Can a Subcontractor Who Only Contracted with the General Contractor Hold the Property Owner Liable For the Benefit the Owner Received when the General Contractor Fails to Pay the Subcontractor? — Yes.

The Arizona Supreme Court recently decided Markham Contracting Co. Ink vs. Cahava Springs Phase 1 Arizona (2026). The facts are that the landowners of Cahava Springs voted to create an improvement district to issue bonds to fund infrastructure. Including roads and waterlines. The bonds were to be repaid by a special assessment against the landowner’s properties.

The district and Markham entered into a $13-million-dollar construction contract, Markham performed the work, but The district failed to pay Markham $6.5 million. Markham won an arbitration award against the district for $6.5 million and then sought to collect from the landowners claiming the landowners had not paid all assessments yet received the benefit of the infrastructure and it would be unjust to allow the landowners to retain the benefit without paying for it.

The landowners filed a motion to dismiss Markham’s lawsuit arguing Markham had not claimed any improper conduct by the landowners. The trial court agreed and dismissed Markham’s lawsuit. Markham appealed the Arizona Court of Appeals reversed allowing Markham’s lawsuit to proceed. The landowners appealed and the Arizona Supreme Court which accepted the appeal because the issue of whether improper conduct is required to maintain an unjust enrichment claim (outside of the landlord tenant context) is an issue of statewide importance.

The Arizona Supreme Court again listed the factors required for an unjust enrichment claim;

1. The landowners’ enrichment
2. Markham’s corresponding impoverishment
3. A causal link between them
4. No justification for either, and
5. No available legal remedy

The landowners argued that the retention of the benefits was justified because they were not parties to the construction contract between the district and Markham. Markham argued the enrichment was unjustified because the landowners arranged for the district to improve their land then failed to pay for those improvements via assessments. The court engaged in a lengthy discussion of unjust enrichment and the Court of Appeals 2012 decision of Wang Electric Inc. vs. Smoke Tree Resort which requires improper conduct by the owner to be liable for unjust enrichment for improvement authorized by the owner’s tenant in the landlord/tenant context.

Ultimately, the Arizona Supreme Court ruled in favor of Markham stating that the injustice inquiry turns on: “Did the owner seek, authorize or acquiesce in receiving improvements that someone performed without gratuitous intent and did it pay no one for them? “If so, the owner’s retention of the benefit without compensation to the party whose work produces it is unjust.” Subcontractors should inquire whether the owner paid their general contractor for their work. If not, the next inquiry is did the owner seek, authorize, or acquiesce in the receiving the sub’s improvements, but failed to pay? If so, the sub can make an unjust enrichment claim against not just its contacting counter party, (general contractor) but also against the owner.

If you have questions about whether you may have an unjust enrichment claim against an owner for amounts, you are owed; contact one of the Sacks Tierney Construction Practice Group attorneys.