Monday, July 27, 2009

Quantum Meruit in Virginia (Try Saying THAT Five Times Fast!)

In Mongold, Co-Executor (et al.) v. Woods, (009-6-072, June 4, 2009) the Supreme Court of Virginia analyzed an interesting fact pattern that touches on questions of both contract law and property/estate law.

Ultimately, the Supreme Court reaffirmed earlier decisions holding that the Commonwealth (1) does not recognize a cause of action for promissory estoppel but (2) does recognize a cause of action for quantum meruit.

Promissory estoppel and quantum meruit are two legal theories by which Person A can be awarded compensation -- even in the absence of a binding contract -- if (a) Person A performs a service that benefits Person B and (b) Person A reasonably anticipates that he will be compensated for his services, based on (c) Person B having promised Person A such compensation (or requested such service).

The principle underlying both theories is that the beneficiary of the services should not be unjustly enriched; courts' strict insistence on the existence of a valid contract could lead to such unjust enrichment.


In Mongold, Terry Woods worked as a farm laborer for Paul and Nina Dove for more than two decades. According to the Supreme Court's opinion, Woods accepted considerably lower wages than he otherwise would have been entitled to because the Doves had assured him on more than one occasion that they would leave most of their farm to him after they both died.

Upon Mr. Dove's death, his interest in the farm passed to his wife (the property was held as tenants by the entirety). Then, after Mrs. Dove died, Mr. Woods discovered that she had left the farm to her siblings.

The Circuit Court of Rockingham County found in Mr. Woods's favor (though not on all counts) and awarded him the amount of $115,172.57 from Mrs. Dove's estate on the basis of quantum meruit; the Supreme Court then expanded the time frame for which Mr. Woods was entitled to damages.


Mongold is particularly interesting for the distinction the Court drew between promissory estoppel and quantum meruit.

Promissory estoppel -- said the Court -- provides as its remedy "judicial enforcement of the promisor's promise." If such a remedy were available to Mr. Woods, he would have been entitled to a conveyance of most of the Doves' farm. Perhaps because the remedy for a promissory estoppel claim is so generous, the Supreme Court of Virginia has not previously recognized it as a cause of action, and the Court reaffirmed that position in Mongold.

Quantum meruit provides a different remedy: the reasonable value of services rendered by the promisee on behalf of the promisor, less the compensation that was actually received by the promisee. With respect to Mr. Woods, this meant that the Circuit Court should determine the "extra" value of the services provided by Mr. Woods (in reliance on the Doves' promise) from the beginning of his period of employment.


An important lesson of Mongold is that the absence of a binding contract is not (depending on the facts and circumstances (of course -- everything depends on the facts and circumstances, especially in the courtroom)) a complete bar to recovery of a service-provider who can establish his reliance on another's promise.