This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. ' 480A.08, subd. 3 (1994).

STATE OF MINNESOTA

IN COURT OF APPEALS

C3-95-2233

Andrejs and Ingrid Vape,

Appellants,

vs.

KK Corporation,

Respondent.

Filed June 11, 1996

Affirmed

Huspeni, Judge

Hennepin County District Court

File No. 939290

Kyle J. Hegna, Rebecca L. Wilson, Wilkerson, Hegna & Walsten, P.L.L.P., 1100 Northland Plaza, 3800 West 80th St., Bloomington, MN 55431 (for Appellants)

John A. Warchol, Warchol, Berndt & Hajek, P.A., 110 Broadway Place E., 3433 Broadway St. N.E., Minneapolis, MN 55413 (for Respondent)

Considered and decided by Huspeni, Presiding Judge, Klaphake, Judge, and Holtan, Judge.*

U N P U B L I S H E D O P I N I O N

HUSPENI, Judge

Respondent was awarded summary judgment on appellants' unjust enrichment claim because the district court determined that appellants had not made a prima facie case of unjust enrichment. Because we see no evidence that respondent was unjustly enriched, we affirm.

FACTS

Appellants Andrejs and Ingrid Vape are experienced real estate investors. In May 1990, the broker they had hired informed them of a potential investment in a year-old 102-unit luxury apartment building then owned by respondent KK Corporation. The broker testified that he provided the Vapes with income and expense figures for the property from December 1989 to April 1990.

The Vapes hired a CPA, who obtained and reviewed financial information from KK. The CPA predicted that the Vapes would have a negative cash flow for the first three years they owned the building; he said that prediction was "conservative." Before purchasing the building, the Vapes inspected it themselves and hired an engineer to inspect it.

The purchase agreement provided for a down payment of $700,000, assumption of a $5.9 million mortgage, and a final payment of $195,000 to be due seven years after closing, in June 1997; it also provided that a default in mortgage payments would constitute a default on the contract for deed.

In October 1992, the Vapes stopped making the mortgage payments. KK served notice of cancellation of the contract for deed in March 1993. In June 1993, the Vapes obtained a temporary restraining order prohibiting the cancellation of the contract and brought this action for unjust enrichment. [1] In March 1994, the mortgagee foreclosed and purchased the building for $6.2 million at a sheriff's sale; KK was unable to redeem it and lost its interest in the building.

The Vapes claim KK was unjustly enriched by the $700,000 down payment; KK moved for summary judgment on that claim, arguing that it had not been unjustly enriched. That summary judgment is the basis of this appeal.

D E C I S I O N

Standard of Review

On appeal from summary judgment, we ask whether there are any genuine issues of material fact and whether the district court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). The district court determined that respondent was entitled to summary judgment as a matter of law because appellants failed to prove all the elements of their unjust enrichment claim.

To recover for unjust enrichment, a defaulting vendee must show two things: "the vendor's alleged excess of rightful damages" and "fraud, mistake, or moral wrongdoing on the part of the vendor." Fort Dodd Partnership v. Trooien, 392 N.W.2d 46, 48-49 (Minn. App. 1986); see also Cady v. Bush, 283 Minn. 105, 110, 66 N.W.2d 358, 361-62 (1969). The Vapes failed to present any evidence that KK was unjustly enriched.

[A] defaulting vendee's action for unjust enrichment necessarily carries the burden of affirmative showing of the vendor's alleged excess of rightful damage.

Zirinsky v. Sheehan, 413 F.2d 481, 489 (8th Cir. 1969), cert. denied, 396 U.S. 1059 (1970) (applying Minnesota law). Neither in their brief opposing summary judgment, nor at the summary judgment hearing, nor in their brief on appeal did the Vapes argue or even address the alleged unjust enrichment of KK.

Unjust enrichment is typically invoked by defaulting vendees because the vendor retains both the down payment and the property and is thus unjustly enriched. See generally Zirinsky, 413 F.2d at 481. As a result of the transaction here, KK received $700,000 from the Vapes, but lost the use of the building, income from the building, and ultimately its equity in the building. Pursuant to Zirinsky, the Vapes must prove that these losses together were less than $700,000.

[I]n order to establish any actionable wrong the defaulting vendee must show he is entitled to a sum in excess of [the vendor's] actual damage.

Zirinsky, 413 F.2d at 490. Numerous cases have denied unjust enrichment claims for failure to prove enrichment. See, e.g., Zirinsky, 413 F.2d at 489 (defaulting vendee failed to prove vendor's enrichment); Cady, 283 Minn. at 110, 66 N.W.2d at 362 (vendors did no more than exercise their rights under their written agreement with vendees); Hommerding v. Peterson, 376 N.W.2d 456, 460 (Minn. App. 1985) (where contract provides that in the event of default monies already paid are liquidated damages, defaulting vendee cannot claim them on an unjust enrichment theory). [2]

In view of the Vapes' failure to make any showing that KK was unjustly enriched by the down payment, the district court did not err in granting KK summary judgment on the Vapes' claim for unjust enrichment.

[I]t must be kept in mind that the principle of unjust enrichment should not be invoked merely because a party has made a bad bargain.

Cady, 283 Minn. at 110, 66 N.W.2d at 361-62. It is undisputed that the purchase of the apartment building proved to be a bad bargain, but that fact does not support a claim for unjust enrichment.

The theory of unjust enrichment is based on what the person allegedly enriched has received, not on what the opposing party has lost.

Zirinsky, 413 F.2d at 489 (quoting Georgopolis v. George, 237 Minn. 176, 185, 54 N.W.2d 137, 142 (1952)). The Vapes' losses, regardless of whether they were fraudulently caused, are irrelevant to their unjust enrichment claim. The alleged fact issues as to KK's fraudulent misrepresentations, even if true, would not preclude summary judgment on the unjust enrichment claim. [3]

Affirmed.


Footnotes

* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, ' 10.

[1]The temporary restraining order was dissolved when the Vapes' motion for an injunction was denied; they challenged that denial in this court, which affirmed it. Vape v. KK Corporation, No. C8-93-2174 (Minn. App. June 21, 1994), review denied (Minn. Aug. 24, 1994). In their complaint, the Vapes also alleged three counts of fraudulent inducement; these counts have been dropped.

[2]The contract for deed here contains a similar provision.

[3]While we need not address whether there are material fact questions on the issue of fraud, we note that the "conservative" prediction of the CPA hired by the Vapes that the building would produce a negative cash flow for three years at best casts doubt on the Vapes' allegations that KK misrepresented the building's financial condition.