Question

: Lawrence M. Clarke, Inc., was the general contractor for construction of a portion of a sanitary sewer system in Billings, Michigan. Clarke accepted Kim Draeger’s proposal to do the work for a certain price. Draeger arranged with two subcontractors to work on the project. The work provided by Draeger and the subcontractors proved unsatisfactory. All of the work fell under Draeger’s contract with Clarke. Clarke filed a suit in a Michigan state court against Draeger, seeking to recover damages on a theory of quasi contract. The court awarded Clarke $900,000 in damages on that theory. A state intermediate appellate court reversed this award. Why? [Lawrence M. Clarke, Inc. v. Draeger, 2015 WL 205182 (Mich.App. 2015)] HOMEWORK FORMAT FACTS- (This should be real easy- they come right from the book) ISSUE(s)- (What is the dispute between the parties? What is question to be discussed?) LAW- (What is the applicable law?) Research the law in the chapter, cite and define/explain which laws are applicable. DISCUSSION- (This is your analysis-include major and minor points and opposing points of view or counterpoints to add depth to your analysis. Remember, use proper paragraphs. Submissions should be at least 2/3 paragraphs.) CONCLUSION -(Sometimes referred to as the Resolution-I should be able to know your conclusion by the way your framed your issue and by your Discussion-go back to your Issue- see if you answered the question(s) posed in a sentence or two at best.

Answer 1

In Lawrence M Clarke, Inc v Draeger et al, Plaintiff was a general contractor engaged to construct a public sanitary sewer system. The plaintiff accepted its subcontractor's proposal, added a profit margin of 12%, and essentially submitted the proposal as its own to perform the Project. The plaintiff heavily relied on its subcontractor and brought suit for breach of contract and unjust enrichment against its subcontractor and its principal officer for the subcontractor's alleged non-performance. The trial court awarded the Plaintiff over $900,000.00 under an implied contract theory of quantum meruit. The trial court held the subcontractor's principal officer to be personally liable for the judgment award because the principal officer failed to respect the corporate form.

The Court of Appeals reversed the trial court. It reaffirmed the bedrock principle in Michigan that unjust enrichment is not an available remedy where an express contract exists between the same two contracting parties.

The Court of Appeals also reversed the trial court's calculation of back charges against the subcontractor. The Court of Appeals stated that trial courts must incorporate any savings of the injured party. Here, the general contractor was not entitled to recover damages equal to the gross value of its subcontractors' lower-tiered payment bond claimants. Rather, the damage claim should have been equal to the amounts actually paid by the general contractor to settle the claims against its payment bond.

The Court of Appeals affirmed the trial court's decision to pierce the corporate veil of the subcontracting entity and hold its principal officer personally liable. The trial court found that the subcontractor did not file annual reports, was undercapitalized, did not hold shareholder or board meetings, did not pay annual filing fees, and the principal officer permitted the subcontractor to be dissolved. Michigan courts pierce the corporate veil to protect creditors where a stockholder uses the corporation to avoid legal obligations, and where the corporate form is not respected.