Emond Plumbing & Heating Inc. v. BankNewport
| Decision Date | 29 May 2013 |
| Docket Number | C.A. No. NB 2011-0569 |
| Parties | EMOND PLUMBING AND HEATING INC.; TECTA AMERICA NEW ENGLAND, LLC, Plaintiffs v. BANKNEWPORT, Defendant |
| Court | Rhode Island Superior Court |
DECISION
Before this Court for decision are cross-motions for summary judgment filed by Plaintiffs Emond Plumbing and Heating Inc. (Emond) and Tecta America New England, LLC (Tecta) (collectively Plaintiffs), and Defendant BankNewport (Bank). Plaintiffs individually brought unjust enrichment claims against Bank. Bank now seeks summary judgment against Plaintiffs' claims I and II. Conversely, Plaintiffs ask this Court to deny summary judgment and grant their own motion for summary judgment on Counts I and II. This Court has reviewed the evidence and the applicable law, together with the parties' legal memoranda and oral arguments, and now issues this written Decision.
In May 2010, AIDG Properties, LLC (AIDG), a real estate holding company, purchased an office and industrial building located at 184 John Clarke Road in Middletown for $4,300,000. See Pls.' Ex. K at 1. Anjan Dutta-Gupta (Dutta-Gupta), AIDG's main decision-maker, was alsothe principal for Advanced Solutions For Tomorrow, Inc. (ASFT), a defense contractor. Dutta-Gupta decided to use the building as a headquarter and administrative office for ASFT. See McNamara Aff. at 6-7. Bank financed this purchase with two loans in the total original amount of $4,500,000. The first loan was in the amount of $2,516,000; the second loan was for $1,984,000. The second loan was to provide proceeds for necessary construction improvements estimated to cost $675,000. See Pls.' Ex. A. After closing, AIDG re-assessed the condition of the building and determined that an increase in the construction budget was necessary in order to replace the mechanical systems, an undertaking estimated to cost $400,000, as well as a complete roof replacement, estimated to cost $357,000. Id. Bank agreed to increase its funding to provide for the new construction budget totaling $927,800. Id. On October 6, 2010, a loan modification was executed, bringing both notes to $4,727,520. McNamara Aff. at 10. Replacement of the mechanical systems and roof were critical improvements and were to be concluded before the building could be reasonably used; therefore, they were scheduled first in the improvement process. Payment for these improvements was to be made in a similar manner as an ordinary construction loan. The improvements were to be completed by February 2011, whereupon the whole of the second loan would be converted to permanent financing through facilities offered by the Small Business Administration. See Pls.' Ex. A; Pls.' Ex. V at 20-25, Pls.' Ex. G.
AIDG engaged ABC Building Corp. (ABC) to serve as general contractor for the first phase of improvements, including HVAC and roof work. AIDG and ABC opened a competitive bidding process and solicited interested subcontractors. Pls.' Ex. T at 15, 17. Emond was the lowest bidder for HVAC work. The agreed upon compensation for Emond's work wasoriginally $400,000. This contract was later increased by change orders by $13,428.21, bringing the total compensation for the HVAC improvements to $413,428.21. Pls.' Ex. B.
Tecta won the bid for the roof replacement contract. The original price for the roof replacement was $206,570. There was a change order in the amount of $480, bringing the total compensation for the roof replacement to $207,230. Pls.' Ex. C.
On or about September 1, 2010, work began. Both Emond and Tecta submitted monthly payment applications to ABC with statements of the work completed. ABC, in turn, forwarded to AIDG a monthly consolidated payment application reflecting all work. AIDG submitted this paperwork to Bank for its review, inspection of the completed work and the approval of construction loan disbursements. Pls.' Ex. U at 60-62. Bank engaged its own inspector who confirmed that all work set forth in each payment application had actually been completed before Bank disbursed the funds to AIDG, so AIDG could compensate the subcontractors for their efforts. Id. at 60-61. This process would normally take 30 days. Pls.' Ex. U at 60-63; Pls.' Ex. D. The subcontractors submitted the following payment applications:
Emond, Pls.' Ex. E.:
+------------------------------------------+
¦Application #: ¦Date: ¦Amount: ¦
+----------------+----------+--------------¦
¦1 ¦09/30/2010¦$ 28,440.00 ¦
+----------------+----------+--------------¦
¦2 ¦10/31/2010¦$ 76,728.03 ¦
+----------------+----------+--------------¦
¦3 ¦11/30/2010¦$ 155,572.77 ¦
+----------------+----------+--------------¦
¦4 ¦12/31/2010¦$ 35,473.50 ¦
+----------------+----------+--------------¦
¦5 ¦01/31/2011¦$ 73,486.09 ¦
+----------------+----------+--------------¦
¦6 ¦02/01/2011¦$ 2,385.00 ¦
+----------------+----------+--------------¦
¦7 ¦02/01/2011¦$ 41,342.82 ¦
+----------------+----------+--------------¦
¦ ¦Total: ¦$ 413,428.21 ¦
+------------------------------------------+
Tecta, Pls.' Ex. H.:
+------------------------------------------+
¦Application #: ¦Date: ¦Amount: ¦
+----------------+----------+--------------¦
¦1 ¦10/31/2010¦$ 11,191.50 ¦
+----------------+----------+--------------¦
¦2 ¦11/30/2010¦$ 138,996.00 ¦
+----------------+----------+--------------¦
¦3 ¦12/31/2010¦$ 35,887.50 ¦
+----------------+----------+--------------¦
¦4 ¦02/22/2011¦$ 432.00 ¦
+----------------+----------+--------------¦
¦ ¦Total: ¦$ 186,507.00 ¦
+------------------------------------------+
Emond was paid a total amount of $94,668.02. See Pls.' Exs. F, Y. Tecta, meanwhile, received only $11,191.50. See Pls.' Ex. I. The transmission of the November pay applications were delayed until the time of the December pay applications. See Pls.' Ex. U at 63-64, 66-67. Both these applications were sent to Bank at the same time later in the year. See Pls.' Ex. J. At that time, Emond was owed the total amount of $191,046.27 for payment applications 3 and 4; while Tecta was owed $174,883.50 for payment applications 2 and 3.1 See Pls.' Exs. E, H, J. Emond and Tecta substantially completed their remaining work on the project in January 2011. See Pls.' Ex. T at 25-33; Pls.' Ex. U at 71.
Bank's inspector confirmed that all work noted in the subcontractor's November and December payment applications was complete and Bank disbursed $497,327.66 in loan proceeds to pay for the completed work. On February 4, 2011, Bank deposited construction loan proceeds in the amount of $497,327.66 into AIDG's account. Pls.' Ex. D at 2. Shortly after the deposit was made, Bank learned that Dutta-Gupta was arrested on allegations of bribing a government official with certain contracts between ASFT and the U.S. Navy. Pls.' Ex. K at 1. Subsequently, ASFT laid off all its employees and was closed. On February 8, 2011, Bank reversed the disbursement made on February 4. Bank declared AIDG in default and review and inspection ofJanuary and subsequent pay applications were cancelled. See Pls.' Ex. U at 71, 76. Bank obtained court approval to take control of the real property. Pls.' Ex. V at 65. At this point, having received no payment since the October pay application, Emond was owed $318,760.19 for work and material; while Tecta was owed $196,038.50. See Pls.' Exs. F, I, X, Y.
The two subcontractors commenced mechanic's lien proceedings which were stayed when AIDG filed for bankruptcy.
On July 18 and July 29, 2011, respectively, Bank obtained permission from the Bankruptcy Court and the Rhode Island Superior Court to foreclose on the property. Bank refused demands to release the undistributed loan proceeds and refused to allow Emond to retrieve its installed rooftop HVAC units. On September 15, 2011, Emond notified Bank of its equitable lien claims against any foreclosure proceeds. See Pls.' Ex. N.
On September 16, 2011, Bank submitted a bid of $1 million, foreclosing only on the outstanding second mortgage. Pls.' Ex. V at 89. Bank acquired title subject only to its own first mortgage. Subsequently, Bank closed out and set off its loans to AIDG. Id. at 87-89. Bank plans to use the former AIDG building as its own new headquarters.
On November 15, 2011, Plaintiffs filed the Complaint in Docket Number C.A. NC11-569 against Bank. On December 12, 2011, Bank filed an Answer. On September 17, 2012, Bank filed a Motion for Summary Judgment, followed by Plaintiffs' Cross-Motion for Summary Judgment on October 24, 2012. The matter was placed on the business calendar on September 19, 2012. This Court heard oral argument on December 4, 2012.
Summary judgment is proper when "no genuine issue of material fact is evident from the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, and the motion justice finds that the moving party is entitled to prevail as a matter of law." Smiler v. Napolitano, 911 A.2d 1035, 1038 (R.I. 2006) (quoting Rule 56(c)). When considering a motion for summary judgment, this Court must draw '"all reasonable inferences in the light most favorable to the nonmoving party."' Hill v. Nat'l Grid, 11 A.3d 110, 113 (R.I. 2011) (quoting Fiorenzano v. Lima, 982 A.2d 585, 589 (R.I. 2009)). The burden lies on the nonmoving party to "prove the existence of a disputed issue of material fact by competent evidence," rather than resting on the pleadings or mere legal opinions and conclusions. Hill, 11 A.3d at 113. Where it is concluded '"that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law,'" summary judgment shall enter. Malinou v. Miriam Hosp., 24 A.3d 497, 508 (R.I. 2011) (quoting Poulin v. Custom Craft, Inc., 996 A.2d...
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