Monday, December 7, 2015

Case Law Update: Subcontractor has no Quasi-Contract Claim Directly Against Owner

 MCM Prods. USA, Inc. v Aliusta Design

Decided November 16, 2015 at Sup. Ct., New York County

This case presented the classic issue of whether a subcontractor has a valid cause of action for unjust enrichment against the owner of property, where the governing contract was between the subcontractor and the general contractor.

Here, Plaintiff, the owner of the property at issue, hired and entered into a contract with a general contractor, A.J.S. Project Management Inc. (“AJS”).  AJS then hired various subcontractors, with whom Plaintiff had no contractual relationship with, to assist on the construction on the property.  Certain subcontractors filed mechanic’s liens on the property, based off of money owed to them by AJS.  Plaintiff brought suit seeking a declaratory judgment that Plaintiff is not liable to the subcontractors for any money due and owing between them and AJS.  One of the subcontractors, Hudson Concrete Publishing Inc. (“Hudson”) alleged certain counterclaims against Plaintiff, including a claim for unjust enrichment, wherein Plaintiff moved to dismiss Hudson’s counterclaims for failure to state a cause of action.  This decision addresses the Plaintiff’s motion to dismiss.

The Court explained that, as a general rule, a quasi-contractual claim, such as unjust enrichment, is ordinarily precluded where there is the existence of a valid and enforceable contract which governs the events arising out of the same subject matter.  This general rule is applicable to claims brought against non-signatories, precluding quasi-contract claims being brought against third party non-signatories to a contract that covers the same subject matter of the claim. 

Under a quasi-contract claim, “if services were performed at the behest of someone other than the Defendant, the Plaintiff must look to that person for recovery.”  Thus, it is not enough that the Plaintiff received a benefit from Hudson.  The Court ruled that where an express contract exists between the general contractor and the subcontractor, the mere owner of the property where the work is being done may not be held directly liable to the subcontractor under a quasi-contract theory “unless he assented to such an obligation.”  Thus, the sole remedy of a subcontractor lies against the general contractor with whom the contract was entered into with.

Hudson admitted to being hired by AJS, the general contractor, and failed to assert allegations linking Plaintiff to the services it alleges to have performed on Plaintiff’s property.  As Hudson sought payment for services performed under its contract with AJG, the claim is governed by the terms under that contract, thus the quasi-contract claim against the Plaintiff must fail.  

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