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Subcontractors Secure Major Victory in Unjust Enrichment Case – Markham Contracting Co. v. Cahava Springs Phase I, Inc. et al.

ALEXANDRIA, Va. — The American Subcontractors Association’s (ASA) Subcontractors Legal Defense Fund (SLDF) achieved a significant legal victory for subcontractors in a case addressing recovery under unjust enrichment where a project owner failed to pay for completed work.

The Arizona Supreme Court issued its opinion in Markham Contracting Co. v. Cahava Springs Phase I, Inc. et al., siding with the contractor and affirming key principles that preserve subcontractors’ ability to recover in unjust enrichment claims. The case involved property owners who created a special improvement district to fund infrastructure improvements, received the benefit of those improvements, but did not ensure payment was made to the contractor who performed the work.

The subcontractor, supported by ASA’s SLDF, sought amicus participation to defend a favorable Arizona Court of Appeals ruling that had reversed dismissal of its unjust enrichment claim. The property owners had petitioned the Court to require subcontractors and contractors to plead “improper conduct” by property owners in all unjust enrichment claims—a standard currently limited to tenant-improvement contexts.

The central issue before the Court was whether general unjust enrichment principles apply when property owners initiate and benefit from improvements to their own property but fail to ensure payment to the performing contractor.

In its decision, the Arizona Supreme Court ruled in favor of the contractor and clarified several key holdings:

  • Wang Electric remains good law requiring a showing of improper conduct for unjust enrichment claims, but only in the landlord-tenant context.
  • Wang Electric does not apply in this case because the landowners themselves arranged for the improvements and failed to pay anyone for them.
  • An owner who seeks, authorizes, or benefits from improvements performed under contract with a third party may be held liable in unjust enrichment if no payment is made.
  • Markham sufficiently alleged a valid claim for unjust enrichment.

In short, the Court affirmed that a subcontractor may recover from a project owner under unjust enrichment where the owner has received the benefit of the work but paid no party for it. The Court emphasized that the key inquiry is whether the owner “sought, authorized, or acquiesced in receiving improvements performed without gratuitous intent, and failed to pay for them.”

            ASA noted that this ruling strengthens long-standing equitable principles and provides important clarity for subcontractors seeking fair compensation for completed work.

The American Subcontractors Association is actively involved in the promotion of legislative action across the nation and regularly intervenes in legal actions that affect the construction industry at large. The SLDF supports ASA’s critical legal activities in precedent-setting cases to protect the interests of all subcontractors. ASA taps the SLDF to fund amicus curiae, or “friend-of-the-court,” briefs in appellate-level cases that would have a significant impact on subcontractor rights. Contributions to the SLDF may be made online at www.sldf.net.

Founded in 1966, ASA promotes the rights and interests of subcontractors, specialty contractors and suppliers by building strength in community through education, advocacy, networking and professional growth. ASA adheres to and promotes quality construction, ethical and equitable business practices, safety in the work environment, and best industry practices. For more information about ASA, visit www.asaonline.com, and for more information about the SLDF, visit www.sldf.net.