Case Title: Silver Dollar Motel, Inc. v. Taylor Elec. Co.

Citation: 

Docket Number: 88-31

State: wyoming

Court: Wyoming Supreme Court

Date: 1988-09-27T00:00:00Z

Document:
Silver Dollar Motel, Inc. v. Taylor Elec. Co.1988 WY 121761 P.2d 1006Case Number: 88-31Decided: 09/27/1988Supreme Court of Wyoming
SILVER DOLLAR MOTEL, 
INC., APPELLANT (DEFENDANT),

v.

TAYLOR ELECTRIC COMPANY, 
APPELLEE (PLAINTIFF).

Appeal from the District 
Court, SweetwaterCounty, Kenneth G. Hamm, 
J.

Jack Gage and 
Robert T. Moxley of Whitehead, Gage & Davidson, P.C., Cheyenne, for appellant.

Jack A. Smith, 
Rock Springs, for appellee.

Before BROWN, C.J., THOMAS, CARDINE and MACY, JJ., 
and ROONEY, Retired J.

ROONEY, Retired 
Justice.

[¶1.]     This appeal is from a 
judgment awarding appellee, on the theory of quantum meruit, the cost of 
improvements made by it to appellant's real property under a contract between it 
and appellant's former tenant who took bankruptcy before paying appellee for the 
improvements.

[¶2.]     We 
reverse.

[¶3.]     Appellant words the 
issues on appeal:

"1. The trial court erred 
as a matter of law in ruling that the remedy of quantum meruit is available to 
the plaintiff, an electrical contractor, who having failed to foreclose a 
statutory lien against the defendant's property, and not being in privity with 
the defendant property owner, lost the benefit of his bargain upon the 
insolvency of the defendant's lessee, with whom he had contracted to make the 
improvements on the leased premises.

"2. The trial court erred 
by applying an incorrect measure of damages, i.e., the contract price, for 
improvements to the defendant's leased premises, rather than the amount by which 
the defendant may have been actually enriched, i.e., the enhanced value of the 
improved premises."

[¶4.]     Appellee words 
them:

"1. Whether the [] 
equitable remedy of quantum meruit is available to the Plaintiff for recovering 
his costs for improvements made on the Defendant's property if Defendant's 
lessee becomes insolvent.

"2. Whether the trial 
court awarded the correct amount of damages to the Plaintiff by using the 
contract price as a measure of the damages."

[¶5.]     The basic facts in this 
case are not in dispute. Appellant, as owner of real property in Rock Springs, leased a 
portion of one of the buildings on the property to R. Lynne Pfeiffer 
(hereinafter referred to as "lessee"). In 1984, lessee and appellee entered into 
a contract under which appellee would do electrical remodeling work in the 
leased area of the building, i.e., the restaurant and lounge area. Appellee did 
the work, but lessee filed bankruptcy proceedings before paying for it. Appellee 
was listed as a creditor in the bankruptcy. Although notified of the bankruptcy 
proceedings, appellee did not file a proof of claim therein. Appellant was aware 
of the contract between lessee and appellee. Appellant's manager, D.T. Cook, was 
present daily during the time the work was being performed. He was "interested" 
but did not request any changes or "issue instructions to any" of appellee's 
employees. At Cook's request, appellee ran a one and one-quarter inch conduit to 
a power panel instead of a one inch one so there would be sufficient power to 
supply an office which appellant contemplated at a later time in the building. 
The difference in cost was "not a great deal." Later, appellee did electrical 
work for appellant on the office and elsewhere, and appellee was paid for such 
work by appellant.

[¶6.]     Appellant agreed with 
lessee that lessee would be given "full credit against his lease over time" for 
the cost of remodeling, the lease being for three years with an option to renew 
for three years. It was a percentage lease with a minimum of $3,000 per month 
and utilities. There was no evidence as to the amount of credit for the cost, if 
any, that had been given to lessee by appellant prior to the time lessee 
breached the lease and filed bankruptcy. Nor is there any evidence as to whether 
or not the balance of the credit, if any, was listed as an asset in the 
bankruptcy or whether the obligation of lessee on the lease was listed therein 
as a debt.

[¶7.]     Appellee filed a 
mechanic's lien against the property for the electrical work but did not 
foreclose it in a timely fashion. Other mechanic's liens were filed against the 
facility as a result of lessee's bankruptcy. One went to judgment and was 
settled for "something in excess of $5,000."

[¶8.]     There was testimony 
that the materials and labor furnished by appellee for the project amounted to 
$15,780.56 (the amount of the judgment), but there was no other evidence of the 
amount and nature of damages or of the "enrichment." Some of the electrical work 
performed by appellee was abandoned and not used by the new tenant leasing the 
space after lessee broke the lease with appellant and filed for 
bankruptcy.

AVAILABILITY OF QUANTUM 
MERUIT REMEDY

[¶9.]     The law as applied to 
these particular facts will not sustain a judgment for appellee "under the 
equitable theory of Quantum Mer[u]it," as requested in the amended complaint. 
The elements necessary to support recovery under an unjust enrichment theory 
were set forth by this court in Pancratz Company, Inc. v. Kloefkorn-Ballard 
Construction/Development, Inc., 720 P.2d 906, 908-09 (Wyo. 
1986):

"The elements necessary 
to support a claim for relief based upon quantum meruit 
are:

"1) Valuable services 
were rendered, or materials furnished,

"2) to the party to be 
charged,

"3) which services or 
materials were accepted, used and enjoyed by the party, 
and

"4) under such 
circumstances which reasonably notified the party to be charged that the 
plaintiff, in rendering such services or furnishing such materials, expected to 
be paid by the party to be charged. Without such payment, the party would be 
unjustly enriched.

* * * * * 
*

"The central issue to the 
disposition of this case is whether appellee was unjustly enriched by the work 
performed by appellant. Not only must we find enrichment, but such enrichment 
must be unjust. Bereman v. Bereman, Wyo., 645 P.2d 1155 (1982); Rocky Mountain Turbines, Inc. 
v. 660 Syndicate Inc., Wyo., 623 P.2d 758 (1981); McGrath v. Hilding, 
41 N.Y.2d 625, 394 N.Y.S.2d 603, 363 N.E.2d 328 (1977)."

[¶10.]  At least some of the services and 
materials here rendered or furnished by appellee were not "used and enjoyed" by 
appellant as required by the third element (supra), and the evidence does not 
reflect the existence of the fourth element (supra) in that the expectation for 
payment was shown to be by lessee and not by the person now sought to be 
charged, i.e., not by appellant. Not only do the facts surrounding the 
arrangement for the work and its accomplishment show expectation that payment 
would be made by lessee, but also the failure to perfect a lien against 
appellant's property shows such expectancy.1 Additionally, the "unjust" actor of 
the enrichment (referred to in Pancratz Company, Inc., 720 P.2d at 908-09) was 
not established by the evidence. The quantum meruit/unjust enrichments theory is 
founded on implied contract - one that is dictated by equity. Pancratz Company, 
Inc., 720 P.2d 906. When applied to situations akin to that of this case, it has 
the same purpose as do enactments of "mechanic's lien" statutes2 and "betterment" or "occupying 
claimant" acts,3 i.e., for the purpose of limiting 
the rigid common law to the effect that one could not be compensated for 
improvements placed on real property belonging to another without the other's 
consent. Arch Sellery, Inc. v. Simpson, 346 P.2d 1068 (Wyo. 1959); 41 Am.Jur.2d, 
Improvements, § 4 (1968). These statutory remedies are limited by the specific 
requirements and provisions contained in them. Arch Sellery, Inc., 346 P.2d 1068; Wyman v. Quayle, 9 Wyo. 326, 63 P. 988 (1901). Likewise, the 
quantum meruit/unjust enrichment remedy is limited by the requirements necessary 
for an equitable result (those enumerated in Pancratz Company, Inc., 720 P.2d 
906), including the requirement that the enrichment be "unjust." In Rocky 
Mountain Turbines, Inc. v. 660 Syndicate, Inc., 623 P.2d 758, 764 (Wyo. 1981), this court 
quoted with approval from McGrath v. Hilding, 41 N.Y.2d 625, 629, 394 N.Y.S.2d 603, 606, 363 N.E.2d 328, 331 (1977):

"`Enrichment alone will 
not suffice to invoke the remedial powers of a court of equity. Critical is that 
under the circumstances and as between the two parties to the transaction the 
enrichment be unjust.'"

[¶11.]  The combination of the facts in this case 
does not reflect the enrichment, if any, to have been unjust so as to warrant 
the application of equity in appellee's favor. The non-performance of the 
contract between appellee and lessee was not the fault of appellant. Appellant 
and appellee were both harmed by lessee's breach of contract with appellant. The 
evidence does not reflect the terms of the lease between appellant and the 
tenant replacing appellee. We cannot assume it to have been as profitable for 
appellant as was the lease breached by lessee.

[¶12.]  In most instances, the circumstances in a 
case of unjust enrichment involve only the claimant and the one alleged to be 
unjustly enriched. See comments and examples in Restatement of the Law of 
Restitution. In this case, a third party is also involved. The third party, 
lessee, entered into an express contract with appellee for the services and 
materials. This fact, known to appellant, tends to mitigate against implying the existence of a contract for 
the same services and materials between appellant and 
appellee.

"A person who has 
conferred a benefit upon another as the performance of a contract with a third 
person is not entitled to restitution from the other merely because of the 
failure of performance by the third person."

Restatement of 
the Law of Restitution, § 110 at 455 (1937).

[¶13.]  The trial court expressed concern4 over the agreement by appellant 
with lessee under which appellant would reimburse lessee through decreased 
rental payments over a period of time for the costs of the electrical work 
performed by appellee for lessee. Obviously, part of the consideration to be 
received by appellant for this agreement to reimburse was to be the net rental 
payments, after the deduction for reimbursement, together with the availability 
of restaurant and lounge facilities to motel customers of appellant. Appellant 
did not receive this consideration when lessee breached his lease contract, and 
there is nothing in the record reflecting the amount or value of the lost 
consideration or showing any knowledge on the part of appellee of the agreement 
to reimburse.

[¶14.]  Finally, if, because of the agreement to 
reimburse, appellant were to be considered as stepping into the shoes "of lessee 
with respect to lessee's debt to appellee" (see note 4, supra), such should be, 
with all of the circumstances existing between lessee and appellee for payment, 
including a recognition that some payment may have been made if appellee had 
filed a creditor's claim in lessee's bankruptcy.5 The record does not reflect what 
portion, if any, of appellee's claim would have been satisfied from lessee's 
assets held by the trustee in bankruptcy, if such claim had been filed. The only 
evidence in this respect was testimony by Graham B. Taylor, owner and operator 
of appellee:

"Q. Do you know how much 
money was paid to the unsecured creditors in the Pfeiffer 
bankruptcy?

"A. No, I 
don't.

"Q. Do you know if the 
Pfeiffer bankruptcy is finalized?

"A. I think it 
is.

"Q. Do you know how much 
money you would have received as an unsecured creditor in that bankruptcy if you 
had filed a proof of claim?

"A. 
No."

[¶15.]  The claim for relief based on quantum 
meruit here requested by appellee is not available to it since the elements 
necessary to support such claim, including the element that the enrichment be 
unjust, as set forth in Pancratz Company, Inc., 720 P.2d 906, are not 
present.

PROPER MEASURE OF 
DAMAGES

[¶16.]  Our decision on the first issue presented 
on appeal makes unnecessary consideration of the second issue relative to the 
proper measure of damages.

[¶17.]  REVERSED.

FOOTNOTES

1 The failure of appellee 
to perfect its statutory mechanic's lien remedy does not otherwise weaken its 
position since W.S. 29-1-308 provides: "The remedies provided by this title are 
not exclusive." The title reference is to that pertaining to mechanic's liens, 
W.S. 29-1-101, et seq.

2 Such statutes provide 
for an in rem action against property upon which the claimant bestowed labor or 
materials for which he has not been compensated. As noted supra, appellee 
abandoned this remedy in this case.

3 When one in possession 
and claiming ownership of land is being evicted by another proving better title, 
the Wyoming 
act (W.S. 1-32-206, et seq.) requires payment to the one being evicted for value 
of improvements made by him. The act is not applicable under the facts of this 
case.

4 The trial court 
requested counsel to address in closing arguments the question of "whether or 
not the Defendant stepped into the shoes of Mr. Pfeiffer [lessee], as to paying 
the costs of remodeling," and the issue was referred to in the trial court's 
opinion letter. (The letter was not incorporated by reference into the judgment, 
but it is part of the record.)

5 Reference is here made 
to the possible result of appellee's failure to file the claim only for the 
purpose of addressing the attention given by the trial court to the 
reimbursement factor. The issues in this case can be resolved without giving 
consideration to the failure to file the claim as it may pertain to such as 
mitigation of damages, the collateral source rule, etc.