Vatsal Munshi, Respondent, vs. J-I-T Services, Inc., Appellant.

Vatsal Munshi, Respondent, vs. J-I-T Services, Inc., Appellant. A06-346, Court of Appeals Unpublished, January 16, 2007.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2006).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A06-346

 

 

Vatsal Munshi,

Respondent,

 

vs.

 

J-I-T Services, Inc.,

Appellant.

 

 

Filed January 16, 2007

Reversed Huspeni, Judge*

 

 

Hennepin County District Court

File No. EM-04-002559

 

 

Matthew H. Morgan, Wesley T. Graham, Henson & Efron, P.A., 220 South Sixth Street, Suite 1800, Minneapolis, MN  55402 (for respondent)

 

Michael D. Schwartz, Michael Schwartz, P.A., 455 Pond Promenade, Suite 210, P. O. Box 219, Chanhassen, MN  55317 (for appellant)

 

 

            Considered and decided by Klaphake, Presiding Judge; Ross, Judge; and Huspeni, Judge.

U N P U B L I S H E D   O P I N I O N

HUSPENI, Judge

On appeal from the district court's denial of its motion for judgment notwithstanding the verdict (JNOV), appellant argues that respondent's quantum meruit claim seeking compensation for the value of services he performed for his former employer fails as a matter of law because (1) respondent has an adequate remedy at law and obtained a default judgment against his former employer, and (2) the wages he seeks to recover are the subject of an express contract.  Because respondent has not met his heavy burden of showing that he has exhausted his efforts and is unable to collect the default judgment, he has an adequate remedy at law and his claim fails as a matter of law.  We reverse. 

FACTS

            Respondent Vatsal Munshi worked as Chief Engineering Officer for Impact Building Controls Installers, LLC (IBCI).  In mid-April 2002, IBCI informed respondent that it was having financial difficulties and that it would pay him when it obtained sufficient funds.  IBCI did not pay respondent from mid-April through July 2002, at which time respondent left IBCI and began working for H20 Management Systems (H2O).  Between April and July, respondent received one bonus check from Impact Energy Controls Corporation (IECC), a corporation affiliated with IBCI.  Respondent continued to provide services to IBCI as an H2O employee through mid-October 2002.  IBCI agreed to pay H2O for respondent's services. 

            In June 2002, Deluxe Corporation requested that IBCI propose an energy-management program.  Respondent, still employed at IBCI, worked on the proposal.  On October 16, 2002, IBCI and Deluxe entered into a service agreement.  Two weeks later, IBCI went out of business.  Fermin L. Aragon, who owned IBCI and IECC, filed for bankruptcy in December 2002.[1]  The record does not contain any indication that bankruptcy was discharged or if IBCI, as a corporate entity, underwent bankruptcy.  After IBCI went out of business, appellant J-I-T Services, Inc. began servicing IBCI's service agreements, including the agreement with Deluxe.  Appellant also hired IBCI/IECC employees.  Appellant's only connection to respondent was its payment of an H2O invoice for work respondent completed for IBCI.  

            In February 2004, respondent filed a complaint against IBCI, IECC, and appellant, alleging that despite demands for payment, IBCI failed to pay him wages earned from April to July 2002, and that IBCI, IECC, and appellant were liable in quantum meruit for the unpaid wages.  Respondent alleged that he conferred a benefit upon appellant and appellant was, or should have been, aware that respondent expected to be compensated.  IBCI and IECC informed respondent that they would not be responding to or defending the matter.  In April 2004, a default judgment was entered in favor of respondent against IBCI and IECC under Minn. R. Civ. P. 55 for failing to plead or otherwise defend within the allowable time.  Respondent was awarded $34,550 and $4,904.87 in costs, disbursements, and attorney fees.   

            The district court conducted a jury trial on the remaining quantum meruit claim against appellant.  The jury found that appellant received a benefit from respondent, that appellant was unjustly enriched, and that the fair value of the benefit appellant received from respondent was $21,500.  The district court denied appellant's motion for JNOV, and this appeal follows.    

D E C I S I O N

            Appellant argues that the district court erred in denying its motion for JNOV, contending that respondent's quantum meruit claim fails as a matter of law.  The facts are undisputed.  The application of law to stipulated facts is a question of law, which this court reviews de novo.  Morton Bldgs., Inc. v. Comm'r of Revenue, 488 N.W.2d 254, 257 (Minn. 1992).  

            Appellant argues that respondent had an adequate remedy at law and that an express contract between respondent and IBCI covered the subject matter at issue.  Appellant urges that the default judgment respondent obtained against his former employer for unpaid wages is an adequate remedy at law and prevents the equitable relief awarded against appellant.  The equitable principal of quantum meruit allows a party to recover reasonable compensation for acts performed that benefited another.  Busch v. Model Corp., 708 N.W.2d 546, 552 (Minn. App. 2006).  But "one may not seek a remedy in equity when there is an adequate remedy at law."  Southtown Plumbing, Inc. v. Har-Ned Lumber Co.,493 N.W.2d 137, 140 (Minn. App. 1992).  Whether a party has an adequate remedy at law is a legal question that this court reviews de novo.  ServiceMaster of St. Cloud v. GAB Bus. Servs., Inc.,544 N.W.2d 302, 305 (Minn. 1996). 

            Respondent contends that although he may have an adequate legal remedy against IBCI, that remedy should not be a basis for refusing him relief against appellant, because appellant received an independent benefit from his services.  In support of his independent-benefit argument, respondent claims that appellant never would have been able to take over IBCI's service agreements without his performance.  We recognize that the jury answered "yes" to the question of whether appellant received an independent benefit from respondent's services.  However, a critical question remains:  If IBCI had paid respondent his wages for the period mid-April through July 2002, would respondent have been entitled to bring a separate (quantum meruit) action against appellant?  Our review of the record reveals no basis upon which that question could be answered "yes."  Therefore, if respondent, indeed, has an adequate remedy at law against ICBI, there is no basis upon which his quantum meruit claim against appellant could succeed.  We, thus, examine the adequacy or inadequacy of the remedy at law available to respondent.

            In order for a legal remedy to be adequate it must be practical and efficient.  Zimmerman v. Lasky, 374 N.W.2d 212, 215 (Minn. App. 1985), review denied (Minn. Nov. 25, 1985).  "If a statute . . . provides a remedy by appeal or otherwise, such remedy is generally exclusive and will preclude any resort to equity."  Adelman v. Onischuk,271 Minn. 216, 228, 135 N.W.2d 670, 678 (1965).  In his complaint, respondent alleged that despite demands for payment, IBCI failed to pay him wages earned, in violation of Minn. Stat. §§ 181.14, .101 (2006).  The statute provides respondent with a legal remedy, one that generally would be his exclusive remedy. 

            Respondent argues, however, that his default judgment against IBCI is meaningless and he has no chance of recovering that judgment because IBCI is defunct.  "[A] remedy at law which is practically ineffective is not an adequate remedy."  Ostrander v. Ostrander, 190 Minn. 547, 549, 252 N.W. 449, 450 (1934).  A party, however, must show that the legal remedy is inadequate.  Zimmerman, 374 N.W.2d at 214.  And the burden of proof rests upon the complainant to establish that he is entitled to relief.  Sunny Fresh Foods, Inc. v. MicroFresh Foods Corp., 424 N.W.2d 309, 310 (Minn. App. 1988).   

            In Mon-Ray, Inc. v. Granite Re, Inc., this court held that subcontractors could not pursue an unjust-enrichment claim against the company who had contracted with the general contractor because they had a legal remedy against the general contractor.  677 N.W.2d 434, 440 (Minn. App. 2004), review denied (Minn. June 29, 2004).  This court stated that just because the subcontractors failed to pursue their available legal remedy, that did not entitle them to equitable relief.  Id.; see also Southtown Plumbing,493 N.W.2d at 140 (holding that subcontractors do not have a claim for unjust enrichment when they fail to pursue their available statutory remedy). 

            Respondent had a legal remedy available against IBCI, and serious questions remain as to the efforts he made to collect his unpaid wages.  He left employment with IBCI in July 2002, but he waited until February 2004 before filing a complaint seeking unpaid wages.  Importantly, although Aragon did not file for bankruptcy until December 2002, and even assuming IBCI, the corporate entity, also filed for bankruptcy, respondent had between July and December to pursue his legal remedy.  Additionally, and again assuming that IBCI underwent bankruptcy, respondent could have filed notice with the bankruptcy court that he had a claim against IBCI.  See Mon-Ray, 677 N.W.2d at 440 (stating that the failure to pursue an available legal remedy does not entitle a party to equitable relief).  Finally, while respondent eventually obtained a default judgment against IBCI, he has not shown that he made any effort to collect that judgment.[2]  To permit respondent to recover against appellant in quantum meruit and permit him to attempt to collect a judgment against IBCI could result in double recovery for respondent.  We conclude that respondent has not met his burden of establishing that he is entitled to equitable relief.  See Sunny Fresh Foods, 424 N.W.2d at 310.  Therefore, respondent's quantum meruit claim against appellant fails as a matter of law. 

            As an alternative grounds for reversal, appellant argues that respondent's claim fails as a matter of law because there was an express employment contract between respondent and IBCI that covered the same subject matter involved in the quantum meruit claim against appellantunpaid wages for the period from mid-April through July 2002.  Appellant urges that if courts permit an employee who has worked under an express contract with his employer to sue third parties in quantum meruit when there is a dispute with the employer over unpaid wages, courts would be deluged by a flood of lawsuits.  We recognize the complexity of the question raised in appellant's alternative ground for reversal, although the rather alarmist prediction that "the floodgates will open" if such a cause of action is recognized will not prevail if, in fact, there is a valid basis for permitting such action, we leave for another day determination of that issue.  Because we reverse on the grounds that respondent had an adequate remedy at law, it is not necessary to address the alternative basis for relief here.  

            Reversed.

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

[1]  The record includes a "Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors, & Deadlines" concerning a Chapter 7 bankruptcy case filed on December 27, 2002.  Aragon filed as an "individual" debtor and noted that the nature of his debts were "Consumer/Non-Business."  Although the notice indicates that objections to the discharge of bankruptcy could be filed up to April 1, 2003, the record contains no indication that a discharge of bankruptcy actually occurred.

[2] Without attempting to place an affirmative burden on respondent, we note the possibility that IBCI might have chosen to honor a moral obligation to pay respondent's wages.  See Stanek v. White, 172 Minn. 390, 391, 215 N.W. 784, 784 (1927) ("The moral obligation involved in the original debt [discharged in bankruptcy] affords a sufficient consideration to support a new promise to pay the debt.").