Epic Enterprises LLC v. 10 Brown & Howard Wharf Condominium Association
20-194
| R.I. | Jun 25, 2021Background:
- Bard Group, LLC (respondent) owned nine of 13 condominium units at 10 Brown & Howard Wharf; petitioners owned the other four. Bard was the declarant.
- Roof leaks began in April 2019; common-element repairs and unit interior work were delayed and assessment fees were largely unpaid until 2020.
- Petitioners initially sought a receiver for the Condominium Association; a special master and later foreclosure notices followed; Sharestates (mortgagee) foreclosed and later sought a receiver for Bard Group in a separate action.
- On May 27–29, 2020 petitioners moved to appoint a temporary receiver for Bard Group itself, alleging fiduciary breaches by Bard as declarant and harms to unit values; the Superior Court added Bard as a party and appointed a temporary receiver on June 3, 2020.
- Bard appealed; the Supreme Court held that statutory and equitable receiverships are available only to shareholders or creditors and concluded petitioners lacked standing to pursue receivership against Bard as neither shareholders nor creditors under Rhode Island law.
- The Supreme Court vacated the Superior Court’s appointment of a temporary receiver for Bard Group and ordered the receivership closed and the papers remanded.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to seek appointment of a receiver for Bard Group | Petitioners claimed a right to completion by the declarant and a fiduciary duty owed by Bard, giving them standing to seek receivership. | Bard argued petitioners lack standing because they are neither shareholders nor creditors of Bard and had not exhausted legal remedies. | Court held petitioners lacked standing; receivership statutes and precedent limit standing to shareholders and creditors. |
| Whether petitioners qualify as "creditors" of Bard Group | Petitioners urged a broad definition of "creditor" (anyone owed an obligation) to include them. | Bard and Court maintained the narrower, traditional definition applies (one to whom a debt is owed). | Court refused to adopt a broader definition for equitable receiverships; petitioners are not creditors. |
| Appropriateness of equitable receivership vs. legal remedies | Petitioners argued extraordinary relief was justified by mismanagement, nonpayment, and harm to unit values. | Bard argued legal remedies (special master foreclosure, statutory claims under the Condominium Act) were available and adequate. | Court emphasized receivership is extraordinary; where adequate legal remedies exist, equity should not intervene. Appointment vacated. |
Key Cases Cited
- Peck v. Jonathan Michael Builders, Inc., 940 A.2d 640 (R.I. 2008) (standing for receivership limited to shareholders or creditors)
- Petrovics v. The King Holdings, 188 A. 514 (R.I. 1936) (equity jurisdiction to appoint receivers limited and exceptional)
- Leonard Levin Co. v. Star Jewelry Co., Inc., 175 A. 651 (R.I. 1934) (creditor petitions for receivership recognized)
- Kocon v. Cordeiro, 200 A.2d 708 (R.I. 1964) (equity will not grant relief when adequate legal remedy exists)
- DeMarco v. Travelers Insurance Co., 102 A.3d 616 (R.I. 2014) (mootness principles for appeals)
- Epic Enterprises LLC v. Bard Group, LLC, 186 A.3d 587 (R.I. 2018) (prior litigation between these parties concerning the condominium)