Bank of America v. J. & S. AUTO REPAIRS
143 Ariz. 416, 1985 Ariz. LEXIS 155, 694 P.2d 246 (1985)
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Rule of Law:
Under the doctrine of unjust enrichment, a party who adds detachable parts to a chattel under the mistaken belief of ownership is entitled to restitution for the value of those parts if they can be removed without damaging the chattel. Such parts do not become the property of the chattel's owner through the doctrine of accession.
Facts:
- Bank of America held a purchase money lien on a 1977 Plymouth Voyager Van owned by Thomas H. Duncan.
- After the van was damaged in a fire, Duncan had it towed to J. & S. Auto Repairs on August 15, 1978, for a repair estimate but did not authorize repairs.
- Duncan subsequently disappeared, and J. & S. was unable to contact him.
- J. & S. hired a title service which, in early 1979, provided a report incorrectly stating there were no liens on the van.
- Believing the van was abandoned and that he now owned it, James Lohmeier of J. & S. applied for a bonded title and proceeded to extensively repair the van, replacing the engine, transmission, and other parts.
- After the repairs were completed, J. & S. discovered on April 19, 1979, that Bank of America held a lien on the van.
- On May 21, 1979, J. & S. delivered the repaired van to the bank.
Procedural Posture:
- Bank of America filed a replevin action in trial court against J. & S. Auto Repairs to recover the van.
- J. & S. filed a counterclaim against the bank for $4,400, alleging unjust enrichment for the repairs.
- The trial court awarded possession of the van to the bank but also awarded $3,000 in unjust enrichment damages to J. & S.
- Both parties appealed the trial court's decision to the Court of Appeals.
- The Court of Appeals reversed the trial court, finding that J. & S. was not entitled to restitution, and directed the trial court to enter judgment for the bank.
- J. & S. (petitioner) sought review of the Court of Appeals' decision by the Supreme Court of Arizona.
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Issue:
Does a good-faith improver who adds detachable parts to a chattel under the mistaken belief of ownership have a right to restitution from the true owner for the value of those parts when the owner recovers the chattel through a replevin action?
Opinions:
Majority - Gordon, Vice Chief Justice
Yes, a good-faith improver who adds detachable parts to a chattel under the mistaken belief of ownership has a right to restitution from the true owner. While the Restatement of Restitution § 42(2) precludes recovery for the value of services or the overall enhanced value of a chattel in a replevin action, it does not bar recovery for the parts themselves. The court distinguishes parts from labor, finding that under Restatement § 39, an improver is entitled to restitution for chattels (the parts) transferred by mistake, provided they are not permanently incorporated into the principal chattel. This right depends on the doctrine of accession. The court rejects the 'usefulness' test for accession and adopts a 'detachability' test, holding that parts which can be removed without damaging the vehicle do not become accessions. Because the after-acquired property clause in the bank's contract with the original owner does not bind third parties like J & S, and since the parts can likely be removed without damage, J & S has a right to recover the parts or their value.
Analysis:
This decision modernizes the doctrine of accession in Arizona for mass-produced goods like automobiles. By rejecting the older 'usefulness' or 'integral part' test and adopting a 'detachability' test, the court provides a more equitable outcome that prevents a windfall for the original owner or lienholder. This precedent protects innocent improvers who act under a mistake of fact, allowing them to recover the value of their property (the parts) while still respecting the original owner's right to their chattel in its pre-improved state. The ruling clarifies the distinction between non-recoverable services and recoverable, severable parts in unjust enrichment claims involving chattels.
