Ontiveros Insulation Co., Inc. v. Sanchez

• Citation: 2000 NMCA 51,3 P.3d 695,129 N.M. 200
• Decision Date: 15 May 2000
• Docket Number: No. 19,817.,19,817.
• Parties: ONTIVEROS INSULATION CO., INC., and Rawson, Inc. Builders Supply, Cross Claimants-Appellees, v. Ricardo M. SANCHEZ, Geraldine Sanchez, and Nancy Bustamante, Cross Defendants-Appellants.
• Court: Court of Appeals of New Mexico

3 P.3d 695

129 N.M. 200

2000 NMCA 51

ONTIVEROS INSULATION CO., INC., and Rawson, Inc. Builders Supply, Cross Claimants-Appellees, v. Ricardo M. SANCHEZ, Geraldine Sanchez, and Nancy Bustamante, Cross Defendants-Appellants.

No. 19,817.

Court of Appeals of New Mexico.

May 15, 2000.

Lee E. Peters, Hubert & Hernandez, P.A., Las Cruces, for Appellees.

Paul A. Bleicher, Albuquerque, for Appellants.

OPINION

ARMIJO, Judge.

{1} Ricardo and Geraldine Sanchez and Nancy Bustamante (Homeowners) appeal from an adverse judgment of the district court which found them liable to Ontiveros Insulation Co., Inc. and Rawson, Inc. Builders Supply (collectively, Subcontractors) for a sum of $13,321.61, plus costs and prejudgment interest. This appeal requires us to review a grant of equitable relief, that is, a subcontractor's claim of unjust enrichment against a property owner for whom it provided labor and materials, but with whom it was not in privity of contract. The facts are not in dispute. For the reasons discussed below, we affirm the judgment of the district court.

FACTUAL AND PROCEDURAL BACKGROUND

{2} The district court entered judgment upon the parties' stipulated facts. Homeowners each contracted with William C. Parker, the general contractor, for the construction of their respective homes. The original contracts specified that the Sanchezes would pay $63,000 and Bustamante would pay $73,000 for the completed homes. The stipulated facts do not indicate whether this price was to include the cost of land. Parker purchased building materials, which included doors and windows, from Rawson and hired Ontiveros to install insulation and a heating system. Subcontractors furnished the services and materials as contracted, and the parties agree that, as a result, value was added to the homes.

{3} Unfortunately for all involved, Parker, the general contractor, declared bankruptcy prior to completing construction of the homes, but after Subcontractors had provided the labor and materials. At the time of bankruptcy, Parker had finished some portion of the work, although the extent to which the homes stood completed is not indicated in the record. Also, at this point in time, the Sanchezes had paid Parker $26,000, or approximately 41% of the original contract price, and Bustamante had paid him $45,000, or approximately 62% of her original contract price. The record does not indicate that Homeowners intended any portion of these amounts to compensate Subcontractors for the labor and materials. Parker failed to pay Subcontractors any amounts for their labor and materials.

{4} Upon Parker's default, Homeowners completed their homes by other means. Completion of each home ultimately cost the Sanchezes $125,456 and Bustamante $120,851, including the cost of purchasing the land. The post-construction appraisal of the Sanchez and Bustamante homes ultimately exceeded the actual costs of construction by approximately $19,000 and $20,000, respectively. While the stipulated facts do not indicate the pre-construction appraised value of Bustamante's home, such that any comparison can be made, the post-construction appraised value of the Sanchezes' home was $14,000 greater than the pre-construction appraisal.

{5} Seeking what they saw as their due, Subcontractors filed liens on the homes. Before they could enforce these liens, however, Homeowners defaulted on their mortgages and the mortgagor foreclosed on the properties. Homeowners subsequently exercised their rights of redemption and reclaimed the properties free and clear of any liens. Subcontractors also sought relief from Parker; however, their claims were discharged in Parker's bankruptcy. Neither the foreclosure and redemption, nor the bankruptcy actions, are directly implicated in the present appeal.

{6} Finally, Subcontractors sued Homeowners directly, claiming that Homeowners had been unjustly enriched by the uncompensated value which the labor and materials added to the homes. The district court entered judgment in Homeowners' favor, concluding that they had paid more than their original contract price for the homes and, therefore, had not been enriched.

The Prior Appeal

{7} Subcontractors appealed the district court's judgment to this Court, which reversed and remanded on its summary calendar. In reversing, this Court ruled that the trial court was required to consider the homes' post-construction appraisal values in its consideration of whether or not Homeowners were unjustly enriched. The matter was remanded for this determination. See Ontiveros Insulation Co. v. Sanchez, No. 18,625 (N.M.Ct.App. Oct. 19, 1997). On remand, and upon consideration of the post-construction appraised value of Homeowners' homes, the district court entered judgment in Subcontractors' favor. Homeowners now appeal.

Standard of Review

{8} Before turning to the substance of the present appeal, we address the parties' disagreement as to the procedural stance of this appeal and the applicable standard of review. Homeowners urge us to review the district court's ruling as based upon summary judgment. Subcontractors, on the other hand, argue that the district court entered its judgment on the merits. This dispute ultimately concerns which party bears the benefit of any inferences to be drawn from the stipulated facts. Upon an appeal challenging summary judgment, we construe reasonable inferences from the record in an appellant's favor. See Rummel v. St. Paul Surplus Lines Ins. Co., 1997-NMSC-042, ¶ 9, 123 N.M. 767, 945 P.2d 985. On appeals from judgments on the merits, we construe the record in favor of affirmance, giving the prevailing party the benefit of all reasonable inferences. See Zemke v. Zemke, 116 N.M. 114, 118, 860 P.2d 756, 760 (Ct.App.1993)

.

{9} We have carefully reviewed the record. While the matter came before the district court upon the parties' cross-motions for summary judgment, judgment was entered, as the district court made clear in its preface to the written judgment, "on the merits." We, therefore, construe all inferences in favor of affirming the judgment below. Finally, as this appeal requires us to review the district court's exercise of its equitable powers, we will reverse only upon a showing that the court abused its discretion. See Amkco, Ltd., Co. v. Welborn, 1999-NMCA-108, ¶ 13, 127 N.M. 587, 985 P.2d 757

("On appeal, we review a decision of the trial court granting or denying equitable relief for abuse of discretion."), cert. granted, 128 N.M. 150, 990 P.2d 824 (1999).

The Present Appeal

{10} We now turn to the question presented: Are Homeowners entitled to prevail on their claim that any enrichment was not "unjust?" Homeowners argue that where a subcontractor seeks relief directly from the property owner with whom it has had no contact, it is virtually impossible for any claimed enrichment to be found "unjust." Subcontractors acknowledge that there is a paucity of New Mexico case law factually supportive of their position in this case; nonetheless, they contend that as is always the focus in equity, the only facts that matter are those here presented. See, e.g., J.R. Kemper, Annotation, Building and Construction Contracts: Right of Subcontractor who has Dealt only with Primary Contractor to Recover Against Property Owner in Quasi Contract, 62 A.L.R.3d 288, 293 (1975) (emphasizing such cases turn upon application of the law to "the facts and circumstances of a given case").

{11} New Mexico has long recognized actions for unjust enrichment, that is, in quantum meruit or assumpsit. See Tom Growney Equip., Inc. v. Ansley, 119 N.M. 110, 112, 888 P.2d 992, 994 (Ct.App.1994)

. To prevail on such a claim, one must show that: (1) another has been knowingly benefitted at one's expense (2) in a manner such that allowance of the other to retain the benefit would be unjust. See generally Restatement of the Law of Restitution §§ 1, 40, 41 (1937, as supplemented through 1988). The theory has evolved largely to provide relief where, in the absence of privity, a party cannot claim relief in contract and instead must seek refuge in equity. See Tom Growney Equip., Inc.,

119 N.M. at 112,

888 P.2d at 994; see also Hydro Conduit Corp. v. Kemble, 110 N.M. 173, 175, 793 P.2d 855, 857 (1990) ("This quasi-contractual obligation is created by the courts for reasons of justice and equity, notwithstanding the lack of any contractual relationship between the parties." (citation and internal quotation marks omitted.))

{12} Subcontractors' suits against property owners are generally not favored. See id. at 176, 793 P.2d at 858; see also George M. Morris Constr. Co. v. Four Seasons Motor Inn, Inc., 90 N.M. 654, 656-57, 567 P.2d 965, 967-68 (1977)

(disapproving of subcontractor's personal action against property owner upon facts presented). But see United States ex rel. Sunworks Div. of Sun Collector Corp. v. Insurance Co. of N. Am., 695 F.2d 455, 458 (10th Cir.1982) (recognizing subcontractor's right, under New Mexico law, to claim unjust enrichment against property owner in present context). Remedy is instead viewed as best sought from the underlying general contractor. This general disfavor, however, is not required by anything intrinsic to the subcontractor-property owner relationship, but rather is a reflection of the jurisprudence of equity. Simply, equity does not take the place of remedies at law, it augments them; in this regard, an action in contract would be preferred to one in quasi-contract. See Sims v. Sims, 1996-NMSC-078, ¶ 29, 122 N.M. 618, 930 P.2d 153.

{13} We decline, however, to apply this traditional reticence regarding consideration of equitable relief in the present context. To do so would ignore the basic foundation of equity. As the Missouri Court of Appeals has framed the issue:

Equity is reluctant to permit a wrong to be suffered without remedy. It seeks to do justice and is not bound by strict common law rules or the absence of precedents. It looks to the

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