This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2000).

 

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C7-01-2083

 

Gerard Roy, d/b/a Standard Roofing, Inc.,

Respondent,

 

vs.

 

Judy Leidal,

Appellant.

 

Filed July 2, 2002

Affirmed

Willis, Judge

 

Mower County District Court

File No. C50135

 

Gerard Roy, 2309 Old County Road 34th Place, Burnsville, MN  55337 (pro se respondent)

 

Gary M. Hird, Southern Minnesota Regional Legal Services, Inc., 132 North Broadway, Albert Lea, MN  56007 (for appellant)

 

            Considered and decided by Shumaker, Presiding Judge, Harten, Judge, and Willis, Judge.

U N P U B L I S H E D   O P I N I O N

WILLIS, Judge

Appellant challenges the district court’s judgment against her for unjust enrichment resulting from roofing work that respondent did on her house and garage.  Because the district court did not abuse its discretion by awarding respondent equitable relief, we affirm.   

FACTS

            In June 2000, appellant Judy Leidal contracted with respondent Gerard Roy to do roofing work on her house and garage in Austin.  The contract provided for Leidal to pay Roy $8,300 upon completion of the work.  Roy owned a commercial-roofing business.  But because he was not licensed as a residential-roofing contractor, he applied in Leidal’s name to the City of Austin for a building permit to do the work.  Roy signed the application for the permit with his own name.  The city issued the permit. 

Over a weekend, Roy and his work crew, including Leidal’s son, tore off the old roofing materials and reshingled part of Leidal’s house and garage.  At trial, Roy testified that he told Leidal that he would return the following weekend to continue work.  In the interim, the city inspected the work.  When the city discovered that Roy held no license to do residential roofing, it revoked the building permit and notified Roy not to continue work until he obtained either a license or an exemption from licensure. 

Roy testified that, during that same week, Leidal’s son did not show up for work on other jobs, and Roy terminated his employment.  He testified that when he went to Leidal’s house the following weekend, her son was working on the roof, and Leidal refused to talk to him; Roy packed his gear and left.        

            Roy sued Leidal in district court, ostensibly under the contract.  But he did not sue for the contract price of $8,300; instead, he sued for $7,500, apparently the portion of the work that he believed that he had completed before the city revoked the building permit.  The district court awarded judgment in favor of Roy for $3,500, concluding that, although Roy “should not profit from this illegal activity * * * [Leidal] would be unduly enriched if not required to pay all of [Roy’s] actual expenses involved in the project.”  Leidal appeals.   

D E C I S I O N 

Leidal argues that (1) the district court abused its discretion by enforcing the parties’ contract and thereby permitting Roy to profit from illegal activities, (2) Roy failed to prove that Leidal was unjustly enriched, and (3) the clean-hands doctrine bars Roy from obtaining equitable relief.  Leidal also contends that the evidence is not sufficient to support the amount of the judgment. 

“Granting equitable relief is within the sound discretion of the [district] court.  Only a clear abuse of that discretion will result in reversal.”  Nadeau v. Ramsey County, 277 N.W.2d 520, 524 (Minn. 1979) (citation omitted).

I.  

A.        Enforcement of the parties’ contract

Leidal contends that because a contract to commit an illegal act is void, the district court abused its discretion by enforcing the parties’ contract against her and thereby permitting Roy to profit by engaging in illegal activities, that is, unlicensed residential-roofing work.  “A contract violating law or public policy is void.”  Barna, Guzy & Steffen, Ltd. v. Beens, 541 N.W.2d 354, 356 (Minn. App. 1995) (citation omitted), review denied (Minn. Feb. 27, 1996).  But a contract to do residential-roofing work is not a contract to commit an illegal act.  Roy was to be paid under the contract upon completion of the work; if Roy had obtained a license or an exemption to do residential-roofing work, he could have legally completed performance under the contract. 

When one party repudiates a contract, as the district court apparently found that Leidal did here, the nonbreaching party

may choose to rescind [the contract] and recover in quasi contract the value of his performance.  The theory of recovery is not compensation, as in the case of a suit for breach of contract, but restitution.  Plaintiff is to be restored as nearly as possible to his position before he made the contract.

 

Stark v. Magnuson, 2 N.W.2d 814, 814-15 (Minn. 1942) (citations omitted); see also Krogness v. Best Buy Co., 524 N.W.2d 282, 287 (Minn. App. 1994) (recovery under quasi-contract includes recovery for unjust enrichment), review denied (Minn. Jan. 25, 1995).  Here, the district court entered judgment against Leidal in an amount that was intended to cover Roy’s actual expenses; he did not “profit” from the work.  The district court did not, therefore, abuse its discretion.               

B.        Unjust enrichment

 Leidal argues that Roy has failed to prove the elements necessary to recover under a theory of unjust enrichment.  “Unjust enrichment is an equitable claim that arises when a party gains a benefit illegally or unlawfully, and there is no valid contract completely governing the rights of the parties.”  Stein v. O’Brien, 565 N.W.2d 472, 474 (Minn. App. 1997) (quotation omitted). 

[T]o establish a claim for unjust enrichment, the claimant must show that another party knowingly received something of value to which he was not entitled[ ] and that the circumstances are such that it would be unjust for that person to retain the benefit.

 

Schumacher v. Schumacher, 627 N.W.2d 725, 729 (Minn. App. 2001) (citations omitted).

Leidal contends that she received nothing of value from Roy because she was forced to hire another contractor to redo all of his work and she paid the contractor less than half of the $8,300 that she had agreed to pay Roy.  But the district court found that, based on the city inspector’s trial testimony, Leidal unnecessarily had Roy’s work redone.  This court defers to the district court’s credibility determinations.  Vangsness v. Vangsness, 607 N.W.2d 468, 472 (Minn. App. 2000).

Leidal claims that she knew nothing about the licensing requirement and that Roy did not prove that she engaged in “illegal or unlawful” actions.  The district court concluded that because Leidal’s son worked for Roy’s commercial-roofing business, he “should have known the circumstances regarding [Roy’s] licensing.”  And, although a claim of unjust enrichment arises when a party illegally or unlawfully gains a benefit, a “cause of action for unjust enrichment has been extended to also apply where * * * [a] defendant[’s] conduct in retaining the benefit is morally wrong.”  Schumacher, 627 N.W.2d at 729-30 (citations omitted); Stein, 565 N.W.2d at 474.     

Leidal contends that even if she knew about and participated in Roy’s illegal conduct, the parties were in pari delicto, and therefore the district court should have left both parties as they were.  The doctrine of in pari delicto bars recovery by one party in favor of another when both parties are wrongdoers.  State by Head v. AAMCO Automatic Transmissions, Inc., 293 Minn. 342, 347, 199 N.W.2d 444, 448 (1972). 

The doctrine of in pari delicto, based on judicial reluctance to intervene in disputes between parties who are mutually involved in wrongdoing, holds that anyone who engages in a fraudulent scheme forfeits all right to protection, either at law or in equity.

 

Brubaker v. Hi-Banks Resort Corp., 415 N.W.2d 680, 683 (Minn. App. 1987) (quotation omitted), review denied (Minn. Jan. 28, 1988).    

Here, although Roy did not obtain a residential-roofing license or an exemption, he could have obtained a license or an exemption and finished the work.  And, even if Leidal knew that Roy had no license to perform the work, the consequences for failing to secure a license apply to the contractor alone.  See Minn. Stat. § 326.92, subd. 1 (2000) (providing that person who performs unlicensed work is guilty of misdemeanor).  We decline to apply the doctrine of in pari delicto here.        

C.        Clean-hands doctrine  

 Leidal contends that the clean-hands doctrine bars Roy from obtaining equitable relief because he “knew or should have known that the contract was for an illegal act.”  The clean-hands doctrine provides that “he who seeks equity must do equity.” Gully v. Gully, 599 N.W.2d 814, 825 (Minn. 1999) (quotation omitted).  A court may apply the doctrine to deny a party equitable relief if that party acted in bad faith or if “the result induced by his conduct will be unconscionable either in the benefit to himself or the injury to others.”  Hruska v. Chandler Assocs., Inc., 372 N.W.2d 709, 715 (Minn. 1985) (quotation omitted).  Leidal argues that the fact that Roy applied for the building permit in her name and that, in his contract with her, he used the name Standard Roofing, Inc., instead of Titan-Standard, Inc., the name of his commercial-roofing company, proves that he knew that he would be performing work illegally. 

But the evidence here does not support a finding that Roy acted in bad faith or in a manner that unconscionably benefited himself or injured others.  At trial, the city inspector testified that a homeowner may hire an unlicensed contractor to perform residential-roofing work if that contractor obtains an exemption from licensure and if the project cost does not exceed $15,000.  Roy testified that he did not apply for an exemption because once the city had revoked the building permit for the job, Leidal refused to talk to him about completing the work.   

Roy also testified that, although he applied for a building permit in Leidal’s name, he signed the application with his own name; he did not intend to deceive anyone.  Roy testified that at the time he contracted with Leidal he was in the process of changing the name of his commercial-roofing company from Standard Roofing, Inc., to Titan-Standard, Inc., and that he believed that he contracted with Leidal under the name of Standard Roofing, Inc., because his insurance certificate still bore that name.  The district court apparently found Roy’s testimony credible, and this court defers to the district court’s credibility determinations.  See Vangsness, 607 N.W.2d at 472.  The district court did not abuse its discretion by concluding that Leidal benefited at Roy’s expense and that it would be unjust for her to retain that benefit.  

II.

            Leidal contends that the evidence at trial did not support the amount of the district court’s judgment because Roy submitted no evidence regarding the hours worked or rates of pay for the labor on her job.  This court will set aside a damage award only if it is “manifestly and palpably contrary to the evidence.”  Levienn v. Metro. Transit Comm’n, 297 N.W.2d 272, 273 (Minn. 1980) (citation omitted).

            The contract price of $8,300 for the job covered labor, materials, and the cost to dispose of old roofing materials.  Roy testified that he paid three people, including Leidal’s son, for the work but that he had no documentary evidence to support that claim.  Roy provided invoices that showed that he had paid $1,574.59 for materials for the job.  He also paid $3,655 in disposal costs for old roofing materials, which the district court found “terribly inflated.”  The city inspector testified that Roy had satisfactorily completed approximately 75% of the job before the city revoked the building permit.  Based on that evidence, the district court’s finding that Roy had invested a minimum of $3,500 in the project was not manifestly and palpably contrary to the evidence.           

            Affirmed.