In re IDC Clambakes, Inc.
510 B.R. 678
| Bankr. D.R.I. | 2014Background
- Long-running chapter 11 dispute over use of the Reserved Area on Goat Island, with four condo associations seeking $3.5M in trespass damages against Clambakes for 1998–April 7, 2005.
- Rhode Island Supreme Court decisions America I (2004) and America II (2005) held owner entitlement to the Reserved Area and that title vested in unit owners; issues of compensation followed.
- First Circuit affirmed implied consent to Clambakes’ occupancy but remanded to determine whether implied consent gave rise to an obligation to pay fair value and, if so, the amount.
- Bankruptcy court and district court consistently found no trespass due to implied consent; on remand, court must assess implied-contract/quasi-contract theories.
- On remand, Clambakes argued the associations bore the burden to prove implied-in-fact contract or quasi-contract and that RI law does not require a presumed obligation to pay; associations relied on expert testimony for use-and-occupancy values.
- Court ultimately sustains objections, disallowing all four claims as to be payable by Clambakes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether implied consent creates an obligation to pay fair value. | Associations: implied obligation to pay under implied contract. | Clambakes: no implied obligation to prove payment; implied consent does not automatically include payment duty. | Obligation to pay not established; implied consent alone does not prove a payment obligation. |
| Who bears the burden of proof on implied contract/quasi-contract claims. | Associations bear burden to prove implied contract or unjust enrichment. | Clambakes bears burden to rebut prima facie claim; associations must prove entitlement by preponderance. | Burden lies with the Associations; Clambakes rebutted prima facie case. |
| Existence of an implied-in-fact contract between associations and Clambakes. | Implied-in-fact contract existed via mutual assent to occupancy. | No mutual assent; no oral lease; evidence shows consent but not contract. | No implied-in-fact contract proven. |
| Existence of quasi-contract/unjust enrichment recovery. | Ass’n claim grounded in quasi-contract or unjust enrichment for fair value. | No unjust enrichment; benefit balancing shows no inequity. | Quasi-contract relief not proven; no recovery. |
| Appropriate valuation framework for use and occupancy; impact of America litigation. | Value between $2.6–$3.2M based on expert testimony; building and land rent. | Ground-lease value lower; offsets for post-America assets; no payment obligation. | Net effect: no recovery; associations failed to prove entitlement to quasi-contract or implied contract. |
Key Cases Cited
- America Condominium Ass’n, Inc. v. IDC, Inc., 844 A.2d 117 (R.I. 2004) (America I; reserved area ownership issues resolved against equitable relief for construction costs)
- America Condominium Ass’n, Inc. v. IDC, Inc., 870 A.2d 434 (R.I. 2005) (America II; confirms common element ownership and vesting in unit owners)
- Goat Island S. Condo. Ass’n, Inc. v. IDC Clambakes, Inc., 727 F.3d 58 (1st Cir. 2013) (remand to assess implied consent to pay fair value, if any)
- In re Colonial Bakery, Inc., 108 B.R. 13 (Bankr. D.R.I. 1989) (claims objection procedure; prima facie validity; burden shift)
- Bailey v. West, 249 A.2d 414 (R.I. 1969) (elements of implied-in-law/quasi-contract require proof of an implied contract)
- Fondedile, S.A. v. C.E. Maguire, Inc., 610 A.2d 87 (R.I. 1992) (quasi-contract and unjust enrichment principles)
- R & B Elec. Co., 471 A.2d 1351 (R.I. 1984) (recovery via quasi-contract requires unjust enrichment; no privity needed)
- Santilli v. Morelli, 230 A.2d 860 (R.I. 1967) (removal/equitable relief considerations in land disputes)