Limitations on Subcontractor Claims for Unjust Enrichment

posted by Michael Fortney  |  Jan 14, 2010 3:45 PM in Construction Law

Ohio courts have uniformly held that a subcontractor does not have a claim for unjust enrichment against an owner, if the owner fully paid the contractor for the work performed by the subcontractor.

In order to establish unjust enrichment against an owner, a subcontractor must prove (1) that he conferred a benefit on the owner; (2) that the owner knew of the benefit; (3) and that the owner retained the benefit given under circumstances where it would be unjust for him to retain it without payment.  Not only must the subcontractor suffer a loss, but the owner must have received an unjust gain.  The subcontractor has no claim of unjust enrichment against an owner unless the general contractor in the matter is unavailable for judgment and unable to obtain the money that the subcontractor demands from the property owner. 

The court of appeals in Booher Carpet Sales v. Erickson, addressed the situation head on:

At the other end of the spectrum of possible unfair enrichment cases lies the circumstance in which the property owner has already paid the general contractor the whole amount of the original contract price. In such a case, the subcontractor's claim fails because the owner has not been unjustly enriched. The owner has, in effect, already paid for the subcontractor's performance. Cases of this sort are common enough, both in Ohio and other states, that we can say this rule is axiomatic: when the property owner has fully paid another for particular improvements, the subcontractor may not recover in unjust enrichment for work or materials provided in connection with those improvements. . . . 

The Summit County Court of Appeals similarly decided Brown Graves Company, et al. v. Obert, et al., where the court reversed a decision of the trial court awarding damages on unjust enrichment, citing Ohio law:

In Fairfield Ready Mix v. Walnut Hills Assoc., Ltd. . . . , the First District Court of Appeals considered a claim for unjust enrichment made by a subcontractor against a corporate entity which had hired a general contractor to construct certain buildings.  The court held that, because the defendant had paid the general contractor for the materials supplied by the materialman, the defendant had sustained no gain and, therefore, the materialman did not possess a claim for unjust enrichment.

"In the instant case, the plaintiff has suffered a 'loss' since the plaintiff has not been paid for the materials provided for the construction project.  However, [the defendant has] not sustained a 'gain.' [The defendant] forwarded money to [the general contractor] to pay for the materials.  The materials used by [the defendant] for the construction project were paid for by [the defendant].  Therefore, [the defendant] has not been unjustly enriched[.]"

Thus, where a general contractor is paid in full for a project by the owner; whereas an unpaid subcontractor alleges that it sustained a loss, the owner has not sustained a gain. Ohio law prevents the subcontractor’s unjust enrichment claim against the owner.

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