I recently read an article about the inability of a subcontractor to pursue a claim for unjust enrichment against an owner after the sub blew his lien rights. The article re-capped the case of Springfield Heating and Air Conditioning, Inc. v. 3947-55 King Drive at Oakwood, LLC, 387 Ill. App 3d 906 (1st Dist. 2009), an Illinois matter.
In that case a subcontractor installed HVAC materials on a construction project consisting of two adjoining properties for a total contract sum of about $400,000. The general contractor fired the sub and so the HVAC contractor liened both parcels, each for $300,000 (the total amount the sub was then due for its HVAC work). $300k x 2, however, is $600K – double the proper amount.
The sub sued to foreclose its liens and filed alternative claims for quantum meruit and unjust enrichment against the general contractor and the owner. The trial court granted the defendants’ motion to dismiss the sub’s claims, holding that the lien claim was constructively fraudulent since it was inflated by almost two times the actual lien amount and because the lien wasn’t apportioned among the two property parcels. The court also dismissed the sub’s quantum meruit and unjust enrichment claims because it held that a subcontractor’s only remedy against an owner is a mechanics lien foreclosure action.
On appeal, the appellate court reversed the dismissal of the lien (holding that it was not intentionally fraudulent), but affirmed the dimissal of the equitable claims. But if the lien were invalid (say it was untimely), does that mean that the sub won’t paid for its work?
The answer, in Florida, at least, is it depends. Florida law allows a sub to sue an owner for unjust enrichment if it is proven that an owner has not paid the general contractor (or anyone) for the subcontractor’s scope of work. If it is proven, however that an owner has paid anyone for the subcontractor’s work, then the unjust enrichment claim will not survive. See, e.g., Zalay v. Ace Cabinets of Clearwater, Inc., 700 So.2d 15 (Fla. 2d DCA 1997); Zaleznik v. Gulf Coast Roofing Co., Inc., 576 So.2d 776 (Fla. 2d DCA 1991). This makes sense – after all, if the owner has paid for the work it has not reaped any unfair benefit.
This piece of knowledge comes in handy if a sub is subject to a pay-when-paid clause and the owner and GC are at odds. If the owner has not paid the GC, then a sub that has failed to preserve its lien rights can still seek redress directly from the owner in the form of an equitable action. The sub, therefore, can bypass the GC and look directly to the owner.