Court Opinion

ID: 2779326
Source: CourtListenerOpinion
Date Created: 2015-02-13 17:09:44.588218+00
Date Added: 2024-06-11T10:55:20.581706
License: Public Domain

2015 VT 37

Birchwood Land Company, Inc.
(2014-212)
 
2015 VT 37
 
[Filed 06-Feb-2015]
 
NOTICE:  This opinion is
subject to motions for reargument under V.R.A.P. 40 as well as formal revision
before publication in the Vermont Reports.  Readers are requested to
notify the Reporter of Decisions by email at: JUD.Reporter@state.vt.us or by
mail at: Vermont Supreme Court, 109 State Street, Montpelier, Vermont
05609-0801, of any errors in order that corrections may be made before this
opinion goes to press.
 
 

2015 VT 37

 

No. 2014-212

 

Birchwood Land Company, Inc.

Supreme Court

 

 

 

On Appeal from

     v.

Superior Court, Grand Isle
  Unit,

 

Civil Division

 

 

Judith J. Krizan

November Term, 2014

 

 

 

 

A.
  Gregory Rainville, J.

 

W. Owen Jenkins of W. Owen Jenkins, P.C.,
Essex Junction, for Plaintiff-Appellant.
 
Thomas F. Heilmann and James M. Cooley (On the Brief) of
Heilmann, Ekman & Associates,
  Burlington, for
Defendant-Appellee.
 
 
PRESENT:  Reiber, C.J., Dooley, Skoglund, Robinson and
Eaton,[1]
JJ.
 
 
¶ 1.            
DOOLEY, J.   Plaintiff Birchwood Land Company
(“Birchwood”) appeals the decision of the Superior Court, Grand Isle Unit
denying Birchwood’s motion for attachment and granting defendant Judith
Krizan’s motion to dismiss for failure to state a claim.  Birchwood’s
complaint alleged that Krizan was unjustly enriched by Birchwood’s construction
of an access road and other infrastructure to her property such that she is
able to develop the property without contributing to the cost of the
improvements.  We agree that the complaint fails to state a claim upon
which relief can be granted and affirm.
¶ 2.            
The facts as alleged in Birchwood’s amended complaint are as
follows.  In June 1982, Krizan purchased a vacant and landlocked parcel,
currently described as 43 Tanglewood Drive, for $3000 from the Town of
Essex.  Because the deed to Krizan’s parcel makes reference to a recorded
plat, she acquired by law an implied access easement over the portion of the
adjacent parcel depicted on the plat and now owned by Birchwood.  This is
the sole means of access to her property.  Without frontage on a public
road or access to utilities and other related infrastructure, Krizan’s property
was undevelopable.  In the thirty years of ownership, she had made no
effort to develop her property.
¶ 3.            
In December 2002, Birchwood purchased the land surrounding Krizan’s
parcel to the east, south, and west, including the fee simple ownership of the
strip of land on which Krizan’s access easement is located.  In April
2005, Birchwood obtained approval from the Town to develop its property, including
the construction and extension of Tanglewood Drive and the installation of
water, sewer, and electrical lines, and other related infrastructure.  The
Krizan property was not included in the development approval.  As part of
its development, however, Birchwood extended road access and water and sewer
line connections to Krizan’s property.  In July 2007, Birchwood completed
the road and infrastructure improvements at a substantial expense.
¶ 4.            
After Birchwood completed the improvements, Krizan notified the Town of
her intent to develop her property.  The Town found that Krizan’s lot is
now developable because the lot is now located on a public road and is
connected to the necessary infrastructure.  Consequently, the Town
increased the assessed value of Krizan’s parcel from $10,800 to $92,700. 
The fair market value of Krizan’s property, as determined by the sale price of
a neighboring property, is no less than $117,000.  Birchwood has
calculated that Krizan’s proportionate share of expenses for the construction
and extension of Tanglewood Drive and related infrastructure, not including the
$2405 water and sewer connection cost, amounts to $50,100.  Krizan
initially expressed interest in reimbursing Birchwood for the cost of extending
the sewer and water connections to her property but has refused to contribute
to the road and other infrastructure improvements.
¶ 5.            
Birchwood filed a complaint against Krizan in the trial court, alleging
that Krizan was unjustly enriched by the creation of the public road access to
her lot and should be required to bear a proportionate cost of the
construction, and filed a motion for attachment of real estate owned by
Krizan.  In response, Krizan filed a motion to dismiss for failure to
state a claim upon which relief can be granted.[2]  Birchwood filed an amended
complaint, and the court conducted a hearing on Birchwood’s pending motion for
attachment and Krizan’s pending motion to dismiss.  The court denied
Birchwood’s motion for attachment and granted Krizan’s motion to dismiss. 
This appeal followed.
¶ 6.            
We review decisions on a motion to dismiss de novo under the same
standard as the trial court and will uphold a motion to dismiss for failure to
state a claim only if “it is beyond doubt that there exist no facts or
circumstances that would entitle the plaintiff to relief.”  Dernier v. Mortg. Network, Inc., 2013 VT 96,
¶ 23, 195 Vt. 113, 87 A.3d 465 (quotation omitted).  We assume as
true all facts as pleaded in the complaint, accept as true all reasonable
inferences derived therefrom, and assume as false all contravening assertions
in the defendant’s pleadings.  Id.  Our role in reviewing the
trial court’s decision on such a motion is limited to determining “whether the
bare allegations of the complaint are sufficient to state a claim.”  Kaplan v. Morgan Stanley & Co., 2009 VT 78, ¶ 7,
186 Vt. 605, 987 A.2d 258 (mem.).
¶ 7.            
Birchwood claims that it is entitled to restitution from Krizan for the
improvements it made to the road, utilities, and other related infrastructure
because Krizan was unjustly enriched at Birchwood’s expense.  Birchwood
argues that Krizan is a “free rider” who held onto her undeveloped property for
thirty years awaiting the adjoining property owner to make the necessary
improvements.  Birchwood also argues that, as an easement holder over the
access road, Krizan was obligated to contribute to the improvements. 
Krizan disputes that she held an easement over the road and has any duty to
contribute to Birchwood’s improvements, which were voluntary, unrequested, and
in Birchwood’s self-interest.  The trial court agreed with Krizan, finding
no actionable claim for unjust enrichment.
¶ 8.            
Our case law recognizes claims of unjust enrichment, see, e.g., Kellogg
v. Shushereba, 2013 VT 76, ¶ 22, 194 Vt. 446, 82 A.3d 1121 (stating
that plaintiff is entitled to recovery from defendant for period defendant
received benefit of living in plaintiff’s home without paying for that
benefit), but we have not yet ruled on the validity of a claim of unjust
enrichment for unrequested benefits—that is, unrequested benefits voluntarily
conferred upon the recipient by the claimant.  See Restatement (Third) of
Restitution & Unjust Enrichment § 30 (2011) [hereinafter
Restatement].  Birchwood places great weight on our recent decision in Lasek
v. Vermont Vapor, Inc., 2014 VT 33, ___ Vt. ___, 95 A.3d 447, in which we
held that a tenant had no claim of unjust enrichment against his landlord for
improvements the tenant voluntarily made to the property on which the landlord
collected insurance proceeds after a fire.  Id.
¶ 18.  We stated that “[a]ssuming without deciding that
Vermont law recognizes an unjust enrichment claim by a tenant against a
landlord to recover value of improvements made by the tenant, plaintiff’s claim
fails because he did not show that landlord received a benefit from his
improvements.”  Id.  Birchwood argues that because here we
have no “proof of benefit conferred” deficiency, as in Lasek, we should
rely on this case to hold that unjust enrichment occurred here, because there
is a benefit.  Lasek is of no help to Birchwood.  Our
statement there regarding an unjust enrichment claim for improvements was pure
dicta, stating an assumption and not a holding on which Birchwood can
rely.  In fact, the application of unjust enrichment to unrequested
benefits is an undeveloped area of our law, and we must look beyond our
precedents to decide this appeal.
¶ 9.            
Both parties rely, in part, on the Restatement in making their
arguments.  We frequently have adopted provisions of this Restatement
where our law is undeveloped.  See JW, LLC v. Ayer, 2014 VT 71,
¶ 22, ___ Vt. ___, 101 A.3d 906; Kellogg, 2013 VT 76, ¶ 19; Shattuck
v. Peck, 2013 VT 1, ¶¶ 13, 22, 193 Vt. 123, 70 A.3d 922.  We do
so here.
¶ 10.         Birchwood
makes two unjust enrichment arguments: (1) that Krizan was unjustly enriched by
the substantial increase in the value of her property as a consequence of Birchwood’s
improvements and therefore should be required to return to Birchwood some of
that increase in value as a proportionate share of the improvement costs; and
(2) that as co-holder of an easement providing access to her property, Krizan
is required to share in the cost of improvements to the access road.  We
start with the first argument.
¶ 11.         Section
30 of the Restatement provides that a claim of unjust enrichment for benefits
conferred on the recipient by the claimant’s unrequested intervention is
available only to the extent that “(a) liability in restitution replaces a
money obligation or spares the recipient necessary expense; (b) the recipient
obtains a benefit in money; or (c) relief may be granted to the claimant by
specific restitution.”  Restitution for voluntarily conferred benefits
rarely is granted, but is available in limited circumstances where it “may be
achieved in a manner that avoids any forced exchange.”  Restatement
§ 30 cmt. a.  Potentially applicable
here is subsection (a), which requires us to determine whether Krizan was under
any obligation to pay for the improvements or, in other words, if Birchwood
spared her a necessary expense.  In applying this subsection, one
consideration is that a claimant generally cannot compel the recipient to pay
for benefits voluntarily conferred if, had the transaction been proposed as a
contract, the recipient would have been able to reject it.  Id. § 30 cmt. b.  For
example, if adjacent property owners are under no obligation to make infrastructure
improvements unless and until they develop their lots, a claimant who
undertakes the improvements cannot recover in restitution from the benefitted
recipient, even if the recipient’s property value increased as a result of the
improvements.  Id. § 30 cmt. b, illus. 4.  That is the situation in this case.
¶ 12.         The
illustration above is based on Ranquist v. Donahue, 710 F. Supp. 1160

(N.D. Ill. 1989), which Birchwood cites in support of its argument that Krizan,
as a “holdout owner” and “free rider,” is under a duty to contribute to the
improvements made by Birchwood.  The facts of Ranquist are
substantively similar to the facts in this case, and the court’s analysis goes
to the heart of the issue with which we are confronted.  In Ranquist,
the defendants purchased a single lot in a nine-lot subdivision, and the
plaintiff subsequently bought the remaining eight lots.  An agreement between the original
developer and the municipality required lot owners to make certain
improvements—including road, curb, sewer, and water main construction—before
development of the subdivision.  The plaintiff constructed the necessary
improvements and demanded that the defendants pay their share of the
cost.  The defendants refused.  The court held that if the defendants
were not required to make the improvements until they developed their property,
and could choose not to develop, they could not be held liable for a
proportionate share of the cost of improvements. [3]  Id. at 1161. 
The court further held:
[W]hat the defendants did with their
property after the construction ended is irrelevant . . . .  To
be sure, the defendants’ post-construction actions demonstrated that they
derived a benefit from the construction, but the receipt of the benefits does
not suffice to render a person liable.  There must be some injustice in
allowing him to keep them.  The fact that the defendants made use of the
improvements does not make their retention of the benefits unjust.
Id. at
1162 (citation omitted).
¶ 13.         The
plaintiff in Ranquist made the same arguments that Birchwood makes
here.  Specifically, the plaintiff argued there that, even if the
defendants were under no obligation to make the improvements, they were still
liable for restitution because they accepted the benefit by then developing
their lot, which they otherwise would have been unable to do.  As we noted
above, supra, ¶ 12, the court squarely rejected the plaintiff’s
argument.  The court also rejected the plaintiff’s argument that the
defendants’ motives made their failure to share in the cost of improvements
unjust because the defendants knew that the plaintiff would go forward with the
construction even if they refused to participate.  Ranquist,
710 F. Supp. at 1162.  The court found the underlying motive of the
defendants irrelevant.  Id.  Looking at Birchwood’s complaint,
we find no allegations that either party was obligated to undertake the
improvements irrespective of whether the lots were developed.  In fact,
Birchwood alleges that “[i]n addition to the public frontage requirement, the
Krizan property must be serviced by municipal water and sewer in order to be
developed.”  (emphasis added).  Thus,
the rationale of Ranquist, now explicitly adopted by the Restatement,
applies here.   
¶ 14.         As
demonstrated by the foregoing discussion, Restatement § 30 embraces the
principle that incidental benefits—benefits conferred on the recipient by work
that the claimant undertook for its own benefit—rarely are recoverable in
restitution unless the benefits are a consequence of mistake, fraud, or
compulsion.  Restatement § 30 cmt. b; see also Dinosaur
Dev., Inc. v. White, 265 Cal. Rptr. 525, 530-31 (Cal. Ct. App. 1989)
(holding that plaintiff has no claim in restitution against defendant for
expense of road improvements to road benefitting both parties’ landlocked
parcels because benefit was incidental to plaintiff’s desire to improve its own
property); Major-Blakeney Corp. v. Jenkins, 263 P.2d 655, 664 (Cal.
Dist. Ct. App. 1954) (holding that plaintiff has no claim in restitution
against defendant, adjoining landowner, for expense of off-site improvements
benefitting both properties because “expenditures made and obligations paid
were done exclusively in furtherance of plaintiff’s own interest and to
discharge commitments for which it alone was responsible”); Green Tree
Estates, Inc. v. Furstenberg, 124 N.W.2d 90, 93 (Wis. 1963) (stating that
incidental, voluntary benefits are not unjust unless received through “mistake,
emergency or compulsion”).
¶ 15.         Birchwood
urges us to rely on the Restatement but argues that the unique facts of this
case are so novel and extreme that § 30 is inapplicable and that we should
rely instead on the general policy of § 1 that restitution can be ordered
when a defendant is unjustly enriched.  Birchwood argues that § 30 applies when the benefit is incidental but not when
the benefit is substantial, as alleged here.  We disagree. 
Section 30 precisely fits the facts of this case, and the precedent
on which it relies, Ranquist v. Donahue, is indistinguishable in
substance.  The terms incidental and substantial are not mutually
exclusive, with the former requiring a conclusion that the enrichment is not
unjust and the latter triggering a conclusion of unjust enrichment.  The
cases cited above, including Ranquist, demonstrate that a benefit can be
both incidental and substantial.
¶ 16.         Birchwood
further urges that the purpose of the doctrine of unjust enrichment is to prevent
benefits to a “free rider.”  Here, Birchwood has characterized Krizan as a
free rider who unfairly held onto her property for thirty years waiting for
someone else to pay for the improvements that would allow her to develop her
lot.  Under Ranquist, the characterization of the recipient as a
“holdout owner” or “free rider” is of no consequence to the outcome.  It
is incident to the nature of property ownership that one owner’s
self-interested actions may benefit a neighboring owner, even though this may
encourage free riding and discourage more industrious property owners from
making improvements.  As noted in Restatement § 30, comment b:
Both this degree of unjust enrichment and
this degree of inefficiency are ordinarily tolerated as necessary consequences
of rights incident to private property.  Where the cost of such bargaining
failure is judged to be too high, the response of the law is not to expand an
owner’s liability in restitution, but to require the desired behavior by direct
regulation; or to substitute public for private rights in the property
concerned.
We adopt Restatement § 30 as
the governing law for this case and conclude that Birchwood’s unjust enrichment
claim fails under § 30.
¶ 17.         We
next address Birchwood’s second argument: that Krizan’s obligation to pay for
the improvements arises from the implied easement that she held over the access
road to her landlocked parcel.  While Krizan disputes the existence of an
easement, we need not reach that question to resolve this case.  Because
we are reviewing a motion to dismiss for failure to state a claim, we take the
allegations in the plaintiff’s complaint as true and all defendant’s
contravening assertions as false.  Nonetheless, as we explain below,
assuming that an easement existed, we still conclude that the unjust enrichment
claim fails.
¶ 18.         Section
26 of the Restatement, which covers an exception to the general prohibition on
restitution for voluntarily conferred benefits, entitles a claimant to
restitution “[i]f the claimant incurs necessary expense to protect an interest
in property and in doing so confers an economic benefit on another person in
consequence of the other’s interest in the same property.”  A claim under
§ 26 must satisfy two basic requirements.  First, “the claimant’s
expenditures must have been necessary to protect an interest in property,” such
that “there is a claim under § 26 in respect to necessary repairs, but not
in respect of improvements.”  Restatement § 26 cmt.
a.  Second, “there must be a nexus of interests
such that the benefit is conferred on the recipient in consequence of the
recipient’s interest in the same property.”  Id.  Mere
physical proximity is not sufficient to satisfy the “nexus of interests”
requirement, but the interests of adjacent owners may be linked by servitude, id.
§ 26 cmt. c, like the implied easement allegedly
held by Krizan over the access road.  For example, if two parties share
the use of an easement over a roadway, they both are obligated for the
maintenance and upkeep of the roadway.  As such, the party who has made
the repairs has a claim of restitution against the other party to recover a
portion of the reasonable expenditure, but the claimant has “no claim of
restitution for the cost of improvements (as distinct from repairs) to which
[the recipient] did not agree.”  Id. § 26
cmt. c, illus. 12-13.
¶ 19.         In
arguing that an unjust enrichment claim is proper here, Birchwood relies on Storms
v. Bergsieker, 835 P.2d 738 (Mont. 1992), which involved a claim of unjust
enrichment for repairs over a shared roadway.  There, the parties held an
easement as tenants in common over an access road and single-lane bridge. 
The plaintiffs constructed a new bridge to replace the existing structure,
which had deteriorated and become unsafe.  The court held that, based upon
a theory of unjust enrichment, the defendants were required to participate in
the cost of the new bridge.  Id. at 741.
¶ 20.         The Storms
holding is entirely consistent with Restatement § 26, and, as a result, is
not applicable here.  The case fails to support Birchwood’s argument
because, there, the bridge replacement was a necessary expense, one that both
parties were obligated to undertake.  Id. at 740. 
Here, the improvements to the shared road were not necessary, a point to which
Birchwood conceded.  The improvements-versus-repairs dichotomy is more
aptly demonstrated in Wendover Road Property Owners Ass’n v. Kornicks,
502 N.E.2d 226 (Ohio Ct. App. 1985), in which an association sought restitution
from an individual property owner for road, sewer, and water improvements that
the association performed and for which the property owner refused to pay.
 The court emphasized that a property owner under these circumstances is
obligated to pay only if the improvements are “imperatively necessary.” 
Id. at 230.  The court found nothing in
the record to indicate the improvements were necessary and therefore denied the
claim.  Id. 
¶ 21.         Liability
for restitution in the context of servitudes is premised on the rights and
obligations of dominant and servient tenants.  Generally, both tenants are
obligated to maintain the road, and each tenant therefore is liable to the
other for the cost of repairs.  19 V.S.A. § 2702 (“[W]hen more than one
person enjoys a common benefit from a private road, each person shall
contribute rateably to the cost of maintaining the private road.”); see Hubbard
v. Bolieau, 144 Vt. 373, 375-76, 477 A.2d 972, 973-74 (1984) (recognizing
obligation of easement tenants to contribute to maintenance, snowplowing, and
upkeep of roads).[4] 
Again, the emphasis here is on the maintenance and upkeep, not unnecessary
improvements.  We adopt Restatement § 26 as consistent with Vermont
law and conclude that Birchwood’s unjust enrichment claim fails under
§ 26.
¶ 22.         We
therefore conclude that the trial court did not err in denying Birchwood’s
motion for attachment and dismissing Birchwood’s claim of unjust enrichment
against Krizan.
Affirmed.
 
 

 

 

FOR THE COURT:

 

 

 

 

 

 

 

 

 

 

 

Associate
  Justice

 

[1] 
Justice Eaton was present for oral argument, but did not participate in this
decision.

[2]
 Krizan also moved to dismiss for lack of venue, but that issue is not
part of this appeal.

[3] 
Although the court’s rationale for the decision was as stated above, the court
realized that, under the agreement between the original developer and the
municipality, the defendants might have the obligation to make the improvements
even if they did not develop their lot.  The court gave leave to the
plaintiff to refile to plead and prove that fact.  Id. at 1162-63.

[4] 
The trial court emphasized that, even if the implied easement did exist, it was
extinguished when Birchwood conveyed the road to the Town, making it a public
right-of-way.  We need not explore whether that fact would override
a claim of unjust enrichment because we already conclude that Krizan was not
obligated to contribute to the improvements made by Birchwood.