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Johnson v. Larson

February 24, 2010

MICHAEL JOHNSON D/B/A MICHAEL JOHNSON CONSTRUCTION, PLAINTIFF AND APPELLEE,
v.
ROBERT LARSON AND JOEL PENNY, DEFENDANTS AND APPELLANTS.



APPEAL FROM THE CIRCUIT COURT OF THE THIRD JUDICIAL CIRCUIT LAKE COUNTY, SOUTH DAKOTA HONORABLE VINCENT A. FOLEY Judge.

The opinion of the court was delivered by: Konenkamp, Justice

ARGUED JANUARY 13, 2010

[¶1.] In this breach of contract, conversion, and unjust enrichment case, the circuit court held that defendants were unjustly enriched by plaintiff's services, after a jury rendered a verdict in favor of defendants on plaintiff's breach of contract and conversion claims. On appeal, we reverse the court's damages award against one defendant because two express contracts govern the rights between that defendant and plaintiff. In regard to the defendant with no express contractual relationship with plaintiff, we affirm the court's finding of unjust enrichment, but reverse and remand for a proper calculation of damages.

Background

[¶2.] In early March 2005, Michael Johnson and Robert Larson entered into an oral contract whereby Johnson agreed to remove rock from Larson's farmland in exchange for Johnson receiving the value of the rock removed. Larson is a retired farmer who owns farm and pasture land near Madison, South Dakota. Johnson operates Michael Johnson Construction and owns two mining pits, one east, and one west, of Madison. Shortly after Johnson began removing rock from Larson's land, the two entered into a second oral agreement. In exchange for Johnson's right to keep the excavated rock extracted from Larson's land, Johnson agreed to install drain tile in a low lying area of Larson's farmland.

[¶3.] From March 16, 2005 through April 15, 2005, Johnson removed rock from Larson's land. He also installed drain tile. Johnson claimed that he extracted approximately 1,100 tons of rock. Of that amount, Johnson only removed between three to five semi-truck loads from Larson's land. The rest Johnson stored on Larson's land to the west of Larson's home, for removal at a later date. According to Johnson, Larson permitted him to store the rocks on his land until Johnson needed them.

[¶4.] Joel Penny is a farmer in Decatur, Nebraska. While visiting Flandreau in July 2006, Penny learned that Larson had rock on his land that he wanted removed. Penny contacted Larson. Larson informed Penny that he and Johnson had previously agreed that Johnson would remove the rock from his land. Larson told Penny that after excavating the rock, Johnson had not come back to actually remove the rock he had stockpiled since the spring of 2005. Larson told Penny that he had inquired several times about when Johnson intended to remove the stockpiles. Larson also told Penny that he would contact Johnson to ask whether Johnson intended on removing the rock.

[¶5.] In August 2006, Penny again contacted Larson about removing the rock. Larson believed Johnson had no intention of removing the stockpiled rock, based on the fact he had not heard from Johnson, even after leaving his number with Johnson's bookkeeper. Ultimately, Larson gave Penny permission to remove the rock. Penny paid Larson nothing for the rock. He removed approximately 50 semi-truck loads from Larson's land. Penny estimated that he took approximately 25 loads from the rock pile stocked by Johnson.

[¶6.] In October 2006, Johnson learned that his rock piles were no longer on Larson's land. He sent an invoice to Larson on October 24, 2006, for his services in excavating and removing the rock. Johnson also included an invoice for the installation of the drain tile. He enclosed a letter with the invoices reminding Larson of the parties' oral agreement that Johnson was to receive the rocks in exchange for clearing them from Larson's land. Larson neither responded to the letter nor paid the invoice.

[¶7.] On January 11, 2007, Johnson brought suit against Larson for breach of contract, conversion, restitution, constructive trust, and unjust enrichment. He amended his complaint in April 2007, to include Penny as a defendant and removed the restitution cause of action. A jury trial was held November 17 through November 20, 2008, on the breach of contract and conversion claims. The jury returned a verdict in favor of Larson and Penny. On January 8, 2009, a hearing was held in the circuit court to consider Johnson's equitable claims. On May 13, 2009, the court entered a judgment against Larson and Penny jointly and severally. The court concluded that Larson and Penny were unjustly enriched by the labor, equipment, and materials provided by Johnson for the removal of the rock. The court further concluded that Larson was unjustly enriched by the labor, equipment, and materials provided for the installation of drain tile. On appeal, Larson and Penny assert that the court erred when it concluded that they were unjustly enriched by Johnson.*fn1

Analysis and Decision

[¶8.] Penny and Larson claim, among other things, that because the jury rendered a verdict against Johnson on his breach of contract and conversion claims, the court erred in allowing Johnson unjust enrichment damages on the same facts. We recently held that the equitable remedy of unjust enrichment is unwarranted when the rights of the parties are controlled by an express contract. Burch v. Bricker, 2006 SD 101, ¶18, 724 NW2d 604, 609-10 (quoting Mooney's, Inc. v. South Dakota Dept. of Transp., 482 NW2d 43, 47 (SD 1992) (discussing quantum meruit) (additional citation omitted). Unjust enrichment contemplates an involuntary or nonconsensual transfer, unjustly enriching one party. The equitable remedy of restitution is imposed because the transfer lacks an adequate legal basis.

[¶9.] When there is a valid and enforceable contract, however, liability for compensation or other resolution of the breach is fixed exclusively by the contract. Nadeau v. Pitman, 731 A2d 863, 866-67 (Me 1999); County Comm'rs of Caroline County v. J. Roland Dashiell & Sons, Inc., 747 A2d 600, 607 (Md 2000) (citing many courts holding the same); Leasepartners Corp. v. Robert L. Brooks Trust, 942 P2d 182, 187 (Nev 1997); see also JN Exploration & Prod. v. Western Gas Resources, Inc., 153 F3d 906, 910 (8thCir 1998) (applying North Dakota law). In the contract framework, benefits are voluntarily conferred and transfers are consensual.

[¶10.] No one disputes that Johnson and Larson entered into two valid and enforceable contracts. The first permitted Johnson to remove rock from Larson's farmland in exchange for Johnson receiving the value of the rock removed. The second permitted Johnson to remove rock and receive the value of that rock in exchange for installing drain tile on Larson's land. Because there existed two express contracts, and the benefit conferred on Larson was specified as part of the parties' contracts, Johnson had a valid remedy at law. See Restatement (Third) Restitution § 2 (unjust enrichment can apply in a contract context when the performance received was not specified by the contract). Johnson voluntarily and consensually conferred the benefit of drain tile and rock removal to Larson as part of the parties' valid and enforceable contracts. Therefore, there was no room for a court to imply a promise by Larson to pay Johnson, as the parties expressly ...


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