Goat Island South Condominium, et al v. IDC Clambakes, Inc.

Filing

OPINION issued by Sandra L. Lynch, Appellate Judge; Bobby R. Baldock, Appellate Judge and William J. Kayatta, Jr., Appellate Judge. Published. [15-1771, 15-1818]

Case: 15-1771

Document: 00117133925

Page: 1

Date Filed: 03/24/2017

Entry ID: 6078922

United States Court of Appeals
For the First Circuit
Nos. 15-1771, 15-1818
IN RE: IDC CLAMBAKES, INC.,
Debtor

GOAT ISLAND SOUTH CONDOMINIUM ASSOCIATION, INC.;
CAPELLA SOUTH CONDOMINIUM ASSOCIATION, INC.,
Appellees, Cross-Appellants,
v.
IDC CLAMBAKES, INC.,
Appellant, Cross-Appellee.

APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. William E. Smith, Chief U.S. District Judge]
[Hon. Melvin S. Hoffman, U.S. Bankruptcy Judge]

Before
Lynch, Baldock,* and Kayatta,
Circuit Judges.

Matthew J. McGowan, with whom Salter McGowan Sylvia & Leonard,
Inc., William P. Devereaux, Matthew C. Reeber, Joel K. Goloskie,
and Pannone Lopes Devereaux & West LLC were on brief, for
appellant/cross-appellee.

*

Of the United States Court of Appeals for the Tenth Circuit,
sitting by designation.

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William R. Grimm, with whom Adam M. Ramos, Hinckley, Allen &
Snyder LLP, Charles D. Blackman, and Levy & Blackman LLP were on
brief, for appellees/cross-appellants.

March 24, 2017

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LYNCH, Circuit Judge.
latest

in

decades-long

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Entry ID: 6078922

This bankruptcy appeal is the

litigation

over

a

lucrative

banquet

facility, the Regatta Club in Newport, Rhode Island, which was
constructed on a parcel of land at a time when the validity of the
development rights to that parcel was in dispute.

In 2004 and

2005, the Rhode Island Supreme Court found that the development
rights had expired at the time of construction.

See Am. Condo.

Ass'n v. IDC, Inc. ("America I"), 844 A.2d 117, 134 (R.I. 2004);
Am. Condo. Ass'n v. IDC, Inc. ("America II"), 870 A.2d 434, 443
(R.I. 2005).
and

the

As a result, it found that title to both the land

Regatta

associations,

not

Club
to

belonged
IDC,

Inc.

to

a

and

group
IDC

of

condominium

Properties,

Inc.

("Properties"), the development entities that had incurred the
cost to build the Club.

Two of the title-holding associations,

Capella South Condominium Association, Inc. and Goat Island South
Condominium

Association,

Inc.

("the

Associations"),

appellees and cross-appellants in this suit.

are

the

IDC Clambakes, Inc.

("Clambakes"), the debtor here, was not a party before the Rhode
Island Supreme Court.
Following

the

America

decisions,

Clambakes,

which

operated the Regatta Club, voluntarily filed for bankruptcy under
Chapter 11 of the Bankruptcy Code.

The Associations then filed

proofs of claim seeking relief for Clambakes' alleged trespass on
their property between 1998 and April 8, 2005, the date of the

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America II decision.
claim,

affirming

Associations

had

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Entry ID: 6078922

In 2013, this court rejected that trespass

the

bankruptcy

impliedly

court's

consented

to

finding
Clambakes'

that

the

use

and

occupancy of the Regatta Club.

See In re IDC Clambakes, Inc., 727

F.3d 58, 69 (1st Cir. 2013).

We also remanded on the issue of

whether

there

was

a

corresponding

implied

obligation

that

Clambakes pay the Associations for its use and occupancy of the
Club.

See id. at 72.
On remand, the bankruptcy court first found that there

was no implied-in-fact contract between the parties such that
Clambakes was contractually obligated to make rent payments to the
Associations.

The bankruptcy court then considered whether the

Associations were nonetheless entitled to relief under a theory of
unjust enrichment.

The court answered that question in the

negative, finding that the benefit that the Associations conferred
on Clambakes was fully offset by the value that the Associations
themselves gained by being awarded ownership over the Regatta Club
facility.

See In re IDC Clambakes, Inc. ("Clambakes"), 510 B.R.

678, 695 (Bankr. D.R.I. 2014).
The district court disagreed, finding clear error in the
bankruptcy court's characterization of the benefit conferred on
Clambakes as merely a ground lease, as well as in the bankruptcy
court's unjust enrichment analysis.

Central to the district

court's reasoning was its reading of the America opinions as to

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the ownership of the Regatta Club.

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The district court held that

the findings in the America opinions must serve as "established
facts" and bind "[a]ny equitable analysis" in this lawsuit.

Goat

Island S. Condo. Ass'n v. IDC Clambakes, Inc. ("Goat Island"), 533
B.R. 845, 848–49 (D.R.I. 2015).

Ultimately, the district court

concluded that Clambakes owed the Associations $2.6 million for
its use and occupancy of the Regatta Club during the claim period.
Id. at 851.
We affirm the bankruptcy court's decision to award no
equitable relief to the Associations.
existed between the parties.

No implied-in-fact contract

As to unjust enrichment, we see

nothing in the America opinions to suggest that their holding
regarding the Regatta Club's ownership should bear on, much less
control, the question of whether principles of equity entitle the
Associations to even more relief than the Rhode Island Supreme
Court already afforded them.

Having concluded that the America

opinions did not bind the bankruptcy court's equitable authority,
we find no abuse of discretion in the bankruptcy court's ultimate
decision that the Associations failed to meet their burden of
showing that inequity would result if Clambakes did not pay them
for the use and occupancy of the Regatta Club during the claim
period.

Equity

does

not

bestow

additional

relief

on

the

Associations, which continue to benefit from the Regatta Club
facility that they inherited without any investment of their own.

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I.
The

saga

of

this

litigation

has

been

documented by various state and federal courts.
those facts relevant to this appeal.

exhaustively

We recite only

We rely principally on the

bankruptcy court's recounting of the facts, which the district
court also adopted in full.

See Clambakes, 510 B.R. at 682–85;

Goat Island, 533 B.R. at 847.
In

January

1988,

Globe

Manufacturing

Co.

("Globe")

recorded a declaration of condominium in the Land Evidence Records
of the City of Newport.

Clambakes, 510 B.R. at 682.

That

declaration, as amended and restated in March 1988, reserved
Globe's right to develop a parcel of land known as the Reserved
Area, but the development rights would expire if not exercised by
December 31, 1994.

Id.

Globe assigned its development rights to

IDC, Inc. and then to Properties.1

Id.

From April to December

1994, Properties introduced multiple amendments to the declaration
seeking to extend the expiration date for the development rights
and to exercise those rights.
the

validity

of

these

Id.

amendments,

amendments carried on for years.

The Associations questioned
and

negotiations

over

the

Id.

1

Thomas Roos is the president and sole shareholder of all
the IDC entities, including IDC, Inc., Properties, and Clambakes.
Only Clambakes is a party to this suit, and the parties do not
dispute that Clambakes is a corporate entity distinct from IDC,
Inc. and Properties.

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In late 1997 and early 1998, while negotiations over
Properties' development rights were ongoing, Properties spent
approximately $3 million to construct the Regatta Club in the
Reserved

Area.

Id.

development

rights,

Associations

sought

Despite
the

to

record
halt

the

ongoing

reveals

the

no

dispute

over

the

evidence

that

the

As

the

construction.

Id.

bankruptcy court noted:
In an oft-cited letter during this conflict, a
representative of the America Condominium Association
wrote to the Newport building inspector on February 9,
1998: "It's our understanding that a permit application
has been filed with your Office for the purpose of
constructing [the Regatta Club] . . . . While 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
[building] . . . ."
Id. (alterations in original).
Clambakes came into existence on April 18, 1996 as a
corporate entity separate from the other IDC entities.
683.

Id. at

On March 1, 1998, Clambakes and Properties entered into a

twenty-year lease, under which Clambakes would "use the Regatta
Club and surrounding land making up the Reserved Area to provide
event hosting and catering services."

Id.

Clambakes would pay

Properties an annual rent equal to the higher of $180,000 or six
percent of Clambakes' annual gross revenues.

Id.

Clambakes began

operating the Club in late 1998 and began paying rent to Properties
in 1999.

Id.

Until Clambakes filed for bankruptcy on June 16,

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2005, "it ran a profitable business during the approximately seven
years it operated the Regatta Club."
A.

Id.

The America Litigation
On May 29, 1999, the Associations sued Roos, IDC, Inc.,

and Properties in state court.
that suit.

Id.

Clambakes was not a party to

The Associations alleged that Properties had failed to

exercise its development rights with respect to the Reserved Area
before the December 31, 1994 expiration date; that the 1994
declaration amendments that had sought to extend the expiration
date were invalid; and that "as a result, fee simple title to the
Reserved Area had vested in the condominium unit owners on whose
behalf the Associations acted."

Id.

In America I, the Rhode Island Supreme Court ruled in
favor of the Associations.

See 844 A.2d at 133.

It found that

the amendments were invalid because they did not conform to the
requirements of the Rhode Island Condominium Act.

See R.I. Gen.

Laws §§ 34-36.1-1.01 to -4.20; America I, 844 A.2d at 127–30.
Accordingly, Properties had failed to exercise its development
rights before their expiration, and title to the disputed property
had vested in the Associations.

Id. at 133.

In reaching this

conclusion, the Supreme Court rejected the defendants' argument
that they had invested $3 million in developing the Regatta Club
and that this investment should weigh against the Associations'
winning title to the Club: "Considering that [the defendants]

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developed the Reserved Area at a time when they were on notice
that their right to do so was in dispute, we conclude that they
constructed the parcel at their peril and cannot now contend that
equity should prevent plaintiffs from prevailing because of their
expenditures."

Id. at 135.

Nonetheless, the Rhode Island Supreme Court remanded for
an accounting of the common expenses that Properties had continued
to pay for the Reserved Area after December 31, 1994, the date on
which its development rights expired.
plaintiffs

to

enjoy

the

benefits

constitute an inequitable windfall."

of

Id.
such

Id.

"[T]o permit the
expenditures

would

In remanding for this

purpose, the court expressly stated that the accounting should
"not include any profits that [Properties] may have earned from
its operation of the Newport Regatta Club."

Id. at 135 n.24.

On April 8, 2005, after hearing reargument, the Rhode
Island Supreme Court reaffirmed its ruling that title to the
Reserved

Area,

Associations.
B.

including

the

Regatta

Club,

rested

with

the

See America II, 870 A.2d at 443.

Clambakes' Bankruptcy Filing and 2013 First Circuit Decision
After the America II decision, the Associations asked

the state court to issue writs of execution for possession and
ejectment of Clambakes from the Reserved Area.
B.R. at 684.

Clambakes, 510

On June 16, 2005, Clambakes voluntarily filed for

bankruptcy under Chapter 11 of the Bankruptcy Code.

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See 11 U.S.C.

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§§ 1101–1174; Clambakes, 510 B.R. at 684.
bankruptcy

court

judge

entered

a

consent

Entry ID: 6078922

In August 2005, a
order

that

allowed

Clambakes to operate the Regatta Club until November 5, 2005 after
appropriately remunerating the Associations. Clambakes, 510 B.R.
at 684.

Clambakes complied and vacated the premises after hosting

its final event on that date.

Id.

Another order dated March 15, 2006 confirmed a plan of
reorganization for Clambakes, under which its creditors would be
paid in full.

Funds to pay the Associations were escrowed because

of the dispute over the amount, if any, that Clambakes owed the
Associations.

Id.

The Associations collectively asserted a claim

for approximately $3.5 million for Clambakes' alleged trespass on
the Reserved Area from March 1, 1998 -- the date on which the
Properties-Clambakes lease for the Regatta Club began -- to April
7, 2005.

Id.

Clambakes objected to the Associations' trespass-

based proofs of claim, and the bankruptcy court granted summary
judgment in Clambakes' favor.

Id. at 685.

After much procedural

history that we need not recount, the bankruptcy court held that
the Associations had impliedly consented to Clambakes' use and
occupancy of the Reserved Area and thus that Clambakes had not
trespassed.

Id.

The district court affirmed.

On appeal before this court, we first affirmed the
bankruptcy court's conclusion that Clambakes had not trespassed
because the Associations had given implied consent to Clambakes'

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use and occupancy of the Reserved Area.
727 F.3d at 69.
that

"implied

Entry ID: 6078922

See In re IDC Clambakes,

Next, we turned to the Associations' argument

consent

necessarily

obligation to pay."

Id. at 71.

properly

this

preserved

gives

rise

to

an

implied

Although the Associations had

argument,

we

found

that

it

was

"insufficiently developed for proper adjudication on appeal," as
the bankruptcy court had not addressed it.

Id. at 72.

We thus

remanded for determination of "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."
C.

Id.

The Bankruptcy and District Courts' Decisions on Remand
On remand, the Associations advanced three arguments

before the bankruptcy court.

First, they argued that "in the

context of a trespass action[,] implied consent includes a presumed
obligation to pay fair value absent proof of contrary intent."
Clambakes, 510 B.R. at 686.

Second, they argued that there was an

implied-in-fact contract between the parties such that Clambakes
was obligated to pay the Associations.

Id. at 688.

Finally, they

argued that they were entitled to relief under a theory of impliedin-law

contract,

enrichment.

also

known

as

quasi-contract

or

unjust

Id. at 685–86, 689.

The bankruptcy court quickly rejected the Associations'
first argument, noting that there was no Rhode Island case law to
support the proposition that "implied consent necessarily gives

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rise to a presumptive obligation to pay fair value absent a showing
of contrary intent."

Id. at 687.

The court also ruled that the

Associations had failed to show the existence of an implied-infact contract because there was no evidence of a "mutual intent
[between the parties] to enter into an agreement for the use and
occupancy of the Reserved Area."
Likewise,
Associations
relief.

failed

the
to

Id. at 689.

bankruptcy
prove

their

court

found

entitlement

that

to

the

equitable

"Recovery in quasi-contract requires a plaintiff to prove

that '(1) the plaintiff conferred a benefit on the defendant,
(2) the defendant appreciated the benefit, and (3) under the
circumstances it would be inequitable for the defendant to retain
such benefit without payment of the value thereof.'"

Id. (quoting

Fondedile, S.A. v. C.E. Maguire, Inc., 610 A.2d 87, 97 (R.I.
1992)).

While the Associations had carried their burden of proof

as to the first two elements, id. at 691–92, the bankruptcy court
concluded that they had failed to do so as to the third element,
id. at 692–96.
In arriving at this result, the bankruptcy court first
relied on expert testimony from both parties to estimate that the
benefit that the Associations conferred on Clambakes -- "allowing
it to use and occupy the Reserved Area land" -- was worth between
$1 million and $1.625 million.

Id. at 692.

inquiry did not end there, however.

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The unjust enrichment

The court observed that the

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Associations had denied Roos permission to remove the Regatta Club
structure from the Reserved Area after the America II decision,
even

though

"the

owner

of

land

is

entitled

to

a

mandatory

injunction to require the removal of a structure that has been
unlawfully placed upon his land."

Id. at 693 (quoting Santilli v.

Morelli, 230 A.2d 860, 863 (R.I. 1967)).

Accordingly, "since the

Associations chose to retain and profit from the Regatta Club, the
resulting benefit reaped by the Associations must factor into the
quasi-contract analysis."

Id. at 694.

From this perspective, the bankruptcy court considered
the fact that Properties had invested $3 million to build the
Regatta Club while the Associations had not invested any amount,2
that Clambakes had spent more than $550,000 to outfit and maintain
the Club, and that the Associations had been able to rent the Club
building to another tenant within two weeks of the date when
Clambakes vacated the premises.

Id. at 692–93.

Of the minimum

annual rent of $450,000 that the new tenant pays the Associations,
$240,000 was attributable to the Regatta Club structure, based on
both parties' expert testimony.
factors

into

account,

the

Id. at 695.

bankruptcy

2

Taking all of these

court

concluded

that

The bankruptcy court recognized that Properties, and not
Clambakes, had constructed the Regatta Club. But it also noted
that
"Clambakes
paid
Properties
rent
of
approximately
$1,125,000.00 over the course of the claim period, which could be
viewed in whole or in part as shifting a substantial portion of
Properties' construction costs to Clambakes." Id. at 694.

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"Clambakes

is

Page: 14

entitled

to

a

Date Filed: 03/24/2017

'credit'

for

Entry ID: 6078922

at

least

$1,625,000.00[,] . . . equal to the high end of the value of a
ground lease" conferred on Clambakes.
The

district

court

Id. at 695.

affirmed

the

bankruptcy

court's

conclusion that no implied-in-fact contract existed, but it found
reversible

error

in

the

bankruptcy

court's

unjust

analysis.

See Goat Island, 533 B.R. at 847–48.

enrichment

Before delving

into the particularities of the bankruptcy court's alleged errors,
the district court first noted that, notwithstanding the $3 million
that Properties incurred to build the Regatta Club, the Rhode
Island Supreme Court had ruled that the Associations owned the
Club since its construction.

Id. at 848.

"These determinations

are the established facts of this case, and this proceeding cannot
be a vehicle to revisit or temper the effects of those holdings,"
the district court said.

Id. at 848–49.

From that premise, the district court ruled that the
bankruptcy court committed clear error on four fronts.
bankruptcy

court

should

not

have

characterized

First, the

the

benefit

conferred on Clambakes as a ground lease but rather as a ground
and building lease.

Properly characterized, according to the

district court, the value of the benefit to Clambakes was $2.6
million.

Id. at 849.

Second, the bankruptcy court should not

have considered the $3 million that Properties had incurred in
constructing the Regatta Club.

Id. at 850.

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Third, the bankruptcy

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court should not have considered the $550,000 that Clambakes had
incurred in outfitting and maintaining the Regatta Club.

Id.

Finally, the bankruptcy court should not have "deduct[ed] at least
$240,000 per year from the use and occupancy payment to account
for goodwill and the value of the Regatta Club" when there was
"insufficient particularized evidence" on which to ground the
quantification of that goodwill.

Id. at 851.

The district court

ordered Clambakes to pay the Associations $2.6 million for its use
and occupancy of the Regatta Club during the claim period.3
D.

Id.

Arguments on Appeal
Each party appeals discrete aspects of the bankruptcy

and

district

bankruptcy

courts'

court

decisions.

should

not

have

Clambakes
reached

argues
the

that

the

Associations'

arguments about implied-in-fact contract and unjust enrichment.
Further, even assuming the unjust enrichment claim was properly
heard, Clambakes challenges the district court's finding of clear
error in the bankruptcy court's equitable analysis.

3

Dissatisfied
with
the
$2.6
million
award,
the
Associations moved to alter or amend the district court's judgment.
The Associations sought (1) an additional $7,290, plus interest,
for sewer repair costs; (2) approximately $2.7 million in interest
on the $2.6 million award for use and occupancy; and (3) costs
under Rule 54(d)(1) of the Federal Rules of Civil Procedure and 28
U.S.C. § 1920. The district court granted the motion as to the
sewer repair costs but denied it as to the other two claims. The
Associations have cross-appealed that ruling, which our resolution
has made moot.

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The Associations argue that the bankruptcy and district
courts both erred in finding that no implied-in-fact contract
existed.

They also argue that the bankruptcy court erred in

awarding no restitutionary relief and that the district court erred
in granting no interest on top of the $2.6 million award for use
and occupancy.
II.
A.

Clambakes' Threshold Arguments
Before we proceed further, we reject Clambakes' various

arguments that the bankruptcy court should not have reached the
implied-in-fact contract and unjust enrichment claims, but rather
should have ended the case earlier.
arguments on this point.

Clambakes advances two

It primarily argues that our remand in

2013 required the bankruptcy court to explore only whether implied
consent

necessarily,

obligation to pay.

as

a

matter

of

law,

gives

rise

to

an

Once the bankruptcy court found that no such

principle exists under Rhode Island law, the inquiry should have
been

over

and

the

Associations'

claims

dismissed.

In

the

alternative, Clambakes contends that the Associations should have
been barred from making any implied-in-fact contract or unjust
enrichment claim because they failed to preserve such arguments by
articulating only a trespass theory in their proofs of claim.
Each line of reasoning misunderstands aspects of our
2013 opinion.

First, the plain language of that opinion renders

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unavailing Clambakes' argument that our remand was limited to a
question

of

law.

As

we

there

stated,

the

remand

order

"directed . . . the trial court in the first instance [to]
determin[e] 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."

In re IDC Clambakes, 727 F.3d at 72

(emphasis added).
As

to

Clambakes'

contention

that

the

Associations'

claims based on the existence of an implied-in-fact or quasicontract are unpreserved, we already addressed -- and already
rejected -- this precise argument in 2013.

See id. at 71–72

(finding that Associations' argument was preserved because they
had raised it "[i]n a post-trial motion filed . . . just over a
week after the trial and 18 months before the bankruptcy court
issued its decision").
B.

We do not revisit that ruling today.

Standard of Review
"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). We thus review the bankruptcy
court's findings of fact for clear error and its conclusions of
law de novo "without deference to the district court's ruling."
In re IDC Clambakes, 727 F.3d at 63.

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"[T]o

the

extent

Page: 18

that

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the

ultimate

Entry ID: 6078922

decision

in

a

restitution case rests on a judgment regarding the equities of the
case,

rather

than

application

of

an

established

rule

of

restitution, that exercise of judgment is reviewed only for abuse
of discretion."

Invest Almaz v. Temple-Inland Forest Prods.

Corp., 243 F.3d 57, 66 (1st Cir. 2001).

This approach "reflect[s]

our view that the finder of fact 'who has had first-hand exposure
to the litigants and the evidence is in a considerably better
position to bring the scales into balance than an appellate
tribunal.'"

Id. (quoting Texaco P.R., Inc. v. Dep't of Consumer

Affairs, 60 F.3d 867, 875 (1st Cir. 1995)).
C.

Implied-in-Fact Contract
We affirm, as did the district court, the bankruptcy

court's conclusion that there was no implied-in-fact contract
under which Clambakes agreed to pay the Associations for its use
and occupancy of the Regatta Club.
Under Rhode Island law, an implied-in-fact contract "is
a form of express contract wherein the elements of the contract
are

found

in

and

determined

from

the

relations

of,

and

the

communications between the parties, rather than from a single
clearly expressed written document."

Marshall Contractors, Inc.

v. Brown Univ., 692 A.2d 665, 669 (R.I. 1997).

"[A] contract

implied in fact must contain all the elements of an express
contract.

So, such a contract is dependent on mutual agreement or

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consent, and on the intention of the parties; and a meeting of the
minds is required."

Bailey v. West, 249 A.2d 414, 416 (R.I. 1969)

(citation omitted); see also Goat Island, 533 B.R. at 847 n.2.
The bankruptcy court properly applied this case law to
the facts to find that the Associations had failed to show evidence
of a meeting of the minds.

As the court noted, the record lacked

evidence "that the Associations ever requested a rent payment from
Clambakes or that Clambakes ever made a rent payment to the
Associations.

There [wa]s no evidence of mutual agreement as to

duration and scope of occupancy."
anything,

the

fact

that

Clambakes, 510 B.R. at 689.

Clambakes

paid

rent

to

If

Properties

demonstrated Clambakes' understanding that Properties, rather than
the Associations, was the property owner.

Given Clambakes' lease

with Properties, "there would be no reason to lease the property
again from another entity," as the bankruptcy court observed.

Id.

There is no error.
D.

Unjust Enrichment
We do not find error in the bankruptcy court's fact

finding in the course of its unjust enrichment analysis.

Nor do

we find any abuse of discretion in its equitable balancing or its
ultimate conclusion that the Associations failed to prove their
entitlement to restitutionary relief.
"The Supreme Court has long recognized that bankruptcy
courts are courts of equity with the power to apply flexible

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equitable remedies in bankruptcy proceedings."

Entry ID: 6078922

In re Trailer

Source, Inc., 555 F.3d 231, 242 (6th Cir. 2009) (citing Young v.
United States, 535 U.S. 43, 50 (2002)).

Nothing in the America

decisions suggests that they should be read as diminishing the
bankruptcy court's broad equitable authority.

Indeed, neither

America I nor America II suggests that its findings on the rightful
ownership of the Regatta Club should have preclusive effect over
all future litigation related to the Club, let alone over a claim
of unjust enrichment from the Associations after they have already
won the keys to the Club building.4
The question presented in the America litigation was
whether the Associations or one of the IDC entities (precisely,
IDC, Inc. or Properties) had title to the Regatta Club. The issues
of trespass and unjust enrichment were not before the America
court.

In order to answer the question of ownership, the Rhode

Island

Supreme

Court

principally

engaged

in

an

exercise

of

statutory interpretation, analyzing whether the amendments to the
condominium declaration abided by the requirements of the Rhode
Island Condominium Act.

America I, 844 A.2d at 127–30.

Of course, the Rhode Island Supreme Court also found
that Properties had begun constructing the Regatta Club in the

4

We do not wade into the difficult preclusion issues that
would exist if the Rhode Island Supreme Court's decisions were
treated otherwise.
We simply read the America decisions
differently than did the district court.

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Reserved Area despite knowing that title to that land was in
dispute

and,

as

a

result,

that

Properties'

construction

expenditure would not factor into the question of proper ownership.
Id. at 134–35.

But the fact that the America court declined to

take into account the construction expenditure when adjudicating
the Regatta Club's ownership does not mean that the construction
expenditure cannot be considered in a later equitable analysis -by a federal bankruptcy court dealing with a debtor that was not
a party to the America litigation -- as to whether the Associations
should receive additional relief beyond the Regatta Club building
to which they have already won title.
In fact, even after declaring the Associations to be the
rightful owners of the Regatta Club, the America court was careful
to avoid bestowing on the Associations an "inequitable windfall."
Id. at 135.

Accordingly, it remanded for an accounting of the

common expenses that Properties had paid after its development
rights expired, so that the Associations would not benefit at
Properties'

expense.

Id.

It

further

emphasized

that

this

accounting should "not include any profits that [Properties] may
have earned from its operation of the Newport Regatta Club,"
signaling that redistributing such profits to the Associations
would be inequitable.

Id. at 135 n.24.

In short, we do not read

the America decisions as tying the hands of the bankruptcy court

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in deciding whether the equities of this case weigh in favor of
additional relief for the Associations.
Having determined that the America decisions do not
dictate

the

result

of

the

bankruptcy

court's

equitable

determination, we can quickly conclude that the bankruptcy court
did

not

err

in

its

factual

findings

and

did

not

abuse

its

discretion in awarding no restitutionary relief.
The Associations first argue that the bankruptcy court
erred by characterizing the benefit conferred on Clambakes as
occupancy of only the Reserved Area land, rather than of both the
land and the Regatta Club facility built on it. The district court
similarly found error in the bankruptcy court’s characterization
of the benefit as a ground lease.
849.

See Goat Island, 533 B.R. at

The district court fairly read the bankruptcy court opinion

as determining the benefit conferred on Clambakes to equal the
value of a ground lease even though Clambakes used both the
building and the ground.

We see no reason, though, why this

reasoning constituted clear error sufficient to set aside the
equitable balancing undertaken by the bankruptcy court.

While

Clambakes indeed used both the building and the land, it paid over
$550,000 to improve the building, and it made rental payments to
Properties
building.

totaling

approximately

$1.125

million

to

use

the

The Associations, in turn, received for free a building

that collectively cost Properties and Clambakes roughly $3.55

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million to build and improve.

Date Filed: 03/24/2017

Entry ID: 6078922

In determining on this record the

net benefit Clambakes received, it was by no means unreasonable
not to require Clambakes to also pay the Associations for use of
the building.
The Associations also contend that the bankruptcy court
should not have taken into account Properties' construction cost
and Clambakes' rent payments to Properties in the unjust enrichment
analysis.

Doing so was error, they say, because Clambakes itself

did not bear the construction cost, and we must treat Properties
and Clambakes as the separate corporate entities that they are.
But Rhode Island law on the equitable remedy of unjust enrichment
"presupposes

that

if

plaintiff

were

plaintiff would suffer a net loss.

left

without

a

remedy,

That is, defendant would have

received a benefit 'at the expense of' plaintiff."

R.I. Bhd. of

Corr. Officers v. Rhode Island, 264 F. Supp. 2d 87, 105 (D.R.I.
2003) (emphases added) (quoting Merchs. Mut. Ins. Co. v. Newport
Hosp., 272 A.2d 329, 332 (R.I. 1971)).

Regardless of which IDC

entity paid for the Regatta Club's construction, it is undisputed
that

the

Associations

construction.

did

not

contribute

See Clambakes, 510 B.R. at 693.

a

penny

toward

The Associations'

inability to recover rent for the claim period thus does not result
in a "net loss" to them.
Likewise, the bankruptcy court properly considered the
$550,000 that Clambakes incurred in outfitting and maintaining the

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Regatta

Club

during

the

Page: 24

claim

Date Filed: 03/24/2017

period.

In

Entry ID: 6078922

Dellagrotta

v.

Dellagrotta, 873 A.2d 101 (R.I. 2005), the Rhode Island Supreme
Court allowed a woman to recover, under an unjust enrichment
theory, half the cost of improvements that she made to a house
that she initially mistakenly believed her former in-laws had
gifted to her and her former spouse.

Id. at 114–15.

The former

daughter-in-law was able to recover although she had stayed in the
house after the end of her marriage, even after receiving a notice
of termination of tenancy from her in-laws.

Id. 113.

In allowing

her to recover, the court noted that "although the circumstances
do not warrant conveyance of the house to [her], it is quite
another thing to allow plaintiffs to realize the bounty of her
labors."

Id. at 114.

So too here.

Even assuming that Clambakes

knew that title to the Regatta Club was in dispute, that knowledge
is insufficient to withhold credit to Clambakes for its expenses
and effort in improving upon the Club structure.
Finally, we reach the issue of goodwill.

The district

court concluded that although the bankruptcy court did not err in
finding

some

transfer

of

goodwill

from

Clambakes

to

the

Associations, it erred in quantifying the value of that goodwill
as "at least $240,000."

Goat Island, 533 B.R. at 851.

On appeal,

the Associations also emphasize that Clambakes did not transfer
any business to the Associations because Clambakes continues to
operate its business in other Newport locations.

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As an initial matter, it is not clear from the bankruptcy
court's opinion that the $240,000 per year "credit" that it
identified

was

a

quantification

of

goodwill.

Rather,

the

bankruptcy court's description suggests that it sought to quantify
the value of the Regatta Club building to the Associations.

See

Clambakes, 510 B.R. at 695 ("The quasi-contract analysis boils
down to weighing Clambakes' use of the Reserved Area land valued
at $1,000,000.00 to $1,625,000.00 for the claim period against the
stream

of

income

to

the

Associations

from

the

Regatta

Club

building, sluicing along at a rate of at least $240,000.00 per
year." (emphasis added)).

Further, the bankruptcy court derived

the $240,000 figure by relying on a report submitted by the
Associations' expert.

Id.

Even if the bankruptcy court's aim was to quantify
goodwill, however, we cannot say that the court clearly erred.
Given the risk and effort that Clambakes undertook in establishing
a

successful

event-catering

business

at

the

Reserved

Area

location, it is not unreasonable to infer that the Associations
were able to charge a premium to rent that location to a similar
business beyond what they could have charged for an unproven lot
of land.

At oral argument, the Associations could not point to a

single piece of record evidence to rebut this inference that the
prior operation of a successful business on a lot of land would
enhance the value of that lot.

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III.
There was no abuse of discretion in the bankruptcy
court's decision to award no restitutionary relief; to sustain
Clambakes' objections to each of the Associations' claims; and to
disallow Claims 16, 17, 18, and 19 in their entirety.
there any legal or factual error.

Nor was

We also agree with the district

court's award of $7,290.00, plus interest, for the sewer repair
cost.

In light of this disposition, we need not entertain the

Associations' argument for interest on their restitutionary award.
The judgment of the bankruptcy court is affirmed with the noted
modification.
Costs are awarded to Clambakes.

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