WILLIAM E. SMITH, District Judge.
This cross-appeal from the Bankruptcy Court's Decision and Order begins the end of the protracted, litigious relationship of the parties concerning an area of Goat Island, on a portion of Goat Island South Condominium, known as the "Reserved Area" in Newport, Rhode Island. The Appellants/Cross-Appellees are Goat Island South Condominium Association, America Condominium Association, Capella South Condominium Association, and Harbor Houses Condominium Association (collectively, the "Associations"), and the Appellee/Cross-Appellant is Debtor IDC Clambakes, Inc. ("Clambakes"). Thomas Roos is the sole shareholder of Clambakes, IDC Properties, Inc. ("Properties"), and IDC, Inc.
To understand the issues in this cross-appeal, a brief overview of the underlying facts and procedural history is warranted. The following, largely undisputed, narrative of the relevant events is derived from the Bankruptcy Court's opinion:
In re IDC Clambakes, Inc., 431 B.R. 51, 55-57 (Bankr.D.R.I.2010).
On February 8, 2008, this Court remanded the case to the Bankruptcy Court after its initial decision on Clambakes' motion for summary judgment and appeal therefrom. Goat Island S. Condo. Ass'n, Inc. v. IDC Clambakes, Inc., 382 B.R. 178 (D.R.I.2008). The Court instructed the Bankruptcy Court on remand to (1) ensure the disposition comported with due process requirements; (2) carefully adhere to the elements of trespass under Rhode Island law; and (3) reconsider whether the Association's claim for trespass damages is precluded by America I or America II. Id. at 179-80. On remand, the Bankruptcy Court held a nine-day trial and, thereafter, issued an opinion holding (in relevant part) that (1) the Associations' claims for trespass and/or damages against Clambakes were not precluded by the America litigation; (2) Clambakes was not a trespasser between March 1, 1998 and April 8, 2005 because the Associations consented to its operation of the Regatta Club on the Reserved Area; and (3) Clambakes trespassed between April 8, 2005 and November 5, 2005, but the Associations' damages were limited to the $450,000 that was already paid by the Chapter 11 trustee, pursuant to the August 25, 2005 consent order. In re IDC Clambakes, 431 B.R. at 58-62.
On appeal to this Court, the Associations contend that (1) the Bankruptcy Court's determination that the Associations consented to Clambakes use and occupancy was clearly wrong; (2) even if the Associations had impliedly consented, such implied consent would give rise to an implied obligation to pay; (3) the bankruptcy court abused its discretion in permitting certain testimony; and (4) the Bankruptcy Court erred in considering extra-record evidence, appended to Clambakes' post-trial memorandum. In its cross-appeal, Clambakes argues that the Bankruptcy Court erred in determining that Clambakes had trespassed between April 8, 2005 and November 5, 2005. Clambakes also advances two alternative arguments, to be taken up if the Court does not uphold the Bankruptcy Court's consent determination: (1) that the Bankruptcy Court erred in finding that the Associations had constructive possession of the North Unit; and (2) that the Bankruptcy Court erred in holding that the Associations' demand for trespass damages was not precluded by the doctrine of issue preclusion.
This Court reviews the Bankruptcy Court's factual findings for clear error, Thunberg v. Wallick (In re Thunberg), 641 F.3d 559, 560 (1st Cir.2011), and its conclusions of law are reviewed de novo. Gannett v. Carp (In re Carp), 340 F.3d 15, 21 (1st Cir.2003).
Under the clear error standard of review, this Court will only set aside the Bankruptcy Court's findings of fact where, in light of the whole record, the Court "form[s] a strong, unyielding belief that a mistake has been made." Id. at 22 (quoting Cumpiano v. Banco Santander, 902 F.2d 148, 152 (1st Cir.1990)). The Bankruptcy
The Bankruptcy Court concluded that Clambakes did not trespass from March 1, 1998 to April 8, 2005 because the Associations consented to its use and occupancy of the Reserved Area. On appeal, the Associations contend that the Bankruptcy Court fundamentally misapprehended the record as a whole and that its finding of consent to Clambakes' use and occupancy is clearly wrong.
A trespasser is "[o]ne who intentionally and without consent or privilege enters another's property." Bennett v. Napolitano, 746 A.2d 138, 141 (R.I.2000) (emphasis added) (quoting Ferreira v. Strack, 652 A.2d 965, 969 (R.I.1995)). "Consent is willingness in fact for conduct to occur. It may be manifested by action or inaction and need not be communicated to the actor." Restatement (Second) of Torts § 892 (1979). "If words or conduct are reasonably understood by another to be intended as consent, they constitute apparent consent and are as effective as consent in fact." Id. More specifically with respect to apparent consent:
Id. at § 892, cmt. c (emphasis added).
While the Restatement describes the "[e]xistence of apparent consent [a]s a fact issue," id. at § 892, reporter's note, cmt. c, the Bankruptcy Court's consent determination is more properly viewed as a mixed question of law and fact. Mixed questions of law and fact "invok[e] a sliding standard of review...." Braunstein v. McCabe, 571 F.3d 108, 124 (1st Cir.2009). The applicable standard "varies depending upon the nature of the mixed question; the more fact-dominated it is, the more likely that deferential, clear-error review will obtain, and the more law-dominated it is, the more likely that non-deferential, de novo review will obtain." Sierra Fria Corp. v. Donald J. Evans, P.C., 127 F.3d 175, 181 (1st Cir.1997); see also Fidelity & Guar. Ins. Co. v. Star Equip. Corp., 541 F.3d 1, 5 (1st Cir.2008). In the present case, it is clear that the Bankruptcy Court's consent determination was fact-dominated and is accordingly reviewed for clear error. See Sierra Fria, 127 F.3d at 181.
The Bankruptcy Court determined that, "throughout the seven year term of Clambakes' management and operation of the Regatta Club, the Associations manifested numerous actions (and inactions) signaling apparent consent to Clambakes' possession and operation of the Regatta Club." In re IDC Clambakes, 431 B.R. at 60. In support of this determination, the Bankruptcy Court relied on the following findings of fact. First, Clambakes was not added to the Tolling Agreement or to any subsequent extensions. Id.
Third, Clambakes was not a party to the America litigation, and "while Clambakes is charged with knowledge of its existence, given that its sole shareholder [Roos] was a named Defendant, the Associations gave no indication of their intent to withdraw their apparent consent for Clambakes to continue operating the Regatta Club pending the outcome of the suit against its lessor, Properties." Id. Fourth, both Harbor Houses, one of the Associations, and various individual unit owners contracted directly with the Regatta Club to host private events. Id. Fifth, there was no written or verbal notice, signage, or any other type of claim made against Clambakes to quit the premises. Id.
One of the Associations arguments on appeal is that the Bankruptcy Court improperly considered evidence that was not part of the trial record. By way of background, at the conclusion of trial, the Bankruptcy Court requested that the parties file post-trial memoranda. Appended to Clambakes' post-trial memorandum was a 712 page volume of what it termed "Composite Exhibits." It is undisputed that some of these composite exhibits were not part of the record at trial; it is also undisputed that Associations never moved to strike or otherwise object to these exhibits before the Bankruptcy Court.
"[O]nce the record is closed, a [trial] court, absent waiver or consent, ordinarily may not receive additional factual information of a kind not susceptible to judicial notice unless it fully reopens the record and animates the panoply of evidentiary rules and procedural safeguards customarily available to litigants." Lussier v. Runyon, 50 F.3d 1103, 1105-06 (1st Cir. 1995); see also id. at 1113 ("It is a fundamental principle of our jurisprudence that a factfinder may not consider extra-record evidence concerning disputed adjudicative facts."). Those procedural safeguards "include, but are not limited to, the right to object to evidence, the right to question its source, relevance, and reliability, the right to cross-examine its proponent, and the right to impeach or contradict it." Id. at 1113 n. 13.
In the normal course, if a party desires to supplement the record, it files a motion to reopen the record for the consideration of additional evidence, which the court would consider by assessing a variety of factors. See, e.g., Davignon v. Hodgson, 524 F.3d 91, 114 (1st Cir.2008); Blinzler v. Marriott Int'l, Inc., 81 F.3d 1148, 1160 (1st Cir.1996).
It is true that parties are expected to thoroughly review all submissions by opposing counsel and vigilantly pursue any available objections. And here, there is no doubt that the Associations failed in that regard. They received a copy of Clambakes' post-trial composite exhibits on December 4, 2008 and never objected, moved to strike, or otherwise complained about the inclusion of non-record evidence until well after the Bankruptcy Court's decision was on appeal to this Court. In fact, it would appear that the Associations did not bring the issue to the Court's attention until they filed their September 30, 2010 reply brief.
In Lussier, the court sustained a "preserved objection" and determined that there was "no basis for finding that the parties waived this deprivation, consented to the court's shortcut, or otherwise invited judicial reliance on the extra-record `proof.'" 50 F.3d at 1113, 1115. While there was certainly no preserved objection here, and a colorable argument could be made that the Associations' silence and inaction constituted a waiver of the issue, to consider this issue waived would only reward Clambakes' brazen attempt to sneak new evidence into the record and incentivize litigation by subterfuge. Accordingly, the Court must determine whether the Bankruptcy Court's consent determination was "premised on this late-arriving evidence" or is sufficiently supported by evidence that was properly in the record. See id. at 1115 ("To the extent that the judgment is premised on this late-arriving evidence, it cannot stand.").
As framed by the Associations, the real issue is whether the court relied on Composite Exhibit P in arriving at its consent finding. Composite Exhibit P contains a small excerpt of Raymond Morrissette's testimony before the Bankruptcy Court on July 5, 2005. The following exchanges were underscored in the transcript appended to Clambakes' post-trial memorandum:
(Composite Ex. P, In re: IDC Clambakes, Inc., (Bankr.D.R.I. Dec. 4, 2008), BK No. 05-12267, ECF No. 671-5.)
Although that testimony was provided before the Bankruptcy Court, it was not provided during the trial of this matter, not made an exhibit during the trial, and was therefore not properly part of the record for the Bankruptcy Court's consideration. Yet, while the Associations accurately argue that the Morrissette testimony contained in Composite Exhibit P is (very) frequently cited in Clambakes' reply brief on appeal, it is never cited or quoted in the Bankruptcy Court's decision. And frankly, it strikes the Court that Composite Exhibit P is so significant that, had the Bankruptcy Court considered it, it unquestionably would have cited and quoted from
Having determined that the Bankruptcy Court's finding on consent was not based upon or tainted by its consideration of extra-record evidence, it still remains for this Court to assess whether that finding was clearly erroneous. The arguments of the parties boil down to a disagreement over what could reasonably be inferred from the record evidence of the Associations' actions (or inactions). The Associations argue that it was illogical and clearly wrong for the Bankruptcy Court to find that the Associations had consented at the same time that the parties had engaged in hard-fought litigation and a bitter dispute over title to the Reserved Area. They further argue that the only appropriate interpretation of their words and conduct was that they were pursuing their claims in court, while refraining from self-help. Clambakes, on the other hand, argues that the Bankruptcy Court appropriately relied on a record that reflects nonfeasance and deliberate inaction on the part of the Associations.
In support of its contention that the consent determination was erroneous, the Associations argue that the Bankruptcy Court misconstrued the evidence upon which it relied. Without engaging each and every contention of the Associations, it suffices to say that these arguments go to the character and weight of the evidence; and, such determinations are best left to the finder of fact. See United States v. Young, 105 F.3d 1, 5 (1st Cir.1997) ("Deference to the [trial] court's findings of fact reflects our awareness that the trial judge, who hears the testimony, observes the witnesses' demeanor and evaluates the facts first hand, sits in the best position to determine what actually happened.").
Moreover, while the Associations attempt to pick apart the Bankruptcy Court's assessment of individual pieces of evidence and related findings of fact, it is clear that the Bankruptcy Court's decision rested on the record, as a whole, presented at trial. And looking at that record on appeal, it is apparent that this is a close case on the facts, with evidence supporting the arguments of both sides.
A fair reading of the record supports the view that, from a factual standpoint, Clambakes either thought Properties owned the Reserved Area and Clambakes' use and occupancy was pursuant to a lease, or it thought that its possession was contested due to the pendency of the America litigation. On the other hand, the record also supports the view that, as to Clambakes' operation of the Regatta Club, the Associations essentially sat back and allowed Clambakes to build and operate a thriving business. At the end of the day, while it may be true that one could fairly interpret the record as the Associations suggest, the Court cannot form "a strong, unyielding belief that a mistake has been made." Gannett, 340 F.3d at 22 (quoting Cumpiano, 902 F.2d at 152).
In the Bankruptcy Court's decision, the court held that, "even without argument on the issue, the conclusion is mandatory that, as of April 8, 2005, the Associations' apparent consent ended, that, by operation of law Clambakes became a trespasser upon the Reserved Area, and that said trespass continued until Clambakes vacated the premises on November 5, 2005." In re IDC Clambakes, 431 B.R. at 61 (emphasis added). The court then went on to determine that the appropriate measure of damages for that period of time was limited to the $450,000 that was already paid by the Chapter 11 trustee, pursuant to the August 25, 2005 consent order. On appeal, Clambakes contends that this determination was erroneous because the Associations' proofs of claim do not encompass this time period.
A review of the record suggests that Clambakes is correct. The proofs of claim submitted by the Associations clearly contain the following: "2. Date debt was incurred: 1998 — April 7, 2005." The Associations' brief to this Court suggests that there is no disagreement as to the scope of their proofs of claim: "On October 3, 2005, the Condominium Associations filed timely proofs of claim seeking the fair value of the Debtor's pre-Petition use and occupancy of the Reserved Area and the improvements thereon for the period from 1998 to April 8, 2005 (the `Claim Period')." (See Assoc. Brief 10, ECF No. 11.) Furthermore, in its Reply Brief to this Court, the Associations do not contest (or respond in any manner) to Clambakes' assertion that their claims did not encompass the period of time in question. And finally, this Court conducted a thorough review of the entire Bankruptcy Court record and could find no suggestion that the claim period had been somehow expanded or amended.
Accordingly, the question of whether Clambakes trespassed after April 7, 2005 was simply not before the Bankruptcy Court,
For the reasons set forth in this opinion,
IT IS SO ORDERED.
