Alpha Contracting Services, Inc. v. Professional Retail Services, Inc.

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
ALPHA CONTRACTING SERVICES, .
INC., : C.A. No. Kl 8C-08-034 NEP
In and for Kent County
Plaintiff,
V.
PROFESSIONAL RETAIL SERVICES, :
INC., and ANN, INC. '
Defendants.
wl
Submitted: December 21, 2018
Decided: January 9, 2019
Before the Court is Defendant Ann, Inc.’s (hereinal°cer “Ann”) Motion to
Dismiss and Plaintiff Alpha Contracting Services, LLC’s (hereinafter “Alpha”)
response. Alpha filed its Complaint on August 17, 2018, against Ann and
Professional Retail Services (hereinal°cer “PRS”). In its Complaint, Alpha asserted
four counts: (l) breach of contract; (2) unjust enrichment; (3) quantum meruit; and
(4) violation of 6 Del. C. § 3501 et. seq. Ann’s motion requests dismissal of all
Counts asserted in the Complaint. For the reasons set forth beloW, Defendant Ann’s
motion is DENIED in part and GRANTED in part.
Alpha Contracting Services, lnc. v. Professional Retail Services, lnc., et al
C.A. No. K18C-08-034 NEP
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A. Factual Background and Procedural History
The facts recited are those as alleged in Plaintiff’s Complaint.l PRS, as prime
contractor for Ann, entered into a contract on April 4, 2018, with Alpha (hereinafter
“the Contract”) for renovations at the Ann Taylor Loft Store (hereinaf°cer “the Store”)
located in the Tanger Outlets in Rehoboth Beach, Delaware. PRS was hired by Ann
to act as general contractor and oversee the work performed at the Store. The scope
of the work included furnishing drywall, paint, trim, lumber, mud, hardware, ceiling
tiles, equipment, rentals and labor for restoration. The original contract amount was
to be between $70,000.00 and $80,000.00; however, PRS approved changes that
were in addition to the contracted scope of work in the amount of $4,070.00. Thus,
the agreed contract price between Alpha and PRS was $84,070.00. The Contract
provided for installment payments to be made upon certain dates and upon
completion of certain work. Alpha alleges that it completed all of the contracted
work in a timely manner but has been paid only $40,000.00.
On April 19, 2018, Alpha emailed Kathleen Larmour at PRS to inquire as to
the payment status of the remaining $44,070.00 owed. Ms. Larmour responded via
email on Apn``l 20, 2018, and stated that she disagreed with the project completion
percentage and would contact Alpha within a few weeks. On April 25, 2018, Alpha
sent a final invoice via first class mail to PRS for $44,070.00. PRS did not pay this
invoice, prompting Alpha to bring the instant suit.
B. Standard of Review
On a motion to dismiss, the moving party bears the burden of demonstrating
that “under no set of facts which could be proven in support of its [complaint] would
l Savor, Inc. v. FMR Corp., 812 A.2d 894, 896-97 (Del. 2002) (on a motion to dismiss “all well-
pleaded factual allegations are accepted as true”).
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the [plaintiff] be entitled to relief.”2 Upon this Court’s review of a motion to dismiss,
“(i) all well-pleaded factual allegations are accepted as true; (ii) even vague
allegations are well-pleaded if they give the opposing party notice of the claim; (iii)
the Court must draw all reasonable inferences in favor of the non-moving party; and
(iv) dismissal is inappropriate unless the plaintiff would not be entitled to recover
under any reasonably conceivable set of circumstances susceptible of proof.”3
C. Discussion
I. Count I: Breach of Contract Claim
The parties agree that Alpha seeks no relief against Ann under Count I.
Therefore, Ann’s motion to dismiss is moot as to Count I.
II. Counts II and III: Unjust Enrichment and Quantum Meruit Claims
As to Counts II and Ill of its Complaint, Alpha alleges that Ann was unjustly
enriched under the Contract and that Alpha may recover under a theory of quantum
meruit. The Court will address the unjust enrichment claim first, followed by the
quantum meruit claim.
Pursuant to the Restatement of Restitution, a person who has been unjustly
enriched at the expense of another must make restitution to the other person.4
However, “[a] person [i.e., Alpha] who has conferred a benefit upon another [i.e.,
Ann] as the performance of a contract with a third person [i.e., PRS] is not entitled
to restitution from the other merely because of the failure of performance by the third
2 Daisy Constr. Co. v. W.B. Venables & Sons, Inc., 2000 WL 145818, at *l (Del. Super. Jan. 14,
2000).
3 Savor, 812 A.2d ar 896-97.
4 Restatement of Restitution § 1 (1988).
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person.”5 In order to recover under a theory of unjust enrichment, the plaintiff must
prove five elements: “(1) an enrichment, (2) an impoverishment, (3) a relation
between the enrichment and the impoverishment, (4) the absence of justification,
and (5) the absence of a remedy provided by law.”6
Ann asserts two primary arguments against the viability of Alpha’s unjust
enrichment claim. First, Ann argues that there is already a remedy at law for Alpha,
as it may sue PRS, the other party to the Contract, for damages. Ann asserts that the
Contract set forth the work that Alpha was to perform in exchange for money owed
by PRS. Because this Contract was entered into between PRS and Alpha, Ann
argues that Alpha’s breach of contract claim against PRS is a sufficient remedy at
law. Second, Ann asserts that it was not unjustly enriched to the detriment of Alpha,
particularly as it paid PRS for the work performed at the Store.
In Delaware, it is well established that a subcontractor is barred from recovery
under an unjust enrichment theory where an owner has made full payment to a
general contractor.7 “When that occurs, a subcontractor who is not paid by the
general contractor cannot complain about the owner’s benefit. The benefit was
purchased, and, therefore, its receipt is just.”8 However, this is not the case where
an owner has not paid the general contractor. Rather, this Court has permitted
recovery for a subcontractor under an unjust enrichment theory where the general
contractor was not paid or was not paid in full.9 ln order for a subcontractor to
5 J.O.B. Const. C0. v. Jennings & Churella Ser'vices, Inc., 2001 WL 985106, at *4 (Del. Super.
Aug. 9, 2001) (quoting Restatement of`` Restitution § 110); Chrysler Corp. v. Airtemp Corp., 426
A.2d 845, 855 (Del. Super. 1980).
6 Total Care Physicians, P.A. v. O’Hara, 798 A.2d 1043, 1056 (Del. Super. 2001).
7 J.O.B., 2001 WL 985106, at *4 (emphasis added); see also Cohen v. Delmar Drive-In Theater,
Inc., 84 A.2d 597, 98 (Del. Super. 1951).
8 J.O.B., 2001 wL 985106, at *4.
9 Ia'. (citing Buila'ers Supply of Delmarva, Inc. v. Manbeck, 1998 WL 442845, at *3 (Del. Super.
June 23, 1998); Galvagna v. Marty Miller Construction, Inc., 1997 WL 720463, at *3-4 (Del.
Super. Sept. 19, 1997)).
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recover in that instance, it must demonstrate an inability to collect under the
subcontract combined with the owner’s failure to pay the general contractor.10
Here, Alpha argues that whether there is an adequate remedy at law will
depend on PRS’s defense theories. Specifically, Alpha has pointed to PRS’s Answer
to the Complaint and Counterclaim, which alleges that Ann back-charged and owes
PRS $58,582.50.ll The Court agrees with Alpha that it cannot force PRS to bring
an action against Ann for this back-charged amount in order to recover its
$44,070.00 owed. lf PRS’s assertion is correct, and if Ann is dismissed from this
action, Alpha could be lch without a remedy, and Ann may be unjustly enriched.
The evidence presented by Alpha clearly demonstrates that it did not intend
to provide its work gratuitously. Rather, the Contract demonstrates an intent to be
paid for the work performed. The sufficiency and quality of the work performed
remains a question for the jury, as does whether Ann was unjustly enriched to the
impoverishment of Alpha. Accepting all well-pleaded factual allegations as true,
the Court finds that Alpha has sufficiently pled a claim for unjust enrichment so as
to survive a motion to dismiss.
The Court next turns to Alpha’s quantum meruit claim. Quantum meruit “. . .is
a quasi-contractual remedy by which a plaintiff, in the absence of an express
agreement, can recover the reasonable value of the materials or services it rendered
to the defendant.”12
As a general rule, Delaware courts will not entertain a quantum meruit claim
by a subcontractor against an owner unless the subcontractor is unable to recover on
10 Id.
11 Pursuant to Delaware Rule of Evidence 202(d)(l)(C), this court may take judicial notice of the
pleadings in this case without converting the motion to one for summary judgment.
12 Middle States Drywall, Inc. v. DMS Properties-First, Inc., et al., 1996 WL 453418, at *10 (Del.
Super. May 18, 1996) (quoting Marta v. Nepa, 385 A.2d 727, 729 (Del. 1978)).
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its contract with the general contractor.13 Furthermore, “[g]enerally, quantum meruit
is considered only if the relationship of the parties is not governed by an express
contract.”14 However, a party may recover under a quantum meruit theory, even
with an express contract, where the performing party establishes “that it performed
services with an expectation that the receiving party would pay for them, and that
the services were performed under circumstances which should have put the
recipient on notice that the performing party expected to be paid by the recipient.”15
In Galvagna v. Marty Miller Construction, Inc.,16 this Court allowed a
subcontractor’s claim against an owner based upon quantum meruit, or unjust
enrichment, to survive a motion for summary judgment. In so holding, the Court
found persuasive the fact that the subcontractor and general contractor both alleged
that the owner had not paid them for the services and material that the plaintiff had
supplied and that the owners did not dispute that allegation.17 Additionally, the
Court found that there was an issue of material fact regarding whether the plaintiff
could recover from the general contractor.
In Galvagna, the general contractor contracted with the owners of a building
to build a commercial structure. After the owners and general contractor entered
13 Daystar Sills, Inc. v. Anchor Investments, Inc., 2007 WL 1098129, at *5 (Del. Super. Apr. 12,
2007); see also Gilbane Blclg. Co. v. Nemours Founa'ation, 606 F. Supp. 995, 1007 (D. Del. 1985);
Chrysler, 426 A.2d at 850.
14 Daystar Sills, 2007 WL 1098129, at *4; see also Chrysler, 426 A.2d at 854 (“If it is determined
that the relationship of the parties and the services involved in this claim are the subject of an
express contract, the terms of that contract control and there is no occasion to pursue the theory of
quantum meruit or contract implied in law.”). Here, Alpha has asserted a quantum meruit claim
against both PRS and Ann.
15 R.E. Haight & Associates v. W.B. Venables & Sons, 1996 WL 658969, at *4 (Del. Super. Oct.
30, 1996) (citing Construction Systems Group v. Council of Sea Colony, Phase I, 670 A.2d 1337
(TABLE) (Del. 1995)); see also Grijj‘l``n Dewatering Corp. v. B. W. Knox Const. Corp., 2001 WL
541476, at *7 (Del. Super. May 14, 2001).
16 Galvagna, supra note 9.
17 Ia'. at *4.
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into their contract, the plaintiff, a subcontractor, and the general contractor entered
into an oral contract providing that the plaintiff was to supply the labor and materials
for the structure. The plaintiff alleged that he performed the requested work but was
not paid by the general contractor. Moreover, the plaintiff alleged, and the general
contractor agreed, that the owners did not pay the general contractor or plaintiff the
sums allegedly due.18 In response, the owners argued that they did not have a
contract with the plaintiff and that the plaintiff should seek to recover the amount
owed from the general contractor. The Court found the owner’s argument
unconvincing and ultimately held that it was “reasonable to conclude that the
Owners may be unjustly enriched by the labor and materials which Plaintiff
provided” and that “Plaintiff is entitled to pursue against the Owners the in personam
claim based upon quantum meruit.”19
Here, it is true that Alpha expected to be compensated by PRS, not Ann, under
the terms of the Contract. However, Alpha also expected that Ann would pay PRS
for the services performed and that PRS, in turn, would pay Alpha. As mentioned
above, PRS has alleged that Ann withheld $58,582.50 from PRS in the form of a
back-charge. Presumably, PRS anticipated paying Alpha the $44,070.00 allegedly
18 Ia'. at *1 (“Builders [the general contractor] has not paid Plaintiff``. Furthermore, the owners have
not paid either Builders or Plaintiff the sums allegedly due and owing. The principal of Builders,
Marty Miller, agrees that Builders owes Plaintiff the sums alleged to be due and owing. However,
he alleges that the Owners have not paid him, and that is the reason why he has not paid Plaintiff.”).
19 Ial. at *4. Cf. Chrysler, supra note 5 (defendant, third-party beneficiary under agreement
between plaintiff and corporation, was not liable under theory of quantum meruit absent showing
that plaintiff Was unable to recover under underlying or express contract); Gilbane, supra note 13
(subcontractors were unable to recover under quantum meruit claim against owner absent showing
that all other subordinate payment sources had been exhausted). In Gilbane, the Court found that
the subcontractors had not alleged that they would not ultimately be compensated by the contractor
or that the owner had failed to pay the contractor for the services rendered by the subcontractors
Rather, while the two subcontractors had alleged that they had not been fully compensated for the
services performed under the contract, “. . .there [was] no allegation that they [Would] be unable to
recover full compensation for these services and materials from [the general contractor].” Gilbane,
606 F. Supp. at 1008.
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owed it by Ann. The Court thus finds that Alpha may be unable to recover from
PRS under the express contract. Moreover, the Court finds that Ann may be unjustly
enriched, assuming that PRS’s allegation is true that it has not been paid.
Consequently, the Court finds that Alpha may pursue its claim against Ann based
upon quantum meruit.
III. Count IV: Claim Under 6 Del. C. § 3501 et seq.
Lastly, Ann moves to dismiss Alpha’s claim under 6 Del. C. § 3501 et. seq.,
which governs “Building Construction Payments” between “owners” and
“contractors” and between “contractors” and “subcontractors.” Ann argues that it is
an “owner”20 as defined in Section 3501 and that as an “owner,” it is not liable to
Alpha under the statute. Rather, Ann avers that it hired PRS as a “contractor,”21
which is then responsible for paying Alpha, the “subcontractor.”22 Thus, Ann argues
that this statute is inapplicable to this proceeding, as there is no provision that makes
“owners” liable for payments by “contractors” to “subcontractors.” The Court
agrees and holds that Alpha may not make out a claim against Ann under this statute.
Therefore, Ann’s Motion is granted as to Count IV.
Section 3507(a) states that “[t]he owner shall pay the contractor strictly in
accordance with the terms of the contract.”23 Additionally, Section 3507(d) states
that “[i]f subcontractor payment terms are not specified in the contract between the
20 “Owner” is defined as “a person who has an interest in the lands or premises upon which a
contractor has undertaken to erect, construct, complete, alter or repair any building or addition to
a building.” 6 Del. C. § 3501(4).
21 “Contractor” is defined as including, but not limited to “an architect, engineer, real estate broker
or agent, Subcontractor or other person, who enters into any contract with another person to furnish
labor and/or materials in connection with the erection, construction, completion, alteration or
repair of any building . .."’ 6 Del. C. § 3501(2).
22 “Subcontractor"`` is defined as “a person who enters into a contract to fumish labor and/or
materials to a contractor.” 6 Del. C. § 3501(6).
23 6 Del. C. § 3507(a).
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owner and a general or prime contractor, or in the contract between the general or
prime contractor and a Subcontractor,... a general contractor, prime contractor or
subcontractor shall pay all undisputed amounts owed to its subcontractors. . ..”24
Alpha asserts that Section 3507 must be read as a whole to require an “owner”
to pay the “contractor” who, in turn, is then required to pay the “subcontractor” under
Section 3507(d). While the statute does not explicitly provide a remedy for a
“subcontractor” against an “owner,” Alpha asks this Court to imply a private right
of action and, thus, create pass-through responsibility to an “owner” where the owner
has not made payment to the general contractor.
In support of its argument, Alpha cites to State v. Pierson,25 which discussed
Del. C. 1935, § 3652, the predecessor statute to 6 Del. C. § 3501 et seq. This Court
in Pierson found that the purpose behind Section 3652 is “(l) to protect the owner
against the claims of sub-contractors where the owner has made payment to the
general contractor; and (2) to give sub-contractors protection against
misappropriation of funds by general contractors.”26 Alpha argues, in essence, that
a third purpose may be read into the current statute, that is, to protect a subcontractor
where the owner has not made payment to the general contractor by providing a
cause of action by the subcontractor against the owner. Alpha has not cited to any
case law or authority for this proposition, and the Court finds this argument
unconvincing.
In short, the Court finds that the statute is inapplicable to this proceeding, as
there is no provision that makes “owners” liable for payments by “contractors” to
“subcontractors.” Moreover, the Court sees nothing to indicate an intent on the part
of the General Assembly to create a private right of action under the statute for
24 6 Del. C. §3507(d).
25 State v. Pierson, 86 A.2d 559, 561 (Del. Super. 1952).
26 Ia'. (citing State v. Tabasso Homes, 28 A.2d 248, 253 (Del. Super. 1942)).
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C.A. No. K18C-08-034 NEP
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subcontractors against an owner. A diligent review of Delaware case law and
authority similarly provides no elucidation as to the factual or legal basis for which
Alpha is seeking relief under this statute. Therefore, dismissal of this claim is
appropriate
WHEREFORE, for the foregoing reasons, Defendant Ann’s Motion to
Dismiss is DENIED as to Counts II and III of the Complaint, and GRANTED as to
Count IV.27
IT IS SO ORDERED.
/s/ Noel Eason Primos
Judge
NEP/sz
Sent via File & ServeXpress and U.S. Mail
oc: Prothonotary
Counsel of Record
file
27 The Court notes that PRS filed a response indicating its intention to “join” Ann’s Motion, but
provided no other argument or basis for dismissal. The Court further notes that PRS presented no
argument at the hearing held on December 21, 2018. Accordingly, all of Alpha’s claims against
PRS will remain, including Alpha’s claims against PRS set forth in Count IV.
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