Goat Island South Condominium Ass'n v. IDC Clambakes, Inc.
2015 U.S. Dist. LEXIS 75107
| D.R.I. | 2015Background
- IDC built the Regatta Club, but Rhode Island Supreme Court later held Associations (the condominium owners) owned the building and reserved area from construction forward (America I & II).
- IDC Clambakes, Inc. (Clambakes) operated a restaurant in the Regatta Club/Reserved Area from 1998 to 2005 and paid rent to IDC Properties, not to Associations.
- Associations sought recovery in bankruptcy court for Clambakes’ use and occupancy under quasi-contract (implied-in-law) and also alleged implied-in-fact contract; bankruptcy court rejected implied-in-fact contract and found some quasi-contract elements but offset damages to zero based on various equitable considerations.
- District Court reviews bankruptcy legal rulings de novo and factual findings for clear error; it adopted parts of the bankruptcy court opinion but vacated the quasi-contract ruling and remedy.
- District Court held: (1) implied-in-fact contract claim lacked mutual assent; (2) quasi-contract elements were present and supported a $2.6 million use-and-occupancy award; (3) the bankruptcy court erred in offsetting amounts for IDC’s construction costs, Clambakes’ payments to IDC, Clambakes’ expenditures, and an unquantified goodwill deduction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of implied-in-fact contract between Associations and Clambakes | Parties behaved like landlord/tenant; implicit agreement existed | No mutual assent or meeting of minds given ongoing litigation over title | No implied-in-fact contract; mutual assent lacking (bankruptcy court and district court agree) |
| Quasi-contract/use-and-occupancy liability for 1998–2005 | Associations conferred a benefit (use of building/land); Clambakes appreciated benefit; equity requires payment | Equity excuses payment due to IDC’s construction costs, Clambakes’ payments to IDC, and improvements by Clambakes | Elements satisfied; Clambakes owes use-and-occupancy; $2.6M awarded (district court vacated bankruptcy court’s zero-offset result) |
| Proper offsets against use-and-occupancy (IDC construction costs and Clambakes’ rent to IDC) | Associations: no offset; owner entitled to full value | Clambakes: offsets because rent funded construction and IDC’s expenditures | District court: error to consider IDC construction costs or Clambakes’ rent to IDC as offsets; those belong in claims between Clambakes and IDC, not against Associations |
| Goodwill/improvements deduction from occupancy award | Clambakes: goodwill created and building value justify reducing award | Associations: goodwill exists but not quantified; building value not equivalent to business goodwill | District court: bankruptcy court erred; insufficient evidence to quantify goodwill or deduct building value — no offset allowed |
Key Cases Cited
- Am. Condo. Ass’n, Inc. v. IDC, Inc., 844 A.2d 117 (R.I. 2004) (state supreme court holding Associations owned Regatta Club from construction)
- Am. Condo. Ass’n, Inc. v. IDC, Inc., 870 A.2d 434 (R.I. 2005) (reaffirming that portions are common elements and Associations’ ownership)
- Goat Island S. Condo. Ass’n, Inc. v. IDC Clambakes, Inc. (In re IDC Clambakes, Inc.), 727 F.3d 58 (1st Cir. 2013) (appellate characterization of the record as problematic)
- Fondedile, S.A. v. C.E. Maguire, Inc., 610 A.2d 87 (R.I. 1992) (elements for unjust enrichment/quasi-contract)
- Narragansett Elec. Co. v. Carbone, 898 A.2d 87 (R.I. 2006) (recognition that benefit conferred and appreciation supports recovery)
- R & B Elec. Co. v. Amco Constr. Co., 471 A.2d 1351 (R.I. 1984) (limits on considering related-entity expenditures in quantum meruit/mitigation analysis)