By: Richard E. Guttentag, Esq., Stearns, Roberts & Guttentag, LLC
An action for “unjust enrichment” exists to prevent the wrongful retention of a benefit, or the retention of money or property of another, in violation of good conscience and fundamental principles of justice or equity. The court in Iberiabank v. Coconut 41, LLC, 2013 WL 6061883 (M.D. Fla. 2013) analyzed a contractor’s action for “unjust enrichment” to determine whether the contractor was entitled to payment for the work it performed.
As previously discussed in one of our prior articles, the case of Iberiabank v. Coconut 41, LLC, 2013 WL 6061883 (M.D. Fla. 2013) involved the development of a mixed-use commercial retail center (“Project” and/or “Property”). Land Development Group, LLC executed a Purchase and Sales Agreement to purchase property to develop the retail center. Prior to closing on the Purchase and Sale Agreement, Land Development Group formed Coconut 41, LLC (Coconut 41) under which it conveyed its interest in all of the Property (designated as Development Area 1, Development Area 2, and various “out-parcels”) to Coconut 41. At the closing, Coconut 41 sold Development Area 2 to H.G. Coconut, LLC (“HG Coconut”).
Westwind Contracting (“Contractor”) entered into two contracts with Coconut 41 to furnish work on the Project. One contract was for on-site infrastructure work (infrastructure contract), and the other contract was for off-site road work (off-site contract). HG Coconut was not a party to either contract, had no role in the negotiation of the contracts, and had no obligations in the performance or supervision of the contracts. The Contractor did perform some on-site infrastructure work on Development Area 2 pursuant to the engineering plans, and coordinate the work it did for Coconut 41 with the plans prepared by HG Coconut for the future development of Development Area 2.
The Contractor completed its work, but was not paid in full for its work under the infrastructure contract or off-site contract. The Contractor made a formal demand on Coconut 41 for payment, a copy of which was provided to HG Coconut, among others. The Contractor never submitted any payment applications to HG Coconut or sought payment from HG Coconut.
The Contractor brought two claims against HG Coconut, one of which was to enforce its lien against HG Coconut’s Development Area 2 under the off-site contract, which HG Coconut prevailedon 1 . The Contractor’s other claim was for “unjust enrichment” for work performed under the infrastructure contract and off-site contract with Coconut 41. In connection with the Contractor’s unjust enrichment claim, the Contractor argued that HG Coconut should pay the amounts owed to the Contractor under its contracts with Coconut 41 because HG Coconut benefitted from the Contractor’s work. The Contractor claimed that it was owed $336,665.38 ($141,121.06 for the infrastructure work and $195,544.32 for the off-site work).
In Florida, a claim for unjust enrichment is an equitable claim based on a legal fiction which implies a contract as a matter of law even though the parties to such an implied contract never indicated that an agreement existed between them. An action for unjust enrichment cannot apply where an express contract exists which allows for recover. Because no contract existed between the Contractor and HG Coconut, the court held that the Contractor’s unjust enrichment claim may be presented.
A claim for unjust enrichment requires the Contractor to show by a preponderance of the evidence that (1) the Contractor conferred a direct benefit on HG Coconut; (2) HG Coconut had knowledge of the benefit; (3) HG Coconut accepted or retained the conferred benefit; and (4) the benefit was conferred under circumstances which make it inequitable for HG Coconut to retain the benefit without paying its fair value.
As to the first element, the Court reasoned that the Contractor conferred a direct benefit on HG Coconut because the infrastructure work performed by the Contractor was necessary for HG Coconut to obtain the permits to develop Development Area 2, the work would allow HG Coconut to tie into sewer lines constructed by the Contractor, the work allowed access to Development Area 2, and some of the work was physically constructed on Development Area 2.
As to the second element, the Court reasoned that HG Coconut had express knowledge of the work performed by the Contractor and the benefit it provided to HG Coconut as HG Coconut sued Coconut 41 to ensure completion of the infrastructure work, and that HG Coconut knew that such work was being performed on the Property.
As to the third element, the Court determined that HG Coconut accepted and retained the conferred benefit. The Court based its decision on the grounds that some of work was performed on HG Coconut’s property, as a result of the work it had the ability to connect to the sewer lines as contemplated by the Land Purchase Contract, and the future development of Development Area 2 was dependent on the performance of the infrastructure work performed by the Contractor on Development Area 1. Further, HG Coconut never directed the Contractor to stop performing the work.
As to the fourth element, the Court held that it would be inequitable for HG Coconut to retain the benefits conferred upon it without paying fair value for the amount which remains unpaid to the Contractor.
The Court disagreed with HG Coconut’s arguments that the Contractor’s unjust enrichment claim was barred because in order to accept or retain a benefit, HG Coconut must be in control of the work, and because the Contractor did not complete the work. The Court held that the Contractor was not barred to maintain its action for unjust enrichment because unjust enrichment does not require the benefitted party to have control in order for it to accept or retain the benefit, and the Contractor substantially completed the work. However, the Court did hold that the cost to complete the Contractor’s work (i.e. $20,000) would be offset against the amount due under the unjust enrichment claim. Accordingly, the Court held that the Contractor should be paid $316,665.38 by HG Coconut for the work it furnished to the Project (i.e. $336,665.38 representing the fair value of the work the Contractor furnished less $20,000.00 to complete the work).
This case demonstrates the elements that must be proved by a contractor in order to establish a claim for unjust enrichment. Unjust enrichment is an equitable remedy, which is not available where there is an adequate remedy at law.
About the Author: Richard E. Guttentag is a partner with Stearns, Roberts & Guttentag, LLC, and is Board Certified in Construction Law by the Florida Bar. Mr. Guttentag exclusively in construction law including construction lien claims and defense, payment and performance bond claims and defense, bid protests, construction contract preparation and negotiation, and construction and design defect claims and defense. He can be reached for consultation at [email protected].
1 The Contractor’s action to enforce its lien and HG Coconut’s action for Fraudulent Lien were discussed in our firm’s article “Owner Fails to Establish Claim for Fraudulent Lien” in BNC December 6, 2013 Newsletter.