DocketNumber: No. PC-O3-1745
Judges: GIBNEY, J.
Filed Date: 10/17/2007
Status: Precedential
Modified Date: 7/6/2016
The P S contained certain conditions, one of which was that the sale was subject to the approval of an eight or nine lot subdivision of the property.1 Dalo was required to exercise due diligence, and the closing was scheduled to occur within thirty days of obtaining subdivision approval.
On January 19, 1999, the Scituate Planning Commission (the Commission) voted to approve a proposed subdivision master plan for the property. Final approval was subject to certain conditions, one of which required Devany to obtain an easement to clear brush from property owned by an objecting neighbor, Cecile Davidowicz (Davidowicz). Lengthy negotiations between Devany and Davidowicz ensued.
On March 8, 1999, Adler gave Devany a quote for $196,967 to clear land and perform roadwork on the property. It later reduced the price to $169,835 on March 31, 1999. Adler was aware that Devany did not own the property, but that he had signed a P S on behalf of Bethel Corporation (Bethel). Thereafter, on April 17, 1999, Devany entered into another Indemnification Agreement with the Colvins, this time on behalf of Bethel. However, Bethel was not incorporated until April 21, 1999. In the Indemnification Agreement, the Colvins agreed to allow Bethel "to go upon said property and perform certain road building and associated land development work."2 *Page 3
Sometime in May, 1999, the Colvins entered into a second P S with Devany, this time in his capacity as President of Bethel. The sale still was subject to the acquisition of subdivision approval, with the closing still to be scheduled within thirty days of receiving final approval. The purchase price had been increased to $137,000 and the parties expressly incorporated the April 17, 1999 Indemnification Agreement into the P S.
On April 28, 1999, Adler commenced construction on the property, and continued through June 11, 1999.3 Adler removed and buried trees and boulders, and began laying a roadway of approximately nineteen-hundred-feet in length. When Devany encountered difficulties in obtaining an easement from Davidowicz, he told Adler to discontinue the construction project before completion. On December 31, 1999, Adler submitted an invoice to Devany in the amount of $75,000. To date, Adler has not been paid for the any of the work that it performed for Bethel.
On February 5, 2000, the Colvins informed Devany, through Parenti, that they wanted to close the sale pursuant to a previous, unwritten November 15, 1999 deadline. Thereafter, the Colvins put pressure on Devany to close the deal. On February 29, 2000, Parenti wrote in his notes that:
"I explained to Earl [Colvin] that the closing date was open ended and that upon drafting of the second agreement I urged Earl to put a specific date but that Earl said that he had nothing to lose with the roadwork to be done, a gain to him, and that he wanted to keep the closing as per the first agreement. . . ." Exhibit 36 Parenti's notes, dated February 29, 2000.
On May 3, 2000, the Colvins and Bethel entered into yet another P S, this time in the amount of $170,000. The P S did not specify a closing date. On June 19, 2000 the parties amended the *Page 4 P S to include a closing date of July 21, 2000, with time being of the essence. On July 5, 2000, the Colvins agreed to extend the closing date to September 30, 2000, again with time being of the essence.
On August 1, 2000, Adler sent another $75,000 invoice to Devany. Meanwhile, according to Devany, he was still attempting to resolve the easement issue with neighbor Davidowicz. Towards the end of September, Devany indicated that he and Davidowicz had reached an agreement, and that he needed a few extra days to firm up financing. However, the Colvins refused to extend the September 30, 2000 deadline. On October 1, 2000, Devany executed a release on behalf of Bethel Corporation. Meanwhile, the Rhode Island Secretary of State had issued a notice of revocation of its corporate status to Bethel for failure to file an annual report. On November 30, 2000, the Rhode Island Secretary of State mailed a Certificate of Revocation to Bethel for failure to file an annual report.
On October 6, 2000, Adler filed a notice of intention to file a mechanic's lien. Meanwhile, Parenti attempted to solicit third-party bids for the property on behalf of the Colvins. The Colvins rejected several offers for the parcel: one from Meehan Builders, Inc., in the amount of $288,000; another from Harrow, LLC, for $295,000; another from Robert F. Tasca, Jr. (Tasca), for $250,000. The Colvins also rejected an offer from Adler to purchase the property for $255,000, with the agreement that it would be willing to waive all of its claims for compensation for the construction work that it already had performed on the lot.
On October 23, 2000, the Colvins entered into a P S with Annese Construction Co., Inc. (Annese) in the amount of $300,000. Annese also intended to subdivide and develop the property. Thereafter, Tasca offered Annese $290,000 to construct a home on one of the property's parcels. The Colvins never sold the property to Annese, however, because it was *Page 5 unable to obtain necessary permits. Consequently, on March 19, 2001, the Colvins, Parenti, and Annese executed a release.
On April 2, 2001, the Colvins entered into a P S with Tasca in the amount of $315,000. On April 25, 2001, the Colvins transferred the warranty deed to Tasca. Thereafter, Tasca constructed a single-family residence on the property that utilizes all but seventy feet of the roadway that Adler sub-graded. Tasca later obtained approval to subdivide the property into two lots.
On April 8, 2003, Adler filed the instant action against the Colvins and Devany.4 It alleged breach of contract (Count I), book account (Count II), successor liability against Devany and/or Bethel (Count III), and piercing of Bethel's corporate veil (Count IV). Adler further alleged breach of an implied contract and/or quasi contract and quantum meruit against the Colvins (Count V).5 Adler sought to hold the Devanys and the Colvins jointly and/or severally liable. It also sought interest and attorney's fees.
In response, the Colvins filed a counterclaim against Adler for trespass, conversion, and fraud/slander of title. Additionally, they filed a cross-claim against Devany, asserting that he was personally liable to indemnify the Colvins because, they maintained, Devany neither capitalized Bethel nor followed requisite corporate formalities. Devany later filed a motion for summary judgment asserting that the October 1, 2000 release that the parties signed served to release not only Bethel, but also Devany in his personal capacity, from any obligations that they may have had towards Adler. On June 1, 2004, a Motion Justice of this Court ruled that the *Page 6 release only applied to Bethel because there was no consideration between the Colvins and Devany in his personal capacity.
Thereafter, the Court conducted a five-day non-jury trial. The Colvins and Adler later submitted post-trial memoranda. The Court now will render a decision.
Further, it is well-settled that a trial justice's decision in a non-jury trial need not involve an "extensive analysis and discussion of all the evidence. Even brief findings and conclusions are sufficient if they address and resolve the controlling and essential factual issues in the case." Parella,
In response, Adler contends that while the mechanics lien law may have provided it with a remedy against the Colvins, it does not constitute Adler's exclusive remedy. It further maintains that it is entitled to equitable relief because it met its burden of proving that the Colvins had been unjustly enriched. Adler then asserts that it presented several distinct methods for the Court to determine Adler's measure of damages. Adler also disputes Devany's characterization at trial that the contract between Adler and Bethel was contingent upon Bethel's obtaining subdivision approval.6 *Page 8
In order to determine what comprises "a just or unjust result requires a trial justice to examine the facts of the particular case and balance the equities." Id. at 115 (citing R B Electric Co.,
"a plaintiff is required to prove three elements: (1) a benefit must be conferred upon the defendant by the plaintiff, (2) there must be appreciation by the defendant of such benefit, and (3) there must be an acceptance of such benefit in such circumstances that it would be inequitable for a defendant to retain the benefit without paying the value thereof." Narragansett Elec. Co.,
898 A.2d at 99 (quoting Bouchard v. Price,694 A.2d 670 ,673 (R.I. 1997)); see *Page 9 also Fondedile, S.A. v. C.E. Maguire, Inc.,610 A.2d 87 ,97 (R.I. 1992) (discussing almost identical elements in a quasi-contract context).
The Rhode Island Supreme Court has held that "a benefit is conferred when improvements are made to property, materials are furnished, or services are rendered without payment." Narragansett Elec. Co.,
In the instant matter, the Colvins gave Bethel permission to begin roadway construction on their property provided that it sign an Indemnification Agreement. In reliance upon this permission, and with confidence that Bethel would timely obtain the necessary subdivision permits, Bethel contracted with Adler to remove and bury trees and boulders, and to partially construct a nineteen-hundred-foot long roadway on the Colvin's property. All but seventy feet of the same roadway later was improved and utilized by Tasca in the construction of a single-family home on the property. The Court finds that at a minimum, a partially constructed roadway improved the property, and thereby constituted a benefit to the Colvins. Furthermore, it is undisputed that Adler has not received payment for its services. As noted, services rendered without payment also constituted a benefit to the Colvins.See Narragansett Elec. Co.,
Earl Colvin testified at trial. The Court finds him to be an intelligent, articulate, very clever individual with sharp business sense. He is a detail man. The Court does not find credible his testimony asserting that he was unaware of the construction work on the property. In the April 17, 1999 Indemnification Agreement, the Colvins expressly permitted Bethel to perform roadwork on the property. Adler subsequently commenced working on the property without any objection either directly from the Colvins, or through Parenti, their agent. Indeed, Parenti *Page 10 credibly testified that Earl was aware that roadwork was being performed on the property, and Parenti's February 29, 2000 notes indicate that Earl viewed the construction as a "no lose situation": either he closes the deal, or he gains from the roadwork. In addition, Adler's notice to file a mechanics' lien put the Colvins on notice that work had been performed on the property.
Devany also testified about the events surrounding his failure to purchase the property. The Court finds his testimony to be more credible than Earl's. It further finds that in general, Devany was a very good witness whose version of events was far more convincing than Earl's. Devany credibly testified that Earl knew about both the roadwork and that Devany was close to an agreement with Davidowicz concerning the easement issue. However, the Colvins refused to extend the September 30, 2000 closing deadline. Once the deal fell through, Earl immediately began to seek higher bids for the property. In light of the foregoing, the Court finds that the Colvins appreciated the benefit of Adler's roadwork; consequently, Adler satisfies its burden of demonstrating the second element of unjust enrichment and/or of a quasi-contract test. The Court now must consider whether the Colvins accepted the benefit of Adler's work such that it would be inequitable for them to retain the benefit of that work without paying for its value.
The Court has found that Earl was aware of Adler's roadwork, and that the Colvins financially benefited from that work when they sold the property. Real estate appraiser Sweeney testified on behalf of Adler. He was an excellent and credible witness who opined that the property's increase in value to over $300,000 was directly attributable to the roadwork performed by Adler. The fact that the Colvins were willing to accept $170,000 for the property in July, 2000, and some three months later held out for an offer of $300,000 would support an inference that the Colvins realized that the partially constructed roadway had increased the value of their property substantially. *Page 11
This conclusion is further bolstered by the Colvins' own actions. The Colvins and Bethel had agreed to close on the property on September 30, 2000, with time being of the essence. The purchase price was for $170,000. At that point in time, Bethel owed Adler $75,000 for the partially constructed roadway. Twenty-three days after the sale fell through, the Colvins signed a P S with Annese in the amount of $300,000. See P S, dated October 23, 2000. At the time, the Colvins were aware that Adler had not been paid for the construction because they had turned down an offer from Adler for $255,000, coupled with an agreement to waive any and all claims for its unpaid work. In view of the foregoing, the Court concludes that the Colvins were unjustly enriched and it would be inequitable for them to retain the benefit of Adler's work without paying for its value. The Court next must consider the amount of damages that Adler has suffered.
Contrary to the Colvins' assertion, the proper measure of damages for an unjust enrichment claim is "the fair and reasonable value of the work done." ADP Marshall, Inc. v. Brown University,
Adler contends its damages amount to approximately $109,000 to $110,000, and relies upon testimony from real estate developer David Annese to support this contention. Mr. Annese testified that it would cost approximately $60,000 to complete the roadwork. Adler subtracted this cost from the contract price of $169,835 to reach a balance of $109,835 — the damages it alleges that it suffered. The Colvins counter that because Adler was willing to pay $255,000 and waive its claim for work already performed, the maximum it should be entitled to recover is $60,000, i.e., the difference between the price Adler was willing to pay and the $315,000 that Tasca actually did pay.
The Court finds that Mr. Annese's calculation does not account for any profits that Adler would have added to its $60,000 cost. Such profits also would have to be subtracted from the contract price in order to calculate a more realistic assessment of damages. Consequently, the Court finds Mr. Annese's calculation of damages to be inaccurate.
The Court concludes that Devany was acting under a good faith belief that the sale would be consummated when he contracted with Adler to perform roadwork on the property. Adler, although cognizant of the fact that Bethel did not own the land, reasonably could have relied upon Devany's belief that the property would be sold to Bethel. As Devany's subcontractor, the Court concludes that Adler is entitled to personal judgment from the Colvins for damages as a result of their unjust enrichment. See R B Elec. Co., Inc.,
It is undisputed that the Colvins received a substantially higher price from Tasca than it would have received from Adler. It also is undisputed that Adler performed roadwork on the *Page 13 property. Although the roadwork may have been responsible for the entire appreciation in the value of the property, such increase does not accurately reflect the damages actually incurred by Adler. Adler charged Devany $75,000 for the work that it performed. Presumably, this sum represented Adler's belief of the worth of its services. Consequently, the Court finds that the fairest and most accurate assessment of the value of Adler's work is the amount that it actually charged Devany. The Court accordingly concludes that Adler's damages on the unjust enrichment claim amounts to $75,000, plus interest.
It is axiomatic that "[t]he standards for piercing the corporate veil vary with the circumstances." Miller v. Dixon Industries Corp.,
In the present case, it has not been alleged, much less proven, that Devany attempted to perpetrate a fraud when he incorporated Bethel. Furthermore, there is no evidence that an injustice would result unless Bethel's corporate identity was disregarded. Indeed, the reverse may be true: were the Court to disregard Bethel's corporate identity and hold Devany personally liable for Bethel's breach of contract, Devany would be responsible to pay the amount for which the Colvins were unjustly enriched. Consequently, the Court declines the invitation to pierce Bethel's corporate veil.
The well-established "rule holds that a preincorporation contract may be adopted, accepted, or ratified by a corporation when properly organized, resulting in corporate liability on the contract." Katz v.Prete,
In Rhode Island, "[i]n order to successfully assert an action for indemnity, the prospective indemnitee must prove three elements."Muldowney v. Weatherking Products, Inc.,
Indemnification "arises out of a contract which may be express or may be implied in law to prevent a result which is regarded as unjust or unsatisfactory. . . ." Rosado v. Proctor Schwartz, Inc.,
Implied indemnification is a "restitution concept which permits shifting the loss because to fail to do so would result in the unjust enrichment of one party at the expense of the other." Mas v. Two BridgesAssoc.,
"[a]s a general rule of law, apart from unjust enrichment . . . a subcontractor who has furnished labor or materials for the construction or repair of some form of improvement on the lands of another has no right to a personal judgment against the landowner where there is no contractual relationship between them." R B Elec. Co., Inc.,
471 A.2d at 1355 (emphasis in the original).
The Colvins assert that the Indemnification Agreement releases them from financial liability; however, the indemnification agreement runs from Bethel to the Colvins. Considering that Bethel no longer exists, and the Court has declined the Colvin's invitation to pierce the corporate veil, the issue of indemnification is moot. Consequently, the Court concludes that the Colvins are liable for the payment of Adler's damages, plus interest. In light of this conclusion, the Court denies and dismisses Count II (book account) and Count III (successor liability) of the complaint.
Counsel shall submit an appropriate order consistent with this decision.
"NOW THEREFORE, Bethel Corp. agrees to be primarily responsible for any and all claims which may arise relative to certain road building and associated land development work performed by Bethel on the property known as Assessor's Plat 48, Lot 118 Scituate[,] RI, and further agrees to hold Earl and Lillian G. Colvin harmless and to indemnify them from any and all claims which may be made against them relative to the aforementioned road building and associated land development work as owners of the property."
*Page 1"The court may award a reasonable attorney's fee to the prevailing party in any civil action arising from a breach of contract in which the court:
(1) Finds that there was a complete absence of a justiciable issue of either law or fact raised by the losing party; or
(2) Renders a default judgment against the losing party."
Narragansett Electric Co. v. Carbone ( 2006 )
Dellagrotta v. Dellagrotta ( 2005 )
Parella v. Montalbano ( 2006 )
R & B Elec. Co., Inc. v. Amco Const. Co., Inc. ( 1984 )
Muldowney v. Weatherking Products, Inc. ( 1986 )
Fondedile, S.A. v. C.E. Maguire, Inc. ( 1992 )
Banks v. Bowen's Landing Corp. ( 1995 )
Miller v. Dixon Industries Corp. ( 1986 )
ADP Marshall, Inc. v. Brown University ( 2001 )
In Re Poling Transportation Corp. ( 1992 )