Opinion ID: 758495
Heading Depth: 2
Heading Rank: 5

Heading: MacDraw's Unjust Enrichment Claim

Text: 31 MacDraw's final contention on appeal is that Judge Kram erred by granting summary judgment in favor of CIT on MacDraw's unjust enrichment claim. We review a grant of summary judgment de novo, drawing all factual inferences and resolving all ambiguities in favor of the nonmoving party. EFCO Corp. v. U.W. Marx, Inc., 124 F.3d 394, 397 (2d Cir.1997). 32 We have observed that, [u]nder New York law, a plaintiff seeking an equitable recovery based on unjust enrichment must first show that a benefit was conferred upon the defendant, and then show that as between the two parties enrichment of the defendant was unjust. Reprosystem, 727 F.2d at 263 (2d Cir.1984). The district court construed MacDraw's unjust enrichment claim as one based on the fact that CIT took possession of and sold the Laribee equipment at a profit, without sharing any of the proceeds with MacDraw. 7 It then gave two reasons for its decision to grant summary judgment in CIT's favor. First, the district court noted that the sale of the equipment was insufficient to cover all of Laribee's outstanding debt to CIT. That, combined with the fact that MacDraw had received $6.4 million in payment for the equipment from CIT, led the district court to conclude that CIT had not been unjustly enriched by its sale of the equipment. Second, the district court reasoned that, in any event, Laribee's junior secured creditors and the Laribee bankruptcy estate would be entitled to priority over any interest asserted by MacDraw. 33 On appeal, MacDraw contends that the reasons given by the district court are insufficient to sustain the dismissal of MacDraw's unjust enrichment claim. Specifically, MacDraw maintains that the district court did not consider the fairness of CIT's mid-December 1990 consolidation of Laribee's debt into one note secured by the equipment. According to MacDraw, that consolidation masked the profit that CIT realized from its sale of the equipment and gave the district court the false impression that CIT had not been made whole on the Laribee-MacDraw transaction at issue in this litigation. MacDraw also faults the district court for apparently failing to consider MacDraw's assertion that, in anticipation of Laribee's bankruptcy, CIT fraudulently lured MacDraw into doing work that enhanced the value of the equipment in which CIT had a security interest. We find no merit in MacDraw's arguments. 34 As an initial matter, well-settled principles of New York law would ordinarily preclude MacDraw from pursuing an unjust enrichment claim against CIT under the circumstances presented here. First,  'the existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract [i.e., unjust enrichment] for events arising out of the same subject matter.'  U.S. East Telecommunications, Inc. v. U.S. West Communications Services, Inc., 38 F.3d 1289, 1296 (2d Cir.1994) (quoting Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382, 521 N.Y.S.2d 653, 516 N.E.2d 190, 193 (1987)); see also Restatement of Restitution § 110 (1937) (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.) Here, the written Vendor's Consent and Agreement entered into between Laribee and MacDraw explicitly provided that CIT did not assume any of Laribee's obligations under the purchase orders with MacDraw. Accordingly, the cause of action of unjust enrichment was presumptively unavailable to MacDraw. 35 Second, despite MacDraw's arguments to the contrary, CIT's consolidation of all of the Laribee debt into a single note secured by the equipment was not impermissible. Under New York law, an insolvent debtor may properly assign assets to a creditor as security for an antecedent debt although the effect of the transfer will be to prefer that creditor. Ultramar Energy Ltd. v. Chase Manhattan Bank, N.A., 191 A.D.2d 86, 91, 599 N.Y.S.2d 816 (1st Dept.1993). Moreover, it is also irrelevant under New York law whether CIT knew that Laribee was insolvent or that the consolidation had the effect of preferring CIT over Laribee's other creditors. See id. Finally, there is no support in New York law for the proposition that, as a condition to its receipt of its security interest in the Laribee equipment, CIT had an obligation to satisfy Laribee's debt to MacDraw, which was after all an unsecured creditor. See id. 36 We need not consider MacDraw's contention that CIT's alleged oral promise and fraud rendered these fundamental legal principles inapplicable in the instant case. At the conclusion of the trial, after a full consideration of the circumstances of CIT's course of dealing with MacDraw, the district court found that CIT had neither promised to pay the final installment nor committed any fraud against MacDraw. Accordingly, we affirm the district court's dismissal of MacDraw's unjust enrichment claim.