S & M Rotogravure Service, Inc. v. Baer

• Decision Date: 03 May 1977
• Docket Number: No. 75-315,75-315
• Citation: 252 N.W.2d 913,77 Wis.2d 454
• Parties: S & M ROTOGRAVURE SERVICE, INC., Plaintiff-Appellant, v. Arthur W. BAER and Howard J. Baer, Defendants, Arthur W. Baer, Inc., Defendant-Respondent and Third-Party Plaintiff, D & R Investment Co., Third-Party Defendant and Appellant.
• Court: Wisconsin Supreme Court

Page 913

252 N.W.2d 913

77 Wis.2d 454

S & M ROTOGRAVURE SERVICE, INC., Plaintiff-Appellant, v. Arthur W. BAER and Howard J. Baer, Defendants Arthur W. Baer, Inc., Defendant-Respondent and Third-Party Plaintiff D & R Investment Co., Third-Party Defendant and Appellant.

No. 75-315.

Supreme Court of Wisconsin.

Submitted on Briefs March 30, 1977.

Decided May 3, 1977.

Niebler & Niebler, Menomonee Falls, for plaintiff-appellant.

Sam N. Lawent and Seymour Pikofsky, Milwaukee, for defendant-respondent and third-party plaintiff.

HANLEY, Justice.

Two issues are presented on appeal:

1. Does the second amended third-party complaint state facts sufficient to constitute a cause of action for a money judgment based upon unjust enrichment against D & R?

2. Did the trial court abuse its discretion in denying S & M's motion for summary judgment upon Baer's counterclaim?

Third-Party Complaint

The trial court concluded that the second amended third-party complaint sufficiently states a cause of action in equity for unjust enrichment. The elements of such an action are:

"(1) a benefit conferred upon the defendant by the plaintiff; (2) an appreciation or knowledge by the defendant of the benefit; and (3) the acceptance or retention by the defendant of the benefit under such circumstances as to make it inequitable for the defendant to retain the benefit without payment of its value." Gebhardt Bros. Inc. v. Brimmel, 31 Wis.2d 581, 584, 143 N.W.2d 479, 481 (1966).

The complaint in question alleges that at the special instance and request of D & R, Baer performed remodeling and construction work, valued at $50,741.43, upon real estate owned by D & R. It further alleges that D & R had knowledge of the contract for construction between Baer and S & M and approved all plans and payments for the work. Thus, the first two elements of an action for unjust enrichment are satisfied.

D & R's major challenge to the complaint relates to the sufficiency of the allegation of the third element of unjust enrichment that the defendant, if not required to pay the plaintiff, will be unjustly enriched. D & R contends that "without statutory lien rights the contractor has no claim for unjust enrichment against the owner with whom he had no contract," and cites Industrial Credit v. Inland G. M. Diesel, Inc., 51 Wis.2d 520, 187 N.W.2d 157 (1971).

In Industrial Credit, supra, the defendant Inland G. M. Diesel performed extensive repair work on a truck owned by Horton and subject to a security interest held by Horton's creditor, the plaintiff Industrial Credit. No contract existed between Industrial Credit and Inland, and Industrial Credit had not consented to the repairs. Horton filed for bankruptcy, and Industrial Credit commenced a replevin action against Inland to gain possession of the truck. Inland counterclaimed, asserting mechanic's lien rights and a cause of action for unjust enrichment. The circuit court found Inland had no lien rights above a limited amount, and also dismissed the claim for unjust enrichment. This court affirmed the trial court's decision stating:

"We conclude that where, as here, there is an express statutory provision to protect the garageman, that statutory remedy excludes the assertion of a cause of action for unjust enrichment against a holder of a properly filed security interest. In Gebhardt Bros., Inc. v. Brimmel (31 Wis.2d page 585, 143 N.W.2d page 481) we quoted with approval from Superior Plumbing Co. v. Tefs (1965), 27 Wis.2d 434, 134 N.W.2d 430, and Utschig v. McClone, (1962), 16 Wis.2d 506, 509, 114 N.W.2d 854:

" ' "By the subcontractors' lien statutes, sec. 289.02, Stats., and following, the law has offered security and protection to a subcontractor. His failure to avail himself of the remedy so provided does not produce for him a right to recover payment directly from an owner who did not employ him and with whom he had no contract." '

"We are satisfied that the policy of the law implicit in these cases controls herein, i. e., where the statutory law clearly provides a procedure which if followed will insure a claimant full protection, he ought not to be able to resort to common law or equitable remedies as against innocent parties who have complied with the law to protect their interests." Industrial Credit Co. v. Inland G. M. Diesel, supra at 527, 187 N.W.2d at 160.

As the above quotation from Industrial Credit shows, the court relied heavily upon three cases Utschig v. McClone, supra; Superior Plumbing Co. v. Tefs, supra; Gebhardt Bros., Inc. v. Brimmel, supra. These cases involved actions for money judgments commenced by a subcontractor against a property owner, upon whose property the subcontractor had performed construction work pursuant to an agreement with the general contractor. In each case this court held the plaintiff subcontractor had no cause of action.

In Utschig the court did not specifically consider the subcontractor's claim as one based upon unjust enrichment, but rather focused more upon the issue of contractual privity between the subcontractor and owner. Finding the subcontractor had failed to allege facts establishing such privity, the court stated the failure of the subcontractor to avail himself of the adequate protections in the lien statutes, sec. 289.02, et seq., Stats., does not produce a right to recover from the owner. Utschig, supra, 16 Wis.2d at 509, 114 N.W.2d 854.

In Superior Plumbing, supra, the subcontractor asserted the theory of unjust enrichment. The court, holding that the owner's demurrer to the complaint should have been sustained, quoted extensively from Utschig and stated that the third element of a cause of action for unjust enrichment did not appear in the complaint. Because the complaint alleged Superior Plumbing was the subcontractor of a general contractor, the only inference to be drawn was that the owner had paid the general contractor for the benefit conferred by the subcontractor. Thus, it did not affirmatively appear that it would be inequitable for the owner to retain those benefits without payment to the subcontractor.

In Gebhardt Bros., supra, the court further clarified this ground for denying a subcontractor a cause of action for unjust enrichment against the property owner. The court stated:

"As we have previously said, we find no equity in favor of the plaintiff when the relationship of the plaintiff to the defendant is that of subcontractor to owner and when the evidence indicates that the owner has either paid the general contractor for the benefits furnished or is obligated to do so. . . .

"We conclude it would be inequitable to find the owner Brimmel liable on an implied contract to Gebhardt when, as here, there was an express contract between the contractor Semrow and the subcontractor Gebhardt. This case is directly governed by our decision in Superior Plumbing Co. v. Tefs . . . . We therein held that a subcontractor must resort for payment to the principal contractor and not to the owner of the property and that the owner is not liable on an implied contract simply because he has received goods or services or knows that the services have been rendered." Gebhardt Bros., supra, 31 Wis.2d at 585, 143 N.W.2d at 481.

In Seegers v. Sprague, 70 Wis.2d 997, 236 N.W.2d 227 (1975), the court applied the above line of cases in an action where a subcontractor of a subcontractor sued the general contractor-property owner upon the theory of unjust enrichment. The defendant Sprague, a general contractor, contracted with plumbing contractor Keller for the installation of plumbing and septic systems on property owned by Sprague. Keller contracted with the plaintiffs, the Seegers brothers, for the installation of the septic systems. The court held the Seegers had failed to prove a cause of action in unjust enrichment against Sprague, stating:

"On the basis of Superior Plumbing, supra, no unjust enrichment has occurred here. Payments by Sprague to Keller to cover his work and the work of his subcontractors have not left Sprague enriched. The absence of payment to Seegers is due to Keller's actions." Seegers v. Sprague, supra at 1005, 236 N.W.2d at 231.

Under the law of the above cases we evaluate the merit of D & R's contention that Baer cannot sue for unjust enrichment because its lien rights under the statutes have been lost.

D & R's reliance upon the Industrial Credit case, supra, is misplaced, for that case is dissimilar to the cases in the Superior Plumbing line and distinguishable from the instant case because a mechanic's lien upon a vehicle subject to the defendant's security interest was involved. In effect, the court in that case resolved a question of priorities of creditors' rights in bankruptcy. To permit the mechanic to recover from the secured creditor upon the theory of unjust enrichment would have effectively destroyed the secured creditor's priority. In Industrial Credit, however, as in the subcontractor cases, there was also present the fact that the defendant had previously paid another for the benefits conferred the secured creditor had lent the bankrupt money in exchange for its right to repossess the truck. We think Industrial Credit is distinguishable from the subcontractor cases, and the holding therein is clearly limited to the situation where "a cause of action for unjust enrichment is asserted against a holder of a properly filed security interest." Industrial Credit, supra, 51 Wis.2d at 527, 187 N.W.2d at 160.

Analysis of the rationale of the Superior Plumbing line of cases involving subcontractors reveals that the critical factor in each was that it appeared, upon the face of the complaint or upon the evidence after trial, that the defendant had paid another for the benefits conferred, and thus it was not inequitable to permit the defendant to retain the benefits without paying the plaintiff. Hence, the third element of unjust enrichment, that the defendant would be unjustly enriched, was...