Opinion ID: 4094807
Heading Depth: 1
Heading Rank: 3

Heading: analysis

Text: Implied Contract The plaintiff assigns error to the trial justice’s finding that the evidence failed to establish an implied contract. He argues that the trial justice erroneously confined her analysis to the 1996 and 1999 conversations between plaintiff and Aiello and ignored the subsequent conduct of the parties. As a result, plaintiff contends, the trial justice overlooked material evidence. In addition, plaintiff posits that the trial justice’s narrow view of the evidence limited her assessment of its probative value on the critical issue of whether the parties reached an agreement that gave plaintiff the right of first refusal to buy RRM. An implied-in-fact contract “is a form of express contract wherein the elements of the contract are found in and determined from the relations of, and the communications between the parties, rather than from a single clearly expressed written document.” Marshall Contractors, Inc. v. Brown University, 692 A.2d 665, 669 (R.I. 1997). “The difference between an express contract and an implied-in-fact contract is simply the manner by which the parties express their mutual assent.” Id. Critically, to be enforceable, an implied-in-fact contract “must contain all [of] the elements of an express contract.” Bailey v. West, 105 R.I. 61, 64, 249 A.2d 414, 416 (1969). We have held that the “essential elements of contracts ‘implied in fact’ are mutual agreement, and intent to promise, but the agreement and the promise have not been made in words and are implied from the facts.” Id. at 64-65, 249 A.2d at 416. In determining whether these elements are present, we generally look to the “parties’ conduct, actions, and correspondence.” Marshall Contractors, Inc., 692 A.2d at 669. Our careful review of the bench decision satisfies us that, contrary to plaintiff’s contention, the trial justice’s analysis was not confined to the 1996 and 1999 conversations. The - 10 - trial justice began by summarizing the testimony of the various witnesses, finding all witnesses—except defendants—to be honest and credible. Accepting the facts as true, it is clear to this Court that the trial justice did not overlook material evidence regarding the parties’ subsequent conduct.9 She noted the “frequent conversations, references, comments, and remarks confirming the future plan, that is,    when    Aiello retired [plaintiff] would buy [RRM]   .” She also referenced plaintiff’s testimony about an “ongoing and continuing series of comments, conversations, and remarks all of which were consistent with what had been stated to him in 1996 and 1999.” The trial justice highlighted the 1996 and 1999 conversations because the record contains scant evidence of other concrete occurrences to serve as a starting point. Although the doctrine of an implied-in-fact contract allows for a wider evidentiary net to prove the formation of a contract, proof of the essential elements of a contract is nonetheless required. Compare Marshall Contractors, Inc., 692 A.2d at 669, with Filippi v. Filippi, 818 A.2d 608, 619 (R.I. 2003) (explaining that the parol-evidence rule limits contractual review of an integrated document to the document itself). The record before us demonstrates that there was an understanding between the parties that plaintiff would eventually own RRM. This understanding alone, however, was not sufficient to create an implied contract. Turning to the 1996 conversation, the trial justice found that Aiello’s offer was framed as a mere possibility of a future ownership opportunity, a tactic often used as a selling point. As plaintiff was a new hire in 1996, she was “not at all persuaded that either of the Aiellos would have gone so far to offer the business to [plaintiff] at that point or that [plaintiff] would have been reasonable in believing that this is what they were doing.” Furthermore, there is no 9 The trial justice did state that “[t]he theory of implied contract does not permit a Court to rely on subsequent conduct in order to attribute obligations that the parties did not have in mind in the first instance.” However, this pronouncement was stated in the ambit of plaintiff’s right of first refusal argument, discussed infra. - 11 - evidence that any terms of the sale were discussed by the parties in 1996. The trial justice also examined the evidence surrounding the 1999 conversation and found that the discussion gave rise to more uncertainty. In summarizing this ambiguity, she concluded: “Importantly, the question of what would happen if    Aiello were to die before retiring was not addressed. Furthermore, ‘retirement’ was not defined. In other words, left open was the question of whether ‘retirement’ meant that    Aiello would stop working in the ordinary course of reaching the end of his natural work life versus his selling this particular business and moving on to some other employment situation or perhaps starting a new business. Was [plaintiff] entitled to purchase if the Aiellos simply decided to sell this particular business as opposed to retiring?” The trial justice also recognized gaps in basic contract terms, including the payment structure, financing, and purchase price. She concluded that the decision to sell RRM to plaintiff rested solely with the Aiellos based on the lack of specificity surrounding those discussions. This Court has declined to find mutual assent on essential terms when “the promises of the parties depend on the occurrence of some future event within the unilateral control of the promisors   .” Centerville Builders, Inc. v. Wynne, 683 A.2d 1340, 1341 (R.I. 1996). The trial justice also emphasized that plaintiff did not consider himself bound to an agreement to purchase and that he could negotiate or decline to go forward were an offer to purchase presented to him. See Smith v. Boyd, 553 A.2d 131, 133 (R.I. 1989) (“[A]lthough it is objective intent that controls in contract formation, subjective intent may be one of the factors which comprises objective intent. There are instances in which a party intends that his agreement to terms of a contract will have no legal consequences. In this situation, there is no intent to be bound.”). Before this Court, plaintiff argues that the parties’ conduct formed an agreement which gave plaintiff a right of first refusal to purchase RRM. Although we agree with the trial justice that this interpretation would eliminate some of the lingering questions that confronted her, we - 12 - agree that she correctly rejected this argument. An implied contract granting plaintiff the right of first refusal is simply not supported by the evidence nor was the claim raised in plaintiff’s first amended complaint. Significantly, paragraph 62 of the first amended complaint alleges that “[t]he actions of Aiello and [plaintiff] exhibited mutual agreement and intent to sell RRM to [p]laintiff, thus there was established a contract for the sale of the business implied in fact.” (Emphasis added.) The plaintiff’s first amended complaint is silent as to any suggestion that defendants gave plaintiff the right of first refusal to purchase RRM. This argument explicitly was rejected by the trial justice, based on the evidence and testimony that was before the court. We see no error. This Court previously has acknowledged that “the resolution of a dispute concerning if and when contract negotiations materialize into a mutual understanding and result[] [in a] binding contract is ordinarily a question of fact for the factfinder.” Marshall Contractors, Inc., 692 A.2d at 670. Having vetted the voluminous trial transcripts, we fail to glean any evidence indicating that the parties agreed on essential terms of a purchase agreement as to establish an implied contract for the purchase of RRM.10 See Opella v. Opella, 896 A.2d 714, 720 (R.I. 2006) (“For either an express or implied contract, ‘a litigant must prove mutual assent or a meeting of the minds between the parties.’” (quoting Mills v. Rhode Island Hospital, 828 A.2d 526, 528 (R.I. 2003) (mem.))). Accordingly, we are satisfied that the trial justice did not err in concluding that plaintiff failed to establish the existence of an implied contract. 10 Since we affirm the trial justice’s finding that plaintiff failed to prove the existence of an implied contract, we find it unnecessary to discuss whether plaintiff was ready, willing, and able to enter into such contract had there been one. - 13 - Promissory Estoppel The plaintiff makes a similar argument concerning his claim of promissory estoppel: that the trial justice overlooked material evidence by confining her analysis to the 1996 and 1999 conversations. The plaintiff also contends that the trial justice erroneously concluded that plaintiff did not reasonably rely on Aiello’s promises to his detriment. We do not agree. Promissory estoppel generally is invoked when, for one reason or another, an agreement between two parties fails on an essential element of a contractual claim. Alix v. Alix, 497 A.2d 18, 21 (R.I. 1985). In adopting the Restatement (Second) Contracts approach to the doctrine, this Court has defined promissory estoppel as: “[a] promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance, [and therefore] is binding if injustice can be avoided only by enforcement of the promise.” Filippi, 818 A.2d at 625 (quoting Alix, 497 A.2d at 21). Application of the doctrine of promissory estoppel also has been extended “to situations in which the promisee’s reliance on the promise was induced, and injustice may be avoided only by enforcement of the promise.” Id. (citing Alix, 497 A.2d at 21). In Filippi, this Court articulated a three-element approach to promissory estoppel: “1. A clear and unambiguous promise; “2. Reasonable and justifiable reliance upon the promise; and “3. Detriment to the promisee, caused by his or her reliance on the promise.” Id. at 626. In addressing plaintiff’s promissory estoppel claim, the trial justice found that the claim failed on each element. First, the trial justice found that Aiello did not make a clear and unambiguous promise that plaintiff could purchase the business. Specifically, the trial justice found that Aiello’s statements were “too indefinite to constitute a specific term for purposes of - 14 - promissory estoppel.” As discussed, the evidence before the trial justice demonstrated that Aiello’s statements concerned future opportunities for employment or the possibility of buying the business, but lacked any certainty and specificity. The trial justice did not overlook material evidence in determining that these statements were likewise too unclear and ambiguous to support a claim of promissory estoppel. Although Aiello often indicated that plaintiff would someday own RRM, the frequency of these remarks does not cure their ambiguity. At most, Aiello’s redundancy created a promise to discuss the purchase of RRM with plaintiff at some point in the future. “Promissory estoppel cannot be based upon preliminary negotiations and discussions or on an agreement to negotiate the terms of a contract.” B.M.L. Corp. v. Greater Providence Deposit Corp., 495 A.2d 675, 677 (R.I. 1985). Because a finding of promissory estoppel can transpose an otherwise gratuitous promise into an enforceable agreement, Hayes v. Plantations Steel Co., 438 A.2d 1091, 1096 (R.I. 1982), this Court is reluctant to expand the doctrine to a promise that is uncertain or indefinite merely because the promise was reiterated on numerous occasions. Because the doctrine of promissory estoppel is aimed at enforcing clear and unambiguous commitments in order to avoid injustice, a strict adherence to the elements of promissory estoppel is required. Even if Aiello’s statements were found to be sufficiently clear and unambiguous promises, plaintiff still bore the burden of proving the remaining elements of promissory estoppel, including detrimental reliance. The trial justice found that it was not reasonable for plaintiff to rely on Aiello’s statements. She held that a “competent businessman” would not reasonably rely on “vague statements, love, and affection” when “the business world is built on written agreements.” We note that approximately nine years elapsed from plaintiff’s return to work at RRM and the time when Aiello sold the business to Calcagni. During that time, with the - 15 - exception of the brief eleventh-hour discussion with the moneylender, there is no evidence that plaintiff consulted with an attorney or accountant or initiated or engaged in any discussions with Aiello about buying the company. Futhermore, Aiello’s future plans for RRM were never reduced to writing. The trial justice also found that plaintiff benefited from his position at RRM—gaining considerable experience and earning an acceptable salary—thus defeating the element of detrimental reliance. We are therefore satisfied that the trial justice correctly concluded that plaintiff did not reasonably rely on Aiello’s statements to his detriment. Fraud and Negligent Misrepresentation The plaintiff argues that the trial justice erred in dismissing his fraud and negligent misrepresentation claims. Specifically, he contends that the trial justice “found that both of the Aiellos were dishonest not only in their testimony, but also in their dealings with [plaintiff].” As a result, plaintiff maintains that the trial justice erroneously concluded that the Aiellos simply changed their minds when they decided to sell RRM to someone other than plaintiff. The defendants posit that the trial justice’s credibility findings do not meet the legal requirements of a fraud or negligent misrepresentation claim. “To establish a prima facie fraud claim, ‘the plaintiff must prove that the defendant made a false representation intending thereby to induce [the] plaintiff to rely thereon and that the plaintiff justifiably relied thereon to his or her damage.’” McNulty v. Chip, 116 A.3d 173, 18283 (R.I. 2015) (quoting Parker v. Byrne, 996 A.2d 627, 634 (R.I. 2010)). However, “the general rule is that mere unfulfilled promises to do a particular thing in the future do not constitute fraud in and of themselves.”11 37 Am. Jur. 2d Fraud and Deceit § 87 at 122 (2013). This precept was 11 37 Am. Jur. 2d Fraud and Deceit § 87 at 122-23 (2013) (“Reasons given for the rule not permitting predication of fraud on promises that are merely unkept subsequently are that a mere promise to perform an act in the future is not, in a legal sense, a representation or statement of - 16 - not overlooked by the trial justice, who found that Aiello’s statements regarding RRM always revolved around the future disposition of the company, and therefore could not form the basis for a claim of fraud. These principles apply with equal force to plaintiff’s negligent misrepresentation claim. “To establish a prima facie case of negligent misrepresentation, the plaintiff [must prove, inter alia,]: ‘a misrepresentation of a material fact.’” Zarrella v. Minnesota Mutual Life Insurance Co., 824 A.2d 1249, 1257 (R.I. 2003) (emphasis added) (quoting Mallette v. Children’s Friend and Service, 661 A.2d 67, 69 (R.I. 1995)). Future events or promises are not considered factual. See 37 C.J.S. Fraud § 76 at 263-64 (2008) (“[T]o give rise to a liability for negligent misrepresentation, an alleged misrepresentation must be factual and not promissory or related to future events.”); see also 37 Am. Jur. 2d Fraud and Deceit § 128, at 167-68 (“‘Negligent misrepresentation’    differs from fraudulent misrepresentation only in that while the latter requires knowledge that the pertinent statement was false, the former merely requires that the person who made the statement failed to exercise reasonable care or competence to obtain or communicate true information.”). The record is devoid of any evidence that indicates that Aiello’s statements were “made without any intention of performing [them] at the time of making [them].” 37 Am. Jur. 2d Fraud and Deceit § 91 at 126. In fact, the trial justice concluded that the Aiellos “genuinely wanted to groom [plaintiff] as a candidate for buying them out.” The plaintiff has failed to set forth any evidence which indicates that Aiello acted with scienter or knew that his representations were false when made. Cf. Cheetham v. Ferreira, 73 R.I. 425, 429, existing or past fact, and a person has no right to rely on such a promise or statement. A mere failure to perform a promise does not change its character. Moreover, a representation that something will be done in the future, or a promise to do it, cannot, from its nature, be true or false at the time when it is made. The failure to make it good is merely a breach of contract, which must be remedied by an action on the contract, if at all.”). - 17 - 56 A.2d 861, 863 (1948) (“[A] seller’s expression of mere matters of opinion or judgment, especially as to possible future profits, comes within the category of ‘dealers’ talk’ or ‘puffing.’ However, where the representation amounts to the positive assertion of an existing material fact    it transcends the limits of ‘puffing.’”). Accordingly, plaintiff’s fraud and negligent misrepresentation claims must fail for lack of proof as well. Unjust Enrichment In his final argument, plaintiff contends that, after finding that plaintiff established a claim of unjust enrichment, the trial justice erred by limiting damages to reasonable interest and then dismissing the count for failure to prove those damages. The defendant responds that this argument has been waived and, alternatively, that plaintiff failed to present any proof of the damages to which plaintiff claims he is entitled—evidence that links the profitability of RRM, as well as its eventual sale, to plaintiff’s loans to the company. As a threshold matter, we are not persuaded that plaintiff waived his argument on the appropriate measure of damages on his unjust enrichment claim. This Court has long adhered to the “raise or waive” rule: “an issue that has not been raised and articulated previously at trial is not properly preserved for appellate review.” State v. Gomez, 848 A.2d 221, 237 (R.I. 2004) (quoting State v. Donato, 592 A.2d 140, 141 (R.I. 1991)). The defendant urges this Court to apply the “raise-or-waive” rule because plaintiff argued in his posttrial memorandum that he should be entitled to interest on the loans he made to RRM. Here, plaintiff requested interest and reimbursement as damages “at the very least” and pointed to RRM’s growth and profitability as evidence that “[h]e conferred an objectively definable benefit upon the Aiellos by allowing RRM to grow and become profitable, undoubtedly increasing its attractiveness to prospective - 18 - purchasers.” For these reasons, we are satisfied that plaintiff’s argument on this issue has not been waived. “It is well established that ‘[r]ecovery for unjust enrichment is predicated upon the equitable principle that one shall not be permitted to enrich himself at the expense of another by receiving property or benefits without making compensation for them.’” South County Post & Beam, Inc. v. McMahon, 116 A.3d 204, 213 (R.I. 2015) (quoting Emond Plumbing & Heating, Inc. v. BankNewport, 105 A.3d 85, 90 (R.I. 2014)). “Under Rhode Island law, unjust enrichment is not simply a remedy in contract and tort but can stand alone as a cause of action in its own right.” Dellagrotta v. Dellagrotta, 873 A.2d 101, 113 (R.I. 2005) (citing Toupin v. Laverdiere, 729 A.2d 1286 (R.I. 1999)). To recover on an unjust enrichment claim, a plaintiff must prove: “(1) that he or she conferred a benefit upon the party from whom relief is sought; (2) that the recipient appreciated the benefit; and (3) that the recipient accepted the benefit under such circumstances ‘that it would be inequitable for [the recipient] to retain the benefit without paying the value thereof.’” Id. (quoting Bouchard v. Price, 694 A.2d 670, 673 (R.I. 1997)). As a result, “unjust enrichment focuses on the propriety of a payee or beneficiary retaining funds or a benefit   .” Process Engineers & Constructors, Inc. v. DiGregorio, Inc., 93 A.3d 1047, 1052 (R.I. 2014) (quoting Parnoff v. Yuille, 57 A.3d 349, 355 n.7 (Conn. App. Ct. 2012)). The parties have not directed our attention to, nor have we uncovered, any case law that articulates a hard and fast rule for the measure of damages on an unjust enrichment claim arising out of interest-free loans. As a result, we are of the opinion that plaintiff’s damages were not necessarily limited to a reasonable rate of interest. We are satisfied, however, that the trial justice did not err in limiting plaintiff’s damages to interest in the context of this case. According to the Restatement (Third) Restitution and - 19 - Unjust Enrichment § 49(2) at 176 (2011), “[e]nrichment from a money payment is measured by the amount of the payment or the resulting increase in the defendant’s net assets, whichever is less.” Because the loans were repaid in full, the trial justice’s analysis could have concluded. Supplemental enrichment, usually a form of disgorgement, may be appropriate under certain circumstances—namely, when an individual receives a benefit due to conscious wrongdoing. See id. at §§ 51, 53. The trial justice was unable to conclude that the Aiellos engaged in any deceit or legal wrongdoing, finding instead that defendants simply changed their minds about selling the business to plaintiff. Based on the customary form of compensation for a loan—a reasonable rate of interest on the amount of the loan—the trial justice determined that interest was an appropriate measure of damages. A moneylender generally is not compensated for the positive benefits derived by the loan, such as increased profitability, unless the agreement provides for some sort of royalty. Unjust enrichment is not aimed at placing the benefit conferring party in a better position than had there been a contract or compensation in the first place. Finally, and significantly, even the most generous reading of the record discloses a vague and attenuated evidentiary connection between the plaintiff’s loans and the growth and profitability of RRM. The plaintiff did testify that he made loans to the company in order to enhance RRM’s business and that some loans were provided to allow RRM to undertake certain projects. Nonetheless, the record is devoid of any evidence which correlates the plaintiff’s loans to RRM’s pecuniary triumphs. See Restatement (Third) Restitution and Unjust Enrichment § 51, cmt. f. at 212 (“[A]n objection that profits are ‘remote’ may mean simply that they are impossible to measure with sufficient accuracy; or that they are the product of legitimate contributions by the defendant that should not, in justice, be awarded to the claimant    .”). - 20 - Thus, we are of the opinion that the trial justice did not inappropriately limit the plaintiff’s damages on his unjust enrichment claim to reasonable interest, which was not proven at trial.12