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Cote v. Aiello

Supreme Court of Rhode Island

November 2, 2016

Mathew M. Cote
John Aiello et al.

         Providence County Superior Court No. PC 06-4136 Patricia A. Hurst, Associate Justice

          For Plaintiff: Melissa Bucaria, Esq.

          For Defendants: Lauren E. Jones, Esq. Robert S. Thurston, Esq. Richard A. Boren, Esq.

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



         This case came before the Supreme Court on October 5, 2016, on appeal by the plaintiff, Mathew M. Cote[1] (plaintiff), from a Superior Court judgment, following a trial before a justice of the Superior Court sitting without a jury, that dismissed his complaint alleging breach of an implied contract, promissory estoppel, fraud, negligent misrepresentation, and unjust enrichment. After a ten-day trial, the trial justice found for the defendants, John (Aiello) and Anna-Maria Aiello (Mrs. Aiello) (collectively, defendants or the Aiellos), on all claims, [2] declaring, inter alia, that the plaintiff failed to prove the existence of an implied contract to purchase the defendants' business, Richmond Ready-Mix (RRM), and that the promises made by Aiello to the plaintiff were not clear and unambiguous declarations to support a claim for promissory estoppel. On appeal, the plaintiff argues that the trial justice erred by: (1) confining her analysis to the 1996 and 1999 conversations between the plaintiff and Aiello; (2) inappropriately speculating about the plaintiff's willingness to purchase RRM; (3)incorrectly concluding that the plaintiff did not detrimentally rely on Aiello's promises; (4)overlooking material evidence in considering the plaintiff's fraud and negligent misrepresentation claims; and (5) applying the incorrect measure of damages to the plaintiff's unjust enrichment claim. Because we are of the opinion that the trial justice did not overlook or misconceive material evidence and was not otherwise clearly wrong in dismissing the complaint, we affirm the judgment.

         Facts and Travel

         The facts of this case recount a story of an employee who succumbed to his employer's promises about future events that never materialized. In 1986, after graduating from high school, plaintiff began working for Aiello's then-existing construction company, Aiello Construction. When Aiello closed the doors on that business in 1991, plaintiff was transferred to a sister company, Richmond Sand and Gravel (RS&G). The plaintiff terminated his employment with RS&G later that year because of the manner in which Aiello's son-in-law, Jeffrey Nero (Nero), was managing the company. Some years later, in May 1996, he was lured back when Aiello presented plaintiff with an opportunity first to return to RS&G and then to transfer to a sister company, RRM. Aiello sweetened the offer by explaining to plaintiff that he could purchase RRM in the future, although they did not discuss any terms of a potential purchase. The plaintiff was led to believe that Aiello owned RRM. He was not alone. Many years later it was revealed that Mrs. Aiello was the sole shareholder of the company, an ownership interest that both defendants had concealed.

         After plaintiff accepted the employment opportunity, he and Aiello continued to enjoy a close personal relationship.[3] In 1997, plaintiff was named president and vice president of RRM, and acted as its chief executive officer (CEO). Over the years, Aiello made repeated references to the future, indicating that plaintiff would purchase RRM and Nero would purchase RS&G. For example, in 1999, Aiello declared that when he was ready to retire he would sell RRM to plaintiff at fair market value and would structure a payment plan for him as well. Although statements of this nature were made on several occasions, the details of any potential purchase were never discussed, nor were any contract terms explored by plaintiff.

         Despite plaintiff's hard work and loyal service, Aiello sold RRM[4] to Peter Calcagni (Calcagni) for $1, 829, 800 on June 22, 2005. The purchase agreement included a promise that plaintiff would be paid the sum of $50, 000-which Calcagni was led to believe was a bonus but was actually a repayment of an outstanding loan from plaintiff to RRM. On June 25, 2005, Aiello informed plaintiff that he had sold RRM to Calcagni. The plaintiff became visibly distraught at this news; and, as Calcagni assumed control of the business, he remained frustrated. The plaintiff continued to work for Calcagni until July 2009, when the assets of RRM were sold in receivership to Michael D'Ambra (D'Ambra).[5] The plaintiff currently works for D'Ambra at Rhode Island Ready Mix, the successor company of RRM.

         The plaintiff filed an action against Aiello on August 8, 2006. The complaint alleged: (1) promissory estoppel; (2) breach of an oral contract; (3) breach of an implied contract; (4) breach of a quasi-contract; and (5) constructive trust. On May 15, 2007, plaintiff filed an amended complaint, alleging the same claims against Mrs. Aiello. The amended complaint also alleged fraud and negligent misrepresentation against both defendants.

         A bench trial before a justice of the Superior Court commenced on November 30, 2011. The trial spanned ten nonconsecutive trial days, concluding on January 6, 2012. At trial, plaintiff recounted the numerous assertions that Aiello made regarding his future plans for RRM. He testified that in 1996 he was told by Aiello that it would be a "great opportunity" for plaintiff to join the RRM team and that "at some time in the future [plaintiff] would possibly be able to purchase the company." The plaintiff recalled accepting the offer because "[i]t felt like [he] was coming back to [his] father's business to help him run it and to take it over at some point." He testified that, after he was appointed president, vice president, and CEO, Mrs. Aiello said, "Congratulations, it is your baby now." According to plaintiff, Aiello often declared that "when he was going to retire * * * he would come up with a fair market value of the business and at some point sell the business to [plaintiff]." Nonetheless, plaintiff acknowledged that he also knew that he was under no obligation to purchase RRM. The plaintiff also testified that statements concerning his future ownership of RRM were made in other contexts-recounting that a third party was directed to inquire with plaintiff about whether RRM was for sale[6] and that Aiello had counseled him to execute a prenuptial agreement in order to protect himself and RRM.

         Nero corroborated plaintiff's testimony. He testified that, like plaintiff, he managed RS&G and was repeatedly told that he could purchase the company after Aiello retired. Nero also explained that the future plans for RS&G and RRM were openly discussed within the Aiello family. At the end of his testimony, Nero claimed that he was "surprised" that Aiello sold RRM because he "always assumed that [plaintiff] would be with [RRM]." Aiello explicitly denied ever stating that plaintiff would have the option to purchase RRM in the future. Mrs. Aiello testified that plaintiff did not accrue any additional authority from his corporate titles. However, their credibility was assailed by the factfinder.

         Based on Aiello's statements, plaintiff testified that he acted "like a company owner" and oversaw "the whole operation." He did not consider other employment opportunities and made numerous loans to RRM in hopes of someday owning the company. These loans totaled approximately $400, 000 and were interest-free.[7] The plaintiff did acknowledge on cross-examination that all of the loans were repaid. Nero corroborated plaintiff's hard work, testifying that RRM grew in large part due to plaintiff's efforts.

         D'Ambra testified that while he eventually revived RRM after the receivership, he and Aiello had previously negotiated a sale of RS&G and RRM in 2005. According to D'Ambra, Aiello did not believe that plaintiff had the ability to buy the company. After the negotiations with D'Ambra fell through, Calcagni purchased the sister companies.[8]

         Calcagni testified that he believed Aiello owned both companies. He stated that he had no knowledge of Mrs. Aiello's ownership until she arrived at the closing to sign the requisite documents. Mrs. Aiello testified that her husband served as a consultant and that she was the sole owner of RRM. However, she acknowledged that the funds from the sale of RRM to Calcagni were commingled with her husband's proceeds from the simultaneous sale of RS&G, such that she was unable to quantify the net proceeds. Calcagni testified that the Aiellos took considerable efforts to conceal the sale from their employees. For instance, Calcagni stated that when he inspected the premises, he was not allowed to exit the vehicle. He also testified that the Aiellos crafted a misleading memorandum which stated that Calcagni was a new stockholder in the companies, indicating that Aiello was still involved in the companies. Although Calcagni testified that Aiello assured him that plaintiff would continue to manage RRM and would not take issue with the sale, he described a meeting he had with plaintiff because of his concerns that plaintiff was disgruntled. It was at this meeting that he learned that the $50, 000 paid to plaintiff was not a bonus, but was repayment of a loan.

         Both parties submitted posttrial memoranda; and, on July 22, 2013, the trial justice issued a comprehensive bench decision. The trial justice summarized the testimony and found that plaintiff, Nero, D'Ambra, and Calcagni were credible and honest witnesses. Based on their testimony, she found that "no later than 1999, [plaintiff] genuinely believed he would have the opportunity to buy the business when * * * Aiello retired and that * * * Aiello would help him structure a payment plan." She added that plaintiff was a double asset to the Aiellos-he was a hard worker, as well as "a potential buyer waiting in the wings until they were ready to sell."

         The trial justice found neither defendant to be credible, noting that Aiello was evasive and nonresponsive, sometimes injecting petty, negative comments about other witnesses in an attempt to inject bias into the proceedings. The trial justice concluded that Aiello "disingenuously attempted to minimize his role" in RRM and that Mrs. Aiello assented to her husband's efforts through her silence and acquiescence. The trial justice was not persuaded that the Aiellos had difficulty working with plaintiff; rather, she was convinced that plaintiff was "encourage[d] * * * into thinking he should throw his heart, soul, and money into" RRM.

         Before turning to the issue of liability, the trial justice characterized the Aiellos' conduct as "despicable and an egregious breach of personal trust." Nevertheless, the trial justice rejected all claims, save for plaintiff's claim of unjust enrichment. On the question of whether there was an implied contract, the trial justice found that in 1996 Aiello spoke in terms of future possibilities and an employment incentive, which she found was mere "puffing." She explained that plaintiff and Aiello did not discuss any essential terms of the agreement, and the subsequent conduct of the parties did not cure this fatal defect. Referring to the 1999 conversation in which Aiello declared that, when he retired, he would structure a payment plan for plaintiff to purchase the business, the trial justice concluded that this conversation injected even more uncertainty because the meaning of the term "retirement" was unclear; there was no discussion about a succession plan in the event that Aiello died before retiring; and there was no colloquy about financing or the potential purchase price. Because plaintiff testified that he did not consider himself bound to purchase the company, the trial justice concluded that there was no implied contract, as the essential elements of mutual assent and certainty of the essential terms were lacking.

         The trial justice was unconvinced that plaintiff was ready, willing, and able to purchase RRM. She accepted the testimony of Ralph Shippee (Shippee), a moneylender, who testified to a brief conversation he had with plaintiff prior to June 2005 concerning potential financing for the purchase price of RRM. The trial justice concluded that Shippee would have offered financing to plaintiff, but plaintiff had failed to prove that he would have proceeded with the purchase upon reviewing the actual financing terms. Having carefully reviewed the testimony of the trial witnesses, the trial justice concluded that plaintiff's implied contract claim must fail.

         The trial justice also rejected plaintiff's promissory estoppel claim, finding that Aiello's promises were not clear and unambiguous. The trial justice found that the term "retirement" was an indefinite term that created ambiguity. She found that Aiello's statements were "at best, discussions of possible future career developments and opportunities" and not promises. Second, the trial justice found no reasonable reliance on these statements by plaintiff because a competent businessman would not rely on "vague statements, love, and affection * * * even in the face of the Aiellos' continuous bolstering and lulling conduct." Finally, the trial justice found that there was no detrimental reliance because plaintiff was paid a considerable salary and gained managerial experience during his employment.

         Next, the trial justice briefly addressed in tandem plaintiff's fraud and negligent misrepresentation claims. The trial justice noted the general rule that fraud claims cannot be predicated on promises of future action unless the promise is used as a device to accomplish a fraudulent scheme. The trial justice concluded that, on the basis of the evidence presented, the Aiellos did not intend to deceive plaintiff at the time the statements were made. Rather, the trial justice found that in 2005 the Aiellos, faced with financial difficulties, simply ...

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