Unjust Enrichment not a Cause of Action in its own right, Fort Worth Court of Appeals says

COURTS OF APPEALS REMAIN SPLIT ON VIABILITY OF UNJUST ENRICHMENT AS AN INDEPEDENT LEGAL THEORY FOR RECOVERY OF DAMAGES
    
Whether unjust enrichment is a cause of action under Texas common law is somewhat unsettled, with inconsistent appellate opinions from different courts of appeals. In Davis v OneWest Bank N.A., the Forth Worth Court of Appeals recently rejected the invitation to recognize such a cause of action, following its own prior decisions, rather than the case from Houston urged by the appellant. A petition for review is currently pending in the Texas Supreme Court.
 
In Pepi Corp. v. Galliford, 254 SW 3d 457 (Tex. App. - Houston [1st Dist.] 2008), the First Court of Appeals acknowledged that unjust enrichment could be brought as an independent cause of action, but that the plaintiff had sought relief under a quantum meruit theory.
  
The opinion rejecting the Houston case was written by Justice Bonnie Sudderth, who recently joined the Second Court of Appeals. Judge Sudderth is known for her blog on evidence during her tenure as a district judge in Forth Worth (Tarrant County).

CARDELL DAVIS 

 v. 
 

 ONEWEST BANK N.A. F/K/A ONEWEST BANK FSB

In their summary judgment motion, appellees raised two grounds on the issue Davis appeals, under the heading, "Plaintiff's claim for unjust enrichment fails as a matter of law because the Moving Defendants acted in accordance with the law": (1) unjust enrichment is not an independent cause of action; and (2) appellees acted in accordance with law by foreclosing on the property. See Tex. R. Civ. P. 166a(b), (c); Frost Nat'l Bank v. Fernandez, 315 S.W.3d 494, 508-09 (Tex. 2010) (stating that a defendant who conclusively negates at least one essential element of a cause of action is entitled to summary judgment on that claim), cert. denied, 131 S. Ct. 1017 (2011).

In part of his sole issue, and relying on Pepi Corp. v. Galliford, 254 S.W.3d 457, 460 (Tex. App.-Houston [1st Dist.] 2007, pet. denied), Davis argues, "At the outset, [he] would show that he may bring a claim for unjust enrichment as an independent cause of action." In Pepi, the First Court held that unjust enrichment is an independent cause of action. Id.

However, this court has held the opposite, stating, "Unjust enrichment, itself, is not an independent cause of action but rather `characterizes the result of a failure to make restitution of benefits either wrongfully or passively received under circumstances that give rise to an implied or quasi-contractual obligation to repay.'"[3] Argyle ISD ex rel. Bd. of Trustees v. Wolf, 234 S.W.3d 229, 246 (Tex. App.-Fort Worth 2007, no pet.) (citations omitted); see also Hulen v. Hamilton, No. 02-06-00288-CV, 2008 WL 553812, at *4 (Tex. App.-Fort Worth Feb. 28, 2008, no pet.) (mem. op.) (stating same); Friberg-Cooper Water Supply Corp. v. Elledge, 197 S.W.3d 826, 832 (Tex. App.-Fort Worth 2006) (stating same), rev'd on limitations grounds, 240 S.W.3d 869, 869-71 (Tex. 2007); David Dittfurth, Restitution in Texas: Civil Liability for Unjust Enrichment, 54 S. Tex. L. Rev. 225, 238 (2012) ("Most of the Texas courts of appeals and federal courts that have considered the question under Texas law have rejected the existence of an independent cause of action for unjust enrichment."). But cf. HECI Exploration Co. v. Neel, 982 S.W.2d 881, 891 (Tex. 1998) ("We have recognized that, in some circumstances, a royalty owner has a cause of action against its lessee based on unjust enrichment, but only when the lessee profited at the royalty owner's expense."); Heldenfels Bros. v. City of Corpus Christi, 832 S.W.2d 39, 41-42 (Tex. 1992) (discussing subcontractor's inability to recover under quantum meruit and unjust enrichment theories); George P. Roach, Unjust Enrichment in Texas: Is it a Floor Wax or a Dessert Topping?, 65 Baylor L. Rev. 153, 203-40 (2013) (exploring "the ongoing dispute of whether unjust enrichment is a cause of action").

We decline Davis's invitation to reconsider our precedent, overrule this portion of his sole issue without reaching the rest of his arguments, and affirm the trial court's judgment. See Tex. R. App. P. 47.1.



TOC: George P. Roach, Unjust Enrichment in Texas

FOOTNOTES

[1] See Tex. R. App. P. 47.4.

[2] Valarie Berry is not a party to the appeal. In December 2004, Charlie M. Cook, Berry's mother, took out a reverse mortgage secured by a deed of trust on the property; the deed of trust was recorded in January 2005 and then ultimately assigned to and recorded by OneWest. Davis sued appellees, alleging, among other claims, fraud, quantum meruit, and the unjust enrichment claim at issue on appeal. In his pleadings, Davis claimed that Berry conveyed the property to him on her mother's behalf in November 2010 and told him that there were no liens on the property and that he made $70,000 in improvements before the property's foreclosure and sale to Fannie Mae. Davis does not appeal the trial court's summary judgment on his other claims.

[3] Also, we have scrutinized the record here, and contrary to Davis's contentions, there is no competent summary judgment evidence to raise a fact issue with regard to whether OneWest knew of Davis's claim to own the property at the time he repaired it. See Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009) (requiring the reviewing court to consider evidence presented in the light most favorable to the nonmovant); 20801, Inc. v. Parker, 249 S.W.3d 392, 399 (Tex. 2008) (requiring the reviewing court to indulge every reasonable inference and resolve any doubts in the nonmovant's favor). And although Davis argues in his reply brief that appellees never gave him notice of their superior title, property code section 13.002(1) provides that an instrument that is properly recorded in the proper county is notice to all persons of the existence of the instrument. Tex. Prop. Code Ann. § 13.002(1) (West 2014); Ford v. Exxon Mobil Chem. Co., 235 S.W.3d 615, 617 (Tex. 2007) ("While not all public records establish an irrebuttable presumption of notice, the recorded instruments in a grantee's chain of title generally do."). The record reflects that Davis had constructive notice of appellees' deed of trust, and on its face, Davis's deed states, "This deed is subject to all easements, restrictions, conditions, covenants, and other instruments of record." It also states, "This instrument was prepared based on information furnished by the parties, and no independent title search has been made." [Emphasis added.] The record does not reflect that Davis's deed was recorded.

SOURCE: FORT WORTH COURT OF APPEALS - NO. 02-14-00264-CV - 4/9/2015 Davis v OneWest Bank N.A. (Tex. App. - Fort Worth, April 9, 2015, pet. filed)(Opinion by Justice Sudderth) (affirming summary judgment for the bank, holding that unjust enrichment is not an independent cause of action and that the bank acted in accordance with law by foreclosing on the real property).  
  

PEPI CORP  v. GALLIFORD

(excerpt)

 



Pepi Corp. v. Galliford, 254 S.W.3d 457
 (Tex. App.-Houston [1st Dist.] 2007, pet. denied)
Click to enlarge view



HOUSTON COURT OF APPEALS ON ELEMENTS OF UNJUST ENRICHMENT CLAIM

(2014 CASELAW SNIP)

 

A person is unjustly enriched when he obtains a benefit from another by fraud, duress, or the taking of an undue advantage. Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992). A key element of unjust enrichment is that the person sought to be charged wrongly secured or passively received a benefit. Villarreal v. Grant Geophysical, Inc., 136 S.W.3d 265, 270 (Tex. App.-San Antonio 2004, pet. denied). It is not enough that the person sought to be charged received some incidental benefit. Bashara v. Baptist Mem'l. Hosp. Sys., 685 S.W.2d 307, 310 (Tex. 1985).

SOURCE: HOUSTON COURT OF APPEALS FOR THE FIRST DISTRICT -  No. 01-13-00995-CV - 1/15/2015



 

The Equitable Remedy of Constructive Trust

What is Constructive Trust as a form of relief in a lawsuit?

CONSTRUCTIVE TRUST DEFINED

A constructive trust is a legal fiction, a creation of equity to prevent a wrongdoer from profiting from her wrongful acts. Procom Energy, L.L.A. v. Roach, 16 S.W.3d 377, 381 (Tex. App.-Tyler 2000, pet. denied). Such trusts are remedial in character and have the broad function of redressing wrong or unjust enrichment in keeping with basic principles of equity and justice. Id.; see also Hubbard v. Shankle, 138 S.W.3d 474, 485 (Tex. App.-Fort Worth 2004, pet. denied).

 

ESSENTIAL ELEMENTS THAT MUST BE SATISFIED TO STAKE CLAIM FOR IMPOSITION OF A CONSTRUCT TRUST

 

To obtain a constructive trust, the proponent must prove (1) the breach of a special trust, fiduciary relationship, or actual fraud, (2) unjust enrichment of the wrongdoer, and (3) tracing to an identifiable res. Troxel v. Bishop, 201 S.W.3d 290, 297 (Tex. App.-Dallas 2006, no pet.); Hubbard, 138 S.W.3d at 485. "`A constructive trust is a relationship with respect to property, subjecting the person by whom the title to the property is held to an equitable duty to convey it to another, on the ground that [her] acquisition or retention of the property is wrongful and that [she] would be unjustly enriched if [she] were permitted to retain the property.'" Baker Botts, L.L.P. v. Cailloux, 224 S.W.3d 723, 736 (Tex. App.-San Antonio 2007, pet. denied) (quoting Talley v. Howsley, 176 S.W.2d 158, 160 (Tex. 1943)).

SOURCE: SAN ANTONIO COURT OF APPEALS – No. 06-13-00043-CV – 2/20/2014

 

 

Express contract as a bar to recovery under alternative quantum meruit theory

   
In the presence of a valid contract covering the transaction, recovery on an equitable theory such as quantum meruit is generally not available, but there are limited exceptions.

QUANTUM MERUIT AS A THEORY OF RECOVERY 

Quantum meruit “is founded [on] the principle of unjust enrichment.” Bashara v. Baptist Mem’l Hosp. Sys., 685 S.W.2d 307, 310 (Tex. 1985). Unjust enrichment is an implied-contract theory stating one should make restitution when it would be unjust to retain benefits received. Walker v. Cotter Props., Inc., 181 S.W.3d 895, 900 (Tex. App.—Dallas 2006, no pet.).

Unjust enrichment allows recovery “when one person has obtained a benefit from another by fraud, duress, or the taking of an undue advantage.” Heldenfels Bros., Inc. v. Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992). It is “based upon the promise implied by law to pay for beneficial services rendered and knowingly accepted.” In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 740 (Tex. 2005) (internal quotation marks omitted).

EXPRESS CONTRACT PRECLUSION OF EQUITABLE CLAIM

But an express contract between the parties precludes a plaintiff from recovering for services rendered in quantum meruit if the contract covers those services or materials and if no exception to the general rule applies. See Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671, 683–84 (Tex. 2000); Pepi v. Galliford, 254 S.W.3d 457, 462 (Tex. App.—Houston [1st Dist.] 2007, pet. denied); see also Woodard v. Sw. States, Inc., 384 S.W.2d 674, 675 (Tex. 1964) (“Recovery on an express contract and on quantum meruit are inconsistent.”).

The equitable remedy of quantum meruit is therefore unavailable when an express contract covers the subject matter at issue—the party seeking compensation has a legal remedy under the contract. See id. (citing Heldenfels Bros., 832 S.W.2d at 41); see also Hester v. Friedkin Cos., Inc., 132 S.W.3d 100, 106 (Tex. App.—Houston [14th Dist.] 2004, pet. denied) (holding that express contract bar applies not just when plaintiff is seeking to recover in quantum meruit from party with whom it expressly contracted, but also when plaintiff is seeking to recover “from a third party foreign to the original contract but who benefitted from its performance”) (quoting Iron Mountain Bison Ranch Inc. v. Easley Trailer Mfg., Inc., 42 S.W.3d 149, 160 (Tex. App.—Amarillo 2000, no pet.)).
  
STANDARD OF REVIEW ON APPEAL
  
Both the existence of an express contract and federal preemption are affirmative defenses to [party's] state law quantum meruit claim. See Tricon Tool & Supply, Inc. v. Thumann, 226 S.W.3d 494, 500 (Tex. App.—Houston [1st Dist.] 2006, pet. denied) (noting that express contract is affirmative defense to quantum meruit claim); Harrill v. A.J.’s Wrecker Serv., Inc., 27 S.W.3d 191, 194 (Tex. App.—Dallas 2000, pet. dism’d w.o.j.) (observing that preemption is affirmative defense (citing Kiefer v. Cont’l Airlines, Inc., 882 S.W.2d 496, 497–98 (Tex. App.—Houston [1st Dist.] 1994), aff’d, 920 S.W.2d 274 (Tex. 1996))). A party that asserts an affirmative defense bears the burden of proving it. Tricon Tool & Supply, 226 S.W.3d at 501. In the absence of specific jury findings on these affirmative defenses, we consider whether [party] has established each element of its defense conclusively and whether reasonable minds could not differ as to the truth of the controlling facts. See Brown v. Zimmerman, 160 S.W.3d 695, 702 (Tex. App.—Dallas 2005, no pet.); Brown v. Shores, 77 S.W.3d 884, 885 n.2 (Tex. App.—Houston [14th Dist.] 2002, no pet.). In reviewing the express contract issue, we note the jury’s findings that [party] failed to pay for medical services under the plan but was excused from doing so.

SOURCE: HOUSTON COURT OF APPEALS - 01-09-00591-CV - 12/8/2011

Christus Health d/b/a Uniform Services Family Health Plan, Appellant v. Quality Infusion Care, Inc.,

We hold that the trial court erred in awarding judgment in favor of Quality on the jury’s quantum meruit finding because the express contract rule bars a quantum meruit recovery here as a matter of law, given the jury’s implied findings that a contract existed, and express finding that Christus’s failure to comply was excused—coupled with evidence that Quality failed to seek pre-authorization for treatment, as the agreement required. See Pepi Corp., 254 S.W.3d at 462–63; see also Bado Equip. Co., Inc. v. Bethlehem Steel Corp., 814 S.W.2d 464, 473 (Tex. App.—Houston [14th Dist.] 1991, no writ) (holding that summary judgment was proper on unjust enrichment claim brought by seller of cranes [against purchaser, constructor of rig, corporation that subsequently purchased rig, and second corporation which, along with constructor, was joint owner of corporation that purchased rig] because of express contract covering goods); Econ. Forms Corp. v. Willams Bros. Constr. Co., Inc., 754 S.W.2d 451, 458–59 (Tex. App.—Houston [14th Dist.] 1988, no writ) (holding general contractor not liable in quantum meruit for unpaid party who had lease agreement with subcontractor covering materials provided by party because express contract covered materials).

SOURCE: OPINION FROM HOUSTON COURT OF APPEALS - - 12/8/2011

Express contract precludes quantum meruit, unjust enrichment claim

EXPRESS CONTRACT AND QUASI-CONTRACTUAL THEORIES OF RECOVERY INCOMPATIBLE AND MUTUALLY EXCLUSIVE

[R]ecovery under the theory of quantum meruit is prohibited if an express contract covers the services or materials for which the claimant seeks recovery. Gentry v. Squires Constr., Inc., 188 S.W.3d 396, 402-03 (Tex. App.-Dallas 2006, no pet. ).

Here, the jury found the parties had an agreement that covered the services and materials in this case. In its responsive brief, Builders Carpet asserts that Truly v. Austin, 744 S.W.2d 934, 937 (Tex. 1988), provides for an exception that allows “a breaching plaintiff to recover in quantum meruit” in building or construction contracts. Here, however, the jury found Builders Carpet did not breach the contract; consequently, the exception does not apply. Because Builders Carpet cannot recover under a quantum meruit theory as a matter of law, the jury's answers to those questions were immaterial and should have been disregarded. See Spencer v. Eagle Star Ins. Co. of Am., 876 S.W.2d 154, 157 (Tex. 1994) (“A question is immaterial when it should not have been submitted, or when it was properly submitted but has been rendered immaterial by other findings.”); Basic Cap. Mgmt. v. Dynex Comm'l, Inc., 254 S.W.3d 508, 513 (Tex. App.-Dallas 2008, pet. granted ) (same).

Generally speaking, when a valid, express contract covers the subject matter of the parties' dispute, there can be no recovery under a quasi-contract theory, such as unjust enrichment. Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671, 684 (Tex. 2000); DeClaire v. G & B Mcintosh Family Ltd. P'ship, 260 S.W.3d 34, 49 (Tex. App.-Houston [1st Dist.] 2008, no pet.). This is because parties should be bound by their express agreements, and when a valid agreement already addresses the matter, recovery under an equitable theory is generally inconsistent with the express terms of the agreement. Conoco, 52 S.W.3d at 684; see also Edwards v. Mid- Continent Office Distribs., L.P., 252 S.W.3d 833, 837 (Tex. App.-Dallas 2008, pet. denied) (“The doctrine of unjust enrichment applies the principles of restitution to disputes that are not governed by a contract between the parties.”).

The Texas Supreme Court, however, has recognized an exception to this rule when overpayment was made under a valid contract. Sw. Elec. Power Co. v. Burlington N. R.R. Co., 966 S.W.2d 467, 469-70 (Tex. 1998).

SOURCE: 05-08-01149-CV (Dallas Court of Appeals) (3/16/10)

Elements of Quantum Meruit Claim (alternative to breach-of-contract cause of action for services rendered)

QUANTUM MERUIT CLAIM: NOTICE OF EXPECTATION OF PAYMENT AS ONE ELEMENT Quantum meruit is an equitable remedy that does not arise out of a contract, but is independent of it. Vortt Exploration Co. v. Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex. 1990). WHAT TYPE OF LEGAL THEORY IS QUANTUM MERUIT? Quantum meruit is an equitable theory of recovery founded in the principle of unjust enrichment. Vortt Exploration Co. v. Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex. 1990). CONTRACT AND QUANTUM MERUIT INCOMPATIBLE - MUTUALLY EXCLUSIVE REMEDIES - EXPRESS CONTRACT DEFENSE Generally, a party may recover under quantum meruit only when there is no valid express contract covering the services or materials furnished. Id.; see also Woodard v. Sw. States, Inc., 384 S.W.2d 674, 675 (Tex. 1964) (“Where there exists a valid express contract covering the subject matter, there can be no implied contract.”). ELEMENTS OF QUANTUM MERUIT CLAIM UNDER TEXAS COMMON LAW “To recover under the doctrine of quantum meruit, a plaintiff must establish that: 1) valuable services and/or materials were furnished, 2) to the party sought to be charged, 3) which were accepted by the party sought to be charged, and 4) under such circumstances as reasonably notified the recipient that the plaintiff, in performing, expected to be paid by the recipient.” Heldenfels Bros. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992); Vortt Exploration Co., 787 S.W.2d at 944; Speck v. First Evangelical Lutheran Church of Houston, 235 S.W.3d 811, 815 (Tex. App.—Houston [1st Dist.] 2007, no pet.). SOURCE: Doyle v. Heilman, 01-09-00164-CV (Tex.App.- Houston [1st Dist.] Mar. 11, 2010) (judgment on quantum meruit claim for personal care services reversed, essential element of notice that Plaintiff expected to be paid for services rendered not shown, not satisfied)