# Earhart v. William Low Co. > California Supreme Court · October 22, 1979 · 25 Cal. 3d 503 URL: https://www.frixlaw.com/law-library/cases/9550394 ## Case - **Full name:** FAYETTE L. EARHART, Plaintiff and Appellant, v. WILLIAM LOW COMPANY Et Al., Defendants and Respondents - **Court:** California Supreme Court - **Decided:** October 22, 1979 - **Citations:** 25 Cal. 3d 503; 158 Cal. Rptr. 887; 600 P.2d 1344; 1979 Cal. LEXIS 320 - **Precedential status:** Published - **Opinion:** Concurring in part by Clark - **Judges:** Tobriner, Clark - **Cited by:** 32 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9550394 ## Opinion text CLARK, J., Concurring and Dissenting. Defendant William Low Company owning 17 acres of property acquired a contract right to purchase the adjoining 17 acres (the Pillow property) intending to construct a mobile home park on the 34 acres. A special use permit allowing construction of a mobile home park on the Pillow property was to expire on 29 May 1971. After more than two months of negotiations between plaintiff, a building contractor, and defendant William Low, president of defendant company, agreement was reached for plaintiff to build the park for $892,557.86. On 16 April 1971 counsel for Low and the company sent to plaintiff’s counsel a letter of intent to accept plaintiff’s bid. The letter stated that acceptance was subject to defendants’ obtaining requisite financing and plaintiff furnishing a construction bond. Neither condition was met. The letter concluded: “It is my client’s further understanding that in return for this letter of intent and in order to keep a conditional use permit effective, your client will commence immediate framing of a proposed laundry room on the subject property and move some equipment on said premises by Monday, April 19, 1971.” Subsequently, defendant Low on several occasions requested plaintiff to commence work to preserve the permits. Defendants never made an independent, express promise to pay for such work. Late in May plaintiff commenced work on both parcels. He claimed that about a week later he learned defendants had not obtained the requisite financing. Plaintiff stopped work and commenced this action 14 June 1971. *517 The complaint states four causes of action: breach of contract, quantum meruit, fraud, and negligent misrepresentation. When the matter came on for trial on 17 May 1976, the trial court granted judgment on the pleadings on all causes of action except the quantum meruit count. The trial court awarded recovery against defendant company in quantum meruit for the work done on its property. The court denied any recovery for the work done on the Pillow property. The court also denied any recovery against defendant Low. The court explained its ruling denying recovery for improvements on the Pillow property: “Generally speaking, the court has a tendency to believe the testimony of Mr. Earhart and to disbelieve the testimony of Mr. Low. I don’t think Mr. Low was being truthful with us. I think he remembered very well the incidents that gave rise to this aborted transaction, and I think he just conveniently forgot such things as a telephone call. “So in reaching the conclusions the court reaches, it is putting essentially no weight on Mr. Low’s testimony. “Now, having said that, where are we? Because of the lateness of the bringing of this case to trial and the defects in the pleadings, the plaintiff was able to go forward only on one cause of action, and that cause of action was a cause of action in quantum meruit or that equitable remedy which accords to a person the fair value of something rendered to another in various situations. This is one of those situations, a situation where services were rendered in the expectation of a binding contract which never materialized. “Even discounting Mr. Low’s testimony, I think it is fair to say that there is some element of mistake and misunderstanding in this week’s period of time when people thought, or some people thought, the financing was available and it turned out it actually wasn’t available. “This is, then, an appropriate case for recoveiy for the fair market value of whatever was produced, and that leads us to a lot of problems, because, again, the plaintiff’s case is very deficient in terms of proof. “First of all, we know that the services were furnished both to the Pillow property and to the Low property, and it is an established proposition of law in California, as stated by Mr. Grauf, that you can’t get *518 recovery for services furnished to a third person, even though the services were furnished at the request of the defendant, and I am now referring to the same general Witkin citation which has been used by Mr. Grauf at page 61. “Now, you can quarrel with that law, I suppose, and under certain circumstances there might be exceptions to it, but this case would seem to be one that applies on all grounds to that principle of law. So the plaintiff can’t recover for services furnished Mrs. Pillow.” 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, 661 [ 56 Cal.Rptr. 97 , 422 P.2d 985 ]; Rotea v. Izuel (1939) 14 Cal.2d 605, 608 [ 95 P.2d 927, 125 , A.L.R. 1424]; Drvol v. Bant (1960) 183 Cal.App.2d 351, 356 [ 7 Cal.Rptr. 1 ]; 1 Witkin, Summary of Cal. Law (8th ed. 1973) pp. 60-61.) It is not entirely clear whether these cases are based on a contract implied by law to prevent unjust enrichment (Rotea v. Izuel, supra, at p. 608 ) or implied in fact reflecting an agreement by conduct (1 Witkin, supra, p. 60). Neither principles of unjust enrichment nor of implied in fact contracts require imposing upon defendant an obligation to pay for improvement to the Pillow property in the circumstances before us. Unjust enrichment presumes some benefit to the persons unjustly enriched sufficient to warrant implication of a promise to pay. Restatement, Restitution (1937) section 1, comment a, provides: “A person is unjustly enriched if the retention of the benefit would be unjust (see Comment c).” Comment c provides: “Even where a person has received a benefit from another, he is liable to pay therefor only if the circumstances of its receipt or retention are such that, as between the two persons, it is unjust for him to retain it. The mere fact that a person benefits another is not of itself sufficient to require the other to make restitution therefor. Thus, one who improves his own land ordinarily benefits his neighbors to some extent, and one who makes a gift or voluntarily pays money which he knows he does not owe confers a benefit; in neither case is he entitled to restitution. . . .” In Rotea v. Izuel, supra, 14 Cal.2d 605, 610-611 , it was held that an obligation will not be implied in law “where the direct benefit is received *519 by a third party and the only benefit received by the defendant is the incidental benefit which he may find in the satisfaction of obtaining compliance with his request. [Citations.]” Absent promise of payment, a person who does no more than request an attorney to consult with a potential client does not incur an obligation to pay the attorney for the consultation. The same rule should apply where the only benefit obtained by the defendant from the requested performance is substantially similar to the benefit received by the plaintiff from the same act. The hitchhiker should not be held to have promised to pay for his ride in the absence of a promise to pay. He and the person providing the ride receive the same benefit from the ride. A defendant who has solicited bids should not be held to have promised to pay the expenses incurred in preparing the bids unless he has expressly promised to do so. The bid provides substantially the same benefit to the one who solicits and the bidder—the opportunity to enter into a contract. Absent express agreement to pay, the potential customer does not obtain a cause of action for services rendered when he accepts the retailer’s request to examine his merchandise, nor does the salesman who responds to the potential customer’s requests for assistance. Again, the benefits are substantially the same—the opportunity to consummate a transaction. When the defendant receives benefits in addition to those received by the plaintiff or which are substantially different, unjust enrichment may be remedied through imposition of a duty to pay. But so long as the only benefits received by the defendant from plaintiff’s conduct are substantially equivalent to those obtained by the plaintiff, mere compliance with a request is not a sufficient benefit to warrant imposition of such duty absent a promise to pay. Absent agreement to pay, it would be mere speculation to conclude the benefit to the defendant rather than the substantially equivalent benefit to plaintiff was the motivating force for plaintiff’s performance. The improvements made to the defendant company’s property inured to the benefit of defendant company, and the trial court properly determined those improvements warranted imposition of a duty to pay their reasonable value. However, the improvements made to the Pillow property did not inure to the use and enjoyment of defendant company but to the owner of that property and recovery was properly denied. In one respect plaintiff’s performance on the Pillow property did confer a benefit to the defendant company which in other circumstances *520 might warrant recovery. Defendant received an advantage comparable to the extension of time to perform a contract or exercise an option. If the use permit had lapsed, the value of defendant company’s right to purchase the Pillow property would have been impaired. It is doubtful whether defendant company would have continued its search for financing, and whether potential lenders would still be interested in the project. The fact that defendant company did not ultimately acquire the Pillow property does not mean it failed to receive contractual advantage from plaintiff’s activity in preserving the use permit. To the contrary, some benefit was realized through increasing the time for defendant company to obtain financing for its project. However, plaintiff secured a substantially similar benefit from his performance. Plaintiff had a contract to build the mobile home park for $892,557.86 contingent upon defendant obtaining financing. If the use permit lapsed, it would be unlikely that the transaction would go forward. By commencing work to maintain the permit, thereby increasing the time to obtain financing, plaintiff also increased the likelihood that his contract would be effective. Because the benefits to plaintiff are substantially similar to those to defendant company, there is no unjust enrichment, and no basis for finding an implied in fact promise to pay. In real property development and construction projects, it is common for developers, contractors, engineers, and attorneys to pool their talents and resources undertaking preliminary steps such as seeking financing and permits for the project. Should the project prove feasible and work commence, they expect to be rewarded for their efforts both for the preliminary steps and for further work on the project. If the parties are unable to complete their project and abandon it, it is apparent there is no enrichment unless there are some collateral benefits. While each party may have benefited from the undertakings of the other parties, the benefits from such performance do not result in unjust enrichment. To impose an agreement to pay for the preliminary services based solely on requests—when the permits or financing cannot be obtained —results in unfortunate consequences. Because each of the parties is ordinarily requesting the others to do their jobs, imposition of an agreement to pay would mean that the developer must pay the contractor for his efforts in preliminary construction while the contractor must pay the developer for his efforts to secure permits and financing. Similar recoveries and liabilities would exist for the other parties. Rather than impose such cross-obligations, we should hold that each party should be responsible for his own undertakings. *521 There is no reason to reach a different result in the instant case. In the original agreement it was provided that defendant company’s obligation to pay was conditioned upon securing financing and a bond, and that plaintiff was to commence work “in return for this letter of intent and in order to keep a conditional use permit effective.” Although the trial judge determined that defendant company requested plaintiff to commence work, he did not find that defendant company made an independent promise to pay or was guilty of misrepresentation. The majority opinion concludes that, irrespective of benefit to the defendant, “compensation for a party’s performance should be paid by the person whose request induced the performance.” {Ante, p. 515, fn. omitted.) The majority rule is too broad. As the trial judge recognized, there may be some situations where recovery in quantum meruit is appropriate where the only benefit received is compliance with a request. However, the trial judge properly concluded this is not one of them. 1 I would affirm the judgment. Manuel, J., concurred. The majority rely upon Chief Justice Traynor’s dissenting opinion in- Coleman Engineering Co. v. North American Aviation, Inc. (1966) 65 Cal.2d 396, 410 [ 55 Cal.Rptr. 1 . 420 P.2d 713 ]. However, he was not considering a case where the benefits of the performance inured to a third party and the only benefit received by the defendant was substantially similar to a benefit received by the plaintiff. The Chief Justice recognized: “When performance is rendered by one party in the mistaken belief that an enforceable contract exists, his remedy is in quantum meruit. (See 3 Corbin, Contracts (1960 ed.) § 599, pp. 593-595, fn. 22, citing Peerless Glass Co. v. Pacific etc. Co., 121 Cal. 641, 647 [ 54 P. 101 ].) Ordinarily, the measure of recovery is the reasonable value of benefits conferred upon the other party. (Challenge Cream & Butter Assn. v. Royal Dutch Dairies, 212 Cal.App.2d 901, 908 [ 28 Cal.Rptr. 448 ]; Townsend Pierson, Inc. v. Holly-Coleman Co., 178 Cal.App.2d 373, 378 [ 2 Cal.Rptr. 812 ]; Major-Blakeney Corp. v. Jenkins, 121 Cal.App.2d 325, 340 [ 263 P.2d 655 ].) If the other party received no benefit, there is ordinarily no obligation to make restitution. (Ibid.)” (65 Cal.2d at p. 418.) Moreover, the Chief Justice’s exception to the general rule that benefit is essential to obligation to make restitution is subject to its own limitation: “When two parties mistakenly believe that a contract exists between them but the agreement is too uncertain and indefinite to be enforced, the one rendering performance and incurring expenses at the request of the other should receive reasonable compensation therefor without regard to benefit conferred upon the other.” (Italics added; 65 Cal.2d at p. 420.) The instant case is not one of mutual mistake. According to the trial judge only plaintiff was laboring under a mistake. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9550394. Public record. Not legal advice.