By: Alexander A. Miuccio Published: June 2015

Court Rejects Subcontractor's Claim Against Owner

Where an unpaid subcontractor is unable to recover from its contractor, the subcontractor sometimes seeks to recover from the owner based on the legal theory of unjust enrichment. This equitable remedy is typically invoked to prevent an owner from being unjustly enriched at the subcontractor’s expense.

In the construction litigation context, however, the owner’s liability to a subcontractor under an unjust enrichment theory is dependent on the owner’s agreement to pay the subcontractor or other circumstances giving rise to such an obligation, as recently shown in the case of Sears Ready Mix v Lighthouse Marina, Inc.

Background

Sears Ready Mix was retained by VMA Concrete Construction to pour concrete for VMA at a premises owned by defendant Pierro-Gallasso. VMA had been retained to perform its concrete work by Pierro-Gallasso’s tenants, defendants Lighthouse Marina and Larry’s Lighthouse. VMA apparently become insolvent prior to making full payment to Sears Ready Mix.

Sears Ready Mix commenced a lawsuit against VMA, the owner and the Lighthouse tenants to recover under the theory of unjust enrichment. VMA failed to respond to the lawsuit and a default was taken against it. Sears Ready Mix’s claim against Pierro-Gallasso and the Lighthouse tenants claimed that they benefitted from Sears Ready Mix’s work and were unjustly enriched as a result of VMA’s failure to remit full payment. The owner and the tenants moved to dismiss the unjust enrichment claim, arguing that they could not be held liable when Sears Ready Mix’s contract was with VMA. Sears Ready Mix acknowledged the general law prohibiting a subcontractor from recovering from the owner, but claimed that it should receive payment notwithstanding because the Lighthouse tenants knew about, and acquiesced to Sears Ready Mix’s work. Sears Ready Mix also claimed that the Lighthouse tenants were interested in settling VMA’s debt to Sears Ready Mix, thus assuming VMA’s obligation.

Decision

The trial court dismissed Sears Ready Mix’s unjust enrichment claim, and the appellate court affirmed that decision. In doing so, the appellate court noted the settled law that a property owner who contracts with a general contractor does not become liable to a subcontractor on an unjust enrichment theory unless it can be demonstrated that the owner consented to pay for the subcontractor’s work. The mere fact that the owner and tenants received some benefit from Sears Ready Mix’s work was insufficient to recover on the unjust enrichment theory because Sears Ready Mix also failed to show that it was working for the owner and tenants when it performed its work.

Comment

This case shows how difficult it is for a subcontractor to recover from the owner under a theory of unjust enrichment. It is not enough to simply state that the owner received a benefit from the subcontractor’s work. The subcontractor must also prove that the owner in some way expressed a willingness to pay for the subcontractor’s work or otherwise assumed an obligation to pay for that work.

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