Commercial Associates v. Tilcon Gammino, Inc.

• Decision Date: 02 March 1993
• Docket Number: No. 92-2281,92-2281
• Citation: 998 F.2d 1092
• Parties: COMMERCIAL ASSOCIATES, et al., Plaintiffs, Appellees, v. TILCON GAMMINO, INC., Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 1092

998 F.2d 1092

COMMERCIAL ASSOCIATES, et al., Plaintiffs, Appellees, v. TILCON GAMMINO, INC., Defendant, Appellant.

No. 92-2281.

United States Court of Appeals,

First Circuit.

Heard March 2, 1993.

Decided July 22, 1993.

John R. Fornaciari, Washington, DC, with whom Louis V. Jackvony, Jr., Jackvony & Jackvony, Lincoln, RI, Robert M. Disch and Ross & Hardies, Washington, DC, were on brief, for appellant.

William R. Landry with whom Michael DiBiase, Karen A. Pelczarski and Blish & Cavanagh, Providence, RI, were on brief, for appellee, Lechmere, Inc.

Before BOUDIN, Circuit Judge, CAMPBELL, Senior Circuit Judge, and STAHL, Circuit Judge.

BOUDIN, Circuit Judge.

This action arises out of efforts to develop a shopping complex known as Bald Hill Plaza in Warwick, Rhode Island. The plan was the brainchild of real estate developer Anthony DelVicario, who was a general partner in a Massachusetts limited partnership called Commercial Associates ("Commercial"). Tilcon Gammino, Inc. ("Tilcon"), a construction company, learned about the project and expressed interest to DelVicario in obtaining a contract to do certain construction work in connection with the project, primarily site clearing and grading. DelVicario, with Tilcon's assistance, approached Lechmere, Inc. ("Lechmere"), a Minnesota corporation that operates a chain of retail stores, and persuaded Lechmere to join the project as one of the shopping center's "anchor stores."

Lechmere purchased the real estate on which its store was to be located, and Commercial acquired the remainder of the property needed for the development. Lechmere and Commercial entered into a written agreement--called the CORE agreement--which provided inter alia that Commercial would be responsible for the site-clearing work and the construction of the "footprint" underlying the entire shopping complex, including the "pad" upon which Lechmere's store would be built. In consideration, Lechmere agreed to pay Commercial $1.3 million. Commercial then retained Tilcon to serve as the general contractor for the site-clearing work. Commercial and Tilcon entered into a written contract dated February 8, 1985, which generally described the scope of the work to be performed by Tilcon and contained an estimated total cost of "about $2,800,000." Tilcon started the site-clearing work around that same time. DelVicario was the supervisor of the project and directed Tilcon's activities at the work site on a daily basis.

Lechmere had wanted the pad completed by March 15, 1985, so its store could open that September in time for the holiday shopping season. At least in part to meet that timetable, DelVicario insisted that Tilcon accelerate its work schedule, requiring Tilcon's staff to work overtime and necessitating extra equipment and supplies. And, according to Tilcon, DelVicario insisted that Tilcon perform substantial work at the shopping center site that went beyond the description of the job contained in the February 8 contract; Tilcon refers to these additional tasks as "extras."

Work was completed on schedule, but a dispute soon arose as to Tilcon's compensation. Tilcon claimed that it was entitled to additional compensation for the "extras" it performed at DelVicario's direction. Commercial disagreed--it believed that Tilcon had agreed to a "guaranteed maximum price" and had been paid in full--and refused to pay the final three bills submitted by Tilcon. Tilcon filed a mechanic's lien on the property under Rhode Island law, and on February 7, 1986, brought an action against Commercial and Lechmere in Rhode Island Superior Court to enforce that lien. Pursuant to the Rhode Island statute, Commercial posted a $1.2 million bond to release the lien, and the action proceed in rem against the bond. ¹

Following a seven-day bench trial the superior court found in favor of Tilcon. In a 28-page opinion, the court found that Tilcon was not bound by the estimated price contained in the original February 8 contract. The court found that Tilcon was bound by a maximum price of $3,095,000 contained in a May 8 letter to Commercial, but that a number of tasks were excluded from this price. Finally, the court found that Tilcon was entitled to compensation on a "cost-plus" basis for numerous "extras" performed at the site, pursuant to the oral assurances of DelVicario.

Under Rhode Island law Tilcon could recover in the lien enforcement proceeding only for work performed within the 120-day period prior to notice of the lien (the so-called "lien period"). The court expressly found that Tilcon was entitled to compensation for work performed prior to the lien period, but held that it had no power to include these amounts in its judgment. The court left it to Tilcon to "pursue this claim in another appropriate proceeding."

The Rhode Island court entered judgment against Commercial and Lechmere for $1,329,207.03, which represented the court's painstaking calculation of the compensation due Tilcon for work at the Bald Hill site during the 120-day lien period. Tilcon, however, was able to collect only $1.2 million, the amount of the bond that had been posted to release the lien, leaving a $129,207 deficiency between the judgment and Tilcon's recovery. The superior court's decision was affirmed in all respects by the Rhode Island Supreme Court. Tilcon Gammino, Inc. v. Commercial Assocs., 570 A.2d 1102 (R.I.1990).

During the pendency of the mechanic's lien proceeding, Lechmere and Commercial filed this separate action against Tilcon in Rhode Island Superior Court seeking damages of their own arising out of the Bald Hill project. Tilcon removed the action to federal district court based on diversity of citizenship. It also filed a counterclaim against Lechmere and Commercial seeking payment for work that was not recoverable in the lien action--the deficiency between the judgment and the bond, and compensation for work done prior to the lien period--on various theories including breach of contract, unjust enrichment and fraud.

After the final decision in the lien case, Tilcon moved for summary judgment on its counterclaim in this action. Tilcon argued that the Rhode Island Superior Court had found as a matter of fact that DelVicario bound Lechmere and Commercial to a series of oral contracts with Tilcon, and that Tilcon was owed specific amounts for work performed under those contracts. Tilcon claimed that Commercial and Lechmere were collaterally estopped from relitigating these issues, and that Tilcon was therefore entitled to judgment as a matter of law for the $129,207 discrepancy between the superior court's judgment and the $1.2 million bond, ² as well as approximately $600,000 for work at the Bald Hill site prior to the lien period.

The district court agreed that Commercial and Lechmere are bound by the Rhode Island court's factual findings but only those that were necessary to its judgment. Thus, the court held that the Rhode Island decision conclusively established that Tilcon was owed an additional $129,207 for work performed during the lien period. But the district court concluded that the Rhode Island decision did not resolve the issue of who was liable for the deficiency, nor did it establish Tilcon's entitlement to compensation for work prior to the lien period.

The case proceeded to trial. The original claims of Lechmere and Commercial having been dismissed, the case was now limited to Commercial's and Lechmere's liability, if any, for work done by Tilcon prior to the lien period. The dispute was further narrowed by stipulations. Pursuant to its prior ruling, the district court instructed the jury that certain facts, primarily, Tilcon's entitlement to $129,207 for work done during the 120-day period, had been established in prior litigation and should not be reconsidered. The court therefore precluded the parties from introducing any evidence regarding work done during the lien period. It was determined that liability for the $129,207 deficiency would be imposed upon whichever of the defendants was held liable at trial for the pre-lien work.

At trial, Tilcon introduced evidence seeking to show that Commercial and Lechmere were liable for additional payments for work done outside the lien period. At the close of Tilcon's case the court granted judgment as a matter of law for Lechmere with respect to all of Tilcon's claims, leaving only the claims against Commercial; the reasons for the court's ruling are more conveniently discussed later in this opinion. The jury then returned a verdict in favor of Tilcon against Commercial for $307,500. The district court added to this amount the $129,207 deficiency between the judgment in the mechanic's lien action and the bond, made a number of other adjustments to reflect the stipulations among the parties, and then entered judgment in favor of Tilcon against Commercial for the resulting amount of $268,903, plus prejudgment interest on a certain portion of the debt. 801 F.Supp. 939.

Tilcon now appeals. It argues that the Rhode Island court's factual findings, if given proper preclusive effect, required that judgment for the $129,207 deficiency be entered against Lechmere as well as against Commercial. Commercial has not made any appearance in this appeal; if the limited partnership is a defunct or insolvent entity, that might explain why it is important to Tilcon to obtain a judgment against Lechmere. Tilcon also argues that collateral estoppel made Lechmere and Commercial both liable for some $600,000 in work done prior to the lien period and that it was error to submit this issue to the jury, which found only $307,500 due from Commercial. Finally, preclusion aside, Tilcon argues that the court erred by granting judgment for Lechmere as a matter of law on each of Tilcon's claims.

We start by considering the collateral estoppel issue before turning to Tilcon's individual claims against Lechmere and Commercial. "Federal courts are bound by state law...