Goat Island South Condominium Ass'n v. IDC Clambakes, Inc. (In Re IDC Clambakes, Inc.) , 498 F.3d 58 ( 2013 )

United States Court of Appeals
For the First Circuit
No. 12-1710
IN RE: IDC CLAMBAKES, INC., d/b/a The Newport Regatta Club,
Debtor
GOAT ISLAND SOUTH CONDOMINIUM ASSOCIATION, INC.,
AMERICA CONDOMINIUM ASSOCIATION, INC.,
CAPELLA SOUTH CONDOMINIUM ASSOCIATION, INC.,
Appellants,
HARBOR HOUSES CONDOMINIUM ASSOCIATION, INC.,
Plaintiff,
v.
IDC CLAMBAKES, INC., d/b/a The Newport Regatta Club,
Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. William E. Smith, U.S. District Judge]
Before
Lynch, Chief Judge,
Boudin, Circuit Judge,*
and Woodlock, District Judge.**
*
Judge Boudin heard oral argument in this matter and
participated in the semble, but he did not participate in the
issuance of the panel’s opinion in this case. The remaining two
panelists therefore issued the opinion pursuant to 28 U.S.C.
§ 46(d).
**
Of the District of Massachusetts, sitting by designation.
William R. Grimm and Charles D. Blackman on brief for
appellants.
William P. Devereaux, with whom Thomas R. Gonnella, Matthew C.
Reeber, Benjamin L. Rackliffe were on brief for appellee.
August 14, 2013
WOODLOCK, District Judge. This case arises out of nearly
twenty years of litigation conducted along multiple fronts between
real estate development entities on the one hand and the
condominium entities generated by this development on the other.
Since at least 1994, the Plaintiff/Appellant Condominium
Associations and the IDC development entities -- IDC, Inc.; IDC
Properties, Inc.; and IDC Clambakes, Inc., the Defendant/Appellee
in this matter -- have been disputing the ownership and use of
certain property on Goat Island in the City of Newport, Rhode
Island.
The focus of the matter now before us is framed by the
fact that IDC Properties constructed and Defendant IDC Clambakes
operated The Newport Regatta Club on the contested property after
the Associations had asserted that the rights of IDC entities to
own or develop the property had lapsed. Eventually the Rhode
Island Supreme Court found in favor of the Associations. The
Associations thereafter sought to evict IDC Properties from the
land, and IDC Clambakes declared bankruptcy. This case comes to us
on appeal from a bankruptcy court decision and concerns the
question whether IDC Clambakes trespassed on the Associations’
property or whether, through their actions during the pendency of
the litigation, the Associations impliedly consented to operation
of the Regatta Club by IDC Clambakes while title to the land
remained unclear.
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Despite ongoing formal disputes in the state and federal
courts, the parties apparently enjoyed a generally congenial
relationship regarding the Regatta Club. The Associations did not
challenge building, liquor, or operating permits for IDC Properties
during construction other than to question the sufficiency of
planned parking space and zoning compliance. Instead, various
members of the Associations regularly contracted with the Regatta
Club for event space for annual meetings and private events.
The record is marbled with contradictory evidence
regarding manifestations of consent for Clambakes to operate on the
property. Ultimately, however, we find that the bankruptcy court’s
decision as to implied consent is a plausible interpretation of a
problematic record. That decision is fully reasoned and supported
by the evidence. Accordingly, we affirm as to that issue but
nevertheless find it necessary to remand as to the issue of whether
compensation is owed for Clambakes’ authorized use and occupancy.
I.
The material facts and history are essentially
undisputed. For the sake of clarity, we summarize only those facts
pertinent to this appeal. A more complete factual and procedural
history underlying the protracted litigation may be found in
decisions of the District Court, the Bankruptcy Court, and the
Rhode Island Supreme Court. See, e.g., In re IDC Clambakes, Inc.,
C.A. No. 10-267 S, 2012 WL 1194122, at *1-3 (D.R.I. Apr. 10, 2012);
In re IDC Clambakes, Inc., 431 B.R. 51, 54-57 (Bankr. D.R.I. 2010);
-4-
Am. Condo. Ass’n., Inc. v. IDC, Inc., 844 A.2d 117, 119-26 (R.I.
2004) (“America I”).
In 1997 and 1998, IDC Properties constructed the Newport
Regatta Club on a piece of property -- known throughout this
litigation as the Reserved Area -- in spite of an ongoing dispute
over ownership and development rights to the land. IDC Properties
began this development “with full knowledge of plaintiffs’ claims
and after they voluntarily entered into [a] tolling agreement.” In
re IDC Clambakes, Inc., 360 B.R. 24, 26 (Bankr. D.R.I. 2007). The
Associations, IDC Properties, and Thomas Roos (the sole shareholder
of each of the IDC entities) entered into this tolling agreement on
January 5, 2008, having engaged in years of discussions and
negotiations regarding the validity of amendments to the
Condominium Master Declaration purporting to grant IDC Properties
the right to develop the land when it did. After several
extensions, the Tolling Agreement was set to expire on May 31,
1999.
During the process of construction and permitting for the
Regatta Club, the Associations formally objected only to the
parking requirements. When IDC Properties filed for a building
construction permit, the America Condominium Association raised a
concern by writing to the Zoning Officer that, “It’s our
understanding that a permit application has been filed with your
Office for the purpose of constructing a bldg. . . . While we don’t
have a particular objection as to the land use with respect to the
-5-
building itself, we do have a substantial problem with the parking
requirements for that bldg. . . . .” The Associations were aware
that Clambakes applied for a liquor license transfer and sought to
delay the transfer, but only so the Zoning Board of Appeals could
resolve the parking issue dispute. Ultimately, the City Council
approved the liquor license transfer from Dorell, Inc. to IDC
Clambakes, Inc., the entity created in 1996 to lease and operate
the Regatta Club, and the debtor appellee in this action.
Nevertheless, Mr. Roos has stipulated that IDC Properties built the
Regatta Club at a time when he understood that the Associations
were “trying to say that Properties had no right to construct the
Regatta Club.”
IDC Clambakes was not a party to the Tolling Agreement,
and because the lease between IDC Properties and IDC Clambakes was
never recorded and Clambakes did business under the name “Newport
Regatta Club,” the record remains vague regarding the extent to
which the Associations understood or were aware of the precise role
Clambakes had in the development and operation of the Regatta Club.
On May 29, 1999, about six months after the use and
occupancy certificate was approved, Clambakes began operating the
Regatta Club and three days before the Tolling Agreement expired,
the Associations filed a seven-count state court action against Mr.
Roos, IDC Properties, and IDC, Inc., seeking damages and a
declaration that the voting scheme that purported to extend
development rights to IDC at the time it built the Regatta Club was
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invalid. This action “did not involve any claims of trespass, or
appear to involve any issues related to trespass or damages flowing
therefrom.” Goat Island S. Condo. Ass’n., Inc. v. IDC Clambakes,
Inc., 382 B.R. 178, 180 (D.R.I. 2008); see also America I, 844 A.2d
at 125, 125 n.13. Over the next six years, the parties litigated
ownership of the Reserved Area in the Rhode Island state courts
until April 8, 2005 when the Rhode Island Supreme Court declared
that “title [to the Reserved Area] rested with the unit owners in
common ownership” and not with IDC. Am. Condo. Ass’n., Inc. v.
IDC, Inc., 870 A.2d 434, 443 (R.I. 2005) (“America II”).
Meanwhile, during this protracted and contentious
litigation over ownership of the property, the Harbor Houses
Condominium Association, a plaintiff below but not an appellant in
this appeal, contracted with Clambakes to use the Regatta Club for
its annual meetings and various condominium unit owners regularly
contracted with Clambakes to host private events at the Regatta
Club. None of the Associations made any effort to enjoin Clambakes
or to evict it from the property. It was not until after the Rhode
Island Supreme Court’s decision in America II that the Associations
filed for Writs of Execution and Ejectment.
Following the Rhode Island Supreme Court’s decision in
America II, Clambakes tried a variety of initiatives to avoid the
seemingly inevitable consequences of the Court’s ruling. One week
after the decision in America II, Clambakes filed a civil action in
Rhode Island Superior Court, arguing among other things that it
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owned the contested property by adverse possession. Two months
later, on June 16, 2005, Clambakes filed the current Chapter 11
case to trigger the automatic stay, see 11 U.S.C. § 362, and stave
off enforcement of the state court judgment while relitigating some
of the issues that the state courts had already addressed. These
strategies proved unsuccessful. Eventually, a bankruptcy plan was
confirmed for Clambakes.
The district court vacated the bankruptcy court’s initial
decision, see Goat Island S. Condo. Ass’n., Inc., 382 B.R. at
179-80, and remanded the case for a more thorough development of
the facts and compliance with due process.1 On remand, the
bankruptcy court held a nine-day trial and, relevant to this
appeal, held that Clambakes was not liable for trespass between
March 1, 1998 and April 8, 2005 because the Associations impliedly
consented to Clambake’s operation of the Regatta Club. The
bankruptcy court denied any award of damages for this period.
1
The bankruptcy court’s initial decision held that IDC
Clambakes had been a trespasser but that the Associations were not
entitled to damages for the trespass because the state court’s
award of damages (unrelated to trespass) in the America litigation
had preclusive effect on the bankruptcy court claims and,
additionally, that damages would result in unjust enrichment based
on the “totality of circumstances.” In re Clambakes, Inc., 360
B.R. 24 (Bankr. D.R.I. 2007). The district court held that the
bankruptcy court misapplied Rhode Island trespass law, that
“totality of the circumstances” is not a proper ground to deny an
award of damages, and that preclusion was inappropriate both
because the America litigation did not address trespass and because
the parties had not filed any motion for summary judgment regarding
trespass as the bankruptcy court claimed. Goat Island S. Condo.
Ass’n., Inc. 382 B.R. 178.
-8-
Both parties appealed to the district court. The
district court affirmed, see In re IDC Clambakes, Inc., 2012 WL
1194122, and this appeal followed.
II.
We review the bankruptcy court’s decision without
deference to the district court’s ruling. “The court of appeals
undertakes an independent review of [a] bankruptcy court order,
utilizing the same appellate standards governing the district court
review.” In re LaRoche, 969 F.2d 1299, 1301 (1st Cir. 1992).
Thus, we review the bankruptcy court’s factual findings for clear
error and its conclusions of law de novo. Jeffrey v. Desmond, 70
F.3d 183, 185 (1st Cir. 1995); In re G.S.F. Corp., 938 F.2d 1467,
1474 (1st Cir. 1991).
“[A factual] finding is ‘clearly erroneous’ when although
there is evidence to support it, the reviewing court on the entire
evidence is left with the definite and firm conviction that a
mistake has been committed.” In re the Bible Speaks, 869 F.2d 628,
630 (1st Cir. 1989). If the bankruptcy court’s “account of the
evidence is plausible in light of the record viewed in its
entirety, [we] may not reverse.” Id. at 630. However, we may
affirm the decision of the bankruptcy court “on any ground
supported by the record.” In re Carp, 340 F.3d 15, 21 (1st Cir.
2003).
Mixed questions of law and fact “invok[e] a sliding
standard of review . . . .” Braunstein v. McCabe, 571 F.3d 108,
-9-
124 (1st Cir. 2009). The more fact intensive the question, the
more deferential the level of review (though never more deferential
than the “clear error” standard); the more law intensive the
question, the less deferential the level of review. See Sierra
Fria Corp. v. Donald J. Evans, P.C., 127 F.3d 175, 181 (1st Cir.
1997).
III.
Rhode Island law, which governs this trespass action,
defines a trespasser as “[o]ne who intentionally and without
consent or privilege enters another’s property.” Bennett v.
Napolitano, 746 A.3d 138, 141 (R.I. 2000). There is no question
that the Associations have made out two of the basic elements for
a trespass claim: Clambakes intentionally and voluntarily entered
the land and the land was in the Associations’ rightful possession.
Clambakes does not dispute this. The relevant question on appeal
is whether the bankruptcy court appropriately found implied
consent.
- A -
We address two preliminary issues before turning to the
substance of the bankruptcy court’s decision. In doing so, we
confront two arguments mounted by the Associations which, while
technically accurate as statements of legal principle, have no
bearing on this case.
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1. Mistake as to Ownership
The Associations’ first argument –- that a mistake as to
ownership is not a defense to trespass –- misses the point. Mistake
as to ownership played no role in the bankruptcy court’s
determination, and therefore was not the source of any error.
Further, any mistaken belief by Clambakes that IDC Properties owned
the land does not have the preclusive effect Appellants suggest.
The fact that Clambakes entered into a lease with IDC Properties,
which was under the mistaken belief that it owned the disputed
property, does not preclude a finding that Clambakes may have
thought it had the Associations’ implied consent to operate. The
two forms of permission are not mutually exclusive, particularly in
a situation where all parties involved understood that title was in
dispute. Neither of the Associations’ cited cases, Campbell v.
Lederer Realty Corp., 129 A. 732, 733 (R.I. 1925); Rhode Island
Economic Development Corp. v. The Parking Co., L.P., 909 A.2d 943,
945 (R.I. 2006), can support the proposition that an entity
entering into a lease for contested property with the apparent
landowner is thereby prohibited from also seeking or receiving
permission from another party claiming ownership.
2. Reasonable Reliance
The Associations’ next argument –- that there can be no
apparent consent without a finding of reasonable reliance -– finds
no application in this appeal. Appellants appear to contend that
the bankruptcy court made no finding of reasonable reliance,
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despite the court’s specific statement that “[the Associations’]
conduct demonstrates a continuing unequivocal expression of consent
. . . , upon which Clambakes reasonably relied.” In re IDC
Clambakes, Inc., 431 B.R. at 60 (emphasis added). The propriety of
this finding presents a separate issue, discussed in more detail
below, but the argument that this case warrants reversal for
failure to find reasonable reliance cannot withstand even the most
cursory glance.
With those preliminary issues resolved, we move on to the
substantive issues underlying the central question of implied
consent.
- B -
Consent, in any form, is fatal to a claim for trespass.2
Consent can be spoken or unspoken, express or implied, and there is
no requirement that it be communicated to the actor. Restatement
(Second) of Torts § 892 (1970). Apparent consent arises from the
parties’ conduct and from context. Griggs-Ryan v. Smith, 904 F.2d
112, 117 (1st Cir. 1990). It is sufficient that a party reasonably
understands words or conduct as conveying consent. Restatement
2
Beginning with the bankruptcy court’s opinion on remand, the
opinions and briefs in this case -- from post-trial motion through
this appeal -- use the terms “implied consent” and “apparent
consent” interchangeably. Although the terms are not necessarily
synonyms, any distinctions are not relevant to this case and we
therefore treat them as interchangeable in their phraseology and
application here.
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(Second) of Torts § 892.3 This is true “[e]ven when the person
concerned does not in fact agree to the conduct of the other” as
long as his “words or acts or even his inaction . . . justify the
other in acting in reliance upon them.” Id. at § 892 cmt. c.
However, there is no consent “if a reasonable person would not
understand from the words or conduct that consent is given . . .
even though he honestly so believes . . . .” Id.
We first address whether the bankruptcy court
appropriately found that actions by the Associations reasonably
conveyed apparent consent. We then turn to the question whether
the bankruptcy court properly found that Clambakes did, in fact,
reasonably rely on those actions.
1. Manifestation of Apparent Consent
The bankruptcy court’s determination that the
Associations’ actions manifested consent for Clambakes’ operation
of the Regatta Club falls within that court’s authority as fact
finder. To be sure, the evidence is not one sided. There is
evidence in the record sufficient to support either a finding of
consent or a finding of no consent as well as evidence
irreconcilably inconsistent with either alternative outcome. Yet
determinations of the character and weight of the evidence are best
left to the finder of fact. United States v. Young, 105 F.3d 1, 5
3
The Rhode Island Supreme Court looks to the Restatement of
Torts in deciding trespass claims. E.g., Mesolella v. City of
Providence, 508 A.2d 661, 667 n. 8 (R.I. 1986).
-13-
(1st Cir. 1997) (“[T]he trial judge, who hears the testimony,
observes the witnesses’ demeanor and evaluates the facts first
hand, sits in the best position to determine what actually
happened.”). And “[w]here there are two permissible views of the
evidence, a factfinder’s choice between them cannot be clearly
erroneous.” In re The Bible Speaks, 869 F.2d at 630.
The Associations rely on the parties’ long history of
bitterly contentious disputes over ownership of the property,
arguing that their own actions foreclose the possibility of any
manifestation of consent when understood in the context of the
specter of the parties’ various legal struggles. The Associations
entered into the Tolling Agreement with IDC, Inc., IDC Properties,
and Mr. Roos before IDC Properties began building the Regatta Club,
in order to preserve their claims that the voting scheme purporting
to extend development rights for IDC was invalid. Thus, from the
very outset -- and before the Regatta Club was built, let alone
operating at full scale under Clambakes’ management –- the
Associations manifested some opposition to development on the
disputed property. The Associations also opposed certain permits
and licenses required for the construction of the Regatta Club,
though never on grounds of trespass. They opposed the building
permit, stating, “[w]hile we don’t have a particular objection as
to the land use with respect to the building itself, we do have a
substantial problem with the parking requirements for that bldg.,
as well as for other commercial parking on and around that site.”
-14-
The Associations also delayed the liquor license transfer based on
the parking concerns but did not raise any other objection and the
City Council ultimately approved the transfer.
Having failed to prevent the construction of the Regatta
Club, the Associations notably declined to take action against the
Club’s operation until after resolution of the state court
litigation. As the bankruptcy court noted, Clambakes continued to
operate the Regatta Club “for more than seven years, with no
written or verbal notice, signage, or any other type of claim made
against Clambakes to quit the premises.” In re IDC Clambakes,
Inc., 431 B.R. at 60. The only evidence in the record of a post-
construction effort opposing Clambakes’ operations is a letter from
Daniel Kinder, an individual unit owner, to the Newport City
Council opposing Clambakes’ application to expand its outdoor
entertainment license. Mr. Kinder states that “IDC applies for a
license to which it had no right. IDC does not own the property in
question.” However, this letter is dated May 7, 2003, after the
Rhode Island Superior Court’s decision in favor of the
Associations, albeit before the Rhode Island Supreme Court’s final
decision. The Associations also lean heavily on a letter from the
American Condominium Association to the Mayor of the City of
Newport, dated June 17, 2000 –- more than a year after Clambakes
began operating the Regatta Club -- which seeks to enforce an
unheeded November 1999 Cease and Desist letter against IDC
Properties ordering it to halt construction of a gazebo or pavilion
-15-
at the Regatta Club. This letter cannot support the weight the
Associations seek to place on it. Read in context, the letter does
not seek to eject Clambakes’ operation, but rather to “ensure that
IDC does not, in any way, use or occupy [the structure] prior to
the resolution of the Zoning issues” (emphasis added). This,
then, is not an effort to halt the Regatta Club’s operation
permanently, but apparently only to enforce the zoning ordinances
governing parking and liquor.4 Moreover, there does not appear to
be any evidence in the record that Clambakes or Mr. Roos ever saw
this letter, and it therefore does not bear on the Associations’
manifestation of consent one way or the other.
The completion of the Regatta Club did not, of course,
mark the end of hostilities between the parties. In May 1999, just
before the expiration of the Tolling Agreement, the Associations
filed a state court action that dragged out for more than six years
regarding ownership of the land. In October 1999, they recorded a
Notice of Lis Pendens. However, these disputes over ownership of
the land are not necessarily equivalent to disputes over operations
taking place on the land during the pendency of the ownership issue
litigation. As the Associations point out, Mr. Roos has testified
that “[the Associations] were challenging every single right that
they could possibly think of.” But, in that statement, he was
4
The American Condominium letter does not expressly state
which zoning ordinances the C&D referenced, and the record does not
appear to include a copy of the C&D.
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commenting on the time frame in 1997 when IDC Properties was
beginning construction, not the post-construction time frame which
revealed the Associations’ apparent disinclination to challenge the
actual operation of the Regatta Club. In fact, in the swirling fog
of the litigious war between the parties, this small but
discernible area of calm and clarity is especially striking. As
the bankruptcy court supportably found, “it is clear that the
Associations and the Roos entities have fought over and litigated
every conceivable issue except Clambakes’ occupancy and operation
of the Regatta Club . . . .” In re IDC Clambakes, Inc., 431 B.R.
at 60-61 (emphasis in original).
For these reasons, the Associations’ actions and
inactions do not necessarily foreclose the possibility that it
reasonably manifested apparent consent for Clambakes’ operations.
And in support of its holding, the bankruptcy court relied on a
number of other factors affirmatively indicating consent.
First, the bankruptcy court put particular emphasis on
the fact that the Associations specifically omitted Clambakes from
the Tolling Agreement, all subsequent extensions, and the America
litigation. Id. at 60 (“From the outset, Clambakes was never
included as a party to the . . . Tolling Agreement . . . . During
the construction and even after it commenced operations, Clambakes
still was not added as a party to the Tolling Agreement . . . .
Clambakes was not a party in [the America] litigation.”). On
appeal, the Associations contend that the bankruptcy court
-17-
committed clear error because “[t]here is no evidence in the record
that supports the conclusion that the Associations knew that
‘Clambakes’ (as opposed to IDC Properties or IDC, Inc.) was
operating the Regatta Club . . . .”
The evidence in the record on this issue is a jumble of
contradictions: On the one hand, IDC Properties held itself out as
the operator of the Regatta Club in its answers to interrogatories;
letters from the Regatta Club to the Associations frequently came
from IDC, Inc.; the lease between IDC Properties and Clambakes was
not recorded; all of the event contracts for the Regatta Club were
in the name of IDC, Inc.; and Clambakes has described itself as a
“bookkeeping entity.” On the other hand, a newspaper reported
Clambakes as the owner of the Regatta Club when the liquor license
was granted; letters from Raymond Morrissette, President of the
American Condominium Association, and Mr. Kinder both acknowledge
Clambakes’ applications for various licenses to operate the Regatta
Club; and the Associations asked for a list of Clambakes’
shareholders during the state court litigation. Resolution of this
evidence based on its character, weight, and credibility involves
determinations of fact by the trial court to which we defer, absent
clear error. See In re The Bible Speaks, 869 F.2d at 630; Young,
105 F.3d at 5. The bankruptcy court’s determination finds
reasonable support in the record, and we therefore find no clear
error in the bankruptcy court’s reliance on this determination.
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Second, during construction of the Regatta Club, the
Associations specifically stated “we don’t have a particular
objection as to the land use with respect to the building itself,
we do have a substantial problem with the parking requirements for
that bldg. . . . .” See In re IDC Clambakes, Inc., 431 B.R. at 60.
The Associations suggest this letter is taken out of context and
merely asserts no disagreement as to the impact of the building’s
zoning on the number of required parking spaces. A review of the
fuller context of the letter belies the Associations’ argument and
indicates that the letter means precisely what it says.
Third, the Harbor Houses Condominium Association
contracted with Clambakes to use the Regatta Club for its annual
meetings and various condominium unit owners regularly contracted
with Clambakes to host private events. See id. It is true that
the individual unit owners do not have the power to bind the
Associations, cf. R.I. Gen. Laws § 34-36.1-3.02(a)(9) (granting the
unit owners association the right to enter into leases, licenses
and concessions over the common elements), and that the
Associations currently maintain that they did not, in fact, consent
to Clambakes’ operation of the Regatta Club. However, the actions
of individual owners and one of the Associations themselves, freely
contracting at market rates for meeting and event space without
objection, are the kinds of actions that manifest consent and
justify reasonable reliance “[e]ven when the [Associations] do[]
not in fact agree to the conduct of the other.” Restatement
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(Second) of Torts at § 892 cmt. c. The Associations should have
understood that their repeated, public patronage of the Regatta
Club (and that of their members) reasonably contributed to a
manifestation of apparent consent.
Fourth, the bankruptcy court considered that, until the
America II decision in 2005, the negotiations and litigation
concerned ownership of the land only, not the operation of the
business, and never included a claim for trespass, ejectment, or
eviction. The bankruptcy court stated that “this apparently
consensual relationship between Clambakes and the Associations
continued for more than seven years, with no written or verbal
notice, signage, or any other type of claim made against Clambakes
to quit the premises.” In re IDC Clambakes, Inc., 431 B.R. at 60.
The Associations argue that this fourth factor (a) is
inconsistent with the statute of limitations and (b) would
impermissibly require them to move for a preliminary injunction
rather than allow them to rest on their claims for legal and
equitable remedies at final judgment. Both arguments misunderstand
the bankruptcy court’s ruling.
A party may bring a claim for trespass until the last day
passes for determining when the statute of limitations runs. But
if the party consents to the use of the property, no trespass
exists to which the statute of limitations would apply. The
bankruptcy court did not hold that the Associations waited too long
-20-
to bring their valid claim. It held that they had no claim in the
first instance due to their apparent consent. Id. at 61.
Furthermore, the bankruptcy court did not suggest that
the Associations must move for a preliminary injunction preventing
Clambakes’ encroachment on the property or else risk manifesting
consent. A party can choose the relief it seeks, but it must
actually seek the relief it wants. The bankruptcy court grounded
its finding that the Associations manifested consent on the fact
that they specifically did not seek to hold any IDC entity liable
for trespass or to eject or evict them, but rather focused their
claims exclusively on land ownership. The Associations now say
they wanted all of the IDC entities to cease operations on the
disputed property, but they did not meaningfully pursue such relief
until after the decision in America II. To be sure, the
Associations did identify this kind of relief in the prayers of
their state court complaint, where they demanded judgment “for a
preliminary and permanent injunction requiring restoration of the
[property] to their condition as of December 31, 1994 [before
construction of the Regatta Club]” as well as “for a mandatory
injunction requiring Declarant to restore the easement to its
condition prior to Declarant’s wrongful conversion.” However, the
Associations also submitted in their complaint that they would
accept “an award of compensatory damages in an amount to be
determined at trial.” The Associations’ subsequent actions in
litigating the complaint indicate a disinclination to stop
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Clambakes from operating in favor of compensation for use of the
land.
Assuredly, the Associations actions over the course of
this period have been far from consistent, but the record contains
substantial, credible evidence from which the bankruptcy court
reasonably found that the Associations manifested apparent consent.
2. Reasonable Reliance
The bankruptcy court’s finding that Clambakes actually
and reasonably relied on the Associations’ manifestations of
apparent consent, In re IDC Clambakes, Inc., 431 B.R. at 60, also
falls within the Court’s authority as fact finder. We come to that
conclusion recognizing that the Associations point to considerable
evidence that they claim is inconsistent with a finding of
reasonable reliance.
The Associations’ claim is that Clambakes did not
actually believe that the Associations had provided consent and
therefore could not have reasonably relied on any manifestations of
consent. Chief among the parade of factors that the Associations
emphasize is Mr. Roos’ stipulation that “[IDC] Properties
constructed the Regatta Club at a time when Roos understood the
Condominium Associations representatives were trying to say that
Properties had no right to construct the Regatta Club.” This is
important evidence of Mr. Roos’ understanding of consent -- or lack
thereof -- at a critical time in this case, but it is not, alone,
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dispositive on the issue of reasonable reliance as the Associations
argue.
This court treats Mr. Roos’ statement -- as a stipulated
fact -- to be true, Morales Feliciano v. Rullan, 303 F.3d 1, 8 (1st
Cir. 2002) (“A party’s stipulations are binding on that party and
may not be contradicted by him at trial or on appeal.”), but that
does not guarantee that the fact is by itself dispositive. The
stipulation must be weighed against other evidence in the record in
order to determine whether the bankruptcy court committed clear
error. For instance, the stipulated understanding of Mr. Roos must
be weighed against the fact that the Associations only objected to
the parking aspects of Clambakes’ application for a building permit
and the Zoning Board eventually approved Clambakes’ liquor license
transfer. Moreover, Mr. Roos stipulated only that he knew the
Associations were opposed to construction of the Regatta Club,
which, as discussed above, is consistent with the Associations
pursuing claims of land ownership only, and does not necessarily
contradict consent for operation of the Regatta Club once
constructed. Finally, the stipulation speaks only to Mr. Roos’
understanding at the time of construction. As discussed above,
many of the Associations’ manifestations of consent (such as
contracting with the Regatta Club, only pursuing land ownership
claims, and not joining Clambakes in the tolling agreement or
America litigation) arose after the time of construction. Thus,
even if Mr. Roos had understood at the time of construction that
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the Associations would not have consented to Clambakes’ operation
of the Regatta Club, subsequent events could reasonably be found to
have changed his understanding. A trial court might permissibly
find that Mr. Roos’ stipulation weighs against a finding of
reasonable reliance, though it does not necessarily carry as heavy
a weight as the Associations contend.
Similarly, the Associations argue that Clambakes admitted
that it did not have their consent to operate the Regatta Club when
it filed a state court complaint on December 28, 2006 alleging
adverse possession, which necessarily includes the allegation that
possession was hostile and without consent. See Reitsma v. Pascoag
Reservoir & Dam, LLC, 7724 A.2d 826, 834-35 (R.I. 2001). This
proves too much. Clambakes argued in the alternative that the
Associations “consented to, agreed, permitted, and allowed
Clambakes’ use and occupancy of the Reserved Area.” As mere
allegations in the alternative, neither position is a binding
representation and neither demands greater consideration than the
other. Nor did the state court resolve either of these arguments
such that Clambakes would be bound by judicial estoppel. We
therefore decline to consider the allegations in Clambakes’ state
court complaint as undercutting to the bankruptcy court’s
determination.
The Associations also contend that Clambakes could not
have reasonably relied on any manifestations of consent because it
relied, not on consent, but on Mr. Roos’ level of confidence that
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the IDC entities had a right to the property. This is a
troublesome aspect of the reasonable reliance analysis. The
bankruptcy court’s finding of reasonable reliance -- indeed, any
finding of reasonable reliance in this case -- necessarily rests on
the notion that Clambakes relied on a belief that it had permission
from both parties claiming to own the land. As discussed above,
Clambakes entered into its lease with IDC Properties under the
mistaken belief that IDC Properties owned the land. This does not
necessarily preclude the possibility that Clambakes may have
believed it also had the Associations’ consent, but the greater the
degree of confidence in IDC Properties’ ownership of the land, the
weaker the permissible inference that Clambakes actually relied on
the Associations’ manifestations of apparent consent in choosing to
continue to operate the Regatta Club.
Some of the evidence regarding Mr. Roos’ confidence may
amount to posturing or litigation strategy, such as the early
threats to sue the Associations for slander of title, and the
various legal positions taken throughout the America litigation.
Other evidence, however, appears to show that Mr. Roos had little
question in his mind as to the validity of the amendments to the
Condominium agreement conferring ownership on IDC Properties. When
asked “you believed that IDC Properties, Inc. owned [the Reserved
Area],” Mr. Roos responded: “I knew we owned it,” and when asked if
he believed the sixth amendment to the condominium agreement gave
him title, he responded: “The 6th amended did give me title.” The
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fact that the IDC entities built and operated a multi-million
dollar banquet hall and business on land they knew the Associations
also claimed to own equally underscores their confidence in their
own title to the land.
Ultimately, these facts may reflect a dispute whether
Clambakes truly relied upon any apparent consent from the
Associations, whether it simply believed IDC Properties’ claim to
the land was beyond reproach, or whether it simply pressed on,
building and operating the Regatta Club on the gamble that events
would resolve in its favor. However, the fact of a dispute is not
sufficient to justify reversal.
Reasonable reliance presents a mixed question of law and
fact, and it is clear from the bankruptcy court’s decision that the
reasonable reliance analysis was deeply fact intensive. The
bankruptcy court focused, in particular, on evidence that Clambakes
maintained years-long contractual relationships with the
Associations and individual owners, presumably expecting continued
business regardless of the outcome of the America litigation. The
bankruptcy court also focused on the evidence of the striking
absence of trespass claims or claims against Clambakes in the
otherwise comprehensive litigation.
While this may be a disputable question, and the record
contains evidence in support of and irreconcilably contradicting
both sides, resolution ultimately depends on determinations as to
the character and weight of the evidence. It is clear that the
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bankruptcy court’s ruling rested, not on any particular piece of
evidence, but on its assessment of the whole factual record. Thus,
on the sliding scale, the standard of review approaches “clear
error,” see Braunstein, 571 F.3d at 124. Here, an alternative
reading of the record does not amount to “a strong, unyielding
belief that a mistake has been made.” In re Carp, 340 F.3d at 22.
We therefore uphold the bankruptcy court’s finding of reasonable
reliance.
IV.
Having found that the Associations impliedly consented to
Clambakes’ operation of the Regatta Club from the time of its
construction through the end of the America litigation, we turn to
the Associations’ argument that implied consent necessarily gives
rise to an implied obligation to pay. The Associations essentially
argue that, even if they did consent to Clambakes occupying and
operating on the Reserved Area, their conduct could not reasonably
have been understood to confer permission to do so free of charge.
The record reveals colorable support for the
Associations’ position. Clambakes entered into a lease for the
land, paying IDC Properties. Thus, Clambakes understood that it
owed money to the property owner (which it mistakenly believed to
be IDC Properties) for use of the land. And although the America
complaint brought no claim for trespass, it did seek either to
force the IDC entities to return the land to its condition before
development or to pay compensatory damages. The Associations’
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actions manifested apparent consent for Clambakes to use the
property, but not necessarily to do so rent free. The America
litigation made abundantly clear that even if the Associations
consented to the operation of the Regatta Club, they would pursue
their rights to ownership of the land and their right to
compensation for the land’s use.
In their brief on appeal, the Associations cite three
cases, which they claim stand for the proposition that implied
consent under these conditions gives rise to an implied obligation
to pay: Narragansett Elec. Co. v. Carbone, 898 A.2d 87 (R.I. 2006);
R&B Elec. Co., Inc. v. Amco Constr. Co, Inc., 471 A.2d 1351 (R.I.
1984); Bailey v. West, 249 A.2d 414 (R.I. 1969). All are implied
contract cases. Clambakes contends that the Associations waived
this argument by failing to raise it at the trial (bankruptcy)
court level. The District Court, on appeal, agreed. See IDC
Clambakes, Inc., 2012 WL 1194122, at *8 n.4 (“The Associations
argue . . . implied consent necessarily gives rise to an implied
obligation to pay fair value of the benefit received. . . . [T]his
argument was not raised before the bankruptcy court below and is,
accordingly, not properly before this Court on appeal.”). This
reflects a clearly erroneous view of the record. Although the
bankruptcy court never addressed the issue, the Associations did
raise the argument. In a post-trial motion filed December 4, 2008,
just over a week after the trial and 18 months before the
bankruptcy court issued its decision, the Associations argued that
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“[e]very theory of implied consent gives rise to a corresponding
implied obligation to pay for the value of what was received.
Debtor should not . . . be permitted to retain the benefit . . .
but pay . . . nothing.” In fact, before the bankruptcy court, the
Associations grounded this argument on precisely the same three
cases which were cited in its briefing before this court.
Despite the fact that the Associations presented their
implied-obligation-to-pay argument in their post-trial motion, the
bankruptcy court did not decide, or even mention, the issue. See
IDC Clambakes, Inc., 431 B.R. 51. The issue is insufficiently
developed for proper adjudication on appeal, see Greenpack of P.R.,
Inc. v. Am. President Lines, 684 F.3d 20, 30 (1st Cir. 2012); Bakia
v. Cnty. of Los Angeles, 687 F.2d 299, 301 (9th Cir. 1982)
(remanding where appeals court did not have benefit of trial
judge’s evaluation of the arguments), and is more appropriately
directed to the trial court in the first instance for determination
whether the facts in this case and the law of Rhode Island support
a finding of consent to operate free of charge or whether the
Associations conditioned their implied consent on an implied
obligation to pay. We therefore remand as to the question whether
implied consent in this case also gives rise to an implied
obligation to pay the fair value for use and occupancy of the
property.5
5
We note that as part of its bankruptcy responsibilities, IDC
Clambakes has placed “sufficient funds . . . in escrow to pay the
Associations in full, if their claims are allowed. That fund
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We affirm as to implied consent for the use and occupancy
of the property but remand for further proceedings consistent with
this opinion regarding the issue whether the implied consent in
this circumstance gives rise to an obligation to pay the fair value
for such use and occupancy and, if so, in what amount. Each party
shall bear their own costs.
remains intact.” In re IDC Clambakes, Inc., 431 B.R. at 57.
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