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Newstone Development, LLC v. East Pacific, LLC

Supreme Court of Rhode Island

June 24, 2016

Newstone Development, LLC
East Pacific, LLC, et al.

         Newport County, (NC 11-266), Superior Court, Associate Justice Bennett R. Gallo

          For Plaintiff: Michael T. Eskey, Esq. Stephen A. Izzi, Esq.

          For Defendants: Donald J. Maroney, Esq. Paul T. Sullivan, Pro Hac Vice Warren D. Hutchison, Esq. Michael Daly, Esq.

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


          Paul A. Suttell, Chief Justice

         This case arises from an incident involving a frozen water pipe and its diluvial aftermath, which caused extensive property damage to several Newport waterfront luxury condominium units. The plaintiff, Newstone Development, LLC (Newstone), owned several units in the condominium complex at the time of the incident. Newstone now appeals from a Superior Court judgment in favor of the defendants, East Pacific, LLC (East Pacific), Michael Rabinowitz, Diane Rabinowitz (the Rabinowitzes), and the contractors, engineers, and architects who were involved in building the condominium (construction defendants).[1] The sole issue before this Court is whether the plaintiff can recover loss-of-use damages during the time that the condominium units were under repair. For the reasons set forth in this opinion, we affirm the judgment of the Superior Court.


         Facts and Procedural History

         The essential facts in this case are not in dispute and are as follows. Newstone owned several condominium units at The Residences at Brown and Howard Wharf Condominiums in Newport (The Residences). East Pacific, an entity formed by the Rabinowitzes for the sole purpose of purchasing their condominium unit, owned unit 205 at The Residences. For a period of time prior to December 19, 2009, the Rabinowitzes had turned off the heat in unit 205. On December 19, 2009, water in a pipe passing through their unit froze, causing the pipe to rupture. The ensuing flood caused extensive damage to The Residences, including to common areas and to units within the building. Units 203, 204, and 206, all of which were owned by Newstone (the Newstone units), sustained a total of $1, 600, 000 in property damage. At the time of the incident, the Newstone units were unoccupied, and were listed and being marketed for sale. Newstone's insurance provider has since paid for all the necessary repairs to the Newstone units and the units have been sold at full market value.

         On May 9, 2011, Newstone filed a four-count complaint against the Rabinowitzes and East Pacific. The complaint alleged counts of negligence (count 1), trespass (count 2), diminution of value of plaintiff's property (count 3), and strict liability (count 4). In its complaint, Newstone alleged that the "condominiums [at The Residences] were extensively damaged as a result of the flooding and water damage caused by * * * [d]efendants." On August 8, 2012, Newstone filed a motion for leave to file an amended complaint, which the hearing justice granted. The amended complaint omitted counts 2 and 4, and alleged that Newstone suffered damages as a result of "not being able to use, occupy, rent or lease the Newstone [u]nits." The complaint was amended again on February 20, 2013. The second amended complaint added construction defendants as additional defendants to the suit.[2]

         On January 24, 2014, East Pacific and the Rabinowitzes filed a motion for summary judgment, to which plaintiff objected. A hearing was held on April 7, 2014. At the summary judgment hearing, plaintiff acknowledged that the Newstone units had sold and had not lost value; consequently, plaintiff informed the court that it would no longer be pressing its claim for diminution of property value. As to its negligence count, plaintiff sought to recover damages for the loss of use of the units as measured by the fair rental value for the period of time that the Newstone units were under repair. The plaintiff argued before the hearing justice that its damages during this period amounted to "loss of use [of the Newstone units, ] [l]oss of the ability to rent the [Newstone units] or use the[m] * * * as its own * * *." The hearing justice granted East Pacific and the Rabinowitzes' motion for summary judgment.[3]

         The plaintiff subsequently filed a motion to reconsider. During the May 5, 2014, hearing on the motion to reconsider, the hearing justice explained that he had granted East Pacific and the Rabinowitzes' motion for summary judgment because "it was pretty much conceded that at the time of the loss that [the Newstone units] were not being offered for rentals." The plaintiff argued for the first time during the hearing on the motion to reconsider that, irrespective of whether it had actually suffered a loss of use, it was entitled to recover for a "prospective loss of use." The hearing justice disagreed and denied plaintiff's motion.

         Following the denial of plaintiff's motion to reconsider, construction defendants filed their respective motions for summary judgment.[4] A hearing on their motions was held on June 23, 2014. At the hearing, plaintiff raised the same argument that it had made during the motion to reconsider, i.e., that it was entitled to recover loss-of-use damages even in the absence of actual economic loss. The hearing justice granted construction defendants' motions for summary judgment reasoning that "awarding * * * [p]laintiff damages for loss of use, " where there was no actual loss of rent, "would result in * * * [p]laintiff profiting ...

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