Court Opinion

ID: 1067274
Source: CourtListenerOpinion
Date Created: 2013-10-09 19:25:51.621777+00
Date Added: 2024-06-11T12:32:52.549186
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                             AT NASHVILLE
                                    August 7, 2002 Session

                          MILL CREEK ASSOCIATES, INC.
                                      v.
                         THE JACKSON FOUNDATION, INC.

                   An Appeal from the Chancery Court for Dickson County
                       No. 7068-01   Leonard W. Martin, Chancellor

                    No. M2001-02811-COA-R3-CV - Filed March 11, 2003

This is an unjust enrichment case. The plaintiff design firm was contacted by the defendant
foundation to develop designs and a budget for the construction of a science theater. The chief
designer of the firm worked on the project and presented a proposal to the foundation. The
foundation neither accepted nor rejected the design firm’s proposal. Instead, the foundation hired
the design firm’s chief designer. Part of the designer’s duties with the foundation was to work on
the science theater project “in house.” The foundation refused to pay the design firm a fee for its
work on the project. The design firm then sued the foundation on a theory of unjust enrichment for
the work performed on the project while the chief designer was still at the firm. The trial court found
that since the project was never completed, the preliminary designs did not confer a value on the
foundation and, consequently, the foundation had not been unjustly enriched. The design firm now
appeals. We reverse, finding that the work performed by the design firm constituted a benefit to the
foundation, and that it would be unjust for the foundation to retain that benefit without paying the
design firm for the value of the benefit.

        Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court is
                               Reversed and Remanded

HOLLY KIRBY LILLARD, J., delivered the opinion of the court, in which W. FRANK CRAWFORD , P.J.,
W.S., and DAVID R. FARMER , J., joined.

Stephen C. Knight, Nashville, Tennessee, for the appellant, Mill Creek Associates, Inc.

Henry F. Todd, Jr., Dickson, Tennessee, for the appellee, The Jackson Foundation, Inc.

                                             OPINION

        Plaintiff/Appellant Mill Creek Associates, Inc. (“Mill Creek”), is a design fabrication firm
that produces displays for the museum, theater, retail, and trade show industries. It is owned by Sam
Craig (“Craig”) and Steve Landers (“Landers”). In August 1998, a representative of
Defendant/Appellee The Jackson Foundation, Inc. (“the Foundation”), contacted Mill Creek about
designing and building a project for its new Renaissance Center facility1 (“the Project”). The Project
involved developing a depiction of a London street scene from the 1830’s in a walkway that would
lead into a science theater in the basement of the Renaissance Center. Robert Cooper (“Cooper”),
Mill Creek’s sole designer, worked with the Foundation on the Project. The Foundation solicited
no other bids or proposals for the design or construction of the project.

       Initially, Cooper met with Foundation representatives Douglas Jackson (“Jackson”) and
Robert Spencer (“Spencer”) to discuss the Project. After the meeting with Jackson and Spencer,
Cooper did preliminary design work, including research, collection of images, and planning. After
that, Cooper went to another meeting at the Renaissance Center, this time with Steve Jacobs
(“Jacobs”). Jacobs had created the idea for the Project. Cooper and Jacobs exchanged information,
and Jacobs provided Cooper with the research Jacobs had conducted. Cooper then did further
research and made sketches for the Project. By September 5, 1998, Cooper had spent about thirteen
hours working on a proposal for the design and budget for the Project.

        In Mid-November, Spencer called Cooper to check on where Cooper was in the “design
phase” of the Project. After receiving that call, Cooper worked almost exclusively on the Project
until December 2, 1998. On that date, he met with Spencer and Jackson to give the Foundation a
packet that included preliminary design printouts, sketches, other related materials, and a budget.
The proposal had a $460,000 budget, which included $400,000 in construction plus a 15% design
fee for Mill Creek of $60,000.

        Though Spencer and Jackson were pleased with how the design looked, they objected to the
overall amount of the budget. They asked Cooper to redesign the Project using half of the proposed
budget, or approximately $200,000. Consequently, Cooper, along with Landers and Craig, reworked
the design to reduce construction costs. On December 16, 1998, Cooper met again with Spencer and
Jackson. He gave them a revised packet on the design, along with a revised budget of $245,000,
which included $213,000 in construction costs plus a 15% design fee of about $32,000. At that
meeting, Cooper gave Spencer and Jackson a letter requesting 20% of the estimated design fee
($6,400) as a “retainer and payment . . . for our services to date.” By the date of this meeting,
Cooper had spent approximately 156 hours working on the Project and developing a budget.
Spencer and Jackson told Cooper that they would present the new budget to the Foundation’s board
of directors for approval.

       During the course of the December 16 meeting, Spencer and Jackson also asked Cooper if
he would be interested in working directly for the Foundation and taking the Project “in house.”
Cooper initially declined. He later reconsidered, however, and was hired by the Foundation as its
Senior Exhibit Designer on January 4, 1999. When Cooper left Mill Creek, he was given his
research and designs on the Project.

       1
           The Renaissance Center itself was op ened to the public in A ugust 1999 .

                                                          -2-
        After Cooper was hired by the Foundation, Mill Creek sent the Foundation a bill for $9,390,
for 156.5 hours at $60 per hour, the amount of time Cooper spent working on the Project while he
was still employed at Mill Creek. The Foundation did not pay Mill Creek for Cooper’s work. On
March 11, 1999, Spencer wrote Landers a letter stating:

         It was neither my nor Mr. Jackson’s understanding that we had entered into an
         agreement for the production and design of the London street and theater. We had
         met with Mr. Cooper on two separate occasions to review what appeared to be
         preliminary sketches and conceptualization for this project. I assume this
         information was provided to allow us to make a decision concerning the services of
         Millcreek [sic].

Therefore, based on its position that there was no contract, the Foundation declined to pay Mill
Creek for Cooper’s services designing the Project while he was employed at Mill Creek.

       The Foundation never formally accepted or rejected the December 16 proposal presented by
Cooper on behalf of Mill Creek. The Foundation later completed a small part of the Project, but did
not move forward with the bulk of it. Completion of the London street scene, however, remained
under consideration, and completing the Project was “part of the list” of projects to which Cooper
was assigned.

       On June 16, 1999, Mill Creek sued the Foundation on claims of breach of contract,
promissory estoppel, and unjust enrichment. Mill Creek asserted that the Foundation was liable to
Mill Creek in the amount of $31,950, which was approximately15% of the Project’s projected
budget for design services.2 On August 29, 2001, the case was tried before the trial court, sitting
without a jury.

        At the trial, Cooper was the primary witness for both sides. Cooper testified as a witness for
Mill Creek in its case-in-chief because Cooper was the agent for Mill Creek who dealt with the
Foundation. Cooper, however, was also designated as the Foundation’s expert witness and testified
on its behalf as well.

        In his testimony, Cooper said that he decided to leave his employment with Mill Creek
because he was not made a partner with the firm.3 He acknowledged that when he left he was given
his research and design work on the Project, and said that he keeps these materials in his Foundation
office at the Renaissance Center. Cooper testified that, at the time he was working on the Project
at Mill Creek, Mill Creek had not entered into a contract with the Foundation. At that time, Cooper
did not expect the Foundation to pay Mill Creek for his work unless the Foundation went forward

         2
          Though the action was initially brought in Davidson County, the case was transferred to the Chancery Court
for Dickson County on February 5, 2001.

         3
          Cooper testified that he was offered a 4% partnership interest in Mill Creek, and that this was no t a sufficiently
large partnership interest to keep him there.

                                                            -3-
with the Project. Cooper said he was confident that, had the Foundation’s board approved the
project, the Foundation would have entered into a contract with Mill Creek to help develop it. He
testified that he had completed 20% of the Project’s design while he was at Mill Creek. When asked
his opinion, Cooper said he thought that, after he became employed by the Foundation, the
Foundation should have compensated Mill Creek for the work he had done on the Project while he
was employed by Mill Creek. Cooper acknowledged that, when he was hired by the Foundation,
the Project was on the list of duties assigned to him. When asked whether the Project had been
constructed, Cooper said that the Foundation had “built a very small portion of the city street as an
entrance into the science theater that resembles some of the work that had been done.” Otherwise,
he stated, the Project had not been constructed.

        Landers testified on behalf of Mill Creek. Landers said that Cooper was the person who dealt
with the Foundation on Mill Creek’s behalf. Through Cooper, Landers understood that Mill Creek
had been hired to design the Project. Landers knew, however, that the Foundation’s board of
directors had not yet approved the Project, and that such approval was necessary before it could be
developed. Landers believed that over 50% of the design of the Project had been completed by
Cooper while he was employed by Mill Creek.

        Landers testified that Cooper resigned from Mill Creek to work for the Foundation with the
understanding that Mill Creek would be paid for the design fees incurred while Cooper was at Mill
Creek. Landers said, “[P]art of [the agreement with Cooper] was getting [Mill Creek] billed out for
the due design fees now. And since he was going to work for the Jackson Foundation, he could pick
it up from there. Everybody leaves on a clean slate.” Based on that understanding, Landers
permitted Cooper to take with him the designs and other materials related to the Project. Landers
acknowledged sending the Foundation a bill for $9,390 after Cooper went to work for the
Foundation. He explained that he sent the bill because the Foundation obviously would no longer
need Mill Creek’s services, in light of the fact that the lead designer on the Project had become
employed by the Foundation. Because the overall budget had not been approved by the Foundation’s
board of directors, Landers thought that it was most logical to bill the Foundation for the hours
worked, rather for a percentage of the design budget.

        Finally, Spencer testified on behalf of the Foundation. Spencer said that Jacobs had the idea
to turn the basement of the Renaissance Center into a science theater and to depict a London street
scene in the entrance hallway. Spencer testified that, when he met with Cooper, there was no
discussion regarding payment for services. Spencer said that he considered the proposal presented
by Cooper to be “an offer to do work. . . . [I]t was a – done in an effort to secure the job.” Spencer
noted that he, as a lawyer, is trained to have all of his agreements in writing. Here, there was no such
written agreement between the Foundation and Mill Creek. Consequently, Spencer felt that the
Foundation did not agree to pay Mill Creek for its work on the Project, and that it would be
unreasonable for Mill Creek to expect such payment. Spencer acknowledged that the Foundation
was still considering developing the London street scene portion of what Cooper had designed.

                                                  -4-
        At the conclusion of the proof, the trial court found that there was no meeting of the minds
between the parties regarding a design fee, and consequently, held in favor of the Foundation on the
breach of contract and promissory estoppel claims. The trial court also found that the Foundation
has derived no benefit from Mill Creek’s design work because it never went forward with the
Project. Based on this finding, the trial court held in favor of the Foundation on Mill Creek’s claim
for unjust enrichment. Mill Creek now appeals the trial court’s decision with respect to the unjust
enrichment claim only.

        Because the case was tried by the court sitting without a jury, we review the court’s decision
de novo, with a presumption of correctness afforded to the trial court’s findings of fact. See
Schnider v. Carlisle Corp., 65 S.W.3d 619, 621 (Tenn. Ct. App. 2001); Tenn. R. App. P. 13(d). The
trial court’s conclusions of law are reviewed de novo, and are not afforded any presumption of
correctness. See State v. Levandowski, 955 S.W.2d 603, 604 (Tenn. 1997).

        Tennessee has long recognized claims based on the doctrine of unjust enrichment. This
theory of recovery can also be called quantum meruit,4 quasi contract, or contract implied in law.
Paschall's, Inc. v. Dozier, 407 S.W.2d 150, 154 (Tenn. 1966) (stating that “[a]ctions brought upon
theories of unjust enrichment, quasi contract, contracts implied in law, and quantum meruit are
essentially the same”); see also River Park Hosp., Inc. v. BlueCross BlueShield of Tenn., Inc., No.
M2001-00288-COA-R3-CV, 2002 WL 31302926, at *11 (Tenn. Ct. App. Oct. 11, 2002). “Courts
frequently employ the various terminology interchangeably to describe that class of implied
obligations where, on the basis of justice and equity, the law will impose a contractual relationship
between the parties, regardless of their assent thereto.” Paschall's, 407 S.W.2d at 154. “Unjust
enrichment is a quasi-contractual theory under which a court may impose a contractual obligation
on the parties where one does not otherwise exist.” Whitehaven Cmty. Baptist Church v. Holloway,
973 S.W.2d 592, 596 (Tenn. 1998). “[C]ontracts implied in law ‘are created by law without the
assent of the party bound, on the basis that they are dictated by reason and justice.’ ” River Park
Hosp., 2002 WL 31302926, at *11 (quoting Angus v. City of Jackson, 968 S.W.2d 804, 808 (Tenn.
Ct. App. 1997)).

         In Paschall’s, the Tennessee Supreme Court determined that, in order to establish a claim
based on quasi contract, the plaintiff must show that (1) a benefit has been conferred upon the
defendant by the plaintiff; (2) the defendant appreciated the benefit; and (3) acceptance of the benefit
under the circumstances would make it inequitable for the defendant to retain the benefit without
paying the value of the benefit. Paschall’s, 407 S.W.2d at 155; Angus, 968 S.W.2d at 808 (quoting
Paschall’s, 407 S.W.2d at 155). “The most significant requirement for a recovery on quasi contract
is that the enrichment to the defendant be unjust.” Paschall’s, 407 S.W.2d at 155. Each claim of
unjust enrichment must be decided according to its own factual situation. B & L Corp. v. Thomas
& Thorngren, Inc., 917 S.W.2d 674, 680 (Tenn. Ct. App. 1995).

        4
          The Latin translation of this phrase means “as much as he has deserved.” B LACK’S L A W D IC T IO N A R Y 1255
(7th ed. 1999).

                                                         -5-
         In the instant case, the trial court dismissed Mill Creek’s unjust enrichment claim based on
its determination that the Foundation derived no benefit from Mill Creek’s work. Mill Creek argues
that the trial court’s conclusion in this regard is contrary to the reasoning in Hall & Waller &
Assocs., Architects, Inc. v. Lambuth College, No. 02A01-9109CH00196, 1992 WL 252510 (Tenn.
Ct. App. Oct. 6, 1992). In Lambuth, the plaintiff architectural firm prepared some preliminary floor
plans for a retirement home, which were done without compensation but with the express
understanding that the firm would be retained for future services if the project proceeded. Lambuth,
1992 WL 252510, at *1. Later, the architectural firm signed a contract with the Village Corporation,
a not-for-profit corporation formed by Lambuth to facilitate the project. Under this contract, the
architectural firm was to furnish services for the project in return for 4% of the completed
construction cost. The firm completed the plans and specifications for the retirement home, and
delivered them to the Village Corporation. Later, however, the retirement home project was
terminated before construction began. The architectural firm sued Lambuth on a theory of quantum
meruit to recover payment for the work it had performed on the project.5 The trial court held in favor
of Lambuth, because there was no agency relationship between Lambuth and the Village
Corporation. Id. at *4. On appeal, this Court held that privity between the parties was not necessary
for the architectural firm to recover for unjust enrichment. Id. at *5. The Court also held that
Lambuth was enriched by the services provided by the architectural firm because the plans and
specifications “were absolutely necessary to the furtherance of [the] project,” and it was anticipated
that the project “would have been of great benefit to Lambuth.” Id. at *11. Therefore, because
privity was unnecessary, and because “all the requirements for recovery on quasi-contract or
quantum meruit . . . ha[d] been established,” the cause was remanded to the trial court for a
determination of damages. Id.

         Thus, in Lambuth, the appellate court implicitly determined that the college was enriched
by the plans and specifications generated by the architectural firm, even though the project was
abandoned before construction began. Like the architectural firm in Lambuth, Mill Creek produced
the initial designs of the London street scene/science theater Project, anticipating that the Foundation
would hire it to complete the designs and to participate in construction of the Project. The fact that
the Foundation did not accept Mill Creek’s proposal does not necessarily mean that the preliminary
designs were devoid of value. The value of the designs may depend on the use to which they are put
considering the fact that, at the time of trial, the Project remained on Cooper’s list of job
assignments. Therefore, Cooper’s preliminary work did confer value to the Foundation, although
that value may be less than if the Foundation had constructed the Project.

        The question remains, however, whether, under these circumstances, it would be unjust for
the Foundation “to retain the benefit without payment of the value thereof.” Paschall’s, 407 S.W.2d
at 155. In this case, the Foundation did not solicit bids from a variety of contractors with the
understanding that only the contractor selected would be compensated as part of his work on the
project. The trial court, however, found that, while the Foundation did not solicit bids from other

            5
                It could not recover from Lambuth on a breach of contract theory, because Lambuth was not a party to the
contract.

                                                             -6-
contractors, it did not enter into an exclusive arrangement with Mill Creek.6 Indeed, it is apparent
that the parties had no express agreement on any compensation for Mill Creek for the preliminary
design, and there has been no appeal from the trial court’s factual finding on this issue.
Nevertheless, although the Foundation did not accept Mill Creek’s proposal, neither did it
completely reject the Project. Rather, it is undisputed that the Foundation hired Cooper, Mill
Creek’s chief designer, to take the Project “in-house” so that it could reap the benefits of Mill
Creek’s preliminary work and decrease its costs. Cooper, testifying on behalf of both Mill Creek and
the Foundation, said that when he made his final proposal to the Foundation, Spencer and Jackson
offered him a job at the Foundation to take “this whole project in-house.” Moreover, it is undisputed
that the Foundation used portions of Cooper’s design to construct a very small portion of the London
street scene as an entrance into the science theater. Finally, Cooper testified that the Foundation has
assigned him to work on the Project at some time in the future, and at trial Spencer confirmed that
the Foundation was still considering completing the London street scene .

         Under these circumstances, we must conclude that it would be unjust for the Foundation to
retain the benefit of Cooper’s designs without paying Mill Creek the value of the benefit of the work
completed by Mill Creek. Consequently, we reverse the decision of the trial court on Mill Creek’s
unjust enrichment claim and remand the cause to the trial court to determine the value of the benefit
of Mill Creek’s work to the Foundation.

       We reverse the decision of the trial court and remand for proceedings not inconsistent with
this Opinion. Costs are to be assessed to the appellee, The Jackson Foundation, Inc., for which
execution may issue, if necessary.

                                                                 ___________________________________
                                                                 HOLLY KIRBY LILLARD, JUDGE

         6
          Though Landers testified that he believed, through Cooper, that the Foundation hired M ill Creek to complete
the designs, Cooper testified that no agreement had been reached with the Foundation that Mill Creek would be
compensated for the designs if the proposal were rejected. Therefore, it appears that the trial court cred ited Coop er’s
testimony, and the evidence does not preponderate against the trial court’s conclusion that the parties did not have a
meeting of the minds on this issue.

                                                          -7-