to rely on unjust enrichment is set forth in Dunnebacke Company v. Pittman.³⁰ Dunnebacke initiated the action to foreclose on a subcontractor's lien against Pittman, a contractor, and the Gilligans, Chicago residents who owned the subject Kenosha County property abutting Lake Michigan. The Gilligans and Pittman had various discussions regarding the possibility of building a structure to prevent further erosion to the property. Although the Gilligans never gave Pittman the go-ahead to commence the work, when they traveled to the property one day they discovered that Pittman had constructed a seven-foot high, three-feet thick wall spanning 50 feet across the property's beach. The Gilligans, concerned that Pittman had built a "monstrosity", wanted it removed. The Gilligans cross-claimed against Pittman for damage to the property and removal costs.

At trial, although the court chided Pittman for proceeding with the work "without having something more, something to show for it," it granted judgment for Pittman based on unjust enrichment. The Wisconsin Supreme Court reversed, noting that the structure was built during the Gilligans' absence and, upon discovery of it, they did not wish to retain it and asked for its removal. The court noted that it would have been a different result if the Gilligans had been present during construction and made no protest or even if, upon discovery of the structure, they had retained it without protest.

As with quantum meruit, unjust enrichment has been applied in a variety of contexts. A recent unpublished decision of the Wisconsin Court of Appeals, Wilson v. Ogilvie,³¹ demonstrates its application in a unique, but unfortunate, situation of a love story gone sour. Wilson allowed her fiancé, Ogilvie, to build a garage (to store tools for his ceramic tile business) on two of her 22 acres. Wilson deeded the property to Ogilvie for no compensation and assisted Ogilvie in constructing the structure. Ogilvie's initially humble thoughts of a mere garage were morphed into more ambitious plans of a shop with an attached residence (ultimately valued at $130,000). After completion, Ogilvie moved into the new residence by himself, the wedding bells were quelled, and the couple broke off their engagement. If there was any question as to whether the relationship could be resurrected, that was answered (in the negative) when Wilson sued Ogilvie for unjust enrichment.

The court of appeals affirmed the trial court's finding that Ogilvie was unjustly enriched in the amount of $14,500, the appraised value of the two acres when vacant. The appeals court noted the trial court's observance that there was no dispute that a benefit was conferred on defendant and that the defendant knew of, and appreciated, the benefit. The court also referenced the trial court's observance "that the only consequence to Wilson at this point is that she now has a hostile neighbor. Her property was not enhanced by his building." The court rejected Ogilvie's argument that Wilson made a "gift that she now regrets," pointing out that the evidence at trial supported a conclusion that Wilson did not intend to make a gift of the property and that she never relinquished her dominion over the property, a necessary act to support a gift. The fact that Wilson deeded the property to Ogilvie was inconsequential to the court, noting the trial court's reliance on Wilson's testimony that she conveyed the property merely to aid financing of the project.

Unjust Enrichment Restitution: Focus on Benefit. With implied-in-fact contract, the damages focus is on the plaintiff and the reasonable value of the services rendered. With unjust enrichment, the damages focus is on the defendant and the amount of benefit received. Rendered versus received is the distinction.

A recent decision highlighting the measure of damages for unjust enrichment is W.H. Fuller Company v. Seater.³² Fuller sought to recover for grading and filling work done on Seater's property at the request of Seater's lessees. The trial court ruled that although there was no written or implied-in-fact contract between Seater and Fuller, there was a contract implied in law. It awarded damages in the amount of the value of Fuller's services, based on its itemized invoices. The court of appeals reversed, noting that the trial court improperly used the implied-in-fact contract measure. The appeals court noted that the proper measure of damages for a contract implied in law is "the value of the benefit [received] under the theory of unjust enrichment." This value "may include services rendered for the defendant, goods or merchandise received by the defendant, or improvements made to the defendant's real estate." It does not include plaintiff's lost profit. The court remanded and instructed the trial court to ascertain which of Fuller's services benefited Seater and the value of the services.

Supporting Proof as to Benefit Conferred. As with damages for implied-in-fact contracts, the unjust enrichment plaintiff should attempt to prove damages (that is, benefit to defendant) with reasonable, albeit not necessarily mathematical, certainty. An even more important caveat is that an unpaid service provider who contemplates an unjust enrichment claim should not let zealousness for payment cloud judgment and make it indifferent to what really transpired on a project.

Remember, the sine qua non of unjust enrichment is a benefit to the defendant. The foregoing cases reflect that if a contractor proceeds with work when an agreement is not in place, it does so at its own risk. The risk can be more than loss of pay for services. If it is unsuccessful on its unjust enrichment claim and it turns out that the work actually harmed the property (was a detriment rather than a benefit), the contractor risks owing money to the disgruntled property owner.³³

Promissory Estoppel

A fourth remedy that may be considered in the absence of a written agreement is promissory estoppel.

In Hoffman v. Red Owl Stores Inc.,³⁴ the Wisconsin Supreme Court recognized the cause of action for promissory estoppel, calling it "[a]n attempt by the courts to keep remedies abreast of increased moral consciousness of honesty and fair representations in all business dealings" and noting that it "supplies a needed tool which courts may employ in a proper case to prevent injustice."³⁵

The court stated that to make a claim under this cause of action, one must show: 1) a promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee, 2) the promise induced such action or forbearance, and 3) injustice can be avoided only by enforcing the promise.³⁶

In Hoffman, the court upheld the trial court's finding of promissory estoppel where the plaintiffs relied on Red Owl's promise to provide them with a franchise grocery store. In response to defendant's argument that "agreement was never reached on essential factors necessary to establish a contract between Hoffman and Red Owl," the court noted that the promise necessary to sustain a cause of action for promissory estoppel need not embrace all essential details of the transaction otherwise necessary to support a breach of contract action. An action for promissory estoppel is not equivalent to a breach of contract action.³⁷

Because it does not involve a contract, the Statute of Frauds is not a defense. Additionally, because damages for promissory estoppel are based on one's change of position or "reliance," lost profits are not recoverable.

Subsequent to Hoffman v. Red Owl, only a few reported decisions have dealt with a plaintiff's successful recovery under this cause of action. For example, in Cosgrove v. Bartolotta, ³⁸ the Seventh Circuit Court of Appeals upheld a jury's finding of promissory estoppel where a restaurant owner made a promise to make his attorney/business advisor part owner in a restaurant venture. In describing the type of "promise" necessary to sustain this cause of action, the court stated that while a "promise that is vague and hedged about with conditions may nevertheless have a sufficient expected value to induce a reasonable person to invest time and effort in trying to maximize the likelihood that the promise will be carried out," if one relies and acts "knowing that he is investing for a chance, rather than relying on a firm promise that a reasonable person would expect to be carried out, he cannot plead promissory estoppel."³⁹

In another recent Seventh Circuit Court of Appeals case, All-Tech Telecom Inc. v. Amway Corporation,⁴⁰ plaintiff sued for misrepresentation and promissory estoppel arising out of Amway's attempts to have All-Tech sell calling card telephones. The court held that All-Tech did not state a claim for promissory estoppel because the parties had a contract covering the various aspects of the business relationship. The court noted that promissory estoppel is a gap-filling remedy not available where there is an express contract between the parties and is not designed to give a party a second bite at the apple in the event it fails to prove a breach of contract.⁴¹

It is certainly difficult to describe a typical case of promissory estoppel. Its application often is problematic because the court must decide whether certain equitable factors weigh in favor of its application. This potentially explains its rare appearance in case law. While the claims of most service providers who have not contracted in writing are more likely to fall within the purview of implied-in-fact contract or unjust enrichment, promissory estoppel still should be considered when promises made to your client do not quite reach contract status.

Conclusion

Almost 50 years ago the Wisconsin Supreme Court stated in an implied-in-fact contract case:

"We cannot refrain from calling attention to the fact that a nominal sum spent for the drafting of an appropriate contract would have avoided this litigation. In the discussion necessary for the preparation of such a contract there would of necessity have been a meeting of the minds of the parties on the details before it could have been reduced to writing. The parties might have failed to agree on the details and there would have been no transaction between them, or the contract would have been one easily interpreted by the courts if necessary."⁴²

Mark R. Hinkston, Creighton 1988 cum laude, practices business litigation with DeMark, Kolbe & Brodek, Racine. He is admitted to practice in Wisconsin, Missouri, Kansas, and Colorado.

The causes of action discussed in this article often are remedies for bad planning and premature performance where there has been a failure to communicate. Yet your knowledge of the different remedies available to unpaid clients can soothe your clients' concerns when they neglected or refused to put an agreement in writing and instead relied upon potentially more tenuous indicia of an agreement, such as oral "negotiations" or a handshake.

Endnotes

¹ Witt v. Realist Inc., 18 Wis. 2d 282, 297, 118 N.W.2d 85, 93 (1962).

² Wis. Stat. § 241.02.

³ Wis. Stat. § 241.02 (a).

⁴ See Stan's Lumber Inc. v. Fleming, 196 Wis.2d 554, 570, 538 N.W.2d 849, 855 (Ct. App. 1995)(citing Toulon v. Nagle, 67 Wis. 2d 233, 248-49, 226 N.W.2d 480, 488-89 (1975)).

⁵ See Witt, supra note 1, at 298, 118 N.W.2d at 94.

⁶ See Gruen Indus. v. Biller, 608 F.2d 274 (7th Cir. 1979). See also Johann v. Milwaukee Elec. Tool Corp., 270 Wis. 573, 589, 72 N.W.2d 401, 410 (1955).

⁷ See Johann, supra note 6, at 589, 72 N.W.2d at 410. See also Leggett & Co. v. West Salem Canning Co., 155 Wis. 462, 469, 144 N.W. 969, 972 (1914).

⁸ See, e.g., CleanSoils Wisconsin Inc. v. Wisconsin Dept. of Transp., 229 Wis. 2d 600 n.8, 599 N.W.2d 903 n.8 (Ct. App. 1999).

⁹ In Ramsey v. Ellis, 168 Wis. 2d 779, 785, 484 N.W.2d 331, 333-34 (1992), Chief Justice Heffernan succinctly distinguished the two causes of action.

¹⁰ Arjay Invest. Co. v. Kohlmetz, 9 Wis. 2d 535, 539, 101 N.W.2d 700, 702 (1960).

¹¹ Theuerkauf v. Sutton, 102 Wis. 2d 176, 185, 306 N.W.2d 651, 658 (1981).

¹² Id.

¹³ Id.

¹⁴ 144 Wis. 646, 129 N.W. 1068 (1911).

¹⁵ Id. at 667, 129 N.W. at 1077.

¹⁶ See, e.g., In re Estate of Steffes, 95 Wis. 2d 490, 290 N.W.2d 697 (1980); Ward v. Jahnke, 220 Wis. 2d 539, 583 N.W.2d 656 (Ct. App. 1998).

¹⁷ See, e.g., Theuerkauf, supra note 11; Wisconsin Title Serv. v. Kirkland & Ellis, 168 Wis. 2d 218, 483 N.W.2d 275 (Ct. App. 1992).

¹⁸ See, e.g., Ramsey, supra note 9.

¹⁹ See Harper, Drake & Assoc. v. Jewett & Sherman Co., 49 Wis. 2d 330, 182 N.W.2d 551 (1971).

²⁰ See, e.g., Puttkammer v. Minth, 83 Wis. 2d 686, 266 N.W.2d 361 (1978); S & M Rotogravure Serv. Inc. v. Baer, 77 Wis. 2d 454, 252 N.W.2d 913 (1977).

²¹ See Gename v. Benson, 36 Wis. 2d 370, 376, 153 N.W.2d 571, 574 (1967).

²² See Harper, supra note 19, at 343, 182 N.W.2d at 555 (noting that the plaintiff "worked these hours in July through September of 1966. It was not until August of 1967, a year later, that he wrote them down.").

²³ See Mead v. Ringling, 266 Wis. 523, 529, 64 N.W.2d 222, 225 (1953).

²⁴ See, e.g., Rowe v. Attorneys' Liability Assurance Soc'y, Dist. I Ct. App., No. 97-2953 (May 18, 1999)(unpublished decision) (affirming trial court's denial of implied-in-fact contract claim where attorney "estimated that he devoted between twenty and five hundred hours to the case"). The reader is reminded that unpublished opinions are of no precedential value and may not be cited as precedent or authority. Wis. Stat. § 809.23(3).

²⁵ Greenlee v. Rainbow Auction/Realty Co., 202 Wis. 2d 653, 671, 553 N.W.2d 257, 265 (Ct. App. 1996).

²⁶ Watts v. Watts, 137 Wis. 2d 506, 405 N.W.2d 303 (1987).

²⁷ See Halverson v. River Falls Youth Hockey Ass'n, 226 Wis. 2d 105, 115-16, 593 N.W.2d 895, 900 (1999) (citing Management Computer Servs. v. Hawkins, Ash, Baptie & Co., 206 Wis.2d 158, 188-89, 557 N.W.2d 67, 80 (1996)(stating "[a] plaintiff's expenditure alone does not, however, support an unjust enrichment claim")).

²⁸ See Halverson, supra note 7, at 118, 593 N.W.2d at 900.

²⁹ Brown v. Thomas, 127 Wis. 2d 318, 326-27, 379 N.W.2d 868, 872 (Ct. App. 1985).

³⁰ 216 Wis. 305, 257 N.W. 30 (1934).

³¹ Dist. III Ct. App., No. 98-2976 (May 25, 1999)(unpublished decision). See Wis. Stat. § 809.23(3).

³² 226 Wis. 2d 381, 595 N.W.2d 96 (Ct. App. 1999).

³³ See, e.g., Dunnebacke, supra note 30, at 312-13, 257 N.W.2d at 33; Fuller, supra note 32, at 388 n.3, 595 N.W.2d at 100 n.3.

³⁴ 26 Wis. 2d 683, 133 N.W.2d 267 (1965).

³⁵ Id. at 695-96, 133 N.W.2d at 273.

³⁶ Id. at 698, 133 N.W.2d at 275.

³⁷ Id. at 697-98, 133 N.W.2d at 275.

³⁸ 150 F.3d 729 (7th Cir. 1998).

³⁹ Id. at 733.

⁴⁰ 174 F.3d 862 (7th Cir. 1999).

⁴¹ Id. at 869. But see Kramer v. Alpine Valley Resort, 108 Wis. 2d 417, 425, 321 N.W.2d 293, 297 (1982)(stating that while existence of a contract will bar a promissory estoppel claim, "this is subject to an exception where the contract fails to address the essential elements of the parties' total business relationship").

⁴² Mead, supra note 23, at 529a, 64 N.W.2d at 226.