Flooring Systems, Inc. v. Radisson Group, Inc.

Brief Fact Summary.

Plaintiff was subcontracted to install carpet for Defendant. Defendant withheld payment from its general contractor because the general contractor did not pay Plaintiff. Plaintiff sued Defendants on claims of breach of contract and unjust enrichment. The general contractor filed bankruptcy and was dismissed from the suit. Summary judgment was entered in favor of Defendants on the ground that Plaintiff’s subcontract barred the unjust enrichment claim. The court of appeals upheld the grant of summary judgment. Plaintiff appealed to the Supreme Court of Arizona.

Synopsis of Rule of Law.

Under Arizona law, a subcontractor may recover against a property owner for unjust enrichment even if a valid subcontract existed between the subcontractor and the general contractor.

Facts.

Flooring Systems, Inc. (Plaintiff) submitted a bid for carpet installation on a Radisson Group, Inc. (Defendant) property to Radisson’s agent, CSA, Inc. (Defendant). CSA accepted the bid, and Plaintiff entered a subcontract with Radisson’s general contractor. Plaintiff completed installation of carpet worth $59,000 but was never paid. On that ground, Radisson withheld $25,000 from the general contractor due to outstanding debts, as allowed by the contract.

Issue.

Under Arizona law, whether a subcontractor may recover against a property owner for unjust enrichment if a valid subcontract existed between the subcontractor and the general contractor.

Held.

Yes. The court of appeals’ ruling is reversed and the case is remanded for trial. Under Arizona law, a subcontractor may recover against a property owner for unjust enrichment even if a valid subcontract existed between the subcontractor and the general contractor.

Discussion.

Under Murdock-Bryant Constr., Inc. v. Pearson, 703 P.2d 1197 (1985), a claim of unjust enrichment may be sustained against a party even though that party did not enter into a contract or commit a tort against the plaintiff. The issue is not whether either party intended for the defendant to pay the plaintiff. Rather, the defendant’s obligation to pay the plaintiff is created by law. It must be proven that the benefit was not given “officiously” or as a gift. Plaintiff cites Commercial Cornice & Millwork, Inc. v. Camel Constr. Serv. Corp., 739 P.2d 1351 (App.1987) and Costanzo v. Stewart, 453 P.2d 526 (1969), which allowed recovery in cases where the owner had not fully paid the general contractor. Defendants are not entitled to summary judgment under Murdock-Bryant. Plaintiff reasonably expected to be paid for the carpet installation, as evidenced by the subcontract. CSA and Radisson withheld a payment of $25,000 from the general contractor because Plaintiff had not been paid. It would be fundamentally unfair to allow Defendants to keep the benefit of Plaintiff’s performance without providing compensation. Radisson may file an interpleader action if it is concerned about multiple claims from other subcontractors, but it may not keep the $25,000.