1800 Smith Street Associates, v. Gencarelli
| Decision Date | 22 December 2005 |
| Docket Number | No. 2004-286-Appeal.,2004-286-Appeal. |
| Citation | 888 A.2d 46 |
| Parties | 1800 SMITH STREET ASSOCIATES, LP v. Louis A. GENCARELLI, Sr. 1500 Mineral Spring Associates, LP, by and through its partner Jason's Realty Corp. v. Louis A. Gencarelli, Sr. Louis A. Gencarelli, Sr. v. 1500 Mineral Spring Associates, LP et al. |
| Court | Rhode Island Supreme Court |
Joseph V. Cavanagh, Jr., Providence, for Plaintiffs.
Robert D. Wieck, Providence, for Defendant.
Present: WILLIAMS, C.J., GOLDBERG, FLAHERTY, SUTTELL, and ROBINSON, JJ.
In this appeal the defendant, Louis A. Gencarelli, Sr. (defendant), the former leader of now bankrupt breakfast fixture, Bess Eaton Donuts & Flour Co. Inc. (Bess Eaton), laments a judgment of the Superior Court in favor of the plaintiffs—1800 Smith Street Associates, LP (SSA), 1500 Mineral Spring Associates, LP (MSA), and Jason's Realty Corp. (Jason's Realty) (collectively plaintiffs)—in three actions consolidated at trial.1 The litigation below involved two separate lease agreements that the plaintiffs claim the defendant prematurely declared null and void. Finding in favor of the plaintiffs, the trial justice held, in relevant part, that: (1) time was not of the essence in the contracts; (2) the defendant waived all time limits in the lease agreements; and (3) the defendant acted in bad faith with regard to his conditional obligations under the lease agreements.
This case came before the Supreme Court for oral argument on September 26, 2005, pursuant to an order directing the parties to show cause why the issues raised in this appeal should not summarily be decided. After hearing the arguments and examining the record and the memoranda that the parties filed, we are of the opinion that this appeal may be decided at this time without further briefing or argument. For the reasons set forth in this opinion, we affirm the judgment.
In 1998, when defendant first learned of the availability of the properties at 1500 Mineral Spring Avenue and 1800 Smith Street, both in North Providence, he was president and Chief Executive Officer of Bess Eaton. Tim Londregan, Bess Eaton's real estate agent, notified defendant of the sites on a tip from Sandra Salvadore (Salvadore), plaintiffs' real estate broker. SSA was then the record owner of the 1800 Smith Street property; MSA likewise owned the 1500 Mineral Spring Avenue property. The third plaintiff, Jason's Realty, was the general partner of both SSA and MSA; Bennie Sisto (Sisto) was, at all relevant times, the president and majority stockholder of Jason's Realty.
Negotiations ensued until both parties were satisfied that a demolition and construction deal could be brokered. The defendant planned to lease both parcels and, per his usual practice, then assign the leases to Bess Eaton, which then would construct doughnut shops on both sites.
On November 5, 1999, defendant signed, in his personal capacity, two separate lease agreements with nearly identical language covering both properties. Most relevant to this appeal, each lease contained the following conditions precedent:
"It shall be a condition precedent to the Lessee's performance of any obligation Lessee may have as Lessee hereunder that; (a) all the permits and approvals be obtained necessary to construct a drive-thru coffee shop and bakery specifically including the drive-thru capability, the signage and exterior menu, except the condition to operate 24 hours a day, (b) that Lessor obtain at its expense and deliver to Lessee an environmental assessment report in writing, which is satisfactory to Lessee and Lessee's Lender, (which satisfaction shall not be unreasonably withheld and/or delayed), from a licensed firm selected by Lessor within sixty (60) days after execution of this lease; * * * (e) that Lessee obtain financing to construct the Building in an amount equal to eighty (80%) percent of all construction costs with financing at commercially acceptable terms and rates within one hundred twenty (120) days after execution of this lease * * *."
In addition, each lease purported to become null and void upon the non-occurrence of any recited contingency:
Thus, under the lease agreements, defendant was obligated to obtain all the necessary town permits and approvals to run a drive-through coffee shop, and to obtain financing within 120 days after the effective date of the lease, or November 1, 1999. The plaintiffs, on the other hand, were required to submit to defendant environmental assessment reports prepared by an approved firm within sixty days of November 1, 1999. Under the terms of the leases, failure of any contingency would render the lease agreements null and void, and terminate all defendant's performance obligations under the lease.
The lease agreements were sent with cover letters addressed to Bennie Sisto, purporting to seek plaintiffs' assurances that they would be lenient with defendant's obligation to obtain town permits and approvals should he experience delays, court contests or appeals. Jason Sisto, then vice president of Jason's Realty and son of Bennie Sisto, executed the leases and separately signed the cover letters indicating that "[t]he content of [the] letter[s][was] acceptable on behalf of [plaintiffs] and [would] be deemed an amendment to the above referenced Land Lease[s]."
Peter Huff (Huff), director of development and construction for Bess Eaton, was appointed the on-site "point man" for the two building projects; he coordinated the work of construction personnel, engineers and attorneys, and was responsible for all construction details for the stores. Huff reported directly to defendant and advised him of any problems that arose in connection with the projects.
Soon after the lease agreements were executed, the parties exchanged several rounds of correspondence pertaining to various details of the agreements, mostly between Huff and Salvadore. Salvadore repeatedly contacted Huff to determine whether defendant had a particular environmental consultant with whom Bess Eaton or its lender preferred to conduct the required inspections. Huff never responded. In two letters dated December 20, 1999, Sisto informed defendant that SSA and MSA had selected Garofalo & Associates (Garofalo) as the environmental engineer for the projects. The defendant signed these letters, which represented an express acknowledgment that their content was acceptable and that their terms would amend the original lease agreements.
Eleven days after defendant executed the letters of amendment, on January 1, 2000, the sixty-day deadline for plaintiffs to furnish defendant with environmental reports passed without compliance. The defendant, however, later testified at trial that receiving the reports within the initial sixty-day period was not important to him. In addition, Bess Eaton apparently thought it would not have a problem obtaining financing without the environmental reports within those sixty days. Instead, defendant seemed to be under the impression that his success in getting financing turned on his ability to secure the requisite approvals from the Town of North Providence (town).
Sometime in late January, Salvadore, as plaintiffs' agent, set up a meeting between defendant, his son, Paul Gencarelli (Paul), and New England Realty Resources to discuss financing options. At the conclusion of this meeting, Paul informed Salvadore that Bess Eaton was all set with financing, and confirmed that sentiment in a letter dated January 31, 2000.
Garofalo began its environmental inspection of the 1500 Mineral Spring Avenue property on February 14, 2000. Upon completion of the Phase I report, Garofalo recommended a Phase II subsurface evaluation because of the former presence of a nearby gasoline station. Salvadore told Huff of Garofalo's recommendation, and Huff told her to proceed, further informing her that he had no interest in seeing the completed Phase I report. When the Phase II evaluation was performed sometime between February 22 and February 24, 2000, Huff expressed his pleasure with the progress.2
As of February 16, 2000, Bess Eaton had not submitted the proper applications for permits and approvals to the town. The defendant and Bess Eaton's corporate counsel, Scott Spear, by correspondence dated February 16, 2000, instructed Salvadore to contact attorney Joe Ferrucci, who was hired by defendant to oversee the local permitting process. Pursuant to this instruction, Salvadore reserved a place on the North Providence Town Planning Board's February 22 agenda. Salvadore further informed Huff, Spear and Ferrucci that they would need to submit some sort of proposal to the planning board director. At the February 22 meeting, Huff made a presentation using informational packages prepared the previous summer during negotiations. Although his proposal was met with favor, a quorum of the board was not present to effect a vote, and the matter was continued to March 13, 2000, almost two weeks beyond expiration of the contractual 120-day financing contingency.
In two letters dated February 29, 2000, defendant informed plaintiffs that because he was unable to secure either the necessary...
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