Trs. of the Beechwood Vill. Condo. Trust v. United Stateslliance Fed. Credit Union
Trs. of the Beechwood Vill. Condo. Trust v. United Stateslliance Fed. Credit Union
Opinion of the Court
*279Beechwood Village Condominiums is an age-restricted condominium development built in phases. After some but not all of the phases had been built, the developer ceased operations at the site. A dispute arose between the developer's mortgage lender and the condominium trust concerning the right to construct additional units. On cross motions for summary judgment, a judge of the Land Court granted partial summary judgment to the lender, USAlliance Federal Credit Union (USAlliance), and intervener Sean P. Fallon.
We conclude that all of the land associated with the condominium development, including the common area, was submitted to the provisions of G. L. c. 183A, the Condominium Act (act or statute), by the master deed,
Background. 1. The development, master deed, and mortgages. The background facts are undisputed. On May 11, 2006, Mark S. Gardner, as trustee of the Mark S. Gardner Trust, sold to Jeffrey *280S. Reale, *87as trustee of the Beechwood Village Realty Trust (developer), a thirty-seven acre parcel of land referred to by the parties as lot 7 on Beech Street in Rockland. On the same day, the developer granted a first mortgage to USAlliance to secure payment of a note in the original principal amount of $ 2,800,000 (2006 USAlliance mortgage),
The master deed provided that the condominium could include up to seventy-nine age-restricted "single family free-standing dwelling" units to be constructed in up to thirty phases. A site plan depicting seventy-nine lots
Phase one, consisting of three units, was constructed before the master deed was recorded.
*88Thus, each unit sat on land designated as a common area, but the unit owner held an exclusive use easement in the lot on which the unit was located.
The original USAlliance mortgage was refinanced on April 11, 2007 (2007 USAlliance mortgage). The 2007 USAlliance mortgage secured an adjustable rate promissory note in the original principal amount of $ 4,700,000, and granted USAlliance a mortgage interest in all of the developer's interest in and to the condominium land, unsold units, all buildings erected or to be erected, and all improvements including all paved walkways, driveways, and parking areas, among others. On April 11, 2007, Gardner signed an agreement subordinating his mortgage to the 2007 USAlliance mortgage. Gardner assigned his mortgage to USAlliance in 2012, so that by *282the time of this litigation, USAlliance held both Gardner's 2006 mortgage and its own 2007 mortgage. The notes have not been paid in full.
Pursuant to the phasing and easement rights reserved by the developer, multiple phases of the condominium, totaling fifty-four units,
2. Partial discharges and releases. Before he assigned his mortgage to USAlliance, Gardner executed and recorded a "Partial Discharge of Real Estate Mortgage" when each unit was sold.
*89The project ran into severe financial difficulties caused in part by the real estate market downturn. No additional phases were added after December 23, 2011.
On April 29, 2016, the condominium trust commenced this action in the Land Court seeking declarations that can be divided into three general categories: (i) the 2007 USAlliance mortgage no longer encumbers any interest in the condominium land or buildings; (ii) the developer's development, phasing, and easement *283rights expired on March 9, 2014, seven years after the master deed was recorded; and (iii) the common area of the condominium is not subject to any development without consent of seventy-five percent of the unit owners. USAlliance, by way of counterclaim, sought declarations that (i) as assignee of the Gardner mortgage, it has a mortgage interest in the condominium land superior to the master deed, securing both the loan from Gardner and all debts owed to USAlliance by the developer;
A judge of the Land Court made several declarations that are not challenged on appeal and which we take as final for purposes of this opinion.
The judge then declared that the developer's rights under two parts of article 4 of the master deed had expired. Specifically, the affected development rights are (1) "all of [the developer's easement]
*284rights under article 4(B)(i)," and (2) the developer's "right and easement in and over phase one of the Condominium, as described in article 4(A), 'to construct the buildings, roadways and other amenities, and to construct drainage and perform grading on and over roadways and other amenities, and that portion of the premises shown as subsequent *90phases on the Condominium Plans....' " He concluded that "[n]one of [the developer's] rights under article 4 has expired except for the two rights described."
The parties jointly sought clarification of the judge's decision. The judge declined to answer the parties' question whether the developer was "prevented from building on the undischarged lots because the expiration of the phasing rights contained in Articles 4A and 4(B)(i) prevents access to those lots." The judge reasoned, in part, that there were no present plans to build and the prevailing parties, USAlliance and Fallon, had not asked for a declaration as to buildability. The net result of the judgment was that USAlliance retained a mortgage interest in the common area including the as yet unbuilt areas on the site plan, but the nature and scope of its development rights remained in doubt. All remaining parties appealed from the judgment. See note 1, supra.
Discussion. We review a summary judgment record de novo to determine "whether, viewing the evidence in the light most favorable to the nonmoving party, all material facts have been established and the moving party is entitled to a judgment as a matter of law." Augat, Inc. v. Liberty Mut. Ins. Co.,
Interpretation of the master deed and partial releases is at the heart of this dispute. "Principles of deed and contract interpretation guide our discussion of the issues. In interpreting a deed, as with any contract, we 'must construe all words that are plain and free from ambiguity according to their usual and ordinary sense.' " Boston Redev. Auth. v. Pham,
We conduct our review with well-settled principles of condominium law in mind. "[D]eeds should be construed as to give effect to the intent of the parties, unless inconsistent with some law or repugnant to the terms of the grant" (quotation and citation omitted). Queler v. Skowron,
1. Ownership of lot 7. USAlliance contends that its mortgage interest in lot 7, as assignee of the Gardner mortgage, is superior to the rights and obligations contained in the master deed, and that its rights were never subordinated to the master deed because the Gardner mortgage was recorded before the master deed submitting lot 7 to G. L. c. 183A. Therefore, USAlliance claims, it has the right to foreclose upon the entirety of lot 7 free of the master deed, subject only to the unit owners' interests in their units, and what USAlliance refers to as the "in common rights" of the unit owners after the partial discharges were recorded. Fallon and USAlliance argue on appeal that the Gardner partial discharges released only the Gardner mortgage interest in the units; they did not release the Gardner mortgage interest in each of the unit owners' respective percentage interest in the common area. The judge agreed and concluded that as assignee of the Gardner mortgage, "USAlliance has a senior interest" in all of lot 7 except *286for the exclusive use areas occupied by the units that had been discharged, as well as the units themselves.
The condominium trust, on the other hand, makes a very different argument. It contends that when Gardner issued partial discharges of individual units, he released each respective unit owner's undivided percentage ownership interest in all of the common area, which, since inception has amounted to the entirety of lot 7. Thus, the condominium trust contends, USAlliance as assignee of the Gardner mortgage has no remaining mortgage interest in any of the condominium land, including the common area. We conclude that under G. L. c. 183A, § 5 (b ) (1), the Gardner partial discharges did release the unit owners' interest in the common area.
The parties' dispute goes to the basics of condominium ownership. The general rule has been described thus. " 'Ownership of a condominium unit is a hybrid form of interest in real estate, entitling the owner to both exclusive ownership and possession of his unit, ... and ... an undivided interest [as tenant in common together with all the other unit owners] in the common areas ...." Flynn,
There may be exceptions to the general rule, but this is not such a case. Consistent with the statute, the master deed itself makes it plain that the unit owners own the common area. Indeed, *92while it is true that what is meant by a unit owner's "undivided interest" in the common area as used in G. L. c. 183A, § 5, has been the topic of some debate, see Kaplan,
DiBiase Corp. is instructive. There, an entire parcel had been submitted to the act and described in the master deed. This court held that the entire parcel was a common area from the time the master deed was recorded; "[i]t is owned by the unit owners as tenants in common in proportion to their respective undivided interests." DiBiase,
As noted above, USAlliance and Fallon nonetheless argue that this case is different because the Gardner mortgage preceded the master deed and, therefore, the developer's submission of lot 7 to the act had no effect on Gardner's mortgage interest in lot 7. See, e.g., Mt. Holyoke Realty Corp. v. Holyoke Realty Corp.,
As the units were sold, all of the common area was included with them. As more units were sold, the percentage interest of each unit in the common area was gradually reduced, but the ownership of the whole of the common area remained with the unit owners. We agree with the condominium trust that when Gardner executed the partial discharges of the first three units, and with each release granted thereafter, Gardner and USAlliance necessarily released their mortgage interests in all of the fee simple interest in the common area. The judge erred in concluding *289that the releases granted by Gardner and USAlliance did not apply to the fee simple interest in the common area, and that USAlliance retained a mortgage interest in the common area.
2. Developer's reserved rights: phasing and easements. The condominium trust next contends that because Gardner discharged his mortgage interest in the units and the associated percentage interest in the common area, USAlliance, as assignee of the Gardner mortgage, has no enforceable mortgage interest in the development at all. To the contrary, the Gardner and USAlliance mortgages continue to encumber the developer's reserved development rights. The master deed provides that each unit (including its proportional interest in the common area) is subject to the phasing and easement rights reserved by the developer. The rights reserved to the developer did not, by operation of law or the master deed, become part of the condominium units or the common area. See Queler,
We turn then to the issue of the status of the developer's rights. "In a phased condominium development, groups or stages of units are completed over a period of several years and become part of the condominium by successive amendments to the master deed." Podell v. Lahn,
The developer's right to construct the condominium in phases, reserved in article 4A, is unlimited in time. Contrary to the condominium trust's argument, the phasing rights did not expire after seven years under the terms of the construction easement set forth in article 4B(i) of the master deed. No rule of construction suggests that the seven-year limitation on the easement rights reserved in article 4B(i) modifies the rights reserved in article 4A. We agree with the judge that the phasing rights are unlimited in *290time, and have not expired.
The condominium trust sought a further declaration as to the viability of the reserved easement rights, and the impact of any remaining easement rights on the developer's right to develop the property. The parties have requested a determination whether the unexpired phasing and easement rights are sufficient to allow the developer access for purposes of further development, and to exercise its right to add additional phases. The judge ruled on the viability of the easements, but declined to enter orders regarding the developer's development rights. This choice was no doubt informed by the judge's determination that USAlliance retained a mortgage interest in the common area. We have come to a different conclusion regarding USAlliance's interest in the fee, one that changes the landscape of the case in a material way.
In the interest of judicial economy, we think it better to address USAlliance's interest in the developer's easement rights as well. Because we are in as good a position to interpret the master deed as the judge, there is no need to remand for the judge to make this determination. We conclude that the construction (and other) easement rights contained in paragraph 4B(i) expired on March 9, 2014, but that the other access easements reserved in 4B(ii)-(iv) remain in effect. These easement rights are, however, insufficient to allow access for further construction of additional phases.
The easement language in article 4B(i) is broad, covering "the easement, license, right and privilege to pass and repass by vehicle and on foot in, upon and over and to the Common Area and Facilities of the Condominium ... for all purposes, including *95but not limited to transportation and storage of construction materials in order to complete construction work on the [c]ondominium." See Appendix. Those reserved easement rights explicitly include access "to complete construction work on the [c]ondominium." The broad access rights expressly reserved in article 4B(i) were reserved for only seven years, or the completion of all phases, whichever came first. "[W]hen contract language is unambiguous, it must be construed according to its plain meaning." A.L. Prime Energy Consultant, Inc. v. Massachusetts Bay Transp. Auth.,
The phrase "to complete construction work on the [c]ondominium" is not repeated in the more narrow reservation of rights contained in article 4B(ii). See Appendix. Although unlimited in time, the developer's reservation in article 4B(ii) allows only "access to and from buildings located on other [p]hases for all purposes, including, but not limited to, transportation and storage of construction materials." If the seven-year limitation on construction of new phases in article 4B(i) is to have any meaning, we must construe article 4B(ii) as allowing access only to and from buildings already constructed, not access to undeveloped lots to construct new buildings. See McMahon v. Monarch Life Ins. Co.,
Similarly, article 4B(iii) reserves to the developer the exclusive right to grant easements to install utilities for an unlimited period of time. That right simply does not allow access for the construction of additional phases.
We conclude, therefore, that the developer (currently) has no easement over the roadways to reach the undeveloped areas as shown on the plans attached to the master deed in order to construct additional phases. Were USAlliance to foreclose on its mortgages, it would be similarly limited.
Finally, the condominium trust sought a further declaration that "the common area of the [c]ondominium is not subject to any development without the consent ... of 75% of the owners of the beneficial interest." The condominium trust claims that the unit owners have the right under G. L. c. 183A, § 5 (b ) (2) (iii), and the master deed to revive expired development rights, but that a declaration that all of the developer's reserved phasing rights have effectively expired (or been rendered a nullity) is necessary to allow them to exercise their rights under § 5 (b ) (2) (iii).
So ordered.
*293APPENDIX .
Article 4 of the Master Deed for the Beechwood Village Condominiums provides as follows:
"4. Condominium Phasing
The Condominium is to be developed as a phased Condominium, each phase of which shall include one or more Units or one or more common facilities. Phase One of the Condominium consists of 3 Dwelling Unit[s], each situated on the Lot bearing the number identical to the Unit number and being Units 56, 58 and 79.
"A. Reservation of Right to Create Additional Phases
The Declarant intends, and hereby reserves the right, but not the obligation, to create as many as 30 additional phases .... All improvements intended for each future phase will be substantially completed prior to the addition to the Condominium of the phase in question.... Declarant reserves the right to grant mortgages on further phases at any time and from time to time, including all rights of Declarant to add phases, develop, own and sell Units, and all other rights reserved herein by Declarant, and all rights of Declarant under the Condominium Trust. When and if all phases are completed, the Condominium will contain seventy nine (79) units.
Said premises Phase One is submitted to the provisions of Chapter 183A and is subject to the right and easement hereby reserved by the Declarant to construct the buildings, roadways and other amenities, and to construct drainage and perform grading on and over roadways and other amenities, and that portion of the premises shown as subsequent phases on the Condominium Plans referred to hereinabove."
"B. Reservation of Construction Easements and Well Water Easements
(i) The Declarant hereby expressly reserves to itself, its successors and assigns, and its or their nominees, for a period ending seven (7) years next after the date on which this Master Deed is recorded, or upon the completion of all phases in the Condominium, whichever is first, the easement, license, right and privilege to pass and repass by vehicle and on foot in, upon and over and to the Common Area and Facilities of the Condominium (including but not limited to driveways, walkways and any EUA) for all purposes, including but not limited to transportation and storage of construction materials in order to complete construction work on the Condominium, provided that in the exercise of the rights reserved by the Declarant in this paragraph, the Declarant will not unreasonably affect the use and enjoyment of the Common Area and Facilities in the *97phases already added to the Condominium. Nothing in this paragraph shall be deemed to create any rights in the general public.
(ii) The Declarant also reserves the exclusive right to grant temporary and/or permanent easements over and across the Condominium Land for access to and from buildings located on other Phases for all purposes, including, but not limited to, transportation and storage of construction materials.
*294(iii) The Declarant reserves the exclusive right to grant easements and/or temporary easements over, under, through and across the common area of the Condominium Land for the purpose of installing any and all utility lines serving the units in the Condominium and such other equipment as may be necessary for the installation of the same.
(iv) The Declarant reserves to itself, its successors and assigns, and its or their nominees for the benefit of Declarant's land abutting the Condominium upon which Declarant intends (if feasible) to construct a Recreational Clubhouse and swimming pool, a right and easement in, over, through and under the Common Area of the Condominium, including all Exclusive Use Areas, to locate, drill and pump any and all wells, springs or other natural sources of water, including a right of way as necessary to construct and maintain any well, pump, or conduit, and to deliver said water to said abutting land.
"C. Reservation of Right to Change Phasing
The Declarant further reserves the right in the creation of subsequent phases (including the right to create sub phases within one or more phases) to change the order of such phases, to change potential configuration of units, to change number of units per phase, provided that in all instances the percentage of interest attributable to each such unit then existing shall be determined in a manner in conformity with the provisions of Chapter 183A as amended.
"D. Method of Adding Additional Phases
The Declarant may add additional phase(s) and the building(s) and Unit(s) therein to the Condominium by executing and recording with the Plymouth County Registry of Deeds amendment(s) to this Master Deed that shall contain the following information:
(i) An amended Exhibit B describing the building(s) being added to the Condominium;
(ii) An amended Exhibit C describing the designations, locations, approximate areas, number of rooms, immediately accessible Common Area and Facilities and other descriptive specifications of the Unit(s) being added to the Condominium, as well as describing any variations in the boundaries of such Unit(s) from those boundaries set forth in Article III, Section D of this Master Deed.
(iii) If the boundaries of the Unit(s) being added to the Condominium vary from those described in said Article III, Section D, the definition of the Common Area and Facilities contained in paragraph E hereof shall be modified, as necessary, with respect to such Unit(s).
(iv) An amended Exhibit C setting forth the new percentage ownership interests for all Units in the Common Area and Facilities of the Condominium based upon the addition of the new Unit(s).
(v) If the Lots designated as appurtenant to the Unit(s) being added to the Condominium vary from those described in Article III Section D and the Site Plan hereof, a description of such variations shall be added so as to identify the *98new or modified Lots appurtenant to the new Unit(s). Such *295description of the new or modified Lot appurtenant to the new Unit(s) shall also include a statement as to whether they are to be maintained by the Condominium Trust or by the owner of the Unit(s) to which they are appurtenant.
(v) A revised Site Plan of the Condominium showing the new Unit(s) if not already shown on the existing Site Plan, and floor plan(s) for the new Unit(s) being added to the Condominium, which floor plan(s) shall comply with the requirements of MGLA Chapter 183A.
"...
"E. ... Each owner understands and agrees that as additional phase(s) are added to the Condominium by amendment to this Master Deed pursuant to Declarant's reserved rights hereunder, the percentage ownership interest of his Unit in the Common Area and Facilities, together with his Unit's concomitant interest in the Condominium Trust and liability for sharing in the common expenses of the Condominium, shall be reduced ...."
Fallon is engaged in separate litigation with USAlliance, and was allowed to intervene for the limited purpose of opposing the condominium trust's motion for summary judgment.
The master deed of the Beechwood Village Condominiums provided for the creation of the condominium trust, "the unit owners' organization formed pursuant to the Act" "through which the unit owners will manage and regulate the Condominium."
The 2006 USAlliance mortgage encumbered the developer's interest in lot 7 and in all "structures or buildings, erected or to be erected upon such land, ... and ... all paved walkways, driveways, and parking areas," among other interests.
The Gardner mortgage encumbered "the land and buildings" on lot 7, "together with any and all improvements now or hereafter situated thereon; TOGETHER with all right, title and interest of [the developer], including any after-acquired title or reversion, in and to the beds of the ways, roads, streets, avenues and alleys adjoining the said premises; and TOGETHER with all and singular the tenements, hereditaments, easements, appurtenances, passages, waters, water rights, water courses, riparian rights, other rights, liberties and privileges thereof or in any way now or hereafter appertaining, including homestead and any other claim at law or in equity as well as any after-acquired title, franchise or license and the reversion and reversions and remainder and remainders thereof; and TOGETHER with all rents, issues, proceeds and profits accruing and to accrue from said premises; and ..." eminent domain awards.
"Lot" is defined by the master deed as "hav[ing] the same meaning as [exclusive use area] and shall mean a Lot, the exclusive right and easement for the use of which is appurtenant to a Dwelling Unit which bears a number identical to the lot number."
The site plan is entitled "Condominium Master Plan 'Beechwood Village' Phase 1" and shows all the lots and the units constructed on three of the lots.
Under the master deed, "Unit" is defined as "a Condominium Unit as that term is defined in [G. L. c. 183A, § 1 ]."
The master deed explains that an "exclusive use area" "has the same meaning as the word 'Lot.' " Each unit has the exclusive right and easement for the use of the lot number that matches the unit number.
An exhibit to the master deed contains a schedule of the percentage interest conveyed by the phase one units, which totaled 99.9 percent. The parties have treated the discharges as discharging 100 percent of the interest in the common area, as do we.
The record contains conflicting information as to the precise number of units that have been constructed. There is some suggestion that some amendments were recorded twice. As nothing in our opinion turns on the exact number of units created, we use fifty-four as the judge did.
The partial discharges were nearly identically worded, other than the lot number designation and address. A typical Gardner partial discharge stated as follows: "[Gardner] releases the following PORTION of the mortgage[d] premises, described as follows: Lot 36 on a certain 'Condominium Master Plan Beechwood Village Phase One' .... The property address for the premises released is 14 Driftwood Land, Rockland, MA." Some of the discharges used the word "unit" rather than "lot." The words were used interchangeably to refer to the discharge or release of the unit, identified by the lot on which it was built.
The parties do not argue that there was any material difference between the terms discharge and release, or in the documents themselves. The only facial difference was that the USAlliance releases were substantially more descriptive, specifically noting that each unit had been conveyed with an undivided percent interest in the common area, language that did not appear in the Gardner discharges. This is not a material distinction. See G. L. c. 183A, § 5 (b ) (1).
See notes 4 & 5, supra.
The judge's unchallenged declarations in the judgment state: "A. USAlliance is the assignee of [the Gardner mortgage].... C. The Gardner Mortgage secures the payment of a $ 1.9 million Promissory Note ... dated May 11, 2006, [and the developer] has not fully paid that note. D. The Gardner Mortgage also secures 'payment of or performance of all other debts' of [the developer] for the benefit of [Gardner] and 'any holder or holders' of the Gardner Mortgage, which now includes USAlliance. E. [The 2007 USAlliance mortgage secured repayment of a] $ 4.7 million Adjustable Rate Promissory Note executed by [the developer, which has not been fully paid]. F. In the 2007 [USAlliance] mortgage, [the developer] granted to USAlliance a security interest in, among other things, [the developer's] rights under article 4 of the Master Deed."
The master deed provides that "[t]he percentage ownership of each Unit in the Common Area and Facilities has been determined upon the basis of the approximate relation that the fair value of each Unit, measured as of the date of this Master Deed, bears to the aggregate fair value of all Units." See G. L. c. 183A, § 5 (a ).
Article 3E(iv) refers to Exhibit C, but the relevant schedule was actually attached as Exhibit B.
Although article 3D(vii) of the master deed, which separately provides that each dwelling unit has the appurtenant right to use the common area (including facilities) other than exclusive use areas in common with other units, may be duplicative of rights of the common owners, it is not inconsistent with a unit's percentage fee interest.
Although in some circumstances the developer may alter these ownership interests by applicable provisions contained in the master deed, see Scully v. Tillery,
USAlliance contended for the first time at oral argument that the common area is owned by the condominium trust. Arguments raised for the first time at oral argument are waived. Santos v. U.S. Bank Nat'l Ass'n,
Despite our clear language in DiBiase Corp., and the statute, we directed "entry of a declaratory judgment consistent with this opinion, declaring that title to the subject land is in the defendants," i.e., the trustees of the unit owner organization. DiBiase Corp.,
For this reason, the fact that the Gardner partial discharges do not explicitly mention each unit's interest in the common area is not controlling.
The judge construed the last sentence of article 4A to submit phase one to the act and to subject Phase One to the easement rights reserved in article 4B(i), which have expired. Neither Fallon nor USAlliance quarrel with this conclusion.
General Laws c. 183A, § 5 (b ) (2) (iii), provides that an organization of unit owners may extend, revive, or grant rights to add additional units to the condominium with approval of seventy-five percent of the unit owners and fifty-one percent of qualified first mortgagees.
Reference
- Full Case Name
- TRUSTEES OF the BEECHWOOD VILLAGE CONDOMINIUM TRUST v. USALLIANCE FEDERAL CREDIT UNION & others.
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- 8 cases
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- Published