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Emond Plumbing & Heating, Inc. v. BankNewport

Supreme Court of Rhode Island

November 28, 2014

Emond Plumbing & Heating, Inc., et al.

Newport County Superior Court. (NB 11-569). Associate Justice Brian P. Stern.

For Plaintiffs: Christopher H. Little, Esq.

For Defendant: Neil P. Galvin, Esq.

Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.


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Flaherty, Justice 

Emond Plumbing & Heating, Inc. (Emond) and Tecta America New England, LLC (Tecta) (collectively the plaintiffs) appeal from a judgment of the Superior Court granting BankNewport's (defendant) motion for summary judgment and denying the plaintiffs' cross-motion for summary judgment. On appeal before this Court, the plaintiffs argue that the Superior Court erred when it analyzed their claims under the Uniform Commercial Code (UCC) and the equitable subordination framework applicable to priority disputes between secured and unsecured creditors. Instead, the plaintiffs contend that their claims should have been analyzed under the theory of unjust enrichment. In that regard, the plaintiffs aver that each of them has sufficiently demonstrated that it conferred a benefit upon the defendant, that the defendant appreciated the benefit, and that the defendant's acceptance of the benefit, without payment, would be inequitable and unjust. Conversely, the defendant argues that it was not unjustly enriched because it neither received, nor did it appreciate, any benefit conferred by the plaintiffs. Further, the defendant argues that it is not inequitable for a secured creditor to retain the benefit that it recovered arising from its contractual rights. Finally, the defendant contends that a judgment in favor of the plaintiffs would do great damage to our jurisprudence because it would effectively render a secured creditor's priority status meaningless. For the reasons set forth in this opinion, we affirm the judgment of the Superior Court.


Facts and Travel

In May 2010, AIDG Properties, LLC (AIDG), a real-estate holding company managed by Anjan Dutta-Gupta (Dutta-Gupta), purchased premises located at 184 John Clarke Road, Middletown (the property). The property consisted of 5.15 acres of real estate and a 57,372-square-foot industrial office building. AIDG purchased the property in order to lease the majority of the office building to Advanced Solutions For Tomorrow, Inc. (ASFT), a related defense contracting firm. Dutta-Gupta was the principal of ASFT and the relationship between AIDG and ASFT has been described as that between a real-estate holding company and an operating company.

To finance the purchase of the property, and to obtain capital to perform certain necessary improvements to the building located thereon, AIDG obtained two loans from defendant. The first loan was in the amount of $2,516,000; it was intended to finance the acquisition of the property. That loan was secured by a first mortgage on the property, naming defendant as mortgagee. Further, AIDG obtained a second loan in the amount of $1,984,000, referred to as a bridge or construction loan, to help, in part, with financing the purchase of the property as well as funding the necessary improvements. The second loan was secured by a second mortgage on the property in favor of defendant. Both loans were personally guaranteed by ASFT, Dutta-Gupta, and his wife, Indrani Dutta-Gupta.

Necessary improvements included the replacement of the mechanical, or HVAC, systems, which was estimated to cost $400,000, as well as a total roof replacement, which was estimated to cost $357,000. It soon became evident that an

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increase to the construction budget was required. As a result, on October 6, 2010, a loan modification was executed, increasing the construction budget and bringing the combined total amount of the first and second loans to $4,727,520.

On August 2, 2010, AIDG engaged ABC Building Corp. (ABC) to serve as the general contractor for the HVAC and roofing renovations. AIDG and ABC engaged in a competitive bidding process to solicit interested subcontractors to bid on the projects. After reviewing the bids that were submitted, ABC selected Emond to serve as the HVAC subcontractor based upon the company's bid and experience. As a result, on August 31, 2010, ABC and Emond entered into a subcontract agreement. The agreement provided that Emond was to remove the ...

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