Francis O. Day Co. v. Montgomery County

CATHELL, Judge. Appellant, Francis O. Day Co., Inc. (Day), appeals from the granting of summary judgment in favor of appellee, Montgomery County, Maryland, in respect to a claim for unjust enrichment filed by Day against Montgomery County. 1 The factual predicate, in spite of appellant’s assertion, is not in dispute. In other words, the result would be the same under any interpretation of the facts. Thus, the issue was appropriately addressed below in a summary judgment context.

Day, nevertheless, presents a unique basis for claiming relief under unjust enrichment principles. ⁵¹⁶ Facts Aldre, Inc. (Aldre), was a general partner for several limited partnerships involved in developing several properties. Aldre entered into an agreement or agreements with Montgomery County in respect to the developments in which it was required to construct infrastructure, including roads, according to appellee’s standards, in order to service the needs of the potential inhabitants of the development. The agreements required Aldre at a certain point in time to dedicate such improvements to appellee, after which the appellee would be required to include those improvements in its infrastructure network and be responsible for their maintenance and upkeep. Aldre was required by appellee to post performance bonds but no payment bond.

The arrangements between Aldre and appellee were pursuant to the County’s various subdivision and developmental statutes. Thereafter, Aldre entered into a contract with appellant for the latter to construct substantial portions of the infrastructure for the various developments. Aldre suffered financial difficulties and defaulted on payment to appellant. Unable to collect from Aldre or to enforce liens against Aldre’s property, appellant instituted suit against the County.

Appellant appears to have posited its theory of recovery initially on a concept that, because the infrastructure was to be dedicated to appellee after it was completed, the agreement between Aldre and appellant was for the construction of a public improvement and, thus, was subject to the Little Miller Act 2 . Appellant then argued that appellee was derelict or negligent in not requiring a payment bond as required under that act. Although appellant discusses the Little Miller Act extensively in its brief, it has not appealed the trial court’s decision on the counts that alleged the provisions of the Act had been violated. We, accordingly, shall not address the Act further.

The issue for us to decide is rephrased as: ⁵¹⁷ When a governing body, pursuant to its statutes, requires a developer to enter into agreements to construct the infrastructure necessitated by the potential demands of the developments’ inhabitants and later dedicate the improvements to the governing entity, is that governing entity unjustly enriched if the developer fails to pay fully the subcontractor for the work performed in constructing the improvements? The answer is “No,” and we shall affirm. The Law We shall discuss generally the Maryland law on unjust enrichment, noting initially that neither party has directed us to any Maryland cases involving unjust enrichment claims under factual situations remotely similar to those extant in the case sub judice. We likewise have failed to find any Maryland cases on point.

While we shall resolve the issue presented in our discussion of the granting of the summary judgment, we cannot help noting that, even if appellant had made it past the summary judgment motion, the problems it would then have faced on an unjust enrichment claim would appear to be insurmountable. In this context, we first address the absence of a written contract between appellant and appellee and the relationship between that fact and the County’s governmental immunity. As in the case at bar, there was no written contract between appellant and appellee in Leese v. Baltimore County, 64 Md.App. 442, 477-79 , 497 A.2d 159 , cert. denied, 305 Md. 106 , 501 A.2d 845 (1985), where we opined: Where a county is attempting to assert governmental immunity as a bar to a contract claim, the common law allows it to “abrogate its responsibility under a contract entered into in performance of a governmental function if dictated by the public good.” American Structures, Inc. v. Baltimore, 278 Md. 356, 359 , 364 A.2d 55 (1976). This is not to suggest that counties and municipalities are fully immun ⁵¹⁸ ized against contractual liability.

Rather, they are “answerable in damages incurred to the time of cancellation.” Id. This common law contract immunity, however, is limited by statute. Under § 1A, Article 25A, Annotated Code of Maryland, “a chartered county ... may not raise the defense of sovereign immunity ... in an action in contract based upon a written contract executed on behalf of the county or its department, agency, board, commission or unit by an official or employee acting within the scope of his authority.” Md.Code Ann. Art. 25A, § lA(a) (1984 Supp.). See also Md. State Gov’t Art. § 12-202 (1984); Md.Code Ann. Art. 25, § 1A (1984 Supp.). ...

His attempted reliance upon Section 1A to avoid sovereign immunity is misplaced. By its terms, Section 1A requires a “written contract” that was “executed on behalf of the county.” A failure to meet either of these requirements nullifies the operation of the section. [Emphasis added.] We discussed similar statutory language applicable to the State’s waiver of immunity in contract cases where unjust enrichment was at issue in Mass Transit Admin, v. Granite Constr. Co., 57 Md.App. 766, 770 , 471 A.2d 1121 (1984), noting: Our review of the facts persuades us that MTA was not unjustly enriched; and an analysis of the parties’ arguments pertaining to the doctrine of sovereign immunity and the principle of unjust enrichment leads us to conclude that, in this case at least, the two concepts are sufficiently incompatible to bar recovery by Granite. In order to steer a course safely past Scylla (the State’s waiver of sovereign immunity is limited to claims based on written contracts), appellee would have to sail into the maws of Charybdis (the principle that unjust enrichment does not apply if there is a written contract).

We explained: “The doctrine of sovereign immunity from suit, rooted in the ancient common law, is firmly embedded in the laws of ⁵¹⁹ Maryland.” Katz v. Wash. Suburban Sanitary Comm’n, 284 Md. 503, 507 , 397 A.2d 1027 (1979); Austin v. City of Baltimore, 286 Md. 51, 53 , 405 A.2d 255 (1979). “If an action is brought for a money judgment in contract or in tort against the State or an agency of the State without the State’s consent, actual or implied, it must be defended on the ground of sovereign immunity, which cannot be waived unless funds have been appropriated for the purpose or the agency can provide funds by taxation.... ” American Structures v. City of Baltimore, 278 Md. 356, 359 , 364 A.2d 55 (1976) (citations omitted). ... It has since been partially abrogated or waived. Chapter 450 of the Laws of 1976, originally codified as art. 41, § 10A of the Annotated Code of Maryland, subsequently recodified as Md.Ann.Code art. 21, §§ 7-101 through 7-104, [3] prohibits the State and its officers, departments, agencies, boards, commissions or other units of State government from raising the defense of sovereign immunity in the courts of this State “in an action in contract based upon a written contract executed on behalf of the State, or its department, agency, board, commission or unit by an official or employee acting within the scope of his authority.” [Footnote omitted.] Id. 57 Md.App. at 773 , 471 A.2d 1121 .

We then noted the elements of unjust enrichment: 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 the payment of its value.... ⁵²⁰ A quasi-contract or implied in law contract, on the other hand, involves no assent between the parties, no “meeting of the minds.” Instead the law implies a promise on the part of the defendant to pay a particular “debt.” See 1 Palmer, supra, § 1.2.

Thus, “[t]he implied in law contract is indeed no contract at all, it is simply a rule of law that requires restitution to the plaintiff of something that came into defendant’s hands but belongs to the plaintiff in some sense.” ... It should also be remembered that a money judgment recovered by virtue of [a] quasi-contract is a remedy to prevent against the unjust enrichment of the defendant. Thus, the measure of the recovery is the gain to the defendant, not the loss by the plaintiff. Id. at 774-75, 471 A.2d 1121 (footnote omitted).

We concluded: THE SOVEREIGN IMMUNITY—UNJUST ENRICHMENT DILEMMA Even if we were persuaded that MTA had been unjustly enriched to the extent of Granite’s gas line relocation work, we would be forced to conclude that sovereign immunity would be a complete bar to recovery. As we have seen, sovereign immunity bars recovery unless waived or abrogated by the State and that the State has waived the defense only with respect to those contract claims which are “based upon a written contract executed on behalf of the State, ... by an official or employee acting ■within the scope of his authority.” Md.Ann.Code, art. 21, § 7-101. We have also seen that recovery for unjust enrichment is based upon an implied in law contract. The two concepts are incompatible.

However meritorious a claim based upon an implied contract may be, if that claim is against the State or any of its agencies, it is barred because it is not based upon a written contract. In this case, it would also be barred because it is allegedly based upon a contract implied as a result of conduct on the part of an ⁵²¹ employee who was acting outside the scope of his employment. Appellee seeks to avoid the bar of sovereign immunity by arguing that its claim is really based on or derived from the $36,283,000 written subway construction contract that was duly executed by an authorized agent of MTA and duly performed by Granite over a period of two-and-a-half years. But that attempt to steer the claim away from the rock ran it directly into the whirlpool.

The only way that Granite’s unjust enrichment claim can be said to be based upon a written contract is to recognize the written subway construction contract as one “dealing specifically with the services rendered,” in which case recovery on a quantum meruit basis is unavailable. Id. at 780-81, 471 A.2d 1121 . In the case sub judice, if appellant’s claim against appellee is based on a written contract, then there can be no unjust enrichment. If it is not based on a written contract, appellee has not waived its sovereign immunity and may well be immune from the claim.

We discern, moreover, that, irrespective of the inherent incompatibility of appellant’s claim, it did not present a claim for unjust enrichment for several other reasons we hereafter address. In its motion for summary judgment, appellee alleged that the plaintiff “claims that Montgomery County ... is liable for these unpaid debts [the debts of Aldre] because of the County’s alleged failure to [comply with] ... the Maryland Little Miller Act.... ” As to the only issue appealed to us, appellant responded: (b) Unjust Enrichment All of the conditions specifications, performances ... for which the County stipulates in its Public Improvement Contracts, a finding[,] the cost of which the subcontractors in the first instance pay, provide a basis for a finding that the County has been unjustly enriched. ⁵²² After the County’s motion was granted, appellant filed a Motion to Alter or Amend, attempting to have the trial court modify its order to apply only to Counts I through IV, leaving Count V “Unjust Enrichment” as a triable issue. In its Motion to Alter, appellant based its argument, in part, on certain provisions in its complaint, i.e., “[t]hat the Day Company ... performed but was not paid for the public improvements ... is continually being prejudiced by its inability to avail itself of any lien rights____” Appellant also stated in its motion that “[t]he Defendant continues to benefit by the Plaintiffs work on ... all of the non lienable projects. The work by the Plaintiff ... [is] not lienable and the Plaintiff has no other source of recovery but for its claim of unjust enrichment;” “[t]here is an issue of fact whether Plaintiff knew ... of the rudiments of the development process and whether Plaintiff knew ... that it might end up performing work in the public improvement area without compensation;” and “[a] genuine factual dispute therefore exists whether this work was amenable to Plaintiffs assertion of mechanic’s lien rights.” There were no other assertions of factual dispute made as to “unjust enrichment.” Appellant, through deposition testimony (and attachments), proffered the bills that appellant had submitted to the developer as proof, presumably, of the County’s unjust enrichment.

Nowhere did appellant ever proffer an appraisal of the value, if any, of the improvements to the County. Its claim related entirely to the sums that appellant had failed to recover from Aldre. In argument, appellant’s counsel, when asked to identify the disputed facts, said: Well, the limitations ... is a disputed fact. ... [A] substantial issue, of unjust enrichment.... ... I don’t believe that the legislature knew or had in mind, when they put in [the Little Miller’s Act] that provision with respect to hen rights.... ⁵²³ ...

I don’t think that the legislature [in passing the Little Miller Act] really had in mind that a subcontractor ... would get stiffed in the hundreds of thousands of dollars .... ... [I]s the county really awarding a construction contract to a developer in excess of $50,000 [a precipitating factor under the Little Miller Act]? We say that it is, and we say that on that basis we should prevail on summary judgment.... ... [I]s this really a Little