Maglica v. Maglica

• Decision Date: 31 August 1998
• Docket Number: No. G016463,G016463
• Citation: 78 Cal.Rptr.2d 101,66 Cal.App.4th 442
• Court: California Court of Appeals Court of Appeals
• Parties: , 98 Cal. Daily Op. Serv. 6877, 98 Daily Journal D.A.R. 9465 Claire MAGLICA, Plaintiff and Respondent, v. Anthony MAGLICA, Defendant and Appellant.

Page 101

78 Cal.Rptr.2d 101

66 Cal.App.4th 442, 98 Cal. Daily Op. Serv. 6877,

98 Daily Journal D.A.R. 9465

Claire MAGLICA, Plaintiff and Respondent, v. Anthony MAGLICA, Defendant and Appellant.

No. G016463.

Court of Appeal, Fourth District, Division 3, California.

Aug. 31, 1998.

As Modified on Denial of Rehearing Sept. 28, 1998.

Review Denied Dec. 16, 1998. ^*

[66 Cal.App.4th 445] Wasser, Rosenson & Carter, Dennis M. Wasser, Los Angeles, Lyon & Lyon, Robert C. Weiss, Roy L. Anderson, Los Angeles, Crosby, Heafey, Roach & May, Peter W. Davis, San Francisco, and James C. Martin, Los Angeles, for Defendant and Appellant.

Keker & Van Nest, John W. Keker, Karin Kramer, San Francisco, Wendy J. Thrum and Helene M. Linker for Plaintiff and Respondent.

OPINION

SILLS, Presiding Justice.

I. INTRODUCTION

This case forces us to confront the legal doctrine known as "quantum meruit" in the context of a case about an unmarried couple who lived together and worked in a business solely owned by one of them. Quantum meruit is a Latin phrase, meaning "as much as he deserves," ¹ and is based on the idea that someone should get paid for beneficial goods or services which he or she bestows on another. ²

The trial judge instructed the jury that the reasonable value of the plaintiff's services was either the value of what it would have cost the defendant to obtain those services from someone else or the "value by which" he had "benefitted [sic ] as a result" of those services. The instruction allowed the jury to reach a whopping number in favor of the plaintiff--$84 million--because of the tremendous growth in the value of the business over the years.

As we explain later, the finding that the couple had no contract in the first place is itself somewhat suspect because certain jury instructions did not accurately convey the law concerning implied-in-fact contracts. However, assuming that there was indeed no contract, the quantum meruit award cannot stand. The legal test for recovery in quantum meruit is not the value of the benefit, but value of the services (assuming, of course, that the services were beneficial to the recipient in the first place). In this case the failure to appreciate that fine distinction meant a big difference. People who work for businesses for a period of years and then walk away with $84 million do so because they have acquired some equity in the business, not because $84 million dollars is the going rate for the services of even the most workaholic manager. In substance, the court was allowing the jury to value the plaintiff's services as if she had made a sweetheart stock option deal--yet such a deal was precisely what the jury found she did not make. So the $84 million judgment cannot stand.

On the other hand, plaintiff was hindered in her ability to prove the existence of an implied-in-fact contract by a series of jury instructions which may have misled the jury about certain of the factors which bear on such contracts. The instructions were insufficiently qualified. They told the jury flat out that such facts as a couple's living together or holding themselves out as husband and wife or sharing a common surname did not mean that they had any agreement to share assets. That is not exactly correct. Such factors can, indeed, when taken together with other facts and in context, show the existence of an implied-in-fact contract. At most the jury instructions should have said that such factors do not by themselves necessarily show an implied-in-fact contract. Accordingly, when the case is retried, the plaintiff will have another chance to prove that she indeed had a deal for a share of equity in the defendant's business.

II. FACTS

The important facts in this case may be briefly stated. Anthony Maglica, a Croatian immigrant, founded his own machine shop business, Mag Instrument, in 1955. He got divorced in 1971 and kept the business. That year he met Claire Halasz, an interior designer. They got on famously, and lived together, holding themselves out as man and wife--hence Claire began using the name Claire Maglica--but never actually got married. And, while they worked side by side building the business, Anthony never agreed--or at least the jury found Anthony never agreed--to give Claire a share of the business. When the business was incorporated in 1974 all shares went into Anthony's name. Anthony was the president and Claire was the secretary. They were paid equal salaries from the business after incorporation. In 1978 the business began manufacturing flashlights, and, thanks in part to some great ideas and hard work on Claire's part (for example, coming out with a purse-sized flashlight in colors), the business boomed. Mag Instrument is now worth hundreds of millions of dollars.

In 1992 Claire discovered that Anthony was trying to transfer stock to his children but not her, and the couple split up in October. In June 1993 Claire sued Anthony for, among other things, breach of contract, breach of partnership agreement, fraud, breach of fiduciary duty and quantum meruit. The case came to trial in the spring of 1994. The jury awarded $84 million for the breach of fiduciary duty and quantum meruit causes of action, finding that $84 million was the reasonable value of Claire's services.

III. DISCUSSION

A. The Jury's Finding That There Was No Agreement To Hold Property for One Another Meant There Was No Breach of Fiduciary Duty

Preliminarily we must deal with the problem of fiduciary duty, as it was an alternative basis for the jury's award. We cannot, however, affirm the judgment on this basis because it is at odds with the jury's factual finding that Anthony never agreed to give Claire a share of his business. Having found factually that there was no contract, the jury could not legally conclude that Anthony breached a fiduciary duty.

The reason is that fiduciary duties are either imposed by law or are undertaken by agreement, and neither way of establishing the existence of a fiduciary duty applies here. As to the former, the fact that Claire and Anthony remained unmarried during their relationship is dispositive. California specifically abolished the idea of a "common law marriage" in 1895 (see Elden v. Sheldon (1988) 46 Cal.3d 267, 275, 250 Cal.Rptr. 254, 758 P.2d 582) and that, if it is not too harsh to say it, was clearly the substance of Claire and Anthony's relationship. They had a common law marriage.

As our Supreme Court said in Elden, "[f]ormally married couples are granted significant rights and bear important responsibilities toward one another which are not shared by those who cohabit without marriage." (Ibid.) The court noted, in that context, that a variety of statutes impose rights and obligations on married people. One set of such imposed rights and obligations, for example, is Family Code sections 1100 through 1103, which both establish a fiduciary duty between spouses with regard to the management and control of community assets (Fam.Code, § 1100, subd. (e)) and provide for remedies for a breach of that duty (Fam.Code, § 1101).

It would be contrary to what our Supreme Court said in Elden and to the evident policy of the law to promote formal (as distinct from common law) marriage to impose fiduciary duties based on a common law marriage. Indeed, in the context of this case the potential for anomalous results is readily apparent. For example, in family law matters involving dissolution of marriage, punitive damages are not available to remedy breaches of fiduciary duty in the management and control of community property (though there are, of course, other remedies). Punitive damages, however, are sometimes available in other breach of fiduciary duty cases. (See, e.g., Heller v. Pillsbury Madison & Sutro (1996) 50 Cal.App.4th 1367, 1390, 58 Cal.Rptr.2d 336.) It is unthinkable, given California's abolition of common law marriage, that an unmarried, cohabiting partner should have a more powerful remedy than a spouse.

That leaves contract, and the jury found there was no contract. Claire, despite the closeness of their relationship, never entrusted her property to Anthony; she only rendered services. And without entrustment of property, or an oral agreement to purchase property together, there can be no fiduciary relationship no matter how "confidential" a relationship between an unmarried, cohabiting couple. (Toney v. Nolder (1985) 173 Cal.App.3d 791, 796, 219 Cal.Rptr. 497.) Indeed, as the Toney decision points out, it takes clear and convincing evidence of such entrustment or an agreement to buy property together (ibid., citing Evid.Code, § 662) to overcome the presumption of title--and, as previously mentioned, there is no dispute that title to the stock of Mag Instrument was taken solely in Anthony's name. Here, because the jury affirmatively found there were no such agreements, we need not even address the question of whether the evidence was "clear and convincing." ³

B. 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 Cas. 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. (...