The law allows a party to bring a claim for unjust enrichment to recover the value of a benefit retained even in the absence of a contractual relationship. On construction projects, the lender typically has a contract (loan agreement) only with the project’s owner and is normally insulated from suit from the project’s general contractor or subcontractors. However, as a recent unpublished case from Division III of the Court of Appeals demonstrates that an exception to this general rule exists when the lender provides assurance of future payment to the contractor to secure continued performance.[i]
The case at issue arose out of the lender’s attempt to foreclose on three Deeds of Trust. Part of the relief the lender sought was to have its loans declared senior to mechanics’ liens that had been filed. The project’s general contractor (who had filed one of the liens) filed a counterclaim against the lender, alleging that the lender was unjustly enriched by improvements the general contractor had made to the foreclosed property.
A claim of unjust enrichment requires proof of (1) benefit received by the defendant; (2) the benefit was received at the plaintiff’s expense; and (3) the circumstances make it unjust for the defendant to retain the benefit without payment.
In this case, it was undisputed that the lender received a benefit from improvements to the property that increased its value on foreclosure. The dispute instead centered on the “unjust circumstances” of the lender retaining the improvements to the property without payment. To support its claim, the general contractor alleged that a representative of the lender told him he needed to get the project done soon, that the project owner was “reliable,” and that the lender was certain the contractor would get paid when the job was done. The contractor completed its infrastructure improvements in reliance on these statements. While the lender’s representative denied making the statements the contractor alleged, the Court deemed the contractor’s evidence sufficient to prove a claim of unjust enrichment and avoid summary judgment.
[i] CC& H Investments v. RCS Northwest, LLC, 2013 WL 4509656 (Wn. App Div. 3, Aug. 22, 2013)