Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

IDC Clambakes, Inc. v. Carney

Superior Court of Rhode Island, Newport

September 26, 2018

IDC CLAMBAKES, INC., Plaintiff,
v.
DENNIS J. CARNEY, IN HIS CAPACITY AS TRUSTEE OF THE GOAT ISLAND REALTY TRUST, ET AL., Defendants.

          Newport County Superior Court

          For Plaintiff: William P. Devereaux, Esq.; William E. O'Gara, Esq.; Matthew C. Reeber, Esq.

          For Defendant: William R. Grimm, Esq.; Charles D. Blackman, Esq.

          DECISION

          VAN COUYGHEN, J.

         "To the victor belong the spoils . . ."[1]

         This matter is before the Court for decision upon the Defendants' motion for summary judgment as to Counts VIII (unjust enrichment) and IX (quasi-contract) of Plaintiff's second amended complaint. For the reasons articulated more fully below, Defendants' Motion for Summary Judgment is granted. Jurisdiction is pursuant to Super. R. Civ. P. 56.

          I

         Background[2]

         This litigation is but another chapter in an ongoing saga which began on January 13, 1988, when Globe Manufacturing Company (Globe), by and through its director Thomas Roos (Mr. Roos), recorded a declaration of condominium creating the Goat Island South Condominium (GIS Condominium). As discussed further below, Mr. Roos was not only the director of Globe, which was the original declarant of the GIS Condominium, but he is also the president, vice president, director and sole shareholder of each successor declarant of the GIS Condominium. The successor declarants are Island Development Company, Inc. (IDC, Inc.) and IDC Properties, Inc. See In re IDC Clambakes, Inc., 510 B.R. 678, 682 (Bankr. D.R.I. 2014).

         The GIS Condominium is a twenty-three acre condominium area, located on Goat Island in Newport, Rhode Island, which at the time of creation consisted of six parcels. Three of the six parcels contained existing condominium buildings designated as the America Condominium, the Capella South Condominium, and the Harbor Houses Condominium. Each condominium has its own association (hereinafter the Condominium Associations). The other three parcels were undeveloped and designated as the South Development Unit, the West Development Unit and the North Development Unit. The North Development Unit, identified for purposes of this litigation as the "Reserved Area," is at the heart of the dispute before the Court. The Reserved Area is a waterfront parcel of land tucked into the west side of Goat Island and includes an unobstructed view of Narragansett Bay, the Newport Pell Bridge, Conanicut Island, and the setting sun. The development of the Reserved Area and its current status will be discussed in further detail below.

         Goat Island South Condominium Association (GISCA) is the master association that oversees the other three condominium associations referenced above. See § 34-36.1-2.20. At the time of the filing of the original declaration, GISCA was controlled by Mr. Roos. In March 1988, Globe and GISCA amended and restated the declaration of condominium (the Master Declaration). In addition to reserving certain development rights laid out in the original declaration, [3] the Master Declaration also reserved Globe's right to convert the Reserved Area to a master unit and to construct improvements thereon or to completely withdraw the area from the GIS Condominium. The amended declaration set an expiration date of December 31, 1994 for the reservation of rights to be exercised.

         In 1992, Globe transferred its interest in the GIS Condominium to IDC, Inc. Subsequently, in October 1994, IDC, Inc. transferred its interest to IDC Properties, Inc. As successor declarant, IDC Properties, Inc. was the entity that possessed all of the development rights in the three undeveloped parcels, which included the Reserved Area. As stated above, Mr. Roos was at the time of the transfer, and remains today, the president and sole shareholder of IDC, Inc. and IDC Properties, Inc. See Mot. Summ. J. Hr'g Tr. 7, July 2, 2018.

         During the period that Globe transferred its interest in the GIS Condominium to the other various entities owned by Mr. Roos, it was also attempting to amend the Master Declaration to extend its development rights to the Reserved Area, as set forth in the Master Declaration, past the December 31, 1994 deadline. The amendments were passed by the master executive board of GISCA between April and December 1994 and purportedly extended IDC Properties Inc.'s right to develop the Reserved Area to December 31, 1999. At that time, Mr. Roos, as president of Globe and subsequently, as president of IDC Properties, Inc., had a controlling interest in the master executive board. Although the amendments were passed by the master executive board of GISCA, several unit owners objected to the validity of the amendments. Despite the dispute regarding the attempted extension of development rights of the Reserved Area, in 1997 and 1998 IDC Properties Inc. initiated plans to construct, and did construct, an event facility on the Reserved Area.

         In 1996, just prior to the construction of the event facility, Mr. Roos incorporated IDC Clambakes, Inc. to operate the event facility to be constructed on the Reserved Area that would come to be known as the Regatta Club (Regatta Club). Mr. Roos is the president and sole shareholder of IDC Clambakes, Inc. See In re IDC Clambakes, Inc., 510 B.R. at 682. The purpose of IDC Clambakes, Inc. was "[t]o engage in the business of conducting social events, receptions, weddings, clambakes, cookouts, [and] parties." (Pl.'s Mem. Opp'n to Mot. Summ. J. Ex. 1, May 23, 2016.) From December 1998 through April 8, 2005, IDC Properties, Inc. leased the Reserved Area, including the Regatta Club, to IDC Clambakes, Inc. pursuant to a lease between Mr. Roos and himself in his capacity as president, vice president and director of both entities. See In re IDC Clambakes, Inc., 510 B.R. at 683. While IDC Properties, Inc. leased the Reserved Area to IDC Clambakes, Inc., IDC, Inc. was the entity that clients hosting events at the Regatta Club contracted with and the entity that hired IDC Clambakes, Inc. to conduct those events.

         The ongoing dispute regarding the validity of the amendment attempting to extend the development rights in the Reserved Area came to a head on May 29, 1999. At that time, the Condominium Associations filed a state court action against IDC, Inc., IDC Properties, Inc. and Mr. Roos, alleging that the attempted extension of the development rights violated the Rhode Island Condominium Act. Importantly, IDC Clambakes, Inc. was not a party to this suit despite its operation of the Regatta Club and occupancy of the Reserved Area. The Condominium Associations claimed that the voting scheme used in amending and extending the development rights in the Reserved Area was contrary to law and therefore, ineffective. Specifically, the Condominium Associations argued that the voting procedure employed to extend the development rights in the Reserved Area did not conform to the Rhode Island Condominium Act because any attempt to extend special declarant development rights required unanimous consent of all unit owners. As such, the Condominium Associations argued that the amendment extending the December 31, 1994 deadline was invalid. Thus, as a result of the invalidity of the extension, the Condominium Associations claimed that fee simple title to the Reserved Area vested in the condominium unit owners on whose behalf the Condominium Associations acted. The Superior Court agreed and granted partial summary judgment in favor of the Condominium Associations, and IDC Properties, Inc. appealed.

         The state court action regarding the development of the Reserved Area resulted in two Supreme Court decisions: America I v. IDC, Inc., 844 A.2d 117 (R.I. 2004) and America II v. IDC, Inc., 870 A.2d 434 (R.I. 2005), where IDC Properties, Inc. argued that "the amendments were approved validly through unanimous votes by the six master condominium unit owners in accordance with the act, and that the hearing justice erred in finding that statute required the unanimous consent of the sub-condominium unit owners." America I, 844 A.2d at 128. IDC Properties, Inc. also raised the affirmative defense of laches, contending that the doctrine of laches should bar the Condominium Associations' challenge to the Reserved Area because the Condominium Associations sat on their rights while IDC Properties, Inc. invested heavily in developing the parcel into the Newport Regatta Club. See America I, 844 A.2d at 133.

         Our Supreme Court ruled in favor of the Condominium Associations and found that the amendments were invalid because they did not conform to the requirements of the Rhode Island Condominium Act and thus, IDC Properties, Inc. had failed to exercise its development rights before their expiration, and title to the disputed property had vested in the Condominium Associations. The Court also held that IDC Properties, Inc. was not entitled to equitable relief regarding the structure it built because it clearly knew that the ownership of the Reserved Area was contested and therefore, built at its own peril. On April 8, 2005, the Supreme Court reaffirmed its ruling that title to the Reserved Area, including the Regatta Club, rested with the Condominium Associations. See America II, 870 A.2d at 443.

         Subsequently, GISCA filed an Application for Writ of Execution for Possession and Writ of Ejectment, seeking to evict IDC Clambakes, Inc. from the Regatta Club. As a result, IDC Clambakes, Inc. sought protection in the United States Bankruptcy Court and filed a petition for Chapter 11 bankruptcy. See In re IDC Clambakes, Inc., 431 B.R. 51, 57 (Bankr. D.R.I. 2010). On August 25, 2005, IDC Clambakes, Inc. entered into a consent order with GISCA (the Consent Order) in the Bankruptcy Court proceeding.[4] (Defs.' Mem. Supp. Mot. Summ. J. Ex. B, Jan. 19, 2018.) The Consent Order provided that IDC Clambakes, Inc. could continue to operate the Regatta Club until November 5, 2005, and that IDC Clambakes, Inc. would pay GISCA $450, 000 for the use and occupancy of the "Reserved Area" for the period of April 8, 2005 through November 5, 2005, at which time it would "peacefully surrender possession of the Regatta Club premises, along with all improvements and fixtures appurtenant thereto, in good and clean condition." Id. The Consent Order also allowed IDC Clambakes, Inc. to reserve its rights to proceed on its claims against GISCA as set forth in the instant lawsuit. However, the Consent Order did not resolve the other issues raised in the Bankruptcy Court proceeding, namely the financial claims raised by GISCA and IDC Clambakes, Inc. against each other.

         In addition, IDC Clambakes, Inc. submitted an amended disclosure statement to its petition for Chapter 11 bankruptcy plan of reorganization (the Amended Disclosure Statement). Along with explaining how IDC Clambakes, Inc. would continue to conduct high-end weddings and other social events at an alternative location on Goat Island after vacating the reserved area, the Amended Disclosure Statement stipulated that IDC Clambakes, Inc. would reserve all of its business assets, including its personal property, intangible and intellectual property, cash on hand, and all licenses pertaining to its operations. The Amended Disclosure Statement also reserved IDC Clambakes, Inc.'s right to pursue any and all claims of any kind or nature against the Condominium Associations regarding the Regatta Club and the Reserved Area. (Defs.' Mem. Supp. Mot. Summ. J. Ex. C, Jan. 19, 2018.)

         On April 19, 2005, despite entering into a Consent Order, IDC Clambakes, Inc. filed the instant state court action against 175 GIS Condominium unit owners, individually (the Unit Owners). The original complaint did not name GISCA as a defendant. The original complaint prayed for relief on several counts, including three counts for declaratory and injunctive relief, unjust enrichment, quasi-contract, tortious interference with prospective business relations and specific performance. On December 28, 2006, IDC Clambakes, Inc. filed its first amended complaint, which added counts for breach of contract, tortious interference with contract and misrepresentation. On June 12, 2014, the parties stipulated that all counts against the Unit Owners would be dismissed with prejudice except Counts V (misrepresentation), VIII (unjust enrichment) and IX (quasi-contract). (See Stipulation of Dismissal, June 12, 2014.)

         During the preliminary years of the instant state court action, IDC Clambakes, Inc. and GISCA's litigation in the federal courts emanating from the Bankruptcy Court proceeding had a long and tortured travel. The initial proceeding, which began in the Bankruptcy Court, was appealed to the United States District Court for the District of Rhode Island and then to the United States Court of Appeals for the First Circuit. The First Circuit remanded the case to the Bankruptcy Court for further fact-finding. The Bankruptcy Court's decision on remand was, again, appealed to the United States District Court and that decision was appealed to the First Circuit. The substance of the litigation in the federal courts has little relevance to the instant state court action except for the Bankruptcy Court Consent Order dated August 25, 2005. Nevertheless, the Court directs the reader to In re IDC Clambakes, Inc., 852 F.3d 50, 53 (1st Cir. 2017) for a recitation of the issues that engaged the federal courts for twelve years.

         On February 26, 2016, the Unit Owners filed a motion for summary judgment in the instant state court action on the two remaining claims and IDC Clambakes, Inc. timely objected. Oral argument was heard on June 6, 2016 and an order entered granting summary judgment in favor of the Unit Owners on Count V (misrepresentation) and continuing the motion for summary judgment as to Counts VIII (unjust enrichment) and IX (quasi-contract) to an undetermined future date to allow IDC Clambakes, Inc. to conduct further discovery and for supplemental memoranda to be filed by both parties. After additional discovery took place, however, IDC Clambakes, Inc. sought leave to amend its complaint for a second time to add GISCA as an additional defendant. The hearing justice granted IDC Clambakes, Inc. motion to amend without prejudice to the Unit Owners or GISCA to pursue their argument regarding whether the amendment was barred by the statute of limitations. IDC Clambakes, Inc. filed its second amended complaint on October 12, 2016, which named GISCA as a defendant and included the two remaining claims for unjust enrichment and quasi-contract.

         Following multiple discovery motions, including an in camera review of allegedly privileged communications, Defendants filed the instant motion for summary judgment and IDC Clambakes, Inc. timely objected. The Court heard oral argument on the parties' respective positions on July 2, 2018. At the close of the hearing, the Court took the matter under advisement. After review of the documents submitted, the arguments of counsel and the appropriate law, the Court hereby renders its decision.

         II Standard of Review

         When deciding a motion for summary judgment, the trial justice must keep in mind that it '"is a drastic remedy and should be cautiously applied."' Steinberg v. State, 427 A.2d 338, 339- 40 (R.I. 1981) (quoting Ardente v. Horan, 117 R.I. 254, 256-57, 366 A.2d 162, 164 (1976)). "Thus, '[s]ummary judgment is appropriate when, viewing the facts and all reasonable inferences therefrom in the light most favorable to the nonmoving party, the [C]ourt determines that there are no issues of material fact in dispute, and the moving party is entitled to judgment as a matter of law.'" Quest Diagnostics, LLC v. Pinnacle Consortium of Higher Educ., 93 A.3d 949, 951 (R.I. 2014) (citation omitted). In this context, "'material' means that a contested fact has the potential to change the outcome of the suit under the governing law if the dispute over it is resolved favorably to the nonmovant." McCarthy v. Northwest Airlines, Inc., 56 F.3d 313, 315 (1st Cir. 1995). Only when the facts reliably and indisputably point to a single permissible inference can this process be treated as a matter of law. Steinberg, 427 A.2d at 340. During a summary judgment proceeding, the court does not pass upon the weight or credibility of the evidence. See DeMaio v. Ciccone, 59 A.3d 125, 129-30 (R.I. 2013).

         "Furthermore, 'the nonmoving party bears the burden of proving by competent evidence the existence of a disputed issue of material fact and cannot rest upon mere allegations or denials in the pleadings, mere conclusions or mere legal opinions.'" Newstone Dev., LLC v. East Pacific, LLC, 140 A.3d 100, 103 (R.I. 2016) (quoting Daniels v. Fluette, 64 A.3d 302, 304 (R.I. 2013)). "[S]ummary judgment should enter 'against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case . . . .'" Id. (quoting Lavoie v. North East Knitting, Inc., 918 A.2d 225, 228 (R.I. 2007)).

         III Parties' Arguments

         In support of their motion for summary judgment, Defendants make three arguments.[5]First, Defendants argue that IDC Clambakes, Inc. cannot establish the elements necessary to prevail on its quasi contract claims, including unjust enrichment and quantum meruit, because there was no conferral of a benefit upon Defendants. Defendants next contend that IDC Clambakes, Inc.'s claims are barred by the doctrine of res judicata because (1) the Bankruptcy Court Consent Order determined that IDC Clambakes, Inc. had to relinquish possession of the Reserved Area and the Regatta Club to the Defendants, (2) the Rhode Island Supreme Court already determined that IDC Properties, Inc. was not entitled to equitable relief and therefore, the same applies to IDC Clambakes, Inc., and (3) the United States Court of Appeals for the First Circuit already rejected the theory behind IDC Clambakes, Inc.'s quasi-contract claims. Finally, Defendants maintain that IDC Clambakes, Inc.'s claims against GISCA are barred by the statute of limitations because they do not comply with Superior Court Rules of Civil Procedure 15(c) and thus do not relate back to the time of the filing of the original complaint, which was filed solely against the Unit Owners.

         In opposition, IDC Clambakes, Inc. first claims that summary judgment is not appropriate because there is a factual dispute as to whether there was a conferral of a benefit to the Defendants. IDC Clambakes, Inc. next argues that Defendants' contention that res judicata applies is baseless because (1) the Consent Order entered in the Bankruptcy Court expressly dismissed IDC Clambakes, Inc.'s quasi-contract claims without prejudice, (2) IDC Clambakes, Inc. was not a party to the litigation in the Supreme Court decision, and (3) the First Circuit dismissed GISCA's claim for unjust enrichment, not IDC Clambakes, Inc.'s. Finally, IDC Clambakes, Inc. argues that the amendment to add GISCA as a party relates back to the original filing of the complaint pursuant to the standard laid out in Rule 15(c).

         The Parties' respective arguments are discussed below.

         IV

         Analysis

         A

         Quasi-contract:

         Unjust Enrichment & Quantum Meruit

         As an initial matter, IDC Clambakes, Inc.'s complaint seeks relief on two remaining counts: Count VIII, labeled "Unjust Enrichment" and Count IX, labeled "Quasi-Contract"; however, in their memoranda and during oral argument, the Parties referred to the counts as "unjust enrichment" and "quantum meruit." In light of the above, the Court will briefly discuss the nuances between quasi-contract, unjust enrichment and quantum meruit.

         Quasi-contract is an obligation that is created by law "for reasons of justice, without any expression of assent and sometimes even against a clear expression of dissent." 1A Corbin, Contracts § 19 (1963). Quasi-contract claims include actions for unjust enrichment and quantum meruit. In fact, our Supreme Court has explained that it may be more accurate to say that "quasi-contract is a more general term," while the doctrines of unjust enrichment and quantum meruit are "specific procedure[s] to recover on a quasi-contract." See Process Eng'rs & Constructors, Inc. v. DiGregorio, Inc., 93 A.3d 1047, 1053 n.7 (R.I. 2014). To succeed in a quasi-contract action, proof of "neither an actual promise nor privity is necessary." R & B Elec. Co., Inc. v. Amco Constr. Co., Inc., 471 A.2d 1351, 1355 (R.I. 1984) (citation omitted). "The obligation to pay in cases of quasi-contract 'arises, not from consent of the parties, as in the case of contracts, express or implied in fact, but from the law of natural immutable justice and equity.'" Fondedile, S.A. v. C.E. Maguire, Inc., 610 A.2d 87, 97 (R.I. 1992) (quoting Hurdis Realty, Inc. v. Town of N. Providence, 121 R.I. 275, 278, 397 A.2d 896, 897 (1979)). Further, an "obligation is imposed despite, and frequently in frustration of," the parties' intentions. Bailey v. West, 105 R.I. 61, 66, 249 A.2d 414, 417 (1969). Although the two forms of recovery under quasi-contract are similar, including the requisite elements needed to prevail on either unjust enrichment or quantum meruit, their distinctions are discussed more in depth below.

         The equitable doctrine of unjust enrichment was first introduced to English common law by Lord Mansfield in 1760. In the case of Moses v. Macferlan, 2 Burr. 1005, 1012, 97 E.R. 676, 681 (K.B. 1760), Macferlan represented to Moses that, if Moses endorsed four promissory notes, Macferlan would never enforce Moses' liability on the endorsements. Id. However, after endorsing the notes, Macferlan sued Moses to compel him to pay the notes and Moses was subsequently ordered to pay Macferlan. Id. Moses then sued Macferlan in the Court of King's Bench for repayment. In affirming a jury verdict in favor of Moses, Lord Mansfield elucidated the doctrine of unjust enrichment where a type of justice exists beyond the realm of codified law: ". . . the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money." See Restatement (Third) of Restitution § 1 comment b, at 4 (2011).

         At first, the doctrine of unjust enrichment was not warmly accepted by English courts. In fact, Lord Justice Scrutton dismissed a case premised on the theory of unjust enrichment and held "[w]hatever may have been the case 146 years ago, we are not now free in the twentieth century to administer that vague jurisprudence which is sometimes attractively styled 'justice as between man and man.'" Holt v. Markham, 1 K.B. 504, 513 (1923). In 1931, however, Percy H. Winfield, a professor of English law at the University of Cambridge, became one of the first English Scholars to embrace the doctrine of unjust enrichment. Professor Winfield explained:

There must always be circumstances which make one man civilly liable to another on grounds reducible neither to contract nor to tort. The principle that 'one person shall not unjustly enrich [preferably 'benefit'] himself at the expense of another' must penetrate any system of law. ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.