Opinion
No. 109,540.
2013-09-13
WAGNER INTERIOR SUPPLY OF KANSAS CITY, INC., Appellee, v. ASSOCIATED DRYWALL CONTRACTORS, INC., et al., Defendants, and DGP Construction Company, Dilip G. Patel and Naina D. Patel, Appellants.
Appeal from Wyandotte District Court; Daniel A. Duncan, Judge. Dilip Patel and Naina Patel, appellants pro se. Vincent F. O'Flaherty, of Law Offices of Vincent F. O'Flaherty, Attorney, LLC, of Kansas City, Missouri, for appellee.
Appeal from Wyandotte District Court; Daniel A. Duncan, Judge.
Dilip Patel and Naina Patel, appellants pro se. Vincent F. O'Flaherty, of Law Offices of Vincent F. O'Flaherty, Attorney, LLC, of Kansas City, Missouri, for appellee.
Before MALONE, C.J., POWELL and SCHROEDER, JJ.
MEMORANDUM OPINION
MALONE, C.J.
DGP Construction Company (DGP), Dilip G. Patel, and Naina D. Patel appeal the district court's judgment in favor of Wagner Interior Supply of Kansas City, Inc. (Wagner) in the amount of $14,800.66 based on a theory of unjust enrichment. DGP and the Patels raise numerous issues on appeal, but the central issue in the case is whether the district court erred by granting judgment in favor of Wagner on a theory of unjust enrichment. Because we agree that the evidence does not support an award in favor of Wagner based on unjust enrichment, we reverse the district court's judgment.
Dilip G. Patel is owner and president of DGP Construction Company. Dilip Patel and his wife, Naina D. Patel, decided to build a residence at 27594 Highland Circle in Olathe, Kansas. The Patels used DGP as the general contractor for the project. DGP accepted a bid of $48,015 from Associated Drywall Contractors, Inc. (Associated Drywall) to perform the interior drywall work on the residence. DGP also awarded Associated Drywall a subcontract in the construction of a Best Western hotel in Kansas City, Kansas.
Associated Drywall used materials provided by Wagner for both the residence and hotel projects. DGP made multiple payments to Associated Drywall covering both the residence and the hotel. On September 16, 2010, Associated Drywall submitted a final bill to DGP for $16,382.46 for the balance on the residence. DGP paid this bill with a check jointly payable to Associated Drywall and Wagner. At the same time, DGP issued another check jointly payable to Associated Drywall and Wagner on the hotel project. Wagner endorsed the two checks over to Associated Drywall in exchange for receiving a check from Associated Drywall for approximately $29,000, which was applied to several accounts as designated by Associated Drywall. As applied, the payment did not cover the balance due on the materials supplied by Wagner for the residence.
Wagner later filed a mechanic's lien against the residence in the amount of $15,580.83. On December 8, 2011, Wagner filed a lawsuit against Associated Drywall, DGP, and the Patels. The petition sought to foreclose the mechanic's lien, requested judgment under equitable theories of unjust enrichment and quantum meruit, and alleged a breach of contract. DGP and the Patels filed an answer to the petition and filed cross-claims for breach of contract and unjust enrichment against Associated Drywall.
Prior to trial, Wagner voluntarily dismissed its mechanic's lien claim. Wagner, DGP, and the Patels filed motions for default judgment against Associated Drywall. On November 26, 2012, the case proceeded to a bench trial. The district court granted the motions for default judgment against Associated Drywall. The district court then heard testimony from Wagner's president, Robert Neenan, and Dilip Patel, president of DGP. Neenan testified that Wagner's unpaid invoices for materials on the residence totaled $14,800.66. At the bench trial, DGP admitted that it had issued joint checks to Associated Drywall and Wagner on the hotel and residence projects. DGP did not dispute Wagner's claim that Associated Drywall owed Wagner $14,800.66 on the residence project.
After hearing the evidence, the district court rendered findings of fact and conclusions of law. Specifically, the district court found that Patel had written a joint check to Associated Drywall and Wagner on the residence and “never took any action” to make sure that Wagner had been paid in full on the residence. The district court concluded that under these circumstances “it would be inequitable and unjust for the Patels and DGP to accept and retain the benefit of all of Wagner's drywall materials without payment of its value.” Accordingly, the district court granted judgment against DGP and the Patels in the amount of $14,800.66 based on a theory of unjust enrichment. DGP and the Patels timely appealed the district court's judgment.
As a preliminary matter, DGP and the Patels devote a substantial portion of their appellate brief to challenging Wagner's mechanic's lien. They contend that the mechanic's lien was improperly perfected. They also argue that a right to a mechanic's lien may only be created by contract. Finally, they allege that Wagner failed to provide them with proper warning and notice of intent to perform before filing the lien. But Wagner voluntarily dismissed its mechanic's lien claim prior to trial. The district court granted only a money judgment in favor of Wagner based on a theory of unjust enrichment. Any decision by this court about Wagner's mechanic's lien would be completely ineffectual to resolve the dispute between the parties. Thus, we dismiss as moot the claims challenging the mechanic's lien. See Resolution Oversight Corp. v. Kansas Health Care Stabilization Fund, 38 Kan.App.2d 899, Syl. ¶ 10, 175 P.3d 268,rev. denied 286 Kan. 1179 (2008) (“An appellate court lacks statutory or constitutional authority to render advisory opinions in cases found to be moot. A case is moot when no further controversy exists between the parties and where any judgment of the court would be without effect.”).
DGP and the Patels also argue that Wagner waived its right to seek recovery against them because Wagner settled its claims with Associated Drywall. This claim fails on procedural grounds. First, DGP and the Patels cite no facts in the record to support the claim that a settlement occurred between Wagner and Associated Drywall. As a result, this court may presume that there are no facts to support the claim. See Kansas Supreme Court Rule 6.02(a)(4) (2012 Kan. Ct. R. Annot. 38). Second, there is no indication that the effect of settlement between Wagner and Associated Drywall was raised as a defense before the district court. Generally, issues that are not raised before the district court cannot be raised on appeal. In re Care & Treatment of Miller, 289 Kan. 218, 224–25, 210 P.3d 625 (2009).
The central issue on appeal is whether the district court erred by granting judgment in favor of Wagner against DGP and the Patels based on a theory of unjust enrichment. Recovery under a theory of unjust enrichment may occur only after proof of: (1) a benefit conferred upon the defendant by the plaintiff, (2) an appreciation or knowledge of the benefit by the defendant, and (3) the acceptance or retention by the defendant of the benefit under such circumstances as would make it inequitable for the defendant to retain the benefit without payment of its value. Haz–Mat Response, Inc. v. Certified Waste Services Ltd., 259 Kan. 166, 177, 910 P.2d 839 (1996).
Appellate review of a claim for unjust enrichment has two components. The appellate court necessarily grants deference to those factual findings of the district court that are supported by substantial competent evidence within the appellate record. Hodges v. Johnson, 288 Kan. 56, 65, 199 P.3d 1251 (2009). Once the pertinent facts are established, an appellate court exercises unlimited review over the district court's conclusion that unjust enrichment provided a basis for recovery. Haz–Mat Response, Inc., 259 Kan. at 176 (“[W]hether a subcontractor can recover from an owner on the basis of unjust enrichment or quantum meruit under the facts of this case is a question of law, with unlimited scope of review.”).
Here, the pertinent facts are undisputed as they relate to Wagner's recovery under a theory of unjust enrichment. The Patels hired DGP to construct their residence. DGP, in turn, accepted Associated Drywall's bid of $48,015 to install the interior drywall for the residence. Associated Drywall then entered into a contract or a series of contracts with Wagner to deliver materials to the residential construction site. It is undisputed that Wagner performed its contractual duties to deliver the necessary materials. It is also undisputed that Wagner was not paid for all of the materials it supplied for the residence, at least according to the manner in which Wagner applied the payments it received from Associated Drywall to several accounts as designated by Associated Drywall.
From these circumstances, it is clear that Wagner's relationship to DGP and/or the Patels is subcontractor to general contractor/owner. Wagner entered into a contractual relationship with Associated Drywall to supply drywall materials that Associated Drywall would then use to complete its contractual obligations to build interior drywall in the Patel residence. See Calvert Western Exploration Co. v. Diamond Shamrock, 234 Kan. 699, 704, 675 P.2d 871 (1984) ( “[A] subcontractor was one who assumed a portion of a contract from an original contractor or another subcontractor for the performance of all or part of the services or work which the other had obligated itself to perform under the contract with the owner.”).
In Haz–Mat Response, Inc., the Kansas Supreme Court addressed a subcontractor's claim against a landowner on a theory of unjust enrichment. In that case, a subcontractor performed hazardous waste removal work at a refinery and brought suit to foreclose its mechanic's lien or, in the alternative, to recover a judgment against the owner based on unjust enrichment. The district court granted the refinery owner's motion for summary judgment on both claims. The Court of Appeals affirmed the district court's ruling on the mechanic's lien but found that the subcontractor had a viable unjust enrichment claim against the refinery owner notwithstanding a lack of privity. See 259 Kan. at 169.
The Kansas Supreme Court granted a petition for review on both issues. The Supreme Court agreed with the Court of Appeals that the subcontractor's lien was not enforceable because the removal of hazardous waste was not an “improvement of real property” within the mechanic's lien statute. 259 Kan. at 176. But the Supreme Court reversed the Court of Appeal's determination that the subcontractor had a viable unjust enrichment claim against the refinery owner. The Supreme Court recognized that recovery under a theory of unjust enrichment does not require a demonstration of privity between the subcontractor and the owner or general contractor. See 259 Kan. at 177. Nevertheless, the Supreme Court determined that a subcontractor's ability to recover against an owner on a theory of unjust enrichment is limited to special circumstances involving inequitable conduct by the owner:
“In theory, the right to recover under unjust enrichment is governed by principles of equity. The obligation upon which the right to recover is based is created and imposed by law to prevent unjust enrichment at the expense of another. If the law is to allow the action based upon an implied-in-law contract between the owner and subcontractor, there must exist some special circumstances that would justify requiring the owner to pay. An examination of our past cases and further consideration of those cases set forth in Annot., 62 A.L.R.3d 288, convinces us that an essential prerequisite to such liability is the acceptance by the owner (the one sought to be charged) of benefits rendered under such circumstances as reasonably notify the owner that the one performing such services expected to be compensated therefor by the owner. In the absence of evidence that the owner misled the subcontractor to his or her detriment, or that the owner in some way induced a change of position in the subcontractor to his or her detriment, or some evidence of fraud by the owner against the subcontractor, an action for unjust enrichment does not lie against the owner by a subcontractor,” (Emphasis added.) 259 Kan. at 178.
Here, the evidence is undisputed that a benefit was conferred by Wagner upon DGP and the Patels, i.e., Wagner provided materials used by Associated Drywall in the construction of the residence. Thus, Wagner satisfied the first element for recovery under a theory of unjust enrichment. The evidence is also undisputed that DGP and the Patels had an appreciation or knowledge of the benefit conferred by Wagner. This fact was. established when DGP issued a joint check payable to both Associated Drywall and Wagner on the residence. Thus, Wagner satisfied the second element for recovery under a theory of unjust enrichment.
The key issue is whether the Patels accepted or retained the benefit conferred by Wagner under such circumstances as to make it inequitable for the Patels to retain the benefit without payment of its value. Here, no evidence was presented at trial that DGP and the Patels assured Wagner payment for the supplies outside of its relationship with Associated Drywall. In other words, neither DGP nor the Patels ever represented that they would be directly responsible for paying Wagner for the materials supplied to the residence. Furthermore, no evidence was presented at trial to refute DGP's claim that it paid Associated Drywall the total contract price of $48,015 for the work on the residence.
The district court found that DGP and the Patels knew that Wagner had not been paid for its supplies, presumably evidenced by the joint check issued as final payment to Associated Drywall and Wagner. The district court noted that DGP and the Patels never sought a lien waiver or some other document in which Wagner acknowledged full payment for its supplies on the residence. Assuming the district court's findings are correct, these facts do not form a basis for Wagner's recovery from DGP and the Patels on a theory of unjust enrichment. Any knowledge DGP and the Patels possessed about Wagner's insufficient compensation at the time they made the final payment under the contract with Associated Drywall does not establish the necessary culpable conduct to support a subcontractor's claim for unjust enrichment against an owner. See Haz–Mat Response, Inc., 259 Kan. at 178.
In granting judgment in favor of Wagner based on unjust enrichment, the district court found that DGP and the Patels “never took any action” to make sure Wagner had been paid in full for the materials supplied to the residence. But our Supreme Court has stated that “[i]n the absence of evidence that the owner misled the subcontractor to his or her detriment ... or some evidence of fraud by the owner against the subcontractor, an action for unjust enrichment does not lie against the owner by a subcontractor.” Haz–Mat Response, Inc., 259 Kan. at 178. Here, DGP or the Patels took no action that constituted an affirmative misrepresentation or inducement for Wagner to provide materials for the residence despite a lack of compensation from Associated Drywall. In fact, the issuance of a final joint check is evidence that DGP and the Patels were seeking to ensure that Associated Drywall paid its supplier from the funds represented by the check.
In summary, based upon the undisputed evidence at trial, Wagner failed to satisfy the third element for recovery under a theory of unjust enrichment. DGP and the Patels did not accept or retain the benefit conferred by Wagner under such circumstances as would make it inequitable for them to retain the benefit without payment of its value. Thus, we conclude the district court erred as a matter of law in granting judgment in favor of Wagner against DGP and the Patels in the amount of $14,800.66 based on a theory of unjust enrichment.
Dismissed in part and reversed in part.