When Is There an Uncompensated Benefit but no Unjust Enrichment?

In Sterling Contracting, LLC v. Main Event Entertainment, LP, 2022-Ohio-2138 (8th Dist.), the Court found no unjust enrichment by an owner despite the undisputed fact that a subcontractor performed acceptable work on the property and the subcontractor never was paid. The decision provides a clean analysis of the legal meaning of when enrichment is "unjust," at least in the world of construction disputes.

Background

Sterling Contracting worked as a subcontractor on a project for the defendant. The general contractor defaulted and its owner (but not the general contracting entity) declared bankruptcy. The defendant eventually paid more than the original contract price to have the construction completed. Though other subcontractors filed liens against the property, which the defendant paid, Sterling Contracting did not file a lien. The sub then sued the defendant under a theory of unjust enrichment. No one disputed that the subcontractor was not paid, that those who filed mechanics liens were paid, or that the defendant paid more than the original contract price in an amount in excess of what Sterling Contracting claimed. These facts, the Court held, required judgment for the defendant.

Outcome

Even though the sub never received payment for its work and the defendant gained the benefit of the subcontractor's work, that "enrichment" was not unjust. Unjust enrichment is not about compensating a plaintiff for a loss or punishing a defendant. Rather, it is an equitable cause of action designed to remedy a situation where one party, despite the lack of a contract between the parties, unfairly gains a benefit at the expense of the other. It is not enough for a plaintiff to confer a benefit on the defendant; "the plaintiff must go further and show that, under the circumstances, he or she has a superior equity so that, as against him or her, it would be unconscionable for the defendant to retain the benefit."

This weighing of the equities usually is a factual question for a jury, but Sterling Contracting provides an interesting example where the Court found no unjust enrichment as a matter of law. In construction cases involving a purchaser, a general contractor, and subcontractors, the "property owner's liability under a theory of unjust enrichment is limited to the extent of the unpaid contract price because it is that amount that the owner would be unjustly enriched if they otherwise retained the full benefit of the work performed." In this case, where the defendant paid more than the original contract price to have the work completed, "no benefit was unjustly retained beyond the benefit originally contemplated" by the owner's contract with the general contractor. The Court found the situation analogous to one where "the owner directly pays the general contractor in full, who in turn breaches its obligation to remit the final payment to subcontractor." In short, forcing the owner to pay even more would "in effect" be punishing the owner "for a wrong it did not commit."

Takeaways

Whether the subcontractor would have had a different outcome had it filed a lien, like many other subcontractors did, is unknown, but it seems likely that the subcontractor would have had a higher likelihood of getting paid had it done so. In light of Sterling Contracting, subcontractors faced with a potentially bankrupt general contractor would be wise to pursue all available avenues of recovery, including placing a lien on the property, rather than just suing the (potentially uncollectable) general contractor and then hoping to recover from the owner under a theory of unjust enrichment.