CC&H Investments v. Rcs Northwest, LLC ( 2013 )

FILED
August 22, 2013
In the Office ofthe Clerk of Court
W A State Court of Appeals, Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION THREE
CC&H INVESTMENTS, a partnership, )
) No. 30590-2-III
Respondent, )
)
v. )
)
RCS NORTHWEST, LLC, an Idaho )
Limited Liability Company, who acquired )
title as RCS NORTHWEST LLC )
LIMITED LIABILITY COMPANY; )
EARL Y BIRD SUPPLY, INC., a )
Washington corporation; WILLIAM )
JENKINS, d/b/a! JENKINS PLUMBING, )
INC., and all other persons or parties )
claiming any right, title, estate, lien or )
interest in the real estate described in the )
complaint; and LEWISTON­ )
CLARKSTON PARTNERS HABITAT )
FOR HUMANITY, )
)
Defendants, )
) UNPUBLISHED OPINION
CHARLEY HEWITT, d/b/a HEWITT )
CONSTRUCTION CO., and JANE DOE )
HEWITT, )
)
Appellant. )
SIDOOWAY, J. - CC&H Investments, a construction lender, brought this action to
foreclose three deeds of trust and have them declared senior to mechanics' liens that had
No.30590-2-III
CC&H Invs. v. RCS Nw., LLC
been filed by three of the defendants. One of the lienholders, Charley Hewitt, doing
business as, Hewitt Construction Co., appeals the summary judgment dismissal of his
counterclaim-a counterclaim that was based not on his lien, but on the theory that
CC&H was unjustly enriched by improvements he had made to the foreclosed property.
The trial court properly dismissed Mr. Hewitt's claim to the extent it was based
solely on the benefit conferred by Mr. Hewitt's improvements to the property. But Mr.
Hewitt claims to have had a conversation with a CC&H principal late in the project, who
allegedly provided assurances that Mr. Hewitt should continue his work and could expect
to be paid. With respect to Mr. Hewitt's claim for work performed thereafter, issues of
fact remain that require trial. We reverse in part and remand.
FACTS AND PROCEDURAL BACKGROUND
RCS Northwest LLC is a real estate developer. Between 2008 and 20 I 0, CC&H
extended three loans totaling $368,500 to RCS, which were used by RCS to acquire
property located in Asotin and finance development of 23 single family home sites
platted as the Highland Place subdivision. The loans were secured by deeds of trust
against RCS's property that were duly recorded. In the fall of2010, RCS evidently
became unable to pay material and labor costs on the project, and mechanics' liens were
filed by Mr. Hewitt, Early Bird Supply Inc., and Jenkins Plumbing Inc. In 2011, CC&H
commenced the action below to foreclose its deeds oftrust. It named the holders of the
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mechanics' liens as defendants and prayed for a determination that their interests were
junior to its deeds of trust.
Mr. Hewitt, a licensed general contractor, was engaged by RCS to construct the
major infrastructure for the subdivision. In answering CC&H's complaint, he asserted a
cross claim against RCS for the $114,972 he alleged remained owing for his work. He
also asserted a counterclaim against CC&H, alleging that if he had not constructed the
infrastructure, the property on which CC&H held deeds of trust would be worth less than
the amount CC&H was owed by RCS. He admitted that CC&H acquired its deeds of
trust before he made improvements to the property. But he argued that his construction
of the infrastructure conferred a benefit on CC&H, that CC&H was aware of the benefit,
and that it would be inequitable for CC&H to retain the benefit without paying for its
value.
CC&H moved for summary judgment against all of the defendants. In support of
its motion, it filed a declaration of Dick Coles, one of its partners, which established
among other matters that it made its first two loans to RCS two years before any
mechanics' liens were filed and that its third loan was to enable RCS to pay deposits on
materials and specialty contractors. Mr. Coles testified in his declaration:
17. . .. CC&H cannot be held responsible for RCS' failure to pay its
contractors. We were not the guarantors on this job.
18. We already paid for the services which are the subject of the
defendants' liens. They are now asking that we pay twice. Their
remedy lies with RCS not CC&H.
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Clerk's Papers (CP) at 94.
CC&H also filed a declaration of Ron Stricklin, a member-manager ofRCS,
establishing that RCS granted the last ofCC&H's three deeds of trust in February 2010.
Mr. Stricklin testified in the declaration that CC&H "paid me funds with which to satisfy
the subcontractor's bills for services and labor," but that "I used those funds for other
legitimate purposes related to the project and was unable to pay the subcontractors who
have now filed liens." CP at 97.
In opposition to the motion for summary judgment, Mr. Hewitt submitted his own
declaration setting forth facts suggesting, he contended, that CC&H knew RCS was
underwater financially and would be unable to pay its contractors. His declaration also
included the following allegations that Mr. Coles made representations to induce him to
complete the infrastructure even though he was not being paid:
11. . .. When I was well along with the work on the project, but
wasn't completely done, I had a conversation with Dick Coles. His
emphasis to me was that I needed to get the project done and get it done
soon. He kept asking me when the project would be done. I asked Mr.
Coles what he knew about this guy, Ron Stricklin and point blank asked
Dick Coles "will I get paid". I was assured by Dick Coles that Ron
Stricklin was reliable or ok or words to that effect and that he was certain
that I would get paid when the job was done.
12. . .. I had no idea that Dick Coles was one of the investors in
CC&H at the time I was having the discussions with him. We were
actually talking about another unrelated project when the conversation
came up. Thereafter, I asked Ron Stricklin about Dick Coles. Stricklin
then told me that Coles was his friend and was the "money guy". Ron
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Stricklin also assured me that I would get paid when the county approved
the job and that CC&H/Coles were financing the whole thing.
CP at 102-03. Mr. Hewitt testified that he continued to work on the project and complete
the development "only because I relied on what Dick Coles and Ron Stricklin had told
me, that there was money to pay for my improvements and that I would get paid." CP at
103.
CC&H filed a supplemental declaration of Mr. Coles in which he acknowledged
having had a conversation with Mr. Hewitt but denied Mr. Hewitt's version of what was
said. In particular, he denied making any assurances or guarantees that Mr. Hewitt would
be paid or telling Mr. Hewitt that he should try to complete the project. Mr. Coles
testified in his supplemental declaration that ifhe said anything to Mr. Hewitt about Mr.
Stricklin, it would have been a truthful statement based on his experiences with Mr.
Stricklin up to that point in time.
The trial court granted CC&H's motion for summary judgment. Mr. Hewitt
appeals.
ANALYSIS
A party may bring a claim for unjust enrichment to recover the value of a benefit
retained even absent any contractual relationship, if fairness and justice require it. Young
v. Young, 164 Wn.2d 477, 484, 191 P.3d 1258 (2008). In these situations, it is said that a
quasi contract exists between the parties. Id. The party must prove three elements: "(1)
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the defendant receives a benefit, (2) the received benefit is at the plaintiffs expense, and
(3) the circumstances make it unjust for the defendant to retain the benefit without
payment." Id at 484-85.
The mere fact that a defendant has received a benefit from the plaintiff is
insufficient to justify recovery. Relief is available only ifit is unjust for the defendant to
keep the benefit received without paying. Chandler v. Wash. Toll Bridge Auth., 17
Wn.2d 591, 601, 137 P.2d 97 (1943); Norcon Builders, LLC v. GMP Homes VG, LLC,
161 Wn. App. 474, 490, 254 PJd 835 (2011). It also is critical that the enrichment be
unjust as between the parties to the transaction. Farwest Steel Corp. v. Mainline Metal
Works, Inc., 48 Wn. App. 719, 732, 741 P.2d 58 (1987).
It is undisputed that ee&H received a benefit in this case. It foreclosed on
residential development property that was more valuable with the infrastructure having
been completed, thanks to the work performed by Mr. Hewitt. The question then
becomes whether it is unjust for ee&H to retain this benefit.
ee&H relies, as did the trial court, on the general rule that the mere fact that a
third person (here, ee&H) benefits from a contract between two other persons (here,
Res and Mr. Hewitt) does not make the third person liable for unjust enrichment based
on the mere failure by one of the contracting parties (here, ReS) to perform. See
Farwest, 48 Wn. App. at 732. Mr. Hewitt has failed to demonstrate any genuine issue of
material fact that would prevent this general rule from applying, for the most part, to the
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benefit that CC&H derived from Mr. Hewitt's improvements to the Highland Park
subdivision. A lender does not have a duty to see that loan funds are properly disbursed
to contractors. Town Concrete Pipe of Wash" Inc. v. Redford, 43 Wn. App. 493, 501,
717 P.2d 1384 (1986).
The general rule is subject to an exception, however, where the third person
benefiting has engaged in some misleading act. See Farwest, 48 Wn. App. at 733.
Among the misleading acts that will support a claim of unjust enrichment is for a lender
to urge a contractor to continue working in circumstances similar to those in this case.
See Irwin Concrete, Inc. v. Sun Coast Props., Inc., 33 Wn. App. 190,653 P.2d 1331(1982) (lender encouraged continued work knowing that foreclosure was looming); cf
Town Concrete, 43 Wn. App. 493 (lender was not unjustly enriched as long as it did
nothing to mislead the contractor).
Our review of dismissal of a claim on summary judgment is de novo. Hisle v.
Todd Pac. Shipyards Corp., 151 Wn.2d 853, 860,93 P.3d 108 (2004). We review all
facts and reasonable inferences from the facts in a light most favorable to the nonmoving
party. Jones v. Allstate Ins. Co., 146 Wn.2d 291,300,45 PJd 1068 (2002).
Here, Mr. Hewitt has testified that he was encouraged by Mr. Coles to continue his
work, with the clear implication from Mr. Coles being that Mr. Stricklin could be counted
upon to perform and pay. He claims to have completed the infrastructure in reliance.
These facts, if true, are sufficient to support a claim of unjust enrichment for the
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incremental benefit, if any, that was conferred by Mr. Hewitt after the conversation with
Mr. Coles took place. Accordingly, we reverse in part the trial court's order granting
summary judgment. Mr. Hewitt is entitled to a trial. on this aspect of his unjust
enrichment claim.
CC&H requests attorney fees on appeal under RAP 18.1 and RCW 60.04.181(3).
It is not the prevailing party, so we need not further consider whether it would be entitled
to fees under chapter 60.04 RCW, dealing with mechanics' liens, ifit had prevailed.
We reverse, in part, the trial court's order on summary judgment. The granting of
the motion to dismiss Mr. Hewitt's unjust enrichment claim is reversed to the extent of
any benefit enjoyed by CC&H as a result of Mr. Coles's alleged statements and
assurances recounted in Mr. Hewitt's declaration opposing summary judgment. Mr.
Hewitt's counterclaim based on any such benefit is remanded for trial. The unjust
enrichment claim is one for money damages, so the trial court's "Order Confirming Sale
of Real Property" is affirmed.
A majority ofthe panel has determined that this opinion will not be printed in the
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Washington Appellate Reports but it will be filed for public record pursuant to RCW
2.06.040.
SiddO~/;r-
WE CONCUR:
Ko smo, C.J.
Brown, J.
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