Goat Island South Condominium Ass'n v. IDC Clambakes, Inc.
852 F.3d 50
| 1st Cir. | 2017Background
- In the late 1990s Properties (an IDC entity) built the Regatta Club on condominium land whose development rights were disputed; Clambakes operated the Club under a March 1, 1998 lease with Properties and paid rent to Properties.
- The Rhode Island Supreme Court held in America I and America II that Properties’ development rights had expired and that title to the Reserved Area (including the Regatta Club) vested in several condominium associations (the Associations).
- Clambakes (not a party to the America litigation) filed Chapter 11 on June 16, 2005; the Associations filed proofs of claim asserting roughly $3.5 million for trespass/use from March 1, 1998 to April 7, 2005.
- Bankruptcy and district courts initially found implied consent precluded trespass liability; on remand the First Circuit directed determination whether implied consent carried an implied obligation to pay fair value for use.
- On remand the bankruptcy court found no implied-in-fact contract and denied unjust enrichment restitution after crediting benefits the Associations received (ownership of the building and resulting income); the district court reversed on unjust enrichment and ordered $2.6 million but this Court reverses, affirming the bankruptcy court’s equitable denial of restitution.
Issues
| Issue | Associations' Argument | Clambakes' Argument | Held |
|---|---|---|---|
| Whether implied consent creates a presumptive obligation to pay fair value | Implied consent to occupancy implies a presumption of payment absent contrary proof | No automatic legal obligation; remand limited to the legal question only | No Rhode Island authority creating such a presumption; bankruptcy court permissibly reached further equitable claims on remand |
| Whether an implied-in-fact contract required Clambakes to pay the Associations | The parties’ course of dealing and use created an implied agreement to pay the Associations | No meeting of the minds; Clambakes paid rent to Properties, not the Associations | No implied-in-fact contract; no mutual assent shown |
| Whether the Associations are entitled to restitution (unjust enrichment) for Clambakes’ use and occupancy | Associations conferred benefit and equity requires restitution; America ownership ruling fixes liability and value | Bankruptcy court has broad equitable power; America does not preclude considering construction costs, Clambakes’ expenses, and income Associations now obtain | Bankruptcy court did not abuse discretion; equities do not support restitution after accounting for Associations’ gain (ownership and income) |
| Whether the America opinions bind the bankruptcy court’s equitable inquiry | America establishes ownership facts that should control equitable relief and preclude considering certain factors | America decided ownership only; it did not preclude later equitable remedies or consideration of construction/outlay | America did not preclude the bankruptcy court’s equitable balancing; district court erred to treat America as dispositive for restitution |
Key Cases Cited
- Am. Condo. Ass'n v. IDC, Inc., 844 A.2d 117 (R.I. 2004) (America I) (held development rights expired; title vested in associations)
- Am. Condo. Ass'n v. IDC, Inc., 870 A.2d 434 (R.I. 2005) (America II) (reaffirmed ownership ruling)
- In re IDC Clambakes, Inc., 727 F.3d 58 (1st Cir. 2013) (remanded to determine whether implied consent created an obligation to pay)
- In re IDC Clambakes, Inc., 510 B.R. 678 (Bankr. D.R.I. 2014) (bankruptcy court opinion denying restitution after equitable crediting)
- Goat Island S. Condo. Ass'n v. IDC Clambakes, Inc., 533 B.R. 845 (D.R.I. 2015) (district court decision reversing bankruptcy court on unjust enrichment valuation)
- Fondedile, S.A. v. C.E. Maguire, Inc., 610 A.2d 87 (R.I. 1992) (elements of unjust enrichment in Rhode Island)
- Dellagrotta v. Dellagrotta, 873 A.2d 101 (R.I. 2005) (permitting recovery under unjust enrichment for improvements when equities support it)