Superior Court reverses order on construction job reimbursement

By Jim Boyle | Oct 15, 2014

A former vice president of a construction firm must reimburse his former company for the

materials purchased from third party vendors during a renovation on his own home, according to an order from a three-judge panel of the Superior Court of Pennsylvania.

The decision reverses an order from the Blair County Court of Common Pleas, which originally ruled that James Ritchey owed Mid-Land Construction $28,000 for materials used in the company's own inventory. The court sided with Ritchey that the third party materials was a mutual benefit for both parties, and reimbursing Mid-State would constitute a windfall for the contractor.

According to the court opinion, written by Judge Paula Francisco Ott, Ritchey had permission to use Mid-State Construction's materials and labor to perform renovations on his new home during a slow period for construction jobs. Mid_state claimed an oral agreement existed that said Ritchey would reimburse the company for the work, a total of $74,000. Ritchey argued that the $74,000 counted as a bonus due to him as vice president of the general contractor.

The Blair County Court of Common Pleas judge ruled in August 2013 that no oral contract existed, but Ritchey had been unjustly enriched by using Mid-State's inventory, ordering a reimbursement of $28,000. The use of more than $16,000 in third party materials held a mutual benefit for both parties, the judge said, because it allowed Mid-State to maintain a strong professional relationship with the suppliers during the slow period.

Ott's opinion stated a lack of evidence regarding the benefit given to the companies, or the harm from a slowdown in business. The trial court's opinion that Mid-Land and Ritchey received a mutual benefit is unsupported by fact, the ruling says.

"There is no indication in either the certified record or in the trial court opinion how the more than $16,000 in materials provided to Ritchey was in any way roughly equivalent to the stated intangible benefit to Mid-State for continuing to do business with three suppliers," Ott wrote.

The trial court also said that the combined reimbursement for Mid-State's inventory and the third party supplies, including carpeting, plumbing and heating materials, would be approximately $44,000, while Ritchey re-sold the home for $40,000 more than what he paid. The negative difference constitutes a windfall for Mid-State, the lower court said.

The Superior Court argues that the sale of the home has no bearing on the money he owes to Mid-State. There is no explanation in the certified record for why Ritchey chose to sell the home and the accepted price, providing no connection between the sale and the use of Mid-State's corporate account to buy the third party materials.

"An award reimbursing Mid-State for the exact amount charged by Ritchey to Mid-State's account, to better Ritchey's real property, cannot be a windfall to Mid-State," says Ott. "At most, such an award merely returns Mid-State to the status quo."

Mid-State did not appeal the decision for non-reimbursement on the labor costs. The Superior Court rules that the company is owed $44,853 and has remanded the case back to the Blair County Court of Appeals for entry of a judgment consistent with the decision.

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