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Distinguishing quantum meruit and unjust enrichment in the construction setting.

It is not uncommon in construction litigation for practitioners to confuse the theories of recovery commonly known as "quantum meruit" and "unjust enrichment." Typically these theories are pled as alternate counts where a plaintiff is uncertain as to the viability of a claim for breach of contract or for foreclosure of a construction lien. Sometimes, however, both quantum meruit and unjust enrichment are improperly pled in the same complaint, and sometimes the remedy chosen is incorrect for the circumstances of the claim. The failure to differentiate between the two may lead to a misguided analysis of a claim with consequences potentially fatal to the litigation.

One source of confusion may be that quantum meruit evolved in law as a means to accomplish exactly the same equitable result--preventing the "unjust enrichment" that might occur where a party who had performed a service was without a contract remedy because of the strict pleading requirements of the common law writ system.(1) Therefore, courts discussing quantum meruit sometimes refer to the normative goal of preventing a party from becoming "unjustly enriched" without intending to invoke the equitable remedy known as unjust enrichment. See, e.g., Tobin & Tobin Ins. Agency, Inc. v. Zeskind, 315 So. 2d 518, 520 (Fla. 3d DCA 1975).(2) In fact, "unjust enrichment" is identified as one of the elements of a quantum meruit claim. See infra.

In analyzing whether a particular case should be pled as quantum meruit or unjust enrichment, it is well to recognize that, while the underlying purposes of each are the same, the elements of the respective actions are different.

Quantum Meruit

The term "quantum meruit" actually describes the measure of damages for recovery on a contract that is said to be "implied in fact."(3) The law imputes the existence of a contract based upon one party's having performed services under circumstances in which the parties must have understood and intended compensation to be paid. Tipper v. Great Lakes Chem. Co., 281 So. 2d 10 (Fla. 1973). Therefore, recovery in quantum meruit is said to be based upon the "assent" of the parties and, being contractual in nature, it sounds in law. Riteway Painting & Plastering, Inc. v. Yetor, 582 So. 2d 15 (Fla. 2d DCA 1991), rev. dismissed, 587 So. 2d 1329 (Fla. 1991). To recover under quantum meruit one must show that the recipient: 1) acquiesced in the provision of services; 2) was aware that the provider expected to be compensated; and 3) was unjustly enriched thereby. Hermanowski v. Naranja Lakes Condominium No. Five, Inc., 421 So. 2d 558 (Fla. 3d DCA 1982), rev. denied, 430 So. 2d 451 (Fla. 1983).

Quantum meruit recovery is appropriate where the parties, by their conduct, have formed a relationship which is contractual in nature, even though an enforceable contract may never have been created. For example, where a written agreement between an owner and a contractor is deemed unenforceable as a result of a technical deficiency or because it violates public policy, the contractor may still recover in quantum meruit. See, e.g., Wood v. Black, 60 So. 2d 15 (1952) (contract unenforceable because contractor not licensed); Tobin & Tobin Ins. Agency, Inc. v. Zeskind, 315 So. 2d 518 (statute of frauds barred enforcement of oral contract). As a general rule, one should not look to recover in quantum meruit unless there have been direct dealings between the parties that create the basis for the contract to be implied "in fact."

Since specific terms in an implied contract are absent, the law supplies the missing contract price by asking what one would have to pay in the open market for the same work. Thus the measure of damages under quantum meruit is defined as "the reasonable value of the labor performed and the market value of the materials furnished" to the project. Moore v. Spanish River Land Co., 159 So. 673, 674 (Fla. 1935).

Unjust Enrichment

Unjust enrichment suffers from a confusion of nomenclature.(4) Although it is referred to as "quasi-contract" and said to be based upon a "contract implied in law," it is not a contract at all. Rather, it is legal fiction described as "an obligation imposed by law to do justice even though it is clear that no promise was ever made or intended."(5) By contrast with quantum meruit, recovery for unjust enrichment is not premised upon there having been "assent" between the parties. While quantum meruit arises out of the expectation of the parties, unjust enrichment is based upon society's interest in preventing the injustice of a person's retaining a benefit for which no payment has been made to the provider.

To recover under an unjust enrichment theory, the following elements must be proven: 1) lack of an adequate remedy at law; 2) a benefit conferred upon the defendant by the plaintiff coupled with the defendant's appreciation of the benefit (i.e., an "enrichment"); and 3) acceptance and retention of the benefit under circumstances that make it inequitable for him or her to do so without paying the value of it (i.e., an "injustice"). Challenge Air Transport, Inc. v. Transportes Aereos Nacionales, S.A., 520 So. 2d 323 (Fla. 3d DCA 1988). Each of these elements can present knotty problems for the unwary.

Inadequacy of the Remedy

The absence of an adequate remedy at law may prove trickier than it appears, because there is no clear rule defining when the lack of a legal remedy is sufficiently complete to justify invocation of equity. Courts seem to apply different standards. Typically, a subcontractor not in privity with an owner will seek to enforce a lien to recover payment refused him by the general contractor. Where the subcontractor has failed to comply with the notoriously technical requirements of the construction lien law,(6) one customarily invokes equity to prevent the owner's being unjustly enriched at the subcontractor's expense. For example, in Rite-way Painting & Plastering, Inc. v. Tetor, 582 So. 2d 15 (Fla. 2d DCA 1991), a subcontractor failed to serve the notice to owner within the mandatory 45 days allowed, and the court recognized that unjust enrichment would lie as a basis for recovery from the owner.

The decision in Rite-way can be contrasted with that in Pinewood Plumbing Supply, Inc. v. Centennial Construction, Inc., 489 So. 2d 216 (Fla. 3d DCA 1986), in which a nonprivity supplier failed to serve the proper notice to allow it to recover against the general contractor and its surety under F.S. [sections] 255.05.(7) The Pinewood court refused to allow unjust enrichment, holding that the subcontractor had an adequate remedy at law under [sections] 255.05 but failed properly to use it. "Pinewood's failure to comply with the notice requirements," stated the Third District, "does not make the remedy inadequate." Id. at 217. Except that the two cases involve separate--albeit closely analogous--statutes, there is no meaningful way in which to harmonize these decisions. Litigants are left to argue over whether one's self-inflicted lack of an adequate remedy bars equitable relief.

Another complication involves the adequacy of remedies against co-parties. The existence of a valid legal remedy against one party will bar recovery in equity against another party.(8) A claimant cannot seek unjust enrichment against one party until it first exhausts its legal remedies against other parties. For example, in Maloney v. Therm Alum Inds., Corp., 636 So. 2d 767 (Fla. 4th DCA 1994), rev. denied, 645 So. 2d 456 (Fla. 1994), a subcontractor whose lien rights had been extinguished by foreclosure of a superior mortgage sought to recover against the owner through unjust enrichment. The Fourth District reversed the judgment against the owner because the subcontractor was still engaged in arbitration with the contractor, and it was, therefore, "premature" to permit an "indirect equity claim" against the owner until it had been determined whether the subcontractor would be fully compensated through the arbitration. Id. at 769.

An otherwise viable legal remedy against one party may be inadequate where the financial weakness of that party would render a judgment uncollectible. See, e.g., Deanna Constr Co., Inc. v. Sarasota Entertainment Corp., 563 So. 2d 150 (Fla. 2d DCA 1990). Establishing the insufficiency of one's remedy against a dissolved corporation or a party in bankruptcy should cause no problem,(9) but where a party is still in business and only suspected of being financially insecure, the task of proving the inadequacy of the remedy will be substantially more difficult. Financial solvency is a factual issue, and claimants should undertake to plead and prove as an affirmative part of their case the unlikelihood of collecting against a party. Id. It should not be assumed, for example, that simply because one party failed to defend a claim, a default judgment would be uncollectible.

Has the Defendant Been "Enriched"?

There is a crucial theoretical difference between the measure of recovery under unjust enrichment and that under quantum meruit. Unjust enrichment focuses on the "benefit conferred" upon the recipient rather than the reasonable value of services provided by the claimant as determined from the market. That is, one looks through the eyes of the recipient to determine whether what was done constituted a benefit at all and, If so, what was the value received. In some cases, there may be no difference in the dollar amount as viewed from either side, but in others the difference may be great.

This may readily be seen by comparing Henry M. Butler, Inc. u. Trizec Properties, Inc., 524 So. 2d 710 (Fla. 2d DCA 1988), with Coffee Pot Plaza Partnership u. Arrow Air Conditioning and Refrigeration, Inc., 412 So. 2d 883 (Fla. 2d DCA 1982), two cases involving contractors' claims against landlords for work contracted by defaulting tenants. In Butler, where the contractor had transformed raw, unimproved space into fully finished offices which the landlord could presumably lease without difficulty, the court recognized that a benefit had been conferred upon the landlord and remanded for trial on unjust enrichment. In Coffee Pot, on the other hand, where an air conditioning contractor repaired and installed refrigeration equipment left by the tenant in space which the landlord could not rent, the court denied recovery in unjust enrichment, finding it merely speculative that the landlord had received a benefit notwithstanding that the value of the equipment itself had been enhanced.(10)

Because of the unique measure of recovery in unjust enrichment, proof of damages must be based upon the peculiar circumstances of each defendant. In simple terms, the issue is whether, even in the face of extensive work performed by the claimant, the defendant was in fact "enriched." This means that claimants must be especially careful in analyzing the basis upon which they intend to quantify their recovery, and that defendants should likewise be alert for lines of defense premised upon the subjective "worthlessness" of the benefit allegedly conferred by the claimant.

"Unjust"--Something for Nothing

Assuming a party has been "enriched" by the efforts of the claimant, the next question is whether the enrichment was "unjust." In order to have been unjustly enriched, a party must have received the benefit without paying for it. For example, where an owner allows a subcontractor to improve property, knowing that the contractor would default and be unable to pay the subcontractor, it would be unjust for the owner to retain the benefit of the work without paying anyone at all. See, e.g., Zaleznik v. Gulf Coast Roofing Co., 576 So. 2d 776 (Fla. 2d DCA 1991). On the other hand, if an owner has paid a contractor for work performed by a subcontractor, but the contractor has failed to pay the subcontractor, the "injustice was not visited" upon the subcontractor by the owner. Blum v. Dawkins, Inc., -- So. 2d --, 21 Fla. L. Weekly D2352 (Fla. 5th DCA Nov. 1, 1996); Yates v. Bernard's Carpet and Draperies, Inc., 481 So. 2d 515, 516 (Fla. 4th DCA 1985). To allow recovery against the owner in the latter instance would work an injustice in the other direction by forcing the owner to pay twice for the same benefit.

The mere fact that a party has generally made payments in connection with a contract, however, does not necessarily mean that unjust enrichment will not lie on behalf of a specific claimant. In Ruck Bros. Brick, Inc. v. Kellogg & Kimsey, Inc., 668 So. 2d 205 (Fla. 2d DCA 1995), rev. denied, 676 So. 2d 1368 (Fla. 1996), a general contractor, encountering problems in the performance of its masonry subcontractor during the course of a project, entered into a joint check arrangement with the subcontractor and the claimant brick supplier as an inducement to continue furnishing bricks. After additional bricks were delivered, the contractor refused to pay both the subcontractor and the supplier. The trial court dismissed the supplier's unjust enrichment claim on the basis that the contractor had already paid out more than the contract price and, therefore, was not unjustly enriched. The Second District reversed, holding that, while the contractor may have paid other suppliers for their materials, it had not paid for the bricks and, therefore, with respect to the bricks in particular, had received a benefit for which it had not paid. In short, the analysis of an unjust enrichment claim will require a precise tracing of monies with an eye toward matching specific payments with specific benefits received.

Conclusion

The peculiar issues associated with pleading a claim for relief under unjust enrichment reflect how distinctly different it is from quantum meruit. The two remedies are not interchangeable. Because one sounds in equity and the other in law, they may not both be pled simultaneously for the same claim. Bowleg v. Bowe, 502 So.. 2d 71 (Fla. 3d DCA 1987). The practitioner must analyze each case carefully before choosing which remedy applies.

(1) Both quantum meruit and unjust enrichment have historical roots in the common law action of general assumpsit, which evolved as a remedy to collect upon debts arising from promises which were not contained in a contract under seal. See Hazen u. Cobb, 117 So. 853 (Fla. 1928). Each theory of recovery constituted one of the so-called "common counts" that were permitted to be pled under general assumpsit. See generally ARTHUR L. CORBIN, CORBIN ON CONTRACTS [subsections] 17-20 (1952).

(2) It is not uncommon in discussing the concepts for practitioners, and sometimes courts, to use contract implied-in-fact and contract implied-in-law interchangeably, thus unfortunately perpetuating the confusion between the two theories. See, e.g., Aldebot v. Story, 534 So. 2d 1216, 1217 (Fla. 3d D.C.A. 1988).

(3) "Quantum meruit" (Latin for "how much he deserves") was the common count in an action of general assumpsit to recover payment for the value of labor and services ' Another common count was "quantum valebant" ("how much they are worth"), which was used to recover payment for goods sold and delivered. Although modern construction law practitioners sometimes lump claims for services and goods under quantum meruit, strictly speaking, contractors who render services should properly plead quantum meruit, while materialmen who furnish goods should plead goods sold and delivered.

(4) While the term "unjust enrichment" is commonly used as a label for a remedy, this author finds it more conceptually satisfying to think of its being the general wrong giving rise to specific equitable remedies, such as constructive trust, restitution, and equitable lien.

(5) JOHN D. CALAMARI & JOSEPH M. PERILLO, THE LAW OF CONTRACTS [sections] 1-12 (2d ed. 1977); see Tipper v. Great Lakes Chem. Co., 281 So. 2d 10, 13 (Fla. 1973).

(6) FLA. STAT. ch. 713, Part 1.

(7) FLA. STAT. [sections] 255.05 serves in public construction projects to provide comparable protection to subcontractors and suppliers that the construction and law provides in private projects. Because public lands cannot be liened, [sections] 255.05 provides for the posting of a payment bond against which subcontractors and suppliers can assert their claims in lieu of filing liens.

(8) See, e.g., Miracle Center Dev. Corp. v. M.A.D. Constr, Inc., 662 So. 2d 1288 (Fla. 3d D.C.A. 1995), where the Third District reversed a general contractor's judgment against a landlord for unpaid tenant improvements because the contractor had also succeeded in obtaining a judgment in contract against the tenant. The appellate court reasoned that allowing the contractor both judgments would constitute a double recovery by the contractor.

(9) See In re Auto Dealer Services, Inc., 65 B.R. 681 (M.D. Fla. 1986); Hillman Constr Corp. v. Wainer, 636 So. 2d 576 (Fla. 4th D.C.A. 1994).

(10) The court in Coffee Pot Plaza Partnership v. Arrow Air Conditioning and Refrigeration, Inc., 412 So. 2d 883 (Fla. 2d D.C.A. 1982), also found that the landlord had not "knowingly and voluntarily accepted the benefits" of the contractor's work and that the contractor should properly look to the tenant for payment, suggesting that the contractor had available (or had not sufficiently disproved) an adequate remedy at law. Id. at 884.

H. Hugh (Terry) McConnell practices appellate law in Coral Gables, concentrating in commercial and construction matters. He received his B.A. from Yale University, J.D. from Northeastern University, and master's in regional planning from the University of North Carolina. Mr. McConnell has taught law at the University of Miami Department of Civil and Architectural Engineering and lectured in construction law at the university's school of law.

This column is submitted on behalf of the Trial Lawyers Section, William B. Wilson, chair, and Brett Preston, editor.
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Title Annotation:Florida
Author:McConnell, H. Hugh
Publication:Florida Bar Journal
Date:Mar 1, 1997
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