Tri-Town Construction Company, Inc. v. Commerce Park Associates 12, LLC
139 A.3d 467
| R.I. | 2016Background
- In 2006 Tri-Town sold 30 wooded acres to Commerce Park Associates 12, LLC (CPA); CPA executed a $4,363,000 promissory note secured by mortgage and Cambio signed both as CPA’s manager and individually as guarantor.
- The note required principal-only payments then interest-only payments until the “first Homebuyer closing,” contained a broad guaranty clause and an attorney-fee provision for collection/enforcement of defaults.
- CPA stopped payments in 2008 after financing became unavailable during the recession; Tri-Town foreclosed in 2012, purchased the property at auction for $2,250,000, and sued for the resulting deficiency (~$3.9M) against CPA and Cambio.
- Tri-Town moved for summary judgment on breach of the note and breach of guaranty; defendants asserted frustration of purpose and challenged the guaranty’s validity; CPA counterclaimed seeking return of payments and investments.
- The Superior Court granted Tri-Town summary judgment on both counts, dismissed CPA’s counterclaim under Rule 12(b)(6), and awarded Tri-Town $43,227.25 in attorney’s fees; defendants appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of promissory note — liability for nonpayment | Note is valid, payments were due, defendants defaulted, Tri-Town entitled to summary judgment | Frustration of purpose due to the recession made development impossible, excusing payment | Affirmed — frustration of purpose inapplicable; no shared basic assumption that Tri‑Town was co‑venturer and hardship not substantial enough to excuse performance |
| Breach of guaranty — enforceability of guaranty language | Guaranty language in the note clearly binds Cambio as guarantor | Guaranty unenforceable: not in separate writing, not specific, guarantor not identified, no recitation of consideration | Affirmed — guaranty in same instrument is valid; signature and language sufficiently identify guarantor; corporate officer guarantor need not receive separate consideration |
| CPA counterclaim seeking return of payments/investments | Counterclaim alleges frustrated contract and seeks restitution for payments and investments | Tri‑Town: frustration is a defense, not an affirmative cause of action | Affirmed dismissal — frustration of purpose is an affirmative defense, not a standalone basis for recovery |
| Award of attorney’s fees under contract | Note permits recovery of reasonable fees incurred in collection/enforcement; Tri‑Town’s submitted affidavits and bills show reasonableness | Fees unreasonable in part; affidavits from Tri‑Town’s own counsel insufficient — independent expert proof required | Vacated and remanded — contractual fee entitlement acknowledged, but trial court erred by not receiving independent (non‑party) Rhode Island counsel affidavit/testimony to establish reasonableness |
Key Cases Cited
- Iannuccillo v. Material Sand & Stone Corp., 713 A.2d 1234 (R.I. 1998) (elements for frustration of purpose defense)
- Sullo v. Greenberg, 68 A.3d 404 (R.I. 2013) (standard of review for summary judgment)
- Katz v. Prete, 459 A.2d 81 (R.I. 1983) (corporate officer guarantor need not receive separate consideration)
- Colonial Plumbing & Heating Supply Co. v. Contemporary Construction Co., 464 A.2d 741 (R.I. 1983) (expert affidavits or testimony should establish fee‑award criteria)
- Pearson v. Pearson, 11 A.3d 103 (R.I. 2011) (contractual fee provisions may allow awards even if movant did not prevail on every motion)
- Dauray v. Mee, 109 A.3d 832 (R.I. 2015) (abuse‑of‑discretion review for amount of contractual attorney’s fees)