13.7 RESTITUTION
13.701 In General. "Restitution" is a broad concept that, in the context of contract law, describes at least three distinct kinds of remedies. While all are based on the notion that the defendant has harmed the plaintiff
[Page 1043]
either by causing some specific wrongful conduct or by wrongfully retaining some benefit that rightfully belongs to the plaintiff, the remedy itself may involve: (i) the return of specific property or money held by the defendant; (ii) the payment of money damages as compensation to the plaintiff for an injury; or (iii) the return of the full value of the unjust benefit gained by the defendant.
13.702 Return of Specific Property or Money Held by the Defendant. In American-LaFrance & Foamite Industries v. Arlington County, 358 Arlington County had obtained and made use of items of fire equipment under a contract that was later held to be illegal. The Virginia Supreme Court pointed out the well-established rule that "[t]he obligation to do justice rests on all persons, natural and artificial, and if a county obtain property or money of others without authority, the law, independent of any statute, will compel restitution or compensation." 359 The court accordingly held that the equipment must be returned to the plaintiff and that the plaintiff was also entitled to monetary compensation for the county's use of the equipment, consisting of a monthly rental fee, an allowance for depreciation due to the use by the county, and interest. 360
Similarly, in Hilliard v. Fox, 361 a stockbroker paid money to investors in the mistaken belief that he was contractually obligated to remit the proceeds of a sale of common stock. The court held that even if the payment was made due to the stockbroker's negligence, the investors had no equitable right to retain the money, and thus, the stockbroker was entitled to restitution—repayment of the money. 362 This right may be diminished or terminated, however, if the receiving party has changed its position and the changed circumstances make return inequitable. 363
[Page 1044]
13.703 Payment of Money Damages as Compensation to the Plaintiff. Restitution consisting of payment of money damages as compensation to the plaintiff can arise in two different ways. First, it can arise as a claim for restitution of money actually expended by the plaintiff under a contract that for some reason is invalid or rendered unenforceable. 364
Second, it can arise in the context of a claim for funds expended, or services rendered, on an implied contract theory. 365
This theory of restitution may also encompass an action for quantum meruit, which describes a contract implied in law requiring one who receives and accepts the services of another to make reasonable compensation for those services. 366 However, since recovery in quantum meruit can only be had where there is an expectation of payment, 367 the basis for the action cannot be explained entirely on an unjust enrichment theory, although that is the basis often identified in the cases. 368
This theory encompasses the common law cause of action for trespass. 369 It also encompasses the common law cause of action for assumpsit. 370
[Page 1045]
13.704 Return of the Full Value of the Unjust Benefit Gained by the Defendant. The remedy of restitution is most profitable for the plaintiff where the defendant has increased the value of the thing that has been wrongfully retained. In such cases, the defendant may be called upon to return the entire amount of the benefit to the plaintiff as restitution.
A classic example of this form of restitution is found in Millboro Lumber Co. v. Augusta Wood Products Corp. 371 The parties had entered into a contract, and Millboro Lumber Company had later filed a bill for attachment in equity seeking damages for breach of the contract. Augusta Wood Products Corporation filed a cross-bill requesting rescission of the contract based on alleged fraud in the procurement of the agreement. The circuit court held the contract had been fraudulently procured and awarded damages against Millboro Lumber Company in the amount of the profits it had realized in the transaction.
On appeal, Millboro Lumber Company argued that the proper remedy for the fraud was "mutual restitution and not the payment of damages, and that if damages could be decreed the measure of such damages would be the property parted with . . . and not the profits realized from the transaction." 372 The Virginia Supreme Court held, however, that where complete restitution cannot be made due to the fault of the party who has committed a fraud, equity "will, so far as practicable, require the party profiting by the fraud to surrender the benefit he has received in the transaction." 373 Affirming the award of damages, the court concluded that "[i]n equity and good conscience one who, by perpetrating a fraud on another, has derived a profit, cannot be permitted to retain such profit." 374
[Page 1046]
A more recent example is found in Hill v. Brooks. 375 In that case, the grantor executed a deed of gift establishing a joint tenancy between himself and one of his children. Later, the grantor filed a complaint seeking to set aside the deed on the grounds that he did not understand it, lacked sufficient capacity to be bound, and in fact intended to share the property equally with all of his children upon his death. Although the Supreme Court held that the trial court had erred in ruling for the grantor and imposing a constructive trust on the land, the court explained that where there is an agreement involving joint property, and one party...
