Peden v. Whitney

Background

Patricia and Timothy Peden hired Mark Whitney to design and build a retaining wall at their hillside home. They signed a written Construction Agreement in March 2025 for a fixed cost of $175,200, with additional work requiring approval by both the owner and contractor. After additional work was proposed, the Pedens directed Whitney to stop and terminated the contract on December 3, 2025.

Whitney filed counterclaims for breach of contract, breach of the implied covenant of good faith and fair dealing, a common count seeking the reasonable value of services and materials and alleging unjust enrichment, and declaratory relief concerning warranty and liability. The Pedens moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a pleading does not state a legally sufficient claim, to dismiss counterclaims two through four.

Analysis

Claim Two: Implied Covenant

The court dismissed the implied-covenant counterclaim with leave to amend. An implied covenant of good faith and fair dealing is a promise the law reads into contracts, requiring parties not to unfairly frustrate the benefits of their agreement. The court found that Whitney’s counterclaim repeated the same alleged conduct and sought the same $43,946.72 as his breach-of-contract counterclaim, making it superfluous.

The court also rejected Whitney’s argument that the agreement’s sparse language supported the claim as pleaded. The agreement required approval by both parties for additional work and costs, so the Pedens’ refusal to approve additional work was permitted by the agreement. The court said an amended claim could proceed if it identified bad-faith conduct during performance that frustrated a contractual benefit different from the unpaid sums sought in the contract claim.

Claim Three: Reasonable Value, Unjust Enrichment, and Account Stated

The reasonable-value and unjust-enrichment theories survived. Although a party generally may not seek quasi-contractual recovery when an enforceable contract covers the same subject, the court held that alternative pleading was permitted because the Pedens disputed whether the written Construction Agreement was valid or enforceable. Whitney could therefore pursue the value of the work if the contract claim failed.

The account-stated theory was dismissed with leave to amend. An account stated requires an agreement on the amount owed and a promise to pay that amount. The court found that Whitney did not plead an agreed final balance or a promise to pay; instead, the counterclaim alleged that the Pedens disputed the charges. The court also noted that the alleged figures were not obviously reconcilable.

Claim Four: Declaratory Relief

The declaratory-relief counterclaim was dismissed with prejudice. It sought a declaration that Whitney and his subcontractors were relieved of warranty or liability for completed and incomplete work. The court found that the Pedens’ negligence claims would resolve the same issues, including whether Whitney’s excavation, removal of lateral and subjacent support, and failure to stabilize the site caused the alleged damage.

The court also held that Whitney lacked standing to seek declaratory relief for his subcontractors because he did not plead that their rights had been assigned to him or that he was acting in a representative capacity. The dismissal with prejudice was based on the claim’s redundancy, which made amendment futile. The court stated that the dismissal was without prejudice to Whitney’s raising the same contentions as defenses to the Pedens’ claims.

Disposition

Judge Laurel Beeler granted the motion to dismiss in part and denied it in part. Claims two and three on the account-stated theory were dismissed with leave to amend. Claim three based on reasonable value and unjust enrichment survived. Claim four was dismissed with prejudice. Any amended counterclaim must be filed within fourteen days and must include a blackline comparison with the current counterclaims. The order resolved ECF No. 56.