Hydro Conduit Corp. v. Kemble

793 P.2d 855, 110 N.M. 173
CourtNew Mexico Supreme Court
DecidedJune 19, 1990
Docket18446
StatusPublished
Cited by63 cases

This text of 793 P.2d 855 (Hydro Conduit Corp. v. Kemble) is published on Counsel Stack Legal Research, covering New Mexico Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hydro Conduit Corp. v. Kemble, 793 P.2d 855, 110 N.M. 173 (N.M. 1990).

Opinion

OPINION

MONTGOMERY, Justice.

The issue in this case is whether sovereign immunity bars a claim against the state for unjust enrichment. The trial court held that it does and granted the state’s motion to dismiss the complaint for failure to state a claim upon which relief could be granted. We hold that the trial court was correct and affirm: A claim for unjust enrichment is an action “based on contract” within the grant of immunity to governmental entities under NMSA 1978, Section 37-1-23.

I.

During 1984, the State of New Mexico, through the Office of Military Affairs/Civil Emergency Preparedness Division (the State), entered into a series of contracts for certain public works projects with CRW Development Corporation (CRW) as the general contractor. These projects consisted, either entirely or largely, of disaster relief programs carried out in Taos and Socorro Counties. The plaintiff in this case, Hydro Conduit Corporation (Hydro Conduit), supplied materials, including corrugated pipe, culverts and related supplies, which were incorporated into the projects. As things turned out, CRW and certain state officials were participants in a scheme to defraud the State; the State was overcharged on various aspects of the projects, and CRW — even though it was paid by the State — failed to pay its materials subcontractor, Hydro Conduit, for the value of the materials supplied. The State, however, did recover some of the funds disbursed to CRW from two insurance companies that carried fidelity bonds on the state officials who were ultimately convicted of dishonest and possibly other wrongful conduct.

Hydro Conduit’s avenue for recovery, however, was apparently limited to the possibility of this action against the State because CRW was defunct and its principal stockholder and officer, Richard Rowand, was insolvent. Although Hydro Conduit sought recovery in the action below against the insurance companies on their fidelity bonds, those claims were dismissed. Because of the collusion between CRW and the state officials, there were no performance or payment bonds under New Mexico’s “Little Miller Act,” NMSA 1978, Sections 13-4-18 to -20 (Repl.Pamp.1988); and of course a mechanic’s or materialman’s lien cannot be filed against the state. State ex rel. W.M. Carroll & Co. v. K.L. House Constr. Co., 99 N.M. 186, 187-88, 656 P.2d 236, 237-38 (1982). Hydro Conduit thus brought this action against the State and the county commissioners of Taos and Socorro Counties. Its complaint alleged simply that the State was presently enjoying the use and benefit of the materials without payment to Hydro Conduit and that the State’s retention of those materials without payment would constitute unjust enrichment. Similar allegations were asserted against the county commissioners.

The State and the county commissioners moved to dismiss the complaint for failure to state a claim upon which relief could be granted, on the ground that Section 37-1-23 barred Hydro Conduit’s claims. Alternatively, the defendants’ motions sought summary judgment, on the ground that they had paid substantially in full for all materials and that, therefore, they would not be “unjustly” enriched by retaining those materials. The district court granted the motion to dismiss, ruling that the action was barred by the statute; it did not reach the alternative motion (for summary judgment) challenging the availability of a claim for • unjust enrichment under the claimed fact that the State and the counties had fully paid for the materials.

On appeal, Hydro Conduit attacks only the district court’s ruling as to the applicability of the sovereign-immunity statute. It argues that a claim for unjust enrichment is not a claim “based on contract” and hence that the statute does not prevent assertion of such a claim against the State or other governmental entities. In response, the State defends the district court’s legal ruling that a claim for unjust enrichment is a claim “based on contract.” The State also supports the ruling on the alternative ground that a claim for unjust enrichment will not lie on these facts.

As noted above, we affirm the lower court’s ruling as to the applicability of the statutory grant of immunity, for essentially the reason that the court gave. In this opinion we discuss preliminarily the viability of Hydro Conduit’s unjust enrichment claim apart from the statutory bar, but we do not uphold the district court’s dismissal on the alternative ground advanced by the State. As Hydro Conduit argues, the district court did not address the summary judgment aspect of the State’s motion, and consideration of that motion requires resort to factual matters that Hydro Conduit was precluded from exploring by the district court’s dismissal of the complaint. At the same time, the unjust-enrichment setting in which Hydro Conduit asserts its claims provides a useful perspective from which to view the primary issue in this case — the applicability of Section 37-1-23.

We turn first, then, to a brief discussion of unjust enrichment as a basis for restitution to a supplier of goods or services in a construction project when the owner receives the benefit of those goods or services but the supplier receives no payment for them.

II.

Citing State v. Fireman’s Fund Indemnity Co., 67 N.M. 360, 355 P.2d 291 (1960), and United States ex rel. Sunworks Division of Sun Collector Corp. v. Insurance Co. of North America, 695 F.2d 455 (10th Cir.1982), Hydro Conduit first asserts that New Mexico recognizes a claim for restitution, in an action based for example on quasi-contract, as distinct from a claim based on an actual contract, express or implied but resting on the mutual assent of the parties. In the Sunworks case, the Tenth Circuit said:

One who has been unjustly enriched at the expense of another may be required by law to make restitution. Restatement of Restitution § 1 comments a, b, c (1937). This quasi-contractual obligation is created by the courts for reasons of justice and equity, notwithstanding the lack of any contractual relationship between the parties. New Mexico law recognizes such a cause of action. In fact, in Terry v. Pipkin, 66 N.M. 4, 340 P.2d 840 (1959), New Mexico specifically acknowledged that a subcontractor who has lost his mechanic’s lien claim against a property owner may have a claim in quantum meruit where the owner has not paid the general contractor.

695 F.2d at 458 (citations and footnote omitted).

Despite the statement in Sunworks that a subcontractor can maintain a claim in quantum meruit against the property owner in certain circumstances, the general rule seems to be to the contrary. See generally Annotation, Building and Construction Contracts: Right of Subcontractor Who Has Dealt Only with Primary Contractor to Recover Against Property Owner in Quasi Contract, 62 A.L.R.3d 288 (1975).

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Bluebook (online)
793 P.2d 855, 110 N.M. 173, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hydro-conduit-corp-v-kemble-nm-1990.