Court Opinion

ID: 9535702
Source: CourtListenerOpinion
Date Created: 2023-08-07 04:52:02.583133+00
Date Added: 2024-06-11T13:33:18.614746
License: Public Domain

MULLARKEY, Chief Justice,
dissenting.
In reversing the trial court’s determination that the landlord in this case was unjustly enriched by the work of the general contractor, the majority creates a new requirement for a claim of unjust enrichment in this context. Specifically, the majority holds that the plaintiff in this case is not entitled to recovery because it failed to establish wrongful conduct by the defendant. See maj. op. at 122. Because the majority’s holding is contrary to existing Colorado law regarding unjust enrichment and the change in the law which it adopts is unwise, I respectfully dissent.
I.
In January of 1992, Central City Development Company (CCDC) entered into a five-year lease, see maj. op. at 117 n. 1, with Santa Barbara Capital, Inc. (Tenant). See id. at 117. The lease provided that the Tenant could only use the building for limited stakes gambling, that the Tenant would pay all costs associated with remodeling, and that CCDC had the right to approve all plans and specifications for remodeling. See id. at 117. The lease also required that the Tenant was supposed to obtain a completion bond equal in the amount to the estimated cost of the proposed alterations and additions. At the end of the lease, the improvements were to become the property of CCDC.
The Tenant originally hired a contractor, which it terminated in June. The Tenant then entered into a contract with DCB Construction Co., Inc. (DCB) for significant work on the interior of the building. See id. Additionally, CCDC was aware of the plans and signed building permit applications required by the city for the work to begin. As required by the lease, the Tenant posted a *124notice that CCDC would not be subject to a lien under section 38-22-105(2), 10 C.R.S. (1998). Nevertheless, during the course of DCB’s work, a representative from CCDC observed the construction on a regular basis. The trial court found that DCB generally knew that CCDC was going to establish some sort of security arrangement with the Tenant for payment of the contractors. The Tenant never obtained the bond required by the lease. Instead, the Tenant and CCDC established an escrow account at a bank that was to be funded with the amount estimated to complete the project; however, the Tenant only committed $50,000 to escrow, which CCDC accepted.
DCB completed significant improvements to the interior of the building, including excavating the ground floor; building a foundation and a structural steel frame; and installing carpentry framing, roof joists, stairs, a fire sprinkler system, electrical wiring, plumbing, heating, ventilation, and air conditioning. See maj. op. at 118. DCB ceased work in November 1992 because the Tenant failed to pay DCB’s submitted bills of $371,-245. The Tenant eventually paid only $76,-515. DCB sued CCDC for its unrecovered costs under a claim of unjust enrichment.
Testimony at the trial showed that DCB’s improvements substantially contributed to the building’s value and that CCDC would eventually recover that value in its casino property. Based on testimony at the trial, the trial court entered judgment in favor of DCB in the amount of $331,191, which included the amount not paid by the Tenant plus interest and costs.
II.
As noted by the majority, the notice under section 38-22-105(2) is not at issue here because such notice does not preclude claims of unjust enrichment. See maj. op. at 118 n. 2; § 38-22-124, 10 C.R.S. (1998). The doctrine of unjust enrichment does not depend on any contract, but rather, on “the need to avoid unjust enrichment of the defendant notwithstanding the absence of an actual agreement to pay for the benefit conferred.” Cablevision of Breckenridge, Inc. v. Tannhauser Condominium Ass’n, 649 P.2d 1093, 1097 (Colo.1982). Under our current case law, the plaintiff must establish the following elements:
(1) that a benefit was conferred on the defendant by the plaintiff; (2) that the benefit was appreciated by the defendant; and (3) that the benefit was accepted by the defendant under such circumstances that it would be inequitable for it to be retained without payment of its value.
Id. at 1096-97.
The majority reformulates “the test for recovery under a theory of unjust enrichment as (1) at plaintiffs expense (2) defendant received a benefit (3) under circumstances that would make it unjust for defendant to retain the benefit without paying.” Maj. op. at 120. The majority then finds that DCB satisfied steps one and two, see id. at 120, but as a matter of law, did not satisfy step three based on the facts of this case, see id. at 123.
The reformulating of the test is not particularly significant except that the majority creates a new requirement in its analysis of step three, stating that in this case, “the contractor must be able to show that the landlord has engaged in some form of improper, deceitful, or misleading conduct.” Id. While I agree that improper, deceitful, or misleading conduct could prove a claim of unjust enrichment, I do not believe that such conduct must exist for such a claim to prevail. By putting this restriction on the unjust enrichment test, the majority sharply narrows the claim’s scope. In my view, imposition of a wrongful conduct requirement is improper. There are many situations which fall short of wrongful conduct but are so unjust that the claim should lie.
The majority relies on the Restatement of Restitution (1937); Ninth District Production Credit Ass’n v. Ed Duggan, Inc., 821 P.2d 788 (Colo.1991); and various out-of-state cases for its conclusion that some wrongful conduct must exist in this ease for DCB to prevail. See maj. op. at 122-123. However, in my view, the Restatement, Dug-gan, and case law from several other jurisdictions (including our own) do not require *125wrongful conduct to prove a claim of unjust enrichment.
The majority acknowledges that circumstances other than improper conduct could prove unjust enrichment. See maj. op. at 121. The Restatement states:
A person who without mistake, coercion or request has unconditionally conferred a benefit upon another is not entitled to restitution, except where the benefit was conferred under circumstances making such action necessary for the protection of the interests of the other or of third persons.
Restatement of Restitution § 112 (1937). The Restatement itself acknowledges that there are numerous ways for a claimant to prove unjust enrichment (e.g., mistake, coercion, request).
The conclusion that wrongful conduct by the owner is not the sine qua non for recovery in this case is consistent with Duggan. There we held that the trial court improperly instructed the jury and should have informed the jury:
It is not inequitable for a secured creditor to retain a benefit conferred by an unsecured creditor without compensating the unsecured creditor if the secured creditor does not initiate or encourage the transaction between the unsecured creditor and the debtor by which that benefit is conferred.
Duggan, 821 P.2d at 800. Nowhere in Dug-gan did we indicate that encouraging the transaction must be wrongful. I note that the “initiate or encourage the transaction” requirement in Duggan applied to a situation where an unjust enrichment claim undermined the predictability of the priority of creditors created by a statutory scheme. See id. at 797 (holding that unjust enrichment claim could prevail contrary to the UCC priority system). There is no applicable statutory scheme in this case, so the “initiate or encourage the transaction” requirement in Duggan, while relevant, may not be disposi-tive. See Cedar Lane Invs. v. American Roofing Supply of Colorado Springs, 919 P.2d 879, 885 (Colo.App.1996) (distinguishing the rule in Duggan because no statutory scheme was in place in this case).
Furthermore, while several out-of-state cases have required some deceitful conduct by the landlord in cases involving restitution claims, see maj. op. at 122-123, several other courts, including our own court of appeals, have not. See Frank M. Hall & Co. v. Southwest Properties Venture, 747 P.2d 688, 691 (Colo.App.1987) (holding that an unjust enrichment claim could exist where landlord took an active role in completion of construction work); Murdock-Bryant Constr., Inc. v. Pearson, 146 Ariz. 48, 703 P.2d 1197, 1203 (Ariz.1985) (awarding restitution to subcontractor against parties who received a benefit); Commerce v. Equity Contracting Co., Inc., 695 So.2d 383 (Fla.Dist.Ct.App.1997) (stating that subcontractor could recover against owner if owner did not pay for benefit received); Idaho Lumber v. Buck, 109 Idaho 737, 710 P.2d 647, 655-57 (Idaho App.1985) (allowing contractor to recover against owner). In Hall, a case remarkably similar to this case, our court of appeals held that a contractor could recover on an unjust enrichment claim from a landlord where “the landlord not only gave its permission for the work but took an active role in its completion.” Hall, 747 P.2d at 691.
Contrary to the majority, I would not adopt a per se rule that requires some type of wrongful conduct in order for DCB to recover.1 Such a requirement unduly re-*126striets a party’s ability to recoup its costs and is inconsistent witli Colorado case law. Properly applying Hall and Duggan here, ample evidence exists showing that CCDC took an active role or encouraged the improvements which supports the trial court’s ruling that CCDC was unjustly enriched.
III.
Even if we were to rely only on the Restatement of Restitution, as does most of the majority’s opinion, the facts here support a finding of unjust enrichment because there is evidence that CCDC requested that DCB make improvements. See Restatement of Restitution § 112 (listing “request” as an exception supporting restitution). CCDC’s request can be inferred from the lease provisions that required the Tenant to remodel the building as a casino because the lease explicitly limited the building’s use to only limited stakes gambling. The lease provided that CCDC retain all of the improvements at the expiration of the lease. Moreover, CCDC retained the right specifically to approve the improvements, and in fact did sign the relevant building permits and actively monitored the work throughout. Finally, the trial court found that DCB knew of an arrangement between CCDC and the Tenant to provide payment to the contractors.
In its opinion, the majority relies on two general propositions of law: (1) an owner is not personally liable for improvements made to his property without his assent and (2) “[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 .” Maj. op. at 121-122 (citations omitted). Here, neither principle is applicable because CCDC clearly knew of and assisted in obtaining the improvements. CCDC could have forced the Tenant to provide a bond adequately covering the construction costs as stated in the lease, but failed to do so. Rather, CCDC allowed the Tenant to proceed with the improvements with an escrow account lacking adequate funds to cover the costs of the construction.
IV.
For the foregoing reasons, CCDC was not simply a bystander which should be allowed to keep all of the improvements done by DCB without paying for them. I would follow the court of appeals’ holding in Hall and would allow the trial court’s ruling to stand. See Hall, 747 P.2d at 691. There is sufficient evidence in the record to support the trial court’s determination that CCDC was unjustly enriched because it would be inequitable to allow CCDC to keep the improvements made by DCB without paying for them. Accordingly, I respectfully dissent.
I am authorized to say that JUSTICE SCOTT joins in this dissent.

. In a footnote, the majority suggests that if the tenant agrees to make improvements, the landlord is not unjustly enriched because the improvements are part of the consideration the tenant agreed to provide. See maj. op. at 120 n. 6. However, the lease between CCDC and Tenant was terminated before all of the agreed consideration was given by both parties. As Dobbs states:
In the landlord’s case, the landlord agrees to lease the land for a term for specified rent plus a residual interest in whatever improvements the tenant makes or is obliged to make. If the tenant gives up the premises before the term is up and the landlord accepts them, then to the extent that the landlord has premises valued in excess of the present value of the remaining rental due, he may be unjustly enriched.
Dan B. Dobbs, Law of Remedies i 12.20(3), at 474 n.25 (2d ed.1993). Consistent with my view, Dobbs does not mention that wrongful conduct is *126required in this type of situation for a claimant to recover under a theory of unjust enrichment.