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Goat Island S. Condo. Association, Inc. v. IDC Clambakes, Inc.

United States District Court, D. Rhode Island

June 10, 2015

GOAT ISLAND SOUTH CONDOMINIUM ASSOCIATION, INC. and CAPELLA SOUTH CONDOMINIUM ASSOCIATION, INC., Appellants,
v.
IDC CLAMBAKES, INC., Appellee

Page 846

For Goat Island South Condominium Association, Inc, Capella South Condominium Association, Inc, Appellants: William R. Grimm, LEAD ATTORNEY, Adam M. Ramos, Hinckley, Allen & Snyder, LLP, Providence, RI; Charles D. Blackman, Lederberg & Blackman LLP, Providence, RI.

For IDC Clambakes, Inc, Appellee: William P. Devereaux, LEAD ATTORNEY, Matthew C. Reeber, Thomas R. Gonnella, Pannone Lopes Devereaux & West LLC, Providence, RI; Kevin Vendituoli, IDC, Inc., Newport, RI.

Page 847

OPINION AND ORDER

William E. Smith, Chief Judge.

Pending before the Court is Appellants Goat Island South Condominium Association, Inc. and Capella South Condominium Association, Inc.'s (collectively the " Associations" ) appeal of the United States Bankruptcy Court decision in this matter. (ECF No. 25.) The decision of the Bankruptcy Court is AFFIRMED in part and VACATED in part.[1]

The Bankruptcy Court chronicled the factual and procedural background of this case in great detail. This Court will not repeat that background here, and Parts I and II of the Bankruptcy Court's decision are hereby ADOPTED. The Court agrees with the Bankruptcy Court's analysis of the question presented and the burden of proof. Additionally, this Court agrees with the Bankruptcy Court concerning the lack of an implied-in-fact contract.[2] Accordingly,

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this Court affirms Parts III.1-2 of the Bankruptcy Court's decision.

However, the Bankruptcy Court's implied-in-law or quasi-contract analysis is a different matter.[3] Faced with a record that has been described by the First Circuit as " problematic," Goat Island S. Condo. Ass'n, Inc. v. IDC Clambakes, Inc. (In re Clambakes, Inc.), 727 F.3d 58, 61 (1st Cir. 2013), the Bankruptcy Court properly determined that the correct solution to this dispute could be found by turning to equity. The Bankruptcy Court determined that certain elements of an implied-in-law, or quasi, contract had been met, but ultimately held that Clambakes had provided reciprocal benefits to Associations, such that no payment for use and occupancy was warranted. While the Court agrees with the Bankruptcy Court's overall framework, the Bankruptcy Court's application of that framework and its chosen remedy were clearly erroneous. Therefore, for the reasons set forth below, the Bankruptcy Court's decision on the quasi-contract issue is vacated.

I. Discussion

Before assessing the Bankruptcy's Court equitable analysis, a critical aspect of this case must be reviewed at the outset. Although Island Development Corporation, Inc. and IDC Properties, Inc. (collectively, " IDC" ) constructed the Regatta Club at its own expense, the Rhode Island Supreme Court has determined that it did so after its development rights had expired and that, consequently, the Regatta Club is owned by Associations, the entities that own the land upon which it was built. See Am. Condo. Ass'n, Inc. v. IDC, Inc., 870 A.2d 434, 443 (R.I. 2005) (America II); Am. Condo. Ass'n, Inc. v. IDC, Inc., 844 A.2d 117, 131 (R.I. 2004) (" America I" ). Further, the Rhode Island Supreme Court rejected IDC's argument that Associations' ownership of the Regatta Club constituted " a considerable and inequitable windfall" on account of IDC's " considerable investment in developing the . . . Regatta Club." America I, 844 A.2d at 134. The Court emphasized that IDC built the Regatta Club " at a time when [it was] on notice that [its] right to do so was in dispute" and concluded that IDC constructed the building " at [its] peril and cannot now contend that equity should prevent [Associations] from prevailing because of their expenditures." Id. at 135. Any equitable analysis in this case must accept the Rhode Island Supreme Court's determination that Associations owned the Regatta Club from the moment it was constructed and that IDC was not entitled to equitable relief for the costs it incurred in constructing the Regatta Club. These determinations are the established facts of this case, and this proceeding

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cannot be a vehicle to revisit or temper the effects of those holdings. That die is cast, and it is from this ...


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