Myers-Macomber Engineers v. M.L.W. Construction Corp.

M.L.W. Construction Corporation (M.L.W.) (defendant) was the owner and developer of a condominium complex. M.L.W. obtained a loan from HNC Mortgage and Realty Investors (HNC) (defendant) for $5,850,000. The loan was secured by a construction mortgage. During construction, Myers-Maycomber Engineers (Engineers) (plaintiff) performed site work for M.L.W. M.L.W. defaulted on its payments to HNC, and pursuant to the terms of the mortgage agreement, HNC exercised its right as mortgagee in possession and hired its own contractors to complete the project. At the time of default, HNC had advanced a total of $2,900,000 to M.L.W. The amount advanced by HNC to M.L.W. included an allocation for site work. HNC ultimately foreclosed on the mortgage and purchased the development at a sheriff’s sale. There was no evidence that HNC made any profit upon the completion of the project. Engineers filed an assumpsit claim against M.L.W. for an unpaid balance of approximately $11,300. M.L.W. did not contest the claim. Engineers also filed suit against HNC, alleging HNC was unjustly enriched by Engineers’ performance of the site work and, therefore, also was liable for the unpaid balance of Engineers’ services. Notwithstanding the fact that there was no express agreement between HNC and M.L.W. obligating HNC to assume M.L.W.’s debts, the lower court held that HNC, as mortgagee in possession, acted as a quasi-trustee and had an obligation to use the undistributed mortgage funds to satisfy the debts of M.L.W. HNC appealed the lower court’s judgment.