Vasquez v. Sportsman's Inn, Inc.

• Citation: 57 A.3d 313
• Decision Date: 19 December 2012
• Docket Number: No. 2011–26–Appeal.,2011–26–Appeal.
• Parties: Gilberto VASQUEZ v. SPORTSMAN'S INN, INC. et al.
• Court: United States State Supreme Court of Rhode Island

57 A.3d 313

Gilberto VASQUEZ

v.SPORTSMAN'S INN, INC. et al.

No. 2011–26–Appeal.

Supreme Court of Rhode Island.

Dec. 19, 2012.

Michael P. Fontaine, Esq., for Plaintiff.

John R. Mahoney, Esq., Providence, for Defendants.

Present: SUTTELL, C.J., GOLDBERG, FLAHERTY, ROBINSON, and INDEGLIA, JJ.

OPINION

Justice FLAHERTY, for the Court.

Before this Court is an appeal by the defendants, Sportsman's Inn, Inc., DLM, Inc., and DLM Realty, LLC, from an order that granted the motion of the plaintiff, Gilberto Vasquez, for a preliminary injunction enjoining the defendants from encumbering, alienating, or conveying property located at 122 Fountain Street in Providence. This case came before the Supreme Court for oral argument on September 19, 2012, pursuant to an order directing the parties to appear and show cause why the issues raised in this appeal should not summarily be decided. After hearing the parties' arguments and after considering the memoranda submitted by counsel, we are satisfied that cause has not been shown, and we shall proceed to decide the appeal at this time without further briefing or argument. For the reasons set forth in this opinion, we vacate the order of the Superior Court granting the plaintiff's motion for a preliminary injunction.

IFacts and Travel

On November 11, 2006, at 10 or 11 p.m., plaintiff arrived at Sportsman's Inn, Inc. (Sportsman's Inn) in Providence. That establishment features hotel and lounge services, and it leases the premises at 122 Fountain Street from DLM, Inc. It is noteworthy that before he arrived at Sportsman's Inn that evening, plaintiff had ingested ecstasy.¹ While socializing during the night, plaintiff said he drank about five alcoholic beverages, including both mixed drinks and beer. The plaintiff left Sportsman's Inn at around 2 a.m., and said that the next thing he remembers was hearing a gunshot, falling to the ground, and waking up in a hospital.

On or about June 2, 2009, plaintiff filed a civil action against Sportsman's Inn and DLM, Inc. In his complaint, he alleged that he was shot as a result of the failure of both defendants to provide adequate security at the business. ²

On December 22, 2009, plaintiff learned that the property at 122 Fountain Street was for sale. He moved with alacrity for a temporary restraining order on the next day. A justice of the Superior Court granted his request and assigned the matter for a hearing on a preliminary injunction. At that hearing, which took place on January 8, 2010, Sgt. Raymond Hull of the Providence Police Department, testifying under subpoena as a keeper of records, documented the number of police service calls to the Sportsman's Inn and its immediate vicinity. The records dated from January 1, 1996 to the time of the hearing. In his testimony, Sgt. Hull estimated that the total number of service calls to that location was about 800.³

David Deluca, president of Sportsman's Inn, Inc. also testified at the hearing for preliminary injunction. He explained that Sportsman's Inn, Inc. and DLM, Inc. shared the same building, office, phone number, office supplies, and insurance policy. He testified that both entities were engaged in the same business of hotel/lounge and services, and that the companies also had common officers. Michael A. Deluca and his nephew, David Deluca, oversaw all the daily operations of both corporations. David Deluca also testified that he did not “know of any corporate formalities that have been followed,” and that since 1995, neither Sportsman's Inn nor DLM, Inc. had conducted any annual meetings of the board of directors or shareholders, and no minutes had been kept. He also explained that whatever business needs DLM, Inc. and DLM Realty had were met by the efforts of Sportsman's Inn's employees, because neither DLM, Inc. nor DLM Realty had any employees.

Deluca also was examined about corporate assets. He testified that DLM, Inc. had about $30,000 in capital; DLM Realty, LLC (DLM Realty), which was merely a holding company that owned all the stock of DLM, Inc., had no other assets; and Sportsman's Inn lacked substantial capital, but he added that it did own bar equipment and two motor vehicles, a Land Rover and a Honda. He said that he was not sure whether Sportsman's Inn paid rent to DLM, Inc. David Deluca also testified that if a substantial judgment were to be rendered against Sportsman's Inn, it would likely declare bankruptcy.

David Deluca further testified that Sportsman's Inn no longer had a parking area of its own. He also explained that, while there were no bouncers ⁴ or security personnel outside the establishment, three bouncers generally were on duty inside: one at the Fountain Street entrance, one at the Martha Street entrance, and one in the back room. However, on the night of the incident described in the complaint, just one manager and only one bouncer were on duty. He said a metal detecting wand was used to prevent people from bringing dangerous objects into Sportsman's Inn.

At a later hearing, Gene Carlino, an attorney, testified about the formation of the corporations. He said that on December 20, 2001, DLM Realty was established, and the two shareholders of DLM, Inc., Michael A. Deluca and Michael Deluca, transferred their stock interests to DLM Realty, thereby creating a parent-subsidiary relationship between DLM Realty and DLM, Inc. Attorney Carlino explained that DLM Realty was established to take advantage of certain tax benefits.

Finally, Jane Lattinville, a certified public accountant, offered testimony. She explained that it was she who prepared the corporate tax return for all three entities: Sportsman's Inn, DLM, Inc., and DLM Realty. She testified that in 2006, Sportsman's Inn's taxable income was $25,427, after expenses. Those expenses included a rent payment of $247,000 to DLM, Inc.⁵ Lattinville also clarified that DLM, Inc. had failed to file its annual report for a few years because of oversight, resulting in the revocation of the corporate charter in 2008. Lattinville said that she then completed the necessary procedure and the charter was reinstated.

On May 19, 2010, the Superior Court issued an “Order (Regarding Motion to Attach and Corporate Identities),” in which the trial justice found that the overall finances of DLM, Inc. and Sportsman's Inn were closely intertwined. ⁶ The trial justice reasoned that: both corporations shared the same building, offices, owners, and officers; DLM, Inc. and Sportsman's Inn did not keep minutes nor did they hold elections in accordance with the bylaws; DLM, Inc.'s charter had been revoked on October 20, 2008; and David Deluca, the chief operating officer, was unaware of whether Sportsman's Inn paid rent or filed tax returns. The trial justice determined that the businesses were sufficiently capitalized, but he expressed a concern that DLM, Inc.'s only income was Sportsman's Inn's rent payments. Finally, the trial justice concluded that even though he could not specifically find that one corporation dominated the affairs of the other, he nonetheless inferred that the same principals dominated the finances, policies, and practices of each entity. Based on these findings, the trial justice concluded that “Vasquez has demonstrated a likelihood of success on the merits that the corporate formalities will be disregarded.” ⁷

The trial justice also issued an “Order (Regarding Motion to Attach in a Tort Action)” on July 15, 2010, in which he denied Vasquez's motion to attach the assets of the corporations. The trial justice reasoned that the prejudgment attachment of property is not authorized in tort actions.⁸ As a result, he rescheduled a hearing on Vasquez's motion for a preliminary injunction to allow the parties to further brief the issue.

On July 29, 2010, the trial justice held a hearing on plaintiff's motion for a preliminary injunction. Derek V. Campbell, a rescue technician for the Providence Fire Department, testified during that hearing. It was Campbell who had drafted the “Run Report” that summarized the response to the emergency call on November 12, 2006. The Run Report indicated that a male was “found on ground outside of club”; Campbell explained that it was his recollection that Vasquez was “outside of the doors in close proximity to the club.” He cautioned, however, that he could not remember specific details of the incident, nor could he recall exactly where the injured plaintiff was found.

The court next heard from plaintiff himself. He testified that he “remember [ed] hearing [a] gunshot and falling down to the floor,” but he said he had no specific memory of who shot him. He explained that he consumed ecstasy before entering the club and “probably [had] about five” beers and mixed drinks when he was at Sportsman's Inn. Significantly, Vasquez was not questioned and did not testify about whether he had been engaged in any arguments or altercations inside Sportsman's Inn on that night.

Finally, John Marques, a Sportsman's Inn manager who worked the night of the incident, testified. He explained that there was no security posted outside the building, but if a patron became loud and disorderly inside the club, the practice was to “[g]o up to the gentleman, see what the problem [was], obviously try to put it under control * * * [and] [i]f you can't[,] you ask them to leave. If you can't ask them to leave, you call the police.” He also said that during the seven years that he was a manager, there were “about five little arguments there, maybe, that [he] remember[ed].”

After the hearing, the trial justice granted plaintiff's motion to enjoin the sale of the property. He concluded that Vasquez had established a likelihood of success that the corporate formalities should be disregarded and that Sportsman's Inn had breached its duty of reasonable care to him. Specifically, the order concluded that the “[d]efendants [were] enjoined and restrained from alienating, conveying[,] or encumbering their real...