Category Archives: unjust enrichment

BREACH OF AN ORAL CONTRACT AND UNJUST ENRICHMENT AND IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING

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In an ideal world, parties would have written contracts.  In reality, parties should endeavor to ensure every transaction they enter into is memorialized in a written contract.  This should not be disputed.  Of course, written contracts are not always the case. Parties enter transactions too often whereby the transaction is not memorialized in a clean written agreement.  Rather, it is piecemealing invoices, or texts, or discussions, or proposals and the course of business. A contract can still exist in this context but it is likely an oral contract.  Keep in mind if there is a dispute, what you think the oral contract says will invariably be different than what the other party believes the oral contract says. This “he said she said” scenario gets removed, for the most part, with a written contract that memorializes the written terms, conditions, and scope.

A recent federal district court opinion dealt with the alleged breach of an oral contract. In Movie Prop Rentals LLC vs. The Kingdom of God Global Church, 2023 WL 8275922 (S.D.Fla. 2023), a dispute concerned the fabrication and installation of a complex, modular stage prop to be used for an event. But here lies the problem. The dispute was based on an oral contract and invoices. The plaintiff, the party that was fabricating the modular stage prop, sued the defendant, the party that ordered the stage prop for the event, for non-payment under various claims.  The defendant countersued under various claims.

The trial court analyzed a motion for summary judgment relating to the defendant’s breach of oral contract claim against the plaintiff. Each party claimed a different fixed price term for the transaction. The trial court found that while the parties disputed the fixed price amount, and whether there were fixed installment payments, it was undisputed that an oral contract existed for a fixed price with money being exchanged for the fabrication of the stage prop, and within a specific duration, as consideration. However, the trial court found that whether the payments were to be installment payments were not an essential term when “it is undisputed that the Oral Contract contains a specified price, a specific duration, and a defined scope of work to be performed.” Move Prop Rentals, supra, at *6.

Because of the oral contract, the trial court granted summary judgment as to an unjust enrichment claim. “As noted, Defendants rely on their payments under the Oral Contract to support their unjust enrichment claim. That fact is fatal to their unjust enrichment claims, as [a]ny proof of an express agreement between the parties as to the compensation to be paid for the services rendered…defeat[s] rather than sustain[s] an action based upon quantum meruit.” Movie Prop Rentals, supra, at *8 (internal quotations and citation omitted). Stated differently, the oral contract precluded the unjust enrichment claim.

Because of the oral contract, the trial court granted summary judgment as to a breach of an implied duty of good faith and fair dealing claim.

Where a party to a contract has in good faith performed the express terms of the contract, an action for breach of the implied covenant of good faith will not lie. Accordingly, a cause of action for breach of the implied covenant cannot be maintained (a) in derogation of the express terms of the underlying contract or (b) in the absence of breach of an express term of the underlying contract.

Movie Prop Rentals, supra, at *8 (internal quotations and citation omitted).

Here, the trial court found that the breach of implied covenant of good faith and fair dealing was in derogation of the express terms of the oral contract because it was based on the plaintiff’s failure to fabricate in exchange for payment:

Defendants content that the Oral Contract obligated Plaintiffs to fabricate the Stage Prop in exchange for Defendants’ installment payments, contingent on Plaintiffs’ status updates. Defendants’ breach of the Oral Contract claim is based on Plaintiffs breach of this express term rather than on an implied duty to perform in good faith. Plaintiff’s failure to fully perform either constitutes a breach of this express term, or, should Plaintiff prevail on their breach of contract claim, Plaintiff’s partial performance does not constitute a breach in light of Defendants’ failure to continue making payments.

Movie Prop Rentals, supra, at *8.

Could this dispute have been avoided with a written contract? Maybe. Maybe not.  However, one thing is clear.  A written contract would have memorialized terms and conditions and each of the parties’ expectations under the contract as it relates to payment and work progress.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

UNJUST ENRICHMENT CLAIMS WHEN THERE IS NO BINDING CONTRACT

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A recent appellate opinion starts off, “This is a typical South Florida construction dispute.”  (See case citation at the bottom) Let’s see, is it?  No. It’s a garden variety payment dispute where the parties did NOT have a binding contract.  Why? That’s for a different day (because the smart practice is ALWAYS to have a contract!) but it touches on the equitable, unjust enrichment claim. And it touches on competing unjust enrichment claims and the apportionment of those claims. In other words, can both parties be right on their unjust enrichment claims?

An owner hired a general contractor for home renovations. Work started but the relationship soured and the general contractor did not complete the work. The general contractor filed a payment dispute against the owner based on unpaid invoices.  It pled alternative theories of recovery against the owner: breach of contract and unjust enrichment. The owner filed a counterclaim against the general contractor for the same claims. During the non-jury trial, the general contractor presented unpaid invoices along with testimony that the invoices represented the value of services rendered. The owner presented evidence of the completion of work damages.

The trial court found that the parties did NOT have a binding contract. Thus, there was no breach of contract. The trial court found that the parties both satisfied the elements for unjust enrichment claims against one another, but a net judgment was rendered in favor of the general contractor based on the general contractor’s unpaid invoices minus the damages the owner satisfactorily proved.

The owner appealed claiming the trial court “was required to employ an all-or-nothing approach in adjudicating the competing unjust enrichment claims.”   The appellate court disagreed:

This court has held that damages in such [unjust enrichment] cases must not be speculative or the product of conjecture.  They may, however, “be valued based on either (1) the market value of the services; or (2) the value of the services to the party unjustly enriched.” 

Against these principles, we examine the instant case. Here, [the general contractor] produced the unpaid invoices and established the amount billed represented a reasonable value of the services performed. Further, while the court rejected evidence in arriving at its determination of damages, “[c]ompetent, substantial evidence is tantamount to legally sufficient evidence, and a reviewing court must assess the record evidence for its sufficiency only, not its weight.” 

To the extent that [the owner] contend damages must be awarded on an all-or-nothing basis, we agree with the proposition that contractual damages are not ordinarily subject to apportionment.  However, we can find no authoritative source extending this general rule to the doctrine of unjust enrichment. Instead, the opposite holds true. The availability of a remedy in unjust enrichment is qualified to avoid unfair hardship. Consistent with this premise, principles of restitution, rather than contract, guide any award of damages. 

The Restatement (Third) of Restitution and Unjust Enrichment provides that the measure of “the unjust enrichment of a conscious wrongdoer . . . is the net profit attributable to the underlying wrong.”  The object is, the Restatement explains, “to eliminate profit from wrongdoing while avoiding, so far as possible, the imposition of a penalty.” 

Although this case does not involve profits in the traditional sense, it is analogous. To protect against a windfall, the trial judge credited [the owner] for the damages they established they sustained during construction. This methodology is consistent with the principles embodied in the Restatement and the underpinnings of unjust enrichment law. Accordingly, we discern no error and affirm the judgment under review.

Dooley v. Gary the Carpenter Construction, Inc., 48 Fla.L.Weekly D2143a (Fla. 3d DCA 2023) (internal citations omitted).

There are some interesting takeaways from this case.

First, testimony that the unpaid invoices represented the value of services performed is important. Here, the unpaid invoices coupled with the testimony was competent, sufficient evidence to support an unjust enrichment claim.

Second, unjust enrichment claims can be apportioned. Thus, both parties perhaps may be right to come up with an equitable approach that gets netted out in a final judgment.

Third, have a contract.  A negotiated, agreed-upon contract with terms and conditions. If you have a binding contract then unjust enrichment does not and should not come into play.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

INDIRECT BENEFIT DOES NOT SUPPORT UNJUST ENRICHMENT CLAIM AGAINST PRIME CONTRACTOR

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A recent case out of the Northern District of Florida dealing with a federal project provides an interesting discussion about a sub-subcontractor asserting a claim against the prime contractor for unjust enrichment. The prime contractor argued any benefit to it was indirect which does not support an unjust enrichment claim as the actual direct benefit flowed to the owner of the project – the government.  The federal district court agreed and dismissed the sub-subcontractor’s unjust enrichment claim against the prime contractor because an indirect benefit does NOT support an equitable unjust enrichment claim. See U.S.A f/u/b/o Eco Universe Contracting, LLC v. Calvary Construction Group, Inc., 2023 WL 3884642 (N.D.Fla. 2023).

The sub-subcontractor’s alleged benefit to support the unjust enrichment claim was the work it performed on the project. “A benefit conferred through a third party is indirect and does not satisfy the first element of an unjust enrichment claim.” Calvary Construction Group, supra, at *5. The federal district court explained:

The direct beneficiary of that [sub-subcontractor’s] work was the owner of the property that was improved by the work, not [the prime contractor]. The benefit to [the prime contractor] came directly from the payment that it received from [the federal government – owner], not [the sub-subcontractor]. Thus, any benefit that [the prime contractor] received from the [the sub-subcontractor’s] work was indirect, not direct.

The [sub-subcontractor] has not cited, nor has the Court located, any Florida cases holding that the payment received by a general contractor for work done by a sub-subcontractor on the owner’s property is a ‘direct’ benefit to the general contractor that can support an unjust enrichment claim.

Cavalry Construction Group, supra, at *5-6.

Keep this case in mind when dealing with an unjust enrichment claim because, as the court noted, the direct benefit for improvements to the property went to the owner of the project; not the prime contractor.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

QUICK NOTE: UNJUST ENRICHMENT CLAIM REQUIRES PROOF OF DIRECT BENEFIT

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An unjust enrichment claim is an equitable claim when there is no direct contract between the parties governing the merits of the claim.  It is not uncommon for these claims to be asserted in a construction dispute. A plaintiff suing a defendant for unjust enrichment must prove that they conferred a benefit on the defendant. This is the first element of an unjust enrichment claim that a plaintiff must prove. Without such proof, the unjust enrichment claim fails.

A recent case, discussed here, explains that the benefit conferred must be a DIRECT BENEFIT and not an indirect benefit.  This means that the plaintiff must prove that the benefit conferred on the defendant was not some indirect or peripheral benefit, but a direct benefit.  In certain contexts, this makes sense.  In others, not so much.  Nevertheless, when asserting an unjust enrichment claim, make sure you can prove that you conferred a direct benefit on the defendant to support this claim.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

DEATH OF SUBCONTRACTOR’S UNJUST ENRICHMENT CLAIM AGAINST PROJECT OWNER

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In a previous article, I discussed a subcontractor’s unjust enrichment claim against a project’s owner and the death of this equitable claim if the owner fully paid the general contractor or paid the general contractor for the subcontractor’s work.  This can be best summarized from a very short 1995 opinion out of the Fourth District Court of Appeal: “Unjust enrichment is equitable in nature and cannot exist where payment has been made for the benefit conferred. [Owner] paid [General Contractor] the full amount of its contract for the construction project.  Accordingly, there can be no unjust enrichment claim to support [Subcontractor’s] claim.”  Gene B. Glick Co., Inc. v. Sunshine Ready Concrete Co., Inc., 651 So.2d 90 (Fla. 4th DCA 1995).

There are instances where there is value to a subcontractor pursuing an unjust enrichment claim against a project’s owner.  But again, these instances die if the owner fully paid the general contractor or paid the general contractor for the subcontractor’s work because the owner paid the general contractor for any benefit conferred by the subcontractor.   This does not mean the subcontractor is without recourse as it can pursue rights against the general contractor, as well as payment bond or lien rights presuming those rights are properly preserved.  Typically, an unjust enrichment claim is explored because lien or bond rights were not properly preserved, there is a pay-when-paid provision in the subcontract and the subcontractor knows the owner has not paid the general contractor for its work, or there are other strategic, personal reasons why a lien or payment bond claim may not want to be pursued.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

UNJUST ENRICHMENT OR QUANTUM MERUIT CAN APPLY FOR EXTRA-CONTRACTUAL WORK IF THE EXPRESS CONTRACT DOES NOT CONCERN THE SAME SUBJECT MATTER

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Can a subcontractor recover from a general contractor for extra-contractual work under an unjust enrichment or quantum meruit theory even though an express contract exists between the parties?   Can a general contractor recover from an owner for extra-contractual work under the same theories even though an express contract exists with the owner?    The case below answers this question in the affirmative IF the express contract does not concern the same subject matter.

In the preceding post, I discussed the case, F.H. Paschen, S.N. Nielsen & Associates, LLC v. B&B Site Development, Inc., 2021 WL 359487 (Fla. 4th DCA 2021), regarding the validity of a dispute resolution provision in a subcontract that allows an architect, engineer, or owner to render a final decision as to the interpretation of the plans, specifications, or contract documents.

This case involved a dispute between a subcontractor and general contractor as to whether the demolition of a 561 square yard asphalt area and replacement with concrete was included in the subcontractor’s scope of work.  The subcontractor performed the disputed work and filed suit against the general contractor.  In addition to suing the general contractor for breach of contract, the subcontractor also asserted equitable claims for unjust enrichment and quantum meruit, claims that generally fail when there is an express contract between the parties.  B&B Site Development, supra, at *6 (“As a general principle, a plaintiff cannot pursue an implied contract theory, such as unjust enrichment or quantum meruit, if an express contract exists.”).

Quantum meruit, known as a contract implied in fact, “imposes liability, in the absence of an express agreement, ‘based on a tacit promise, one that is inferred in whole or in part from the parties’ conduct, not solely from their words.’”  Id. at *6 (citation omitted).

Unjust enrichment, known as a contract implied in law, is also not based on the finding of an express agreement, and requires proof that “(1) the plaintiff has conferred a benefit on the defendant; (2) the defendant has knowledge of the benefit; (3) the defendant has accepted the benefit conferred; and (4) the circumstances are such that it would be inequitable for the defendant to retain the benefit without paying the fair value of it.”  Id. (citation omitted).

As the B&B Site Development Court explained, there are circumstances where such equitable theories, or implied contract theories, will apply even though there is an express contract between the parties. “Reliance upon a theory of implied contract is barred only if an express contract concerns the same subject matter as the implied contract.”  B&B Site Development, supra, at *7 (discussing cases where implied in contract theories applied for subcontractor to recover extra-contractual work).

Those equitable theories, or implied in contract theories, applied in this case to support a judgment in favor of the subcontractor against the general contractor for the extra-contractual work:

The GC and the Sub entered into a construction contract. While the Sub performed under the contract, the GC requested and accepted a change to the scope of work, an extra that the GC erroneously claimed was included within the work described in the subcontract. Under these circumstances, “the law implies an obligation to pay the reasonable costs thereof in addition to the stipulated sum named by the parties in the original agreement.”

The GC is also liable under a theory of unjust enrichment. The Sub conferred a benefit on the GC in the form of asphalt removal and replacement that was required under the master contract but not the subcontract. The GC accepted the benefit and the circumstances are such that it would be inequitable for the GC to retain the benefit without paying fair value for it. As the trial court ruled, “it would be both inequitable and unjust to allow [the GC] to retain the benefit without paying [the Sub] fair value for it, because it was [the GC’s] unilateral mistake and breach of the General Contract that created the problem.”

The existence of the subcontract did not defeat recovery under either implied contract theory of recovery, as the subcontract did not cover removal and replacement of the existing asphalt.

B&B Site Development, supra, at *7-8

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

LEGAL COMPLEXITIES WHEN THERE IS A FAILED PROJECT

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Iberiabank v. Coconut 41, LLC, 2013 WL 6061833 (M.D.Fla. 2013) is a new case involving a failed mixed-use master development (subdivision) that illustrates some of the complexities when a construction project goes bad. It is a great case discussing aspects of Florida’s Lien Law (such as liens for subdivision improvements, single claim of lien, fraudulent liens) that are important for all construction participants. It is also a great case that discusses an unjust enrichment claim for unpaid work and a slander of title claim due to a fraudulently recorded lien. While the facts and issues are lengthy, there are numerous take-aways from this case that should not be ignored and are pointed out at the end of this article.

 

 

I. The Failed Development

 

 

In this case, a developer purchased approximately 46 acres of land. The land was intended to be developed into a master development. The developer sold approximately 14 acres referred to Development Area 2 to HG Coconut. The developer was responsible for installing the necessary infrastructure outside of Development Area 2 that would be required to develop both the developer’s land and Development Area 2. (This included, among other things, widening a road and sanitary-sewer work.)

 

To construct the infrastructure, the developer hired a heavy civil contractor. Two contracts were executed. The first contract was for on-site infrastructure improvements to the developer’s land. The second contract was for off-site infrastructure improvements such as the infrastructure improvements needed to develop Development Area 2. (There was no contract between the contractor and HG Coconut, the owner of Development Area 2.)

 

Because of nonpayment, the contractor recorded a single claim of lien. The lien included Development Area 2 (owned by HG Coconut). Remember, the contractor did not have a contract with the owner of Development Area 2.

 

II. Claims against HG Coconut – the Owner of Development Area 2 – and HG Coconut’s Claims against the Contractor

 

 

The contractor filed a lawsuit and asserted an unjust enrichment claim and lien foreclosure claim against HG Coconut–the owner of Development Area 2.  HG Coconut asserted a fraudulent lien claim and slander of title claim against the contractor.

 

 

A. Unjust Enrichment

 

The contractor contended that it benefited HG Coconut (a party it did not have a contract with) through infrastructure work it performed that provided value to Development Area 2. HG Coconut argued that the unjust enrichment claim should be barred because the contractor’s work was incomplete—it did not finish all of its work. The Middle District dismissed this argument equating recovery under an unjust enrichment theory to that of recovery when a contractor substantially performs. When a contractor substantially performs / completes its work, it is entitled to the full contract price minus the owner’s right to recover damages due to the contractor’s failure to render full performance. Since the contractor substantially completed its work subject to the unjust enrichment claim that provided a benefit to Development Area 2, the Middle District held that the contractor was entitled to the fair market value of the work minus HG Coconut’s offset for the remaining work.

 

B. Lien Foreclosure and Fraudulent Lien

 

The contractor argued that it was not paid for work performed under its off-site contract (the infrastructure work outside of developer’s land that was also needed to develop HG Coconut’s Development Area 2). HG Coconut asserted an affirmative claim against the contractor arguing that the contractor recorded a fraudulent lien.

 

The Middle District entered judgment against the contractor on its lien foreclosure claim. The fraudulent lien claim asserted by HG Coconut establishes the problems under Florida’s Lien Law with the contractor recording a lien that included Development Area 2.

 

Contractor’s performing subdivision improvements are entitled to certain protections under Florida’s Lien Law. Florida Statute s. 713.04(1) provides:

 

“Any lienor who, regardless of privity, performs services or furnishes material to real property for the purpose of making it suitable as the site for the construction of an improvement or improvements shall be entitled to a lien on the real property for any money that is owed to her or him for her or his services or materials furnished in accordance with her or his contract and the direct contract. The total amount of liens allowed under this section shall not exceed the amount of the direct contract under which the lienor furnishes labor, materials, or services. The work of making real property suitable as the site of an improvement shall include but shall not be limited to the grading, leveling, excavating, and filling of land, including the furnishing of fill soil; the grading and paving of streets, curbs, and sidewalks; the construction of ditches and other area drainage facilities; the laying of pipes and conduits for water, gas, electric, sewage, and drainage purposes; and the construction of canals and shall also include the altering, repairing, and redoing of all these things. When the services or materials are placed on land dedicated to public use and are furnished under contract with the owner of the abutting land, the cost of the services and materials, if unpaid, may be the basis for a lien upon the abutting land. When the services or materials are placed upon land under contract with the owner of the land who subsequently dedicates parts of the land to public use, the person furnishing the services or materials placed upon the dedicated land shall be entitled to a lien upon the land abutting the dedicated land for the unpaid cost of the services and materials placed upon the dedicated land, or in the case of improvements that serve or benefit real property that is divided by the improvements, to a lien upon each abutting part for the equitable part of the full amount due and owing. If the part of the cost to be borne by each parcel of the land subject to the same lien is not specified in the contract, it shall be prorated equitably among the parcels served or benefited. No lien under this section shall be acquired until a claim of lien is recorded. No notice of commencement shall be filed for liens under this section. No lienor shall be required to serve a notice to owner for liens under this section.”

 

 

However, just because a contractor performing subdivision improvements has certain lien rights, does not mean it can record a fraudulent lien. A fraudulent lien is defined in Florida Statute s. 713.31(2)(a):

 

“Any lien asserted under this part in which the lienor has willfully exaggerated the amount for which such lien is claimed or in which the lienor has willfully included a claim for work not performed upon or materials not furnished for the property upon which he or she seeks to impress such lien or in which the lienor has compiled his or her claim with such willful and gross negligence as to amount to a willful exaggeration shall be deemed a fraudulent lien.”

 

If a lien is deemed fraudulent, it is unenforceable. Fla.Stat. s. 713.31(2)(b). Additionally, an owner (or contractor, subcontractor, etc. that suffers damage from a fraudulent lien) can assert a claim for damages against the lienor for recording the fraudulent lien:

 

“An owner against whose interest in real property a fraudulent lien is filed, or any contractor, subcontractor, or sub-subcontractor who suffers damages as a result of the filing of the fraudulent lien, shall have a right of action for damages occasioned thereby. The action may be instituted independently of any other action, or in connection with a summons to show cause under s. 713.21, or as a counterclaim or cross-claim to any action to enforce or to determine the validity of the lien. The prevailing party in an action under this paragraph may recover reasonable attorney’s fees and costs. If the lienor who files a fraudulent lien is not the prevailing party, the lienor shall be liable to the owner or the defrauded party who prevails in an action under this subsection in damages, which shall include court costs, clerk’s fees, a reasonable attorney’s fee and costs for services in securing the discharge of the lien, the amount of any premium for a bond given to obtain the discharge of the lien, interest on any money deposited for the purpose of discharging the lien, and punitive damages in an amount not exceeding the difference between the amount claimed by the lienor to be due or to become due and the amount actually due or to become due.”

Fla.Stat. 713.31(2)(c).

 

 

A lien will be fraudulent if it contains willfully exaggerated amounts which can include liening for amounts that are NOT properly lienable. See Coconut 41, supra, at *15. This is why it is imperative to consult an attorney before recording a claim of lien! Not spending the due diligence in advising an attorney of the facts and the accounting comprising the amount you want to lien for can result in a fraudulent lien. Also, because a fraudulent lien contains a willful exaggeration of amounts, the lienor’s consultation with its lawyer is a factor a court can consider to determine that there was no willful exaggeration. Id. “[A] lienor can rely on consultation with counsel prior to filing the claim of lien as evidence of good faith only in the event of a full and complete disclosure of the pertinent facts to the attorney from whom the advice is sought before the lienor acts on the advice. Consultation with an attorney is not entitled to any legal weight if the contractor did not disclose all pertinent facts to the attorney.” Id. quoting Sharrard v. Ligon, 892 So.2d 1092, 1097 (Fla. 2d DCA 2004). Notably, this means that if a lienor is using this defense to counteract a fraudulent lien claim /defense, certain discussions with counsel must be waived to establish the consultation and advice to show the lien and amount was recorded and compiled in good faith.

 

Here, the contractor recorded a single claim of lien that included Development Area 2. However, the entire lien amount did NOT pertain to infrastructure improving Development Area 2.

 

The Middle District pointed out that a single claim of lien was not proper because the property liened was owned by different owners. Florida Statute s. 713.09 discusses the concept of a single claim of lien:

 

“A lienor is required to record only one claim of lien covering his or her entire demand against the real property when the amount demanded is for labor or services or material furnished for more than one improvement under the same direct contract. The single claim of lien is sufficient even though the improvement is for one or more improvements located on separate lots, parcels, or tracts of land. If materials to be used on one or more improvements on separate lots, parcels, or tracts of land under one direct contract are delivered by a lienor to a place designated by the person with whom the materialman contracted, other than the site of the improvement, the delivery to the place designated is prima facie evidence of delivery to the site of the improvement and incorporation in the improvement. The single claim of lien may be limited to a part of multiple lots, parcels, or tracts of land and their improvements or may cover all of the lots, parcels, or tracts of land and improvements. In each claim of lien under this section, the owner under the direct contract must be the same person for all lots, parcels, or tracts of land against which a single claim of lien is recorded.”

 

For this reason, the Middle District found that the lien was willfully exaggerated. In other words, the contractor acknowledged that of its approximate $195,000 lien, the pro-rata share for work done on Development Area 2 was only approximately $61,000; thus, there was an exaggeration of over $100,000 in the lien that covered Development Area 2. “The Claim of Lien was for the total amount owing for offsite work even though Westwind Contracting knew that only a substantially lesser amount was apportionable to HG Coconut.” Coconut 41, supra, at *16. Although the contractor tried to counteract the fraudulent lien by testifying that it provided its counsel with certain information, there was no testimony that it advised counsel that the lien it wanted recorded included land owned by someone other than the entity that hired it.

 

Now, even though the lien was deemed unenforceable, HG Coconut still needed to prove its damages due to the fraudulent lien. The Middle District, however, found that HG Coconut failed to prove such damages. Remember, the damages are included in Section 713.21: “court costs, clerk’s fees, a reasonable attorney’s fee and costs for services in securing the discharge of the lien, the amount of any premium for a bond given to obtain the discharge of the lien, interest on any money deposited for the purpose of discharging the lien, and punitive damages in an amount not exceeding the difference between the amount claimed by the lienor to be due or to become due and the amount actually due or to become due.” HG Coconut did NOT put any evidence of the court costs, reasonable attorneys’ fees, bond premium, or punitive damages.

 

C. Slander of Title

 

In addition to asserting an affirmative claim for fraudulent lien, HG Coconut also asserted a claim against the contractor for slander of title based on the lien. This is a common claim when a party believes a lien was improperly recorded against their property. The elements of slander of title in Florida are: 1) a falsehood, 2) that has been published or communicated to a third party, 3) the defendant knew or should have known the falsehood would result in inducing others not to deal with the plaintiff, 4) the falsehood does result in others not dealing with the plaintiff, and 5) actual and/or special damages (inclusive of attorneys’ fees) are proximately caused by the falsehood. Coconut 41, supra, at *17 quoting McAllister v. Breakers Seville Ass’n, Inc., 981 So.2d 566, 574 (Fla. 4th DCA 2008). However, even if all of the elements above are proven, a defense to slander of title is good faith. Coconut 41, supra, at *18. This defense is important because good faith raises a privilege and shifts the burden to the plaintiff asserting the claim to prove actual malice in order to recover under a slander of title theory of liability. Id. quoting McAllister v. Breakers Seville Ass’n, Inc., 981 So.2d 566, 574 (Fla. 4th DCA 2008).

 

Here, the court did not need to delve into whether there was actual malice because HG Coconut did not prove the elements of slander of title. In particular, there was no evidence that the lien caused or induced anyone not to deal with HG Coconut or that the contractor should have known the lien would have that effect. Further, there was no evidence that HG Coconut incurred any actual and/or special damages caused by the lien. While HG Coconut clearly incurred attorneys’ fees, it did not put on any evidence as to the amount of fees it incurred.

 

III.  Important Take-Aways

 

Below are important points to take-away from this case:

 

  • Unjust enrichment is a claim that can be asserted if a contractor is not in contractual privity with the owner of the land and work was knowingly performed that conferred a benefit to the owner’s land
  • An owner can offset damages in an unjust enrichment claim by asserting as a defense that the work was incomplete/ the contractor failed to fully perform its work
  • A notice to owner is not required for subdivision improvements
  •  If a lien for subdivision improvements includes multiple parcels of land, it shall be prorated among the parcels (if not otherwise stated in the contract)
  • A single claim of lien can cover different land/ parcels if the owner is the same person
  • If there are multiple contracts, there should be separate liens for each contract (even if with the same owner)
  • A fraudulent lien includes a willful exaggeration and can include amounts not properly lienable
  • A party asserting a fraudulent lien needs to present evidence of its damages: attorneys’ fees, court costs, bond transfer costs, punitive damages, etc. to be entitled to damages due to the fraudulent lien
  • Consultation will a lawyer is a defense to a fraudulent lien but all of the important communications with the lawyer regarding the formation and compilation of the lien must be waived and must come into evidence to establish the good faith basis of the lien and lien amount
  • Slander of title is a difficult claim to prove based on a construction lien; the plaintiff must show defendant knew the lien would result in third parties not dealing with the plaintiff and, in fact, third parties did not deal with plaintiff because of the lien
  • A plaintiff in a slander of title action must prove its actual and/or special damages and special damages can include attorneys’ fees
  • A defendant in a slander of title action should assert good faith as a defense which would shift the burden to the plaintiff to prove actual malice

 

For more information on fraudulent liens and slander of title, please see: https://floridaconstru.wpengine.com/owners-defending-a-lien-especially-a-patently-fraudulent-lien/

 

For more information on liens and lienable items/ amounts, please see: https://floridaconstru.wpengine.com/the-final-furnishing-date-and-lienable-amounts-for-construction-liens-decided-on-a-case-by-case-basis/

 

For more information on unjust enrichment theories, please see: https://floridaconstru.wpengine.com/subcontractors-and-unjust-enrichment-claims/

and

https://floridaconstru.wpengine.com/the-reality-when-the-construction-lender-forecloses/

 

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

SUBCONTRACTORS AND UNJUST ENRICHMENT CLAIMS

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Unpaid subcontractors should not overlook unjust enrichment claims against an owner on a private construction project. There is Florida law that maintains that if it is proven that an owner has not paid the general contractor (or anyone) for the subcontractor’s scope of work, an unjust enrichment claim against the owner can survive. On the other hand, if it is proven that an owner has paid anyone for the subcontractor’s work, the unjust enrichment claim will not survive. See, e.g., 14th Henberg, LLC v. Terhaar and Conley General Contractors, Inc., 43 So.3d 877 (Fla. 1st DCA 2010); Commerce Partnership 8098 Limited Partnership v. Equity Contracting Company, Inc., 695 So.2d 383 (Fla. 4th DCA 1997); Zalay v. Ace Cabinets of Clearwater, Inc., 700 So.2d 15 (Fla. 2d DCA 1997); Zaleznik v. Gulf Coast Roofing Co., Inc., 576 So.2d 776 (Fla. 2d DCA 1991).

The case of Commerce Partnership demonstrates that a subcontractor’s unjust enrichment claim can survive if evidence proves that the owner never paid the general contractor or anyone for the subcontractor’s work: 

“The judgment appealed is reversed, and the cause is remanded to the trial court to take additional evidence from the parties on whether Commerce [owner] made payment to or on behalf of its general contractor covering the benefits Equity [subcontractor]conferred on the subject property. Equity shall have the burden of proving is claim of contract implied in law that Commerce  has failed to make such payment by the greater weight of the evidence. If the court shall determine that Commerce [owner] has not paid anyone for the benefits conferred by Equity, then it shall enter judgment for Equity; correspondingly, if the court shall determine that Equity has failed to prove that Commerce did not make such payment, then the court shall enter judgment for Commerce.”
Commerce Partnership, 695 So.2d at 390. 

The reason this argument should not be overlooked is because subcontracts often have a pay-when-paid provision meaning the general contractor is not responsible for paying the subcontractor until it receives payment from the owner. Hence, if the general contractor has not been paid by the owner, then the subcontractor may not have good legal recourse against the general contractor. For this reason, exploring the possibility of pursuing an unjust enrichment claim against the owner may be worthwhile.

 
The question becomes whether the subcontractor has preserved any payment bond or lien rights. If it has, irrespective of the pay-when-paid provision, these arguments should definitely be explored and perhaps pursued. But, sometimes, a subcontractor does not properly preserve lien or bond rights, or the subcontractor is owed amounts in which there are arguments as the lienability. In these circumstances, pursuing the unjust enrichment claim could be a worthwhile alternative especially if the subcontractor has a good feeling that the general contractor was not paid the amounts it is seeking.

 

For more information on unjust enrichment claims, please see: https://floridaconstru.wpengine.com/legal-complexities-when-there-is-a-failed-development-project/

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.