Bourdon's, Inc. v. Ecin Industries, Inc.

704 A.2d 747, 1997 R.I. LEXIS 316, 1997 WL 768973
CourtSupreme Court of Rhode Island
DecidedDecember 16, 1997
Docket95-486-Appeal
StatusPublished
Cited by46 cases

This text of 704 A.2d 747 (Bourdon's, Inc. v. Ecin Industries, Inc.) is published on Counsel Stack Legal Research, covering Supreme Court of Rhode Island primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bourdon's, Inc. v. Ecin Industries, Inc., 704 A.2d 747, 1997 R.I. LEXIS 316, 1997 WL 768973 (R.I. 1997).

Opinion

OPINION

LEDERBERG, Justice.

This case came before the Supreme Court on the appeal of the plaintiff, Bourdon’s, Inc., from a judgment in favor of the defendants, Ecin Industries, Inc., Harvey J. Bigelow, and Patricia M. MaeMillen, on the plaintiffs claim of breach of contract, and in favor of the defendants on their counterclaim for misrepresentation, fraud, and/or deceit. For the reasons set forth below, we affirm the judgment of the Superior Court. In doing so, we hold that the applicable period of limitations for actions for fraud and deceit is the ten-year period found in G.L.1956 § 9-l-13(a), and we further hold that the Statute of Frauds, § 9-1-4, is inapplicable to a claim of misrepresentation, fraud, and/or deceit. The facts insofar as pertinent to this appeal follow.

Facts and Procedural History

The plaintiff is a New Hampshire corporation whose president and majority stockholder is John D. Bourdon (Bourdon). In 1986, plaintiff, which was engaged in the “manufacture and sale of mattresses, institutional bedding, and sleep equipment,” owned three subsidiary corporations (collectively Subsidiary) that sold mattresses primarily to retail furniture stores. The plaintiff, Subsidiary’s corporate parent, supplied bedding to such institutions as hospitals, nursing homes, and hotels.

In August of 1986, defendants Patricia M. MaeMillen (MaeMillen) and Harvey J. Bige-low (Bigelow) began negotiating with Bour-don for the purchase of Subsidiary, having previously incorporated Ecin Industries, Inc. (Ecin), for the purpose of selling bedding and other products. MaeMillen was sole shareholder and president of Ecin, while Bigelow served as vice president and secretary. The parties executed an agreement of sale (Agreement), and a closing was held on December 16,1986.

Pursuant to the Agreement, Ecin agreed to pay a total purchase price of $200,000, with a $1,000 down payment and $199,000 financed without interest by plaintiff, to be paid in monthly installments of $3,500. Ecin executed a promissory note (Note) to plaintiff; the purchase price was secured by Ecin’s newly acquired inventory, machinery, and equipment, MacMillen’s car and residence, Ecin’s casualty insurance, and the personal guarantees of MaeMillen and Bige-low. Part of the purchase price was allocated by the parties to Subsidiary’s customer lists (customer lists), which were supposed to be appended to the Agreement as Exhibit C. The customer lists, however, were not attached to the Agreement at the closing, and the parties introduced conflicting versions of the list into evidence at the trial. The most important customers in dispute were the State of Rhode Island (State) and Johnson & Wales University (J & W). The Agreement also contained the following noncompetition clause:

“For a period of fifty-seven (57) months from the date hereof, or until Buyer shall no longer be in business, whichever shall come first, Seller shall not sell to customers on the Customer Lists or to retail furniture dealers in Rhode Island or Massachusetts south of Boston, except that Seller may sell to [enumerated furniture stores] and any hospital and nursing home accounts.”

A handwritten insertion point and the term “(Exhibit C)” appeared after the word “Lists.”

*750 Following the closing, Ecin moved the Subsidiary operation to its Fall River, Massachusetts facility. Bourdon visited the facility at least monthly to collect payment in accordance with the Note. MaeMillen and Bigelow testified that during negotiations prior to the execution of the Agreement, Bourdon orally agreed that he would use Ecin as a subcontractor to manufacture mattresses and futons to be sold by plaintiff. Bigelow claimed that Bourdon had agreed to furnish such business for “[f]ive years at least.” Relying on this alleged representation, Ecin purchased futon-production equipment from plaintiff, for which Ecin otherwise had no use. MaeMillen and Bigelow also testified that Bourdon had represented to them that the business derived from plaintiff’s subcontracting would yield Ecin at least $800,000 per year. During Bourdon’s visits to collect payment on the Note, MaeMillen and Bigelow claimed that, in response to their inquiries about the promised subcontracting orders, Bourdon would answer that plaintiff’s business was slow, that the work was forthcoming, or that Ecin’s production capacity was not large enough to handle plaintiff’s orders. In order to accommodate the alleged promised larger orders, and with Bourdon’s knowledge that they were doing so, defendants expanded the Ecin factory by 18,000 square feet in September of 1987. Ecin, however, never received more than $40,000 annually in business from plaintiff, and in 1989 the amount was only $72. Bour-don, on the other hand, denied making any oral representations.

On January 1, 1989, less than twenty-five months after the execution of the Agreement, plaintiff sold its institutional-mattress business to a corporation formed by two long-term plaintiff employees. This new corporation, Bourdon’s Institutional Sales, Inc. (BIS), bought and leased equipment and premises from two other corporations of plaintiff’s, Diversified Products, Inc., and J.D. Bourdon Realty. Pursuant to the contract of sale, BIS agreed to hire “Bourdon” as a consultant for the sum of $30,000 per year until 1994. Bourdon was listed on the BIS articles of incorporation as a director, and “John D. Bourdon, d/b/a J.D. Bourdon Realty” was listed as a party to the contract of sale. Bourdon testified that it was plaintiff corporation, and not himself personally, that was hired as the BIS consultant, and he claimed that he never performed any consulting work for BIS, never did any sales work for BIS, and never received notice of or attended any board meetings of the new corporation.

Beginning in 1990, the owners of BIS began making bids on State contracts. Mac-Millen testified that Bourdon, when reminded of the noncompetition clause in the Agreement, informed her that he had sold the mattress portion of plaintiff corporation to BIS, and that plaintiff itself was therefore not competing against Ecin for the State contracts. In August 1989, BIS also began doing business with J & W after purchasing plaintiffs institutional mattress supply business. In November 1990, Ecin stopped making monthly payments pursuant to the Note because, in MaeMillen’s words, “[Bourdon] sold the business that he promised to us to someone else.” The parties stipulated at trial that a principal balance of $36,882 remained on the Note at the time payments ceased.

On March 25, 1992, plaintiff filed suit against defendants in Superior Court, alleging that defendants had failed to pay on the Note, and had breached the Agreement by having failed to pay for machinery and goods delivered to them. On April 27, 1992, defendants filed an answer to the complaint, setting forth the affirmative defenses of failure to state a claim upon which relief could be granted, lack of personal jurisdiction, improper service of process, and breach of contract. On June 1,1995, defendants moved to file an amended answer and counterclaims, seeking to add both the affirmative defense of fraud and/or deceit, and two counterclaims, the first for misrepresentation, fraud, and/or deceit (hereafter referred to as the counterclaim for fraud), and the second for deceptive trade practices. Over plaintiffs objection, the trial justice granted defendants’ motion on June 9,1995.

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Cite This Page — Counsel Stack

Bluebook (online)
704 A.2d 747, 1997 R.I. LEXIS 316, 1997 WL 768973, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bourdons-inc-v-ecin-industries-inc-ri-1997.