Opinion
No. 65352-1-I.
Filed: August 1, 2011. UNPUBLISHED.
Appeal from a judgment of the Superior Court for King County, No. 08-2-42397-2, Ronald Kessler, J., entered March 12, 2010.
Affirmed by unpublished opinion per Cox, J., concurred in by Ellington and Spearman, JJ.
Three elements are necessary to establish a claim for unjust enrichment: "(1) the defendant receives a benefit, (2) the received benefit is at the plaintiff's expense, and (3) the circumstances make it unjust for the defendant to retain the benefit without payment." Here, W.H. Hughes, Jr., Co., Inc., ("Hughes") constructed a water and sewer extension for the city of Auburn and then sued certain property owners who connected to the extension. Hughes fails in its burden to show there is any genuine issue of material fact for the third element of unjust enrichment: that it is unjust for these property owners to retain the benefit of connecting to the sewer without making further payments. These property owners were entitled to judgment as a matter of law. We affirm the dismissal of the unjust enrichment claims against them.
Young v. Young, 164 Wn.2d 477, 484-85, 191 P.3d 1258 (2008).
In May 2004, Hughes, a general contractor, entered into a Developer Public Facility Extension Agreement with the city of Auburn. Under the terms of this agreement, Hughes agreed, at its own expense, to design, construct, and convey to the City an extension of the waterline and sewer for a subdivision. The agreement expressly stated that the "City may enter into a Payback Agreement, if applicable, with [Hughes] pursuant to the requirements of RCW 35.91."
Clerk's Papers at 128.
In November 2005, Hughes completed construction of the sewer extension. Shortly thereafter, Kevin and Charlotte Day and Michael and Kris Baker, respectively, paid $933 in fees to the City, obtained connection permits, and connected to the sewer. The Days paid the City an additional $4,068 in fees after the City advised this additional amount was due under a pending payback agreement with Hughes that had not yet been executed.
Id. at 64.
In 2007, Henry and Beverly Knapp paid $4,159.29 in fees to the City, obtained a connection permit, and connected to the sewer. In July 2008, Robert and Lynn LeGrande paid $1,948 to the City, obtained a connection permit, and connected to the sewer.
Hughes and the City entered into a payback agreement effective September 16, 2008, over four years after they entered into the extension agreement. This was also nearly three years after Hughes completed construction of the sewer. Significantly, this was also after the property owners in this case had connected to the extension.
By the terms of the payback agreement, Hughes agreed to accept $203,124 of its total construction costs of $445,347, from future connections as "a fair pro rata share reimbursement for [its] construction of the [sewer line.]" Hughes also agreed to accept $8,240.29 from the City as reimbursement for the connection fees the Days, Bakers, Knapps, and LeGrandes paid to the City when they connected to the sewer.
Thereafter, Hughes commenced this action for unjust enrichment against these property owners. The trial court granted the property owners' respective motions for summary judgment, dismissing the claims. Hughes moved for reconsideration, which the trial court denied.
Hughes appeals.
UNJUST ENRICHMENT
Hughes argues that there are genuine issues of material fact for trial and that the trial court erred in summarily dismissing its unjust enrichment claims against the property owners. We disagree.
A moving defendant meets its initial burden on summary judgment by pointing out that there is an absence of evidence to support the plaintiff's case. Then, the inquiry shifts to the plaintiff to set forth specific facts demonstrating a genuine issue for trial. Summary judgment should be entered if the nonmoving party fails to establish the existence of an element essential to its case. We review de novo a summary judgment order, viewing the evidence and reasonable inferences therefrom in the light most favorable to the nonmoving party. We may affirm on any ground supported by the record.
Young v. Key Pharm., Inc., 112 Wn.2d 216, 225 n. 1, 770 P.2d 182 (1989).
Id. at 225.
Id.
Schaaf v. Highfield, 127 Wn.2d 17, 21, 896 P.2d 665 (1995).
King County v. Seawest Inv. Assoc., LLC, 141 Wn. App. 304, 310, 170 P.3d 53 (2007) (citing LaMon v. Butler, 112 Wn.2d 193, 200-01, 770 P.2d 1027 (1989)).
A claim of unjust enrichment requires proof of three elements — "(1) the defendant receives a benefit, (2) the received benefit is at the plaintiff's expense, and (3) the circumstances make it unjust for the defendant to retain the benefit without payment." All three elements must be established.
Young, 164 Wn.2d at 484-85.
Id. at 484.
But, "[e]nrichment alone will not suffice to invoke the remedial powers of a court of equity. It is critical that the enrichment be unjust both under the circumstances and as between the two parties to the transaction." In other words, the doctrine of unjust enrichment applies only if the circumstances of the benefit received or retained make it unjust for the defendant to keep the benefit without paying.
Farwest Steel Corp. v. Mainline Metal Works, Inc., 48 Wn. App. 719, 732, 741 P.2d 58, review denied, 109 Wn.2d 1009 (1987).
Chandler v. Wash. Toll Bridge Auth., 17 Wn.2d 591, 601, 137 P.2d 97 (1943).
The facts of this case are largely undisputed. Moreover, the parties' main focus is whether the last of the three elements of unjust enrichment has been satisfied on this record.
Farwest Steel Corp. v. Mainline Metal Works, Inc., is dispositive. There, Farwest supplied steel to Mainline, a steel fabricator, for a construction project in which Hensel was the prime contractor. Before the construction project was complete and before it could pay Farwest in full for the steel purchased, Mainline went into bankruptcy. Farwest then sued Hensel for unjust enrichment because Hensel failed to fully pay Mainline for the fabricated steel Hensel received and incorporated into the project.
48 Wn. App. 719, 741 P.2d 58, review denied, 109 Wn.2d 1009 (1987).
Id. at 721.
Id.
Id.
On appeal, this division of the court of appeals held that even though Hensel was enriched because it received goods without paying for them, the enrichment was not unjust under the circumstances. Hensel did not contribute to Farwest's loss because it was merely an "incidental beneficiary" of the contract between Farwest and Mainline, it did not acquiesce or encourage the contract with Farwest, and it did not mislead Farwest in any way. Therefore, Hensel was not unjustly enriched.
Id. at 732.
Id. at 732-33.
Here, the property owners are also "mere incidental beneficiaries" of the extension agreement that Hughes entered into with the City. There is no evidence that these property owners had anything to do with this agreement. Thus, there is nothing to show that they either "acquiesce[d] in or encourage[d] the contract" with Hughes. Furthermore, there is no evidence in this record that these property owners misled Hughes in any way. In sum, this case is factually and legally indistinguishable from Farwest in that these property owners did nothing to contribute in any fashion to the loss that Hughes realized.
The Restatement (Second) of Contracts defines an "incidental beneficiary" as one who "acquires by virtue of the promise no right against the promisor or the promise." Restatement (Second) of Contracts § 315 (1981). Comment a elaborates: "An incidental beneficiary is a person who will be benefited by performance of a promise but who is neither a promisee nor an intended beneficiary." Id. at cmt. a.
Hughes attempts to distinguish Farwest, but these attempts are unpersuasive. First, it claims there is a genuine issue of material fact whether unjust enrichment occurred and that such issue must be decided by a jury. The simple answer to that argument is that Farwest resolved the same issue on summary judgment, and this record supports the same result in this case. Specifically, the material facts, as we have just discussed, are undisputed and fully support the conclusion that there is nothing left for trial.
Second, Hughes points to Reisenfeld Co. v. Network Group, Inc., a Sixth Circuit case that interprets Ohio law, holding that Farwest's reasoning was at odds with Ohio law. Because the issue here is whether Washington law supports the trial court's grant of summary judgment, what that federal decision says about Ohio law is not helpful.
277 F.3d 856 (6th Cir. 2002).
Id. at 860.
Third, Hughes argues that the property owners "directly contributed to [its] loss by their connection, since those already connected are statutorily prohibited from being made party to a Payback Agreement." This selective utilization of facts does not show that retention of the benefit of the sewer is unjust.
Brief of Appellant at 24.
In May 2004, Hughes agreed, at its own expense, to design, construct, and convey to the City the sewer extension. The extension agreement also expressly stated that the parties might later enter into a payback agreement that would serve to reimburse Hughes for the expenses it incurred to fulfill its obligations under the extension agreement. Significantly, this extension agreement expressly referenced RCW 35.91 as the mechanism by which Hughes would be reimbursed.
RCW 35.91.020(1) (a) provides for construction of sewer facilities and also includes provisions for reimbursement of construction costs by property owners benefited by the improvement:
. . . the governing body of any city, . . . may contract with owners of real estate for the construction of storm, sanitary, or combination sewers, . . . connecting with the public water or sewerage system to serve the area in which the real estate of such owners is located, and to provide for a period of not to exceed twenty years for the reimbursement of such owners and their assigns by any owner of real estate who did not contribute to the original cost of such water or sewer facilities and who subsequently tap onto or use the same of a fair pro rata share of the cost of the construction of said water or sewer facilities. . . .
(Emphasis added.)
Thus, property owners who do not contribute to the original cost of the improvement and later connect must pay "a fair pro rata share of the cost of construction." It is undisputed that under the payback agreement between the City and Hughes, the developer receives these funds from those property owners who did not contribute to the original cost of the improvement.
Significantly, RCW 35.91.020(4) specifies that reimbursement of construction costs is not effective as to property owners who connect before an executed reimbursement agreement is recorded with the county auditor:
The provisions of such [reimbursement] contract shall not be effective as to any owner of real estate not a party thereto unless such contract has been recorded in the office of the county auditor of the county in which the real estate of such owner is located prior to the time such owner taps into or connects to said water or sewer facilities.
(Emphasis added.)
Thus, under the plain words of this statute, the property owners in this lawsuit, all of whom connected to the sewer prior to the execution and recording of the September 16, 2008, payback agreement, are not required to make further contributions to the cost of construction.
This statutory scheme, to which Hughes agreed in the May 2004 extension agreement with the City, clearly specifies the method by which Hughes could anticipate reimbursement of the construction costs that it undertook at its sole expense. Property owners who connected after the recording of the payback agreement would reimburse construction costs on the basis explained above. But the property owners that Hughes sued in this case were not in the class of property owners required to reimburse Hughes because they all connected to the sewer before the recording of the September 16, 2008, payback agreement. As the statute clearly states, they are not required to pay anything more. There is nothing inequitable about this.
We note that Hughes's claim that these property owners received something for nothing is directly at odds with this record. As counsel had to concede at oral argument of this case, under the payback agreement with the City, Hughes received and accepted over $8,000 in connection fees that these property owners paid to the City. This further supports our conclusion that it is not unjust for these property owners to retain the benefit of the sewer connections without making any further payments.
Hughes cites other cases to support its argument. None are persuasive. In Cox v. O'Brien, the court of appeals held that home buyers could not attempt to shift economic risk that they expressly assumed in a purchase and sale agreement by suing the seller for unjust enrichment. Similar to that case, Hughes assumed an economic risk in both its extension agreement and payback agreement, and it cannot shift that risk now to the property owners in an unjust enrichment action.
150 Wn. App. 24, 206 P.3d 682 (2009).
Id. at 38.
In Kenney v. Read and Nelson v. Appleway Chevrolet, Inc., the plaintiff's lawsuit included a claim for unjust enrichment. But those opinions did not analyze that specific claim so they are not persuasive here.
100 Wn. App. 467, 997 P.2d 455 (2000).
160 Wn.2d 173, 157 P.3d 847 (2007).
Hughes also argues that the third element of unjust enrichment is met because "[r]espondents specifically engineered their connection to the sewer line to ensure that they gained the benefit in exchange for the least possible outlay." We see nothing in the record to substantiate this bold factual assertion. In any event, taking all inferences in favor of Hughes, the nonmoving party, this does nothing to demonstrate why it is unjust for these property owners to retain the benefit of the connections without paying more for them. We have already explained why we reach this conclusion, and this assertion does nothing to change our view.
Reply Brief of Appellant at 5.
Finally, Hughes argues that RCW 35.91.020 does not prevent it from obtaining reimbursement from the property owners for sewer access. We agree that this statute makes no mention of developers or what their rights to reimbursement might be in any particular case. But it is equally clear that Hughes agreed in May 2004 to the reimbursement scheme that this statute sets forth. That is the critical point, not whether the statute may or may not encourage property owners to connect before a payback agreement is recorded.
Id. at 6-7.
Id. at 6.
Hughes appears to argue that the trial court improperly relied on whether there was any bad faith by the property owners in deciding the summary judgment motions. But there is no evidence in this record that bad faith was part of the court's summary judgment decisions because there is no reference to that concept either in the parties' briefs or the court's summary judgment orders.
In fact, the first reference to bad faith was in the trial court's order denying Hughes's motion for reconsideration following the summary judgment ruling:
. . . Indeed, bad faith is not an element, per se , of unjust enrichment. . . . It is a factor in support of or in opposition to the third element of unjust enrichment. . . .
Had there been unrebutted evidence of bad faith on the part of defendants, the court would have considered it as a factor; conversely, the unrebutted evidence of a lack of bad faith is also a factor.
Clerk's Papers at 308-09.
We acknowledge that bad faith is not one of the three elements of unjust enrichment. The trial court reached the same conclusion, as the above quotation makes clear. In any event, there is no evidence that the trial court applied an improper standard in its summary judgment ruling. Likewise, there is no showing of bad faith for purposes of showing a genuine issue of material fact for trial.
Because Hughes fails to show that the third element of unjust enrichment is satisfied in this case, there can be no other genuine issues of material fact. The property owners are entitled to judgment as a matter of law.
Hughes also claims the trial court erroneously denied the motion for reconsideration. We disagree.
We review the trial court's order denying a motion for reconsideration for abuse of discretion. There is no showing of any abuse of discretion here for the reasons we have already explained.
Wilcox v. Lexington Eye Inst., 130 Wn. App. 234, 241, 122 P.3d 729 (2005) (citing Perry v. Hamilton, 51 Wn. App. 936, 938, 756 P.2d 150 (1988)).
We affirm the orders granting summary dismissals to the property owners.
WE CONCUR: