SHEILA A. B. McKENNA, Plaintiff,
FEDERAL PROPERTIES OF R.I., INC., Defendant.
Plaintiff: Harris Weiner, Esq.
Defendant: Stephen J. MacGillivray, Esq. Katharine Kohm, Esq.
a four-day non-jury trial in December 2017, this matter is
before the Court on Sheila A. B. McKenna's (Plaintiff)
complaint against Federal Properties of R.I., Inc. (Federal
Properties) for constructive trust, breach of contract,
specific performance, and unjust enrichment. Federal
Properties asserts the statute of limitations; laches; waiver
and/or abandonment; impossibility, impracticability and/or
frustration of purpose; and mutual mistake as affirmative
defenses against Plaintiff's claims. Federal Properties
also counterclaims for slander of title, trespass, use and
occupancy, unjust enrichment, and declaratory relief. At the
conclusion of Plaintiff's and its own case, Federal
Properties moved for judgment as a matter of law pursuant to
Super. R. Civ. P. 52(a). This Court reserved its decision and
at the conclusion of testimony instructed the parties to file
post-trial memoranda. Jurisdiction is pursuant to G.L. 1956
§ 8-2-14 and Super. R. Civ. P. 52(a).
Facts and Travel
parties have agreed to the following facts. On October 21,
1980, Raymond DeLeo (DeLeo), the president of Federal
Properties, obtained an option to purchase a 4.2 acre parcel,
located at Lot 10, Plat 33 in Lincoln, Rhode Island (the
Lincoln Property) in exchange for the payment of $1000 to
Emile H. Palardy (Palardy). DeLeo later assigned the option
to Federal Properties. The Lincoln Property contained a
multi-family residential building, a two-family house, and a
six-bay garage building. On October 21, 1981, the option to
purchase the Lincoln Property with Palardy was renewed, and
on March 16, 1983, Federal Properties closed on the Lincoln
1992, Federal Properties obtained relief from the Lincoln
Zoning Board to divide the Lincoln Property into three
separate lots: 172 School Street (Lot 96 or Parcel A), 178
School Street (Lot 95 or Parcel B), and the remaining
undeveloped 3.61 acres under the original name as Lot 10,
Plat 33 (Parcel C or 182 School Street). Parcel A consists of
the multi-family residential building, and Parcel B includes
the two-family house. Since 1983, Federal Properties has
rented units in the multi-family residential building and the
two-family house to tenants.
April 15, 1992, Plaintiff and DeLeo-on behalf of Federal
Properties-signed a document called the "Real Estate
Agreement" (the 1992 Agreement). The 1992 Agreement
recognized a portion of Parcel C (Parcel C(1)) on which a
house was to be built by Federal Properties for Plaintiff.
Def.'s Trial Ex. DD. It also stated that Federal
Properties was to "continue paying all assessments for
real estate taxes as may be imposed by the Town of Lincoln
from time to time excepting for the pro-ration [sic] of real
estate taxes and such water services charges as they may
apply to the residential structure upon completion."
Id. According to the 1992 Agreement, upon its
execution, Plaintiff was to pay the sum of $75, 000 as the
full purchase price. Id. Plaintiff and Federal
Properties further agreed to the following:
"1. Within 90 days, the Seller shall convey title to
Parcel C to a corporation to be incorporated by the Seller to
be known as the Golfside Estates [(the corporation)] . . . .
The ownership of the corporation shall be held in escrow,
pursuant to the attached escrow agreement . . . pending
subdivision. The articles of incorporation shall require
shareholder approval of all mortgages or sales of any real
property owned by the corporation. Until such transfer, no
sales or encumbrances of the land shall be allowed. Upon
subdivision the corporation shall transfer by warranty deed
all Right, Title, and Interest in Parcel C-1 to Buyer. Until
said corporation is formed Seller, at its expense, shall
maintain the grounds and provide access. Thereafter the
Corporation shall do so free of charge to Buyer.
"2. The Seller shall expedite the recordation of the
division of land discussed hereinabove and proceed to install
the necessary utilities to the building area designated as
the site of the residence for the Buyer.
"3. The Seller shall assist the Buyer with the
completion of working drawings and necessary engineering
services to permit the construction of the residence at the
area designated as C(1) on Exhibit A.
"4. House to be built by Seller according to the
attached specifications for under $100, 000, $25, 000 of
which is deposited concurrent with the signing of this
agreement with the balance payable as provided in a Standard
AIA construction contract to be agreed to by the parties. In
no case shall any further payments be due from buyer until
she sells her home.
"5. If house is not started within one (1) year or
completed within 18 months of the date of this contract, then
Buyer will receive all monies paid plus 10% penalty.
. . . .
"8. If subdivision is not completed within two (2) years
then the seller shall cause the corporation to transfer by
warranty deed all right, title and interest free and clear in
Parcel C and the ownership of the corporation to Buyer, free
of additional charge, in consideration for Buyer executing
the agreement and making the payments hereunder. If buyer
takes property under this clause the note provided for below
will be deemed satisfied.
"9. To secure compliance with this agreement the seller
has this day executed a note payable to Buyer in the amount
of $100, 000 plus any future advances under this agreement.
Said note shall be guaranteed by Mr. Raymond DeLeo personally
and shall be collateralized by the shares of the
parties agree to the following facts with respect to the 1992
Agreement: (1) Federal Properties did not incorporate a
corporation called "Golfside Estates" within ninety
days of April 15, 1992, or ever; (2) Federal Properties did
not convey Parcel C to a new corporation called
"Golfside Estates" within ninety days of April 15,
1992, or ever; (3) Federal Properties did not convey the
ownership of a new corporation called "Golfside
Estates" into escrow within ninety days of April 15,
1992, or ever; (4) Federal Properties did not grant Plaintiff
a warranty deed conveying any right, title or interest in
Parcel C, C(1) or any part thereof; (5) no specifications
were attached to the 1992 Agreement for a house to be built
by Federal Properties on Parcel C(1); (6) no "Standard
AIA construction contract" for the construction of a
house was executed; (7) Federal Properties executed a
promissory note, guaranteed by DeLeo, in the amount of $100,
000 payable to Plaintiff which "secured, pursuant to the
escrow agreement, by stock in Golfside Estates, a corporation
to be incorporated" (the Promissory Note) (see
Def.'s Trial Ex. EE); (8) the house, as actually built,
cost more than $100, 000 to build; (9) the house took more
than eighteen months from April 15, 1992 to complete; and
(10) Parcel C was not further subdivided within two years of
April 15, 1992.
has lived in the house on Parcel C(1) since its completion in
November 1994. After signing the 1992 Agreement, Plaintiff
paid Federal Properties $169, 800, which is broken down into
the following transactions: on April 24, 1992, Plaintiff paid
Federal Properties $100, 000 less $5200 in legal fees paid to
Plaintiff's attorney; on November 19, 1993, Plaintiff
paid Federal Properties $30, 000; on December 16, 1993,
Plaintiff paid Federal Properties $30, 000; and in August
1994, Plaintiff paid Federal Properties $15, 000.
16, 2006, Plaintiff, through her then-attorney Keven A.
McKenna, demanded in writing that Federal Properties convey
Parcel C to her. Nearly four months later, on November 9,
2006, Plaintiff recorded a "Notice of Adverse Possession
and Notice of Equitable Interest" in the Lincoln Land
Evidence Records. See Def.'s Trial Ex. MM.
Federal Properties contends that it did not receive notice of
the same from Plaintiff until 2013. DeLeo then passed away on
February 5, 2013, and in September of that year, Plaintiff
filed this lawsuit and a notice of lis pendens on
the Lincoln Property. See Def.'s Trial Ex. VV.
On July 31, 2014, Plaintiff recorded a Quitclaim Deed in the
Lincoln Land Evidence Records; she subsequently recorded a
Corrective Quitclaim Deed in the Lincoln Land Evidence
Records on August 7, 2014 (collectively, the Quitclaim
1993 through October 2014, Federal Properties has paid
electricity bills, water bills, sewer use, natural gas, real
estate taxes, sewer taxes, and fire taxes for the house.
Additionally, it has paid to mow the lawn and plow the
driveway of snow at the house on Parcel C and has performed
other maintenance and site improvements on Parcel C. Federal
Properties has also exclusively managed and maintained the
properties at 172 and 178 School Street. On July 17, 2014,
Federal Properties sent a notice to quit to Plaintiff, which
stated that Plaintiff was "to vacate and remove [her]
property and personal possessions from the premises[.]"
Def.'s Trial Ex. YY.
October 23, 2014, this Court ordered that the Quitclaim Deeds
had no legal effect at the time and would not be used as
indicia of ownership; their legal status would be held in
abeyance until a final resolution of this case. See
Def.'s Trial Ex. AAA. This Court also ruled that
Plaintiff was permitted to live in the house located on
Parcel C and would be responsible for taxes and utilities for
Parcel C pending this matter's resolution. See
id. The Order was recorded in the Lincoln Land Evidence
Records on October 27, 2014. Additionally, on September 9,
2015, this Court (1) denied Plaintiff's motion for
partial summary judgment seeking to quiet Parcel C's
title under G.L. 1956 § 34-7-1; (2) granted Federal
Properties' motion to dismiss as to Plaintiff's
request for quieting the Lincoln Property's title under
§ 34-11-1; (3) denied Federal Properties' motion to
dismiss as to Plaintiff's claims for (a) quieting the
Lincoln Property's title under § 34-7-1, (b)
specific performance, (c) breach of contract, (d)
constructive trust, and (e) unjust enrichment; (4) denied
Plaintiff's motion for partial summary judgment on the
Promissory Note; and (5) denied Federal Properties'
cross-motion for partial summary judgment on the Promissory
Note. See Def.'s Trial Ex. DDD. On April 5,
2016, after Federal Properties filed a motion for summary
judgment, this Court (1) granted summary judgment on
Plaintiff's request for quieting Parcel C's title
under § 34-7-1; (2) dismissed the same request for
Parcels A and B after acknowledging Plaintiff's consent
to such dismissal; and (3) denied summary judgment with
respect to Plaintiff's claims for specific performance,
breach of contract, constructive trust, and unjust
enrichment. See Def.'s Trial Ex. EEE.
non-jury trial was held on this case from December 11, 2017
to December 14, 2017. After reviewing all of the evidence
presented, this Court now renders its Decision.
Standard of Review
a trial justice presides over a nonjury trial, Rule 52(a) of
the Superior Court Rules of Civil Procedure requires that he
or she 'find the facts specially and state separately
[his or her] conclusions of law thereon.'"
S.Cty. Post & Beam, Inc. v. McMahon, 116 A.3d
204, 210 (R.I. 2015) (quoting JPL Livery Servs., Inc. v.
R.I. Dep't of Admin., 88 A.3d 1134, 1141 (R.I.
2014)). "It is well established that 'a trial
justice sitting without a jury must often make credibility
determinations in order to arrive at the necessary findings
of fact.'" Gregoire v. Baird Props., LLC,
138 A.3d 182, 193 (R.I. 2016) (quoting D'Ellena v.
Town of E. Greenwich, 21 A.3d 389, 391-92 (R.I. 2011)).
Therefore, in a non-jury trial, this Court sits as the trier
of fact as well as of law and "'weighs and considers
the evidence, passes upon the credibility of the witnesses,
and draws proper inferences.'" Parella v.
Montalbano, 899 A.2d 1226, 1239 (R.I. 2006) (quoting
Hood v. Hawkins, 478 A.2d 181, 184 (R.I. 1984)).
"Yet, this requirement does not mandate an expansive
analysis by the trial justice." A. Salvati Masonry
Inc. v. Andreozzi, 151 A.3d 745, 748 (R.I. 2017) (citing
S.Cty. Post & Beam, Inc., 116 A.3d at 210).
"'Even brief findings and conclusions are sufficient
if they address and resolve the controlling and essential
factual issues in the case.'" Hilley v.
Lawrence, 972 A.2d 643, 651 (R.I. 2009) (quoting
Donnelly v. Cowsill, 716 A.2d 742, 747 (R.I. 1998)).
"'[I]f the decision reasonably indicates that [the
trial justice] exercised [his or her] independent judgment in
passing on the weight of the testimony and the credibility of
the witnesses it will not be disturbed on appeal unless it is
clearly wrong or otherwise incorrect as a matter of
law.'" A. Salvati Masonry Inc., 151 A.3d at
748 (quoting JPL Livery Servs., Inc., 88 A.3d at
trial, Plaintiff presented five witnesses and forty-seven
exhibits in support of her action and in defense of Federal
Properties' counterclaims. Federal Properties presented
six witnesses and 128 exhibits in support of its
counterclaims and in defense of Plaintiff's claims. Each
claim by both parties will be addressed in seriatim
seeks a constructive trust against Federal Properties with
respect to her ownership in Parcel C and/or the Lincoln
Property. Plaintiff argues that she paid Federal Properties
for the land and to construct and maintain the home. She also
argues that DeLeo and Federal Properties were so intertwined
that he and his businesses were the same. Specifically,
Plaintiff alleges that on or before March 15, 1983, she
transferred to DeLeo approximately $74, 000, roughly $40, 000
of which to purchase the Lincoln Property. According to
Plaintiff, she paid for the property in cash because she
wanted to keep the transaction a secret from her allegedly
abusive ex-husband, Vincent Cianci. She alleges that during
the time of her former marriage, she was having an affair
with DeLeo and remained good friends with him until his death
in 2013; this relationship, Plaintiff contends, imposed a
fiduciary duty on DeLeo and Federal Properties to ensure that
she received ownership of the Lincoln Property.
further claims that the 1992 Agreement reinforces the
existence of a constructive trust. Specifically, Plaintiff
argues that she supplied $100, 000 for construction, and that
this transaction would indicate to this Court that the land
had therefore already been purchased for her in 1983.
Furthermore, Plaintiff claims she paid an additional $75, 000
to Federal Properties after 1992, but this payment was
strictly for increased construction costs of the house, not
for land acquisition. Plaintiff also argues that excluding
personal items, she spent over $400, 000 in expenditures on
the house, and Federal Properties, although aware of these
upgrades, never objected to such renovations. See
Pl.'s Trial Ex. 25. For these reasons, Plaintiff seeks a
constructive trust with respect to ownership of the Lincoln
Property imputed against Federal Properties which, according
to her, spent her money to purchase the Lincoln Property.
Plaintiff also requests that she is entitled "to half
the rental income on 172 and 178 School Street and the
garages on Parcel C"; all together averaging
approximately $21, 000 per month in rent. Def.'s Trial
underlying principle of a constructive trust is the equitable
prevention of unjust enrichment of one party at the expense
of another in situations in which legal title to property was
obtained by fraud or in violation of a fiduciary or
confidential relationship.'" Connor v.
Schlemmer, 996 A.2d 98, 109 (R.I. 2010) (quoting
Dellagrotta v. Dellagrotta, 873 A.2d 101, 111 (R.I.
2005)). "To demonstrate that the imposition of a
constructive trust is appropriate, 'a plaintiff is
required to show by clear and convincing evidence (1) that a
fiduciary duty existed between the parties and (2) that
either a breach of a promise or an act involving fraud
occurred as a result of that relationship.'"
Id. (quoting Manchester v. Pereira, 926
A.2d 1005, 1013 (R.I. 2007)).
on the facts that were presented to this Court at trial, this
Court finds that Plaintiff failed to prove, by clear and
convincing evidence, her constructive trust claim. First,
Plaintiff has failed to present clear and convincing evidence
that Federal Properties owed her a fiduciary duty. Plaintiff
has asserted a close and personal relationship that she had
with DeLeo over the years, but has not presented evidence of
such a relationship with Federal Properties. "The
criteria for piercing the corporate veil to impose liability
on non-corporate defendants vary with the particular
circumstances of each case." Nat'l Hotel Assocs.
ex rel. M.E. Venture Mgmt., Inc. v. O. Ahlborg & Sons,
Inc., 827 A.2d 646, 652 (R.I. 2003) (citing Doe v.
Gelineau, 732 A.2d 43, 48 (R.I. 1999)). "However,
'when the facts of a particular case render it unjust and
inequitable to consider the subject corporation a separate
entity' [this Court] will not hesitate to disregard the
corporate form and treat the defendant as an individual who
is personally liable for the debts of the disregarded
corporation." Id. (quoting R & B Elec.
Co. v. Amco Constr. Co., 471 A.2d 1351, 1354 (R.I.
1984)). "Thus, in circumstances in which there is such a
unity of interest and ownership between the corporation and
its owner . . . such that their separate identities and
personalities no longer exist [the Court has] held that
'[a]dherence to the principle of their separate existence
would, under the circumstances, result in
injustice.'" Id. (quoting Muirhead v.
Fairlawn Enter., Inc., 72 R.I. 163, 172-73, 48 A.2d 414,
no evidence has been presented indicating that it would be
"unjust and inequitable" to consider DeLeo and
Federal Properties as a separate individual and separate
entity, respectively. Id. Stephen DeLeo (DeLeo's
son), Berta Raposo (Federal Properties' bookkeeper), and
Steven Gorriaran (Plaintiff's son) all testified that
DeLeo would never commit any type of fraud. See
Trial Tr. 381-82, 487-89, Dec. 13, 2017 (Vol. III); Trial Tr.
267, Dec. 12, 2017 (Vol. II). Furthermore, DeLeo and other
employees of Federal Properties obeyed its corporate
structure by consistently reporting financial statements
created by a third-party accounting firm. S ...