## Facts

- Radisson owned a resort renovation project and acted through its agent, CSA.
- CSA invited Flooring Systems, Inc. (a subcontractor) to bid on carpet work; CSA accepted Flooring’s bid.
- Radisson later hired Five Star Services, Inc. as general contractor, and Five Star subcontracted with Flooring for the carpet work.
- Flooring completed the carpet installation, worth about \$59,000, but Five Star failed to pay the full amount due.
- Under the Radisson–Five Star prime contract, Radisson could withhold final payment until known project debts were satisfied.
- Radisson withheld about \$25,000 from Five Star after learning Flooring had not been paid.
- Flooring sued Radisson and CSA (and initially Five Star) asserting, among other theories, unjust enrichment; Five Star entered bankruptcy and was dismissed.

## Issues

1. Whether a subcontractor may pursue unjust enrichment against an owner (and the owner’s agent) despite having a valid subcontract with the general contractor.
2. Whether an owner’s withholding of contract funds due to unpaid subcontractors can support an unjust enrichment claim by the unpaid subcontractor.

## Decision

- The Arizona Supreme Court reversed summary judgment for Radisson and CSA on the unjust enrichment claim.
- The court held that a valid subcontract between the subcontractor and general contractor does not automatically bar unjust enrichment against the owner.
- The court concluded the record raised triable issues on whether Radisson and CSA were unjustly enriched where Flooring was unpaid and Radisson retained both the installed carpeting and withheld funds.
- The court vacated the court of appeals’ decision and remanded for further proceedings on unjust enrichment.

## Legal Principles

- Unjust enrichment may be imposed as an obligation created by law when a defendant retains a benefit without compensating the plaintiff and retention would be unjust, even absent a direct contract between them.
- In construction disputes, the existence of a subcontract does not categorically foreclose restitution from an owner where the owner has not fully paid for the improvement and the subcontractor has not been paid.
- A subcontractor’s performance is not treated as officious when it was provided with an expectation of payment under a contractual arrangement and conferred a substantial benefit on the owner’s property.
- Summary judgment is improper when facts could support findings that the defendant received and retained a benefit, the plaintiff was not adequately compensated, and equity may require restitution.

## Conclusion

The court held that an unpaid subcontractor can pursue unjust enrichment against an owner and its agent even when the subcontractor has a valid subcontract with the general contractor, particularly where the owner knowingly withholds contract funds due to unpaid project debts and retains the benefit of the subcontractor’s work.


Flooring Sys., Inc. v. Radisson Grp., Inc., 160 Ariz. 224, 772 P.2d 578 (Ariz. 1989)