Kraft Constr. Co. v. Cuyahoga Cty. Bd of Commrs. , 128 Ohio App. 3d 33 ( 1998 )

I concur with the majority on appellant/cross-appellee's sole assignment of error relating to the trial court's directed verdict on the issues of trespass and conversion. I concur as well in the majority's findings regarding appellee/cross-appellant's second and third assignments of error relating to the trial court's decisions on hearsay testimony and jury instructions. However, I respectfully dissent from the majority's finding on appellee/cross-appellant's first assignment of error. I would reverse the trial court's finding of unjust enrichment as being against the manifest weight of the evidence.

To hold otherwise is to insulate Kraft from its own bad business decision, a decision it made at arm's length. The majority's decision casts Cuyahoga County in the role of guarantor of Kraft's profits on the residential development in question. There is some irony in providing a real estate developer with a significant advantage in an arm's-length transaction with a county agency. Most would assume that an experienced real estate developer would have the greater business acumen, not the typical bureaucrat on the other side of the bargaining table.

A party is not entitled to compensation on the grounds of unjust enrichment, in the absence of fraud or bad faith, if he received from the other party that which it was agreed between them the other should give in return. Kraft did receive the benefits from the county that it was agreed between them should result from the construction of the pump station: permission to proceed with its residential development, salvage rights to the pump station equipment, and the inclusion of a reversionary clause in the transfer of title agreement. Kraft thus received the benefit of its bargain. There was no evidence showing fraud or bad faith on the county's part. In addition, the only "benefit" that the county received was a new sewage pump station to help alleviate the burden of the additional sewage that Kraft's development, itself, would generate. There should be no recovery under a theory of unjust enrichment.

The jury's verdict and the court's judgment were obtained contrary to' the manifest weight of the evidence. The trial court had found that the evidence showed that the county wrongly received benefits from its dealings with appellant/cross-appellee Kraft.

Judgments supported by some competent, credible evidence going to all the essential elements of the case will not be reversed by a reviewing court as being against the manifest weight of the evidence. C.E. Morris Co. v. Foley Constr. Co. (1978), 54 Ohio St.2d 279, 8 O.O.3d 261, 376 N.E.2d 578, syllabus; Slone v.Aerospace Design Fabrication, Inc. (1996), 111 Ohio App.3d 725,735, 676 N.E.2d 1263, 1269-1270. However, my review of the record in this case leads me to the conclusion that Kraft did not produce credible evidence going to all the essential elements of its action for unjust enrichment.

An action for unjust enrichment, or quantum meruit, is for the value of services rendered. Natl. City Bank v. Fleming (1981),2 Ohio App.3d 50, 57, 2 OBR 57, 63-64, 440 N.E.2d 590, 598-599. Such an action rests upon the equitable principle that one shall not be permitted to unjustly enrich oneself at the expense of another without making compensation therefor. Id. In order to demonstrate a prima facie case, a plaintiff must show that he conferred a benefit upon another and that the circumstances render it unjust and inequitable to permit the other to retain the benefit without making payment. Id.

In the absence of fraud or bad faith, however, one is not entitled to compensation on the grounds of unjust enrichment if he received from the other party that which it was agreed between them the other should give in return. Ullmann v. May (1947),147 Ohio St. 468, 34 O.O. 384, 72 N.E.2d 63, syllabus. See, also, S M Constructors, Inc. v. Columbus (1982), 70 Ohio St.2d 69, 71, 24 O.O.3d 145, 146, 434 N.E.2d 1349, 1351-1352; Eyerman v. Mary KayCosmetics, Inc. (C.A.6, 1992), 967 F.2d 213, 222. This is precisely what happened here: The evidence at trial showed that Kraft did receive in fact the benefits from the county that it was agreed between them should result from the construction of the pump station.

Because there was no evidentiary showing of fraud or bad faith and Kraft did receive the agreed-upon benefits, there should be no recovery under a theory of unjust enrichment. Ullmann, supra. Kraft did not produce "competent, credible evidence going all to all the essential elements" of its claim of unjust enrichment, and hence the judgment was against the manifest weight of the evidence. C.E. Morris Co., supra.

Kraft alleged that the county wrongfully enjoyed benefits from the pump station from July 1992 until the filing of the suit in 1996. Kraft's theory of the case, as reflected in its amended complaint, was that it was entitled to recover, under a theory of unjust enrichment, the reasonable value of the usage and resulting depreciation of the pump station, "as defendant used such without the expectation of paying a reasonable value therefor." In fact, there was no testimony or any other evidence establishing any understanding between Kraft and the county that there would be money payment for the pump station. The evidence did not establish that Kraft had any expectation of a money exchange.

Kraft's construction of the pump station was, in effect, in exchange for permission to develop new residential subdivisions. This permission was, in fact, granted. The ability to develop a residential subdivision in Highland Heights in exchange for a pump station is arguably an exchange of "reasonable value," and testimony at trial established that it was a standard exchange in a development situation. Kraft thus received from the county that which it was agreed between the parties it would receive.

It must be recalled, as well, that the "benefit" of the pump station to the county is primarily that of reducing the burden of the additional sewage that Kraft's development, itself, will generate. Kraft seeks to be insulated from what was essentially its own bad business decision: Kraft had the option of holding off on its development plans until the new municipal gravity sewers were actually approved, if Kraft believed this would occur, and so avoid the cost of constructing the complex pump station that would otherwise be required. Instead, Kraft chose not to wait but to proceed with the residential development and the resultant construction of the Glen Eden pump station.

A claimant alleging unjust enrichment must also demonstrate the reasonable value of the benefit conferred. National City Bank,supra. 2 Ohio App.3d at 57, 2 OBR at 63-64,440 N.E.2d at 598-599. The court did not award relief based on the reasonable value of the usage of the pump station and resulting depreciation, as Kraft had asked. The trial court's judgment reduced the jury's advisory award from $512,000 to $306,594, which the court stated was the difference between the original anticipated cost of the pump station and the actual cost of the pump station. The court made no finding as to the reasonable value of the usage and resulting depreciation of the pump station.

The relief awarded by the trial court, instead, implicitly held the county responsible for all increases in the cost of construction as well as any possible inaccuracies in the initial estimate prepared by CT Consultants, the engineering consultant hired by Kraft. The evidence in the record was inadequate, in my opinion, for a factfinder to place the entire burden for the difference between an initial estimate for construction costs and the final cost on one party.

Appellant/cross-appellee Kraft Construction Company hired CT Consultants, and it was CT Consultants that eventually prepared the proposal, in March 1988, that Kraft construct a new (Glen Eden) pumping station to replace the existing pumping station, the Franklin pump station, and serve not only the new subdivisions to be developed by Kraft but other existing residential areas as well. The cost of the pump station initially was estimated by CT to be $380,000, but when finally completed, with modifications required by the county, the actual cost was $686,594.

For reasons that were in dispute, the necessary agreements to transfer title of the pump station to the county were delayed during the period March 1989 through June 1992. The station has been operating since approximately December 1990 or January 1991. The county sanitary engineer responsible for this matter, Hunsinger, testified that the paperwork was "delayed" because Kraft was in "a big hurry" to begin the construction of the station so as not to delay the rest of the development and understood that the paperwork would have to follow, rather than being completed prior to construction, as is normal. Kraft argued that the county required it to build a state-of-the-art pump station, while knowing that it would be retired from service two or three years later.

As it turned out, the complexity of the pump station and operational adjustments that the county determined were required led to an increase in the cost of construction. As the majority correctly points out, "when the pump station first went on line there were many engineering problems which had to be corrected by the project engineer." The county's position, understandably, is that it wanted to make sure that the station was operating properly before it took title. If the pump station was not operating correctly as constructed by Kraft, as the majority admits, it is difficult to understand how the entire burden for the added cost and delay should be placed on the county. The evidence in the record establishes that any cost overruns incurred were at least as much the responsibility of Kraft as of the county.

In negotiations for an agreement concerning the construction and transfer of title for the pump station, Kraft was allowed to retain salvage rights for the pump station equipment, which was assigned a fair market value of $200,000, upon eventual abandonment by the county. Kraft also negotiated a reversionary clause in which the pump station property would revert to the owner of a neighboring parcel when the county abandoned the station. The county accepted both of Kraft's proposals, which were incorporated into the agreement. The "reasonable value" received by Kraft in exchange for the pump station would have included not only the ability to develop the residential subdivision in Highland Heights but the salvage rights and the reversionary clause as well.

Kraft maintained at trial that it was told that the pump station would be abandoned in two years as a result of a new municipal sewer system. The county denied this, since it had no control over the timing of the construction of additional municipal sewers. The proposed written agreement between the parties stated nothing about a time frame for abandonment of the pump station, nor did Kraft attempt to modify the agreement to include such a date.

In July 1992, Kraft did sign and return a modified agreement and warranty deed to the county but simply deleted a portion that required it to pay outstanding real estate property taxes on the parcel. When the county refused to accept the transfer of title until Kraft paid the outstanding property taxes on the pump station property, Kraft filed suit against the county.

I would find that appellee/cross-appellant's first assignment of error has merit. Since Kraft received the benefits from the county that it was agreed between them should result from the construction of the pump station, there should be no recovery under a theory of unjust enrichment. The trial court's judgment was against the manifest weight of the evidence. As this case was tried to the court, with the jury rendering merely an advisory verdict, and the sole assignment of error to be sustained is that the judgment was against the manifest weight of the evidence, the judgment and award as to unjust enrichment should be reversed under App.R. 12(C).