Judge Michael C. Dunston, in the Superior Court of the Virgin Islands, Division of St. Thomas and St. John was asked to rule on a bank’s motion to dismiss in a contract dispute arising from the sale of a condominium in Cacciamani and Rover Corporation v. Banco Popular, 2013 WL 3759824 (V.I.Super. July 10, 2013).

Enighed Condominiums entered into a loan agreement in October 2005 with Banco Popular for the amount of $28,000,000 and executed a first priority construction mortgage. The mortgage was then modified several times in 2007 and 2008.  

In April 2009, Enighed and Banco executed a Forbearance and Surrender Agreement. Pursuant to its terms, Enighed transferred to BP Sirenusa SPV, Inc. (an entity created by Banco Popular to own and manage the Enighed property), a deed in lieu of foreclosure to Parcel 11, Estate Enighed, Cruz Bay Quarter on St. John.  

Prior to Enighed’s transfer of the property to BP Sirenusa, the plaintiff, an architectural firm ("the firm"), contracted with Enighed to provide it with architectural drawings and civil engineering plans as part of the construction project on the property. As of 2007, Enighed was indebted to the firm for close to $110,000 for the work performed. The firm filed a complaint against Banco and BP Sirenusa to receive compensation for the work performed, asserting a claim of unjust enrichment.

Judge Dunston explained that a person “who has been unjustly enriched at the expense of another is required to make restitution to the other.” To prevail in equity on a claim for unjust enrichment, a plaintiff must prove:

(1) the defendant was enriched;
(2) such enrichment was at the plaintiff’s expense; and
(3) the circumstances were such that in equity and good conscience the defendant should return the money or property to the plaintiff.

The judge went on to say that unjust enrichment is applicable only where there isn’t a contract or in the case where there is an unconsummated or void contract. Parties in contractual privity (in the midst of a binding agreement) are not able to claim restitution based upon the doctrine of unjust enrichment because the terms of their agreement define their rights, duties, and expectations. 

This rule also prohibits a plaintiff from asserting a claim based in quasi-contract against a non-party to the express agreement if the claim concerns subject matter covered by the express agreement, Judge Dunston said. The reasoning behind the scope of the rule is clear. It is self-evident that equitable relief is only available where there is no adequate remedy at law. If the subject matter of the dispute is covered by the terms of the contract, the plaintiff is required to pursue its remedy at law under the contract.

The judge also noted that some courts have indicated that there may be a foundation for an unjust enrichment claim against a third party to a contract on issues outside the scope of the contract. “Injustice in this context requires some type of improper, deceitful, or misleading conduct” by the third party, a Colorado decision explained. Judge Dunston quoted DCB Const. Co., Inc. v. Cent. City Dev. Co. (Colo. 1998), which said that if the third party has “actually engaged in fraud to induce a [party to the contract] either to enter into the contract … or to continue performance … this situation will likely sustain a claim of unjust enrichment.”  

Likewise, the judge found that evidence of coercion or duress might also provide grounds for a sustainable unjust enrichment claim. However, the DCB Const. Co. case said, “the mere fact that one party benefits from the act of another is not of itself sufficient to justify restitution. There must also be an injustice in permitting the benefit to be retained without compensation.” 

 In support of its claim, the firm relied on Frank V. Pollara Grp. LLC v. Ocean View Inv. Holding, LLC (D.V.I. 2013), in which the District Court of the Virgin Islands declined to dismiss a claim of unjust enrichment brought against third parties to a contract. However, in that case, the plaintiffs made allegations of misrepresentation on the part of third parties and had presented evidence that the third parties were “actively involved” in the project that was the subject of a contract and “made a variety of representations relating to the work.”

 Based on the allegations of this complaint, the firm sought compensation from the defendants for the work that was the subject of a contract between the firm and Enighed. As a result, the firm only had a potentially viable cause of action against Enighed. In addition, the firm made no allegations in its complaint suggesting that Banco benefitted from its architectural work by virtue of unjust behavior. 

The firm didn’t make any factual allegations indicating that it had a right to have its plans returned to it or a right to deny Banco permission to use the plans. As a result, this allegation didn’t indicate that the defendants acted unjustly. Instead they merely acquired the property in lieu of a foreclosure proceeding. While it might have been unjust for the firm to have to “bear the loss of a debt unpaid, … it is not necessarily just or right to impose that debt upon [Defendants] merely to rectify the first injustice.”

Judge Dunston granted Banco’s motion to dismiss the complaint.

Cacciamani and Rover Corporation v. Banco Popular, 2013 WL 3759824 (V.I.Super. July 10, 2013)