In re IDC Clambakes, Inc.

360 B.R. 24, 2007 Bankr. LEXIS 232, 2007 WL 172138
CourtUnited States Bankruptcy Court, D. Rhode Island
DecidedJanuary 24, 2007
DocketNo. 05-12267
StatusPublished
Cited by2 cases

This text of 360 B.R. 24 (In re IDC Clambakes, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Rhode Island primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re IDC Clambakes, Inc., 360 B.R. 24, 2007 Bankr. LEXIS 232, 2007 WL 172138 (R.I. 2007).

Opinion

DECISION AND ORDER DISALLOWING THE ASSOCIATION’S CLAIMS FOR MONEY DAMAGES FOR TRESPASS

ARTHUR N. VOTOLATO, Bankruptcy Judge.

Heard on the Debtor’s objection to the claims of Goat Island South Condominium Assoc., Inc.; America Condominium Assoc., Inc.; Capella South Condominium Assoc., Inc.; and Harbor House Condominium Assoc., Inc. (collectively, the “Association”), for damages in the amount of $3.5 Million caused by the Debtor’s alleged trespass on a portion of Association land known as the “Reserved Area”. The parties have filed cross motions for summary judgment, essentially raising two questions: (1) Did the Debtor trespass upon the Association’s property? and (2) If there was a trespass, are the Association’s claims for money damages barred by res judicata in this bankruptcy case? For the reasons discussed below, both questions are answered in the affirmative, resulting in: (1) the granting, in part, of both parties’ Motions for Summary Judgment; and, (2) the disallowance of the Association’s claims for money damages for trespass.

BACKGROUND

The relevant evidence has been heard and adjudicated in the Rhode Island Superior Court and by the Rhode Island Supreme Court, in two opinions regarding these litigious parties: (1) America Condominium Ass’n, Inc., v. IDC, Inc., 844 A.2d 117, 132-133 (R.I.2004) (America I); and (2) America Condominium Ass’n, Inc., v. IDC, Inc., 870 A.2d 434, 443 (R.I.2005) (America II).

Prior to and until December 31, 1994, IDC Properties, Inc., an entity separate from the Debtor but controlled by the same principal, Thomas Roos, owned development rights to the northern portion of the Association property called the Reserved Area. For reasons not known to this Court, nor relevant at this time, IDC Properties failed to timely exercise said development rights. In a post facto effort to undo its error, IDC Properties convened several meetings of the master condominium associations, and certain amendments to condominium documents were approved which purportedly extended its development rights to December 15, 2015. History tells us loudly and clearly that agreement was never reached between the Association and the Roos’ entities as to the validity of the extension approvals. Nevertheless, during 1997 and 1998, in spite of ongoing open hostilities over its alleged ownership and development rights in the Reserved Area, IDC Properties went ahead and constructed an opulent destination banquet facility known as the Regatta Club, right in the middle of the disputed space. IDC Properties then leased the Regatta Club (which became a very popular and profitable business enterprise) to the Debtor, and collected rent of approxi[26]*26mately $1.1 Million from 1998 through 2005.

In May 1999, after years of acrimony and disagreement between the parties, the Association filed a seven count state court complaint against IDC Properties, Roos individually, and another related entity, IDC Development Corporation, Inc. (collectively, “Properties” 1), seeking “compensatory and exemplary damages as well as declaratory and equitable relief.” America I, 844 A.2d at 119. In January 2000, on cross motions for summary judgment, the Rhode Island Superior Court held that Properties’ attempt to extend its development rights deadline was without merit, and that said rights had expired. On appeal, the Rhode Island Supreme Court affirmed the Superior Court’s conclusion that Properties’ development rights did not extend beyond December 1994, and also ruled that title to the Reserved Area and all improvements thereon “vested in the individual unit owners in fee simple.” Id. at 130-133. In addressing Properties’ request for an accounting and for reimbursement of expenses paid in connection with the Reserved Area after December 1994, as well as its multi-million dollar investment in the Regatta Club, the Supreme Court said:

In reviewing defendants’ assertions that plaintiffs should not benefit from defendants’ development of the Newport Regatta Club, we observe that defendants commenced such development with full knowledge of plaintiffs’ claims and after they voluntarily entered into the tolling agreement. Considering that they 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.
However, with respect to the defendants’ payments of common expenses on the disputed parcels after the declar-ant’s development rights had expired, we concur that to permit the plaintiffs to enjoy the benefits of such expenditures would constitute an inequitable windfall.

Id. at 135. On remand to the Superior Court for an accounting, the Supreme Court stated: “This accounting is confined to the common expenses paid by defendants on the master units after the expiration of their development rights on December 31, 1994. It does not include any profits that the defendants may have earned from its operation of the Newport Regatta Club.” Id. at 135, fn. 24.

At reargument over title issues in the Reserved Area, the Supreme Court clarified its earlier ruling in America II, stating:

We conclude, therefore, that those portions of airspace in the South, West, and North parcels that defendants and their predecessors intended to be master units are common elements because no units were created therein. The land underlying these “units” likewise is part of the common elements. Because no units were validly created, no master limited common elements appurtenant to them could be created. Consequently, these portions of the condominium always were, and remain, common elements.

America II, 870 A.2d at 442-3. Essentially the Court held that the Reserved Area historically was, and still is a common element, with title in the individual unit owners, in common ownership, and that this common element was subject to Proper[27]*27ties’ development rights only until they expired in 1994.

In June 2005, shortly after the decision in America II, IDC Clambakes, Inc., the operating entity of the Regatta Club, filed this Chapter 11 case and, not surprisingly, attempted to relitigate in this Court many of the same issues previously decided adversely to it in the state courts. When those efforts were rejected here, the Debt- or got down to business and began in earnest to address its Chapter 11 duties, i.e., its plan was promptly confirmed, all other creditors and fees were paid in full, and sufficient funds were placed in escrow to pay the Association in full if these claims are allowed as filed.

DISCUSSION

The resolution of property rights through the law of trespass is determined according to state law, Taggart v. Weinacker’s Inc., 397 U.S. 223, 227, 90 S.Ct. 876, 25 L.Ed.2d 240 (1970), and to establish a trespass in Rhode Island it must be shown that: (1) the alleged trespasser intentionally entered onto the owner’s property; and (2) the owner had rightful, exclusive possession of the property. Smith v. Hart,

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360 B.R. 24, 2007 Bankr. LEXIS 232, 2007 WL 172138, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-idc-clambakes-inc-rib-2007.