A Michigan municipality, Billings Township, let a contract to general contractor Lawrence M. Clarke, Inc., for the construction of a portion of the city’s sanitary sewer system. Clarke bid on the project after some encouragement from potential subcontractor Kim S. Draeger, which had teamed with KD Equipment Leasing, Inc., and AIC, Inc., to submit a proposal to Clarke for the work. Draeger became Clarke’s subcontractor and KD Equipment Leasing and AIC became Draeger’s subcontractors. Together, Clarke, Draeger, and the subcontractors would perform work on two sections of the project. However, it was alleged that Draeger and its subcontractors did not perform the work completely or properly as the project was in progress. Clarke sued Draeger and its subcontractors, claiming recovery under either breach of contract or unjust enrichment. The defendants counter-claimed, also alleging breach of contract or unjust enrichment, among other claims.
The trial court awarded Clarke over $900,000 in damages. Importantly, the trial court elected to decide the case under a theory of quantum meruit because it determined that deciding this case under the existence of express contracts was problematic since Draeger’s subcontractors, during some length of time on the project, had been legally dissolved after failing to file annual corporation fees and reports. Draeger appealed the decision. On appeal, Draeger argued, among other things, that the trial court should not have side-stepped legal remedies in favor of the equitable remedy of unjust enrichment to decide the case.
The appellate court reversed the trial court’s decision on the contract question. The appellate court determined that, under Michigan law, unjust enrichment was not available at all if there was an express contract between the same parties on the same subject matter. Here, the parties had not made separate legal claims over different parts of the work, such as claiming an express contract governed part of the work and unjust enrichment theory governed the other part of the work. Instead, the parties alleged that their entire dealings were covered either under an express contract or under unjust enrichment. This appellate court reasoned: “[M]ere inconvenience in determining contractual obligations is not a reason to eschew contract law in favor of unjust enrichment principles.” The court directed that the case return to the trial court for specific determinations as to which parts of the work were covered under actual contracts and which were not. The appellate court also directed that the assessed damages be redetermined.
While jurisdictions may vary, this case is an important reminder that even when contractual relationships are complicated or involve several subcontractor relationships, the existence of a contract may trump recovery under any unjust enrichment claim—especially between the same parties on the same work.
Lawrence M. Clarke, Inc. v. Draeger et al., LC No. 08–000227–CZ, 2015 WL 205182 (Jan. 15, 2015)