In this case the court is asked to determine the validity and effect of a settlement agreement (the Settlement Agreement) dated July 31, 1998, resulting from a zoning appeal in an earlier case in this court, Misc. Case No. 241935, [Note 3] and to decide whether the amendments of condominium documents called for by, and executed in keeping with, the Settlement Agreement are enforceable and effective, notwithstanding the noncompliance with condominium law which plaintiffs contend afflicts those amendments. After consideration of the cross-motions for summary judgment filed by the parties, I conclude that the plaintiffs request to invalidate or alter the amendments cannot be granted.
The Settlement Agreement affected various documents of the Cape Codder Condominium (the Condominium). The initial organic documents of the Condominium are the Cape Codder Master Deed (the Master Deed) dated September 24, 1989, executed by the Sippewisset Development Limited Partnership (the Declarant) as the Condominiums declarant, and recorded on October 19, 1989 in the Barnstable Registry of Deeds (the Registry) in Book 6924, Page 325, and the Cape Codder Declaration of Trust (the Declaration of Trust) dated September 26, 1989, which was recorded on October 19, 1989 in the Registry in Book 6925, Page 001. An amendment to the Master Deed was recorded with the Registry on October 7, 1999 in Book 12592, Page 331 in accordance with the Settlement Agreement, and a second amendment to the Master Deed, Trust and By-laws (these two amendments, the Amendments), also in accordance with the Settlement Agreement, was recorded with the Registry in Book 13013, Page 142 on May 17, 2000.
Plaintiffs, the so-called Phase II Unit Owners, commenced this action on December 22, 2004. Plaintiffs seek the following declaratory and injunctive relief: a declaratory judgment that, as a result of the challenged Amendments, the percentage interests of the Condominium units in the common areas of the Condominium were allocated in violation of G. L. c. 183A § 5; judgment reallocating the percentage interests in an approximate relation to the fair value of the units based on an appraisal of the fair value of said units; a declaratory judgment that the provision for election of the Condominium trustees is in violation of G. L. c. 183A; an order requiring that the trustees be elected by a method of election insuring equal representation on the Board of Trustees; a declaratory judgment that certain provisions in the Condominium Trust and Master Deed governing their amendment are in violation of G. L. c. 183A, and requiring a different method of amendment; and judgment in an amount sufficient to reimburse those owners prejudiced by the terms of the Settlement Agreement for their claimed overpayment of the general common area expense assessment. An amended complaint was filed on January 14, 2005.
The first answer was filed by Shari D. Dress on January 18, 2005. John M. Nelson, et al. (Defendants), filed their answer on February 16, 2005. Kathleen Tillery, trustee of Cape Codder Condominium Trust (Trustee Defendants) filed an answer on March 17, 2005.
On March 24, 2005 Olde Cape Codder Corporation, general partner of Olde Cape Codder Limited Partnership, filed a motion to intervene. The Trustee Defendants filed on April 22, 2005 an opposition to Olde Cape Codder Corporations motion to intervene. On May 6, 2005 the court issued an order allowing the motion to intervene. The complaint of Intervenor Olde Cape Codder Corporation was filed on May 6, 2005. Defendants filed an answer June 3, 2005.
On August 4, 2005, Defendants filed a motion for leave to file counterclaim. The court granted that motion following argument on November 8, 2005.
On November 2, 2005, Defendants filed a motion for leave to file cross-claim, and on November 16, 2005 filed an amended motion. The revised motion was allowed on December 12, 2005, and Defendants filed their cross-claim that day. Plaintiffs filed an answer to the counterclaim against them on December 19, 2005.
Now before the court is plaintiffs motion for summary judgment on all counts of its complaint and counterclaim, defendants cross-motion for summary judgment, and the Intervenors motion for partial summary judgment. These motions have been argued by counsel. At the conclusion of the argument on these motions, counsel expressed to the court some optimism about the prospects of being able to arrive at a consensual resolution of their dispute. They undertook efforts in this regard, and participated in status conferences with the court to report their progress. Eventually, the parties earlier optimism about settlement waned, and they advised the court that they would not be able to resolve the litigation themselves.
Summary judgment is granted where there are no issues of genuine material fact, and the moving party is entitled to judgment as a matter of law. Ng Bros. Constr., Inc. v. Cranney, 436 Mass. 638 , 643-644 (2002); Mass. R. Civ. P. 56 (c). The moving party bears the burden of affirmatively showing that there is no triable issue of fact. Ng. Bros., 436 Mass. at 644. In determining whether genuine issues of fact exist, the court must draw all inferences from the underlying facts in the light most favorable to the party opposing the motion. See Attorney General v. Bailey, 386 Mass. 367 , 371 (1982). Whether a fact is material or not is determined by the substantive law, and an adverse party may not manufacture disputes by conclusory factual assertions. Ng Bros., 436 Mass. at 648. A court must deny a motion for summary judgment if, viewing the evidence in the light most favorable to the nonmoving party, there exist genuine issues of material fact. Locator Services Group v. Treasurer and Receiver Gen., 443 Mass. 837 , 846 (2005)
After hearing, and after consideration of the submissions of the parties, including post-hearing submissions which the court permitted at and after the time of hearing, I decide that the uncontested facts and the governing law call for allowance of defendants Rule 56 motion, and that defendants are entitled to a summary judgment declaring that the Master Deed and the Declaration of Trust, as amended in accordance with the terms of the Settlement Agreement, are valid and enforceable. The percentage interests of all unit owners of the Condominium, the election procedures for the Board of Trustees, and the provisions for amendment of the Condominium Trust and Master Deed, all as laid out in the Settlement Agreement and Amendments, are valid and enforceable.
The following facts are undisputed based on the summary judgment record:
1. Beginning in or around 1987, the Declarant, whose General Partner was Petros A. Palandjian (Palandjian), began construction of the Condominium pursuant to a Special Permit issued by the Town of Falmouth (the Special Permit).
2. The Condominium, as it exists today, consists of a total of forty units constructed in two phases. The first phase (Phase I) consisted of twenty units. Fourteen of the Phase I units are located in two buildings known as the Naushon Residences, and the other six Phase I units are located in two buildings known as the Cuttyhunk Residences. Section 14 of the Master Deed originally reserved to the Declarant the rights (the Development Rights) to construct a New Building and a Clubhouse Unit (Phase II) on part of the common area of the Condominium within a ten year period ending October 19, 1999. The original plans, as established in the Master Deed, allowed for the construction of a New Building, which was to consist of six stories and contain 47 units, totaling approximately 81,200 square feet of living space. The Master Deed also provided for construction of a Clubhouse, which would contain a forty-eighth unit to be owned by the trustees. Section 14 of the Master Deed provided that, upon construction of the New Building and Clubhouse Unit, the Master Deed would be amended, reallocating the percentage interests of the Phase I Units in the common areas and facilities of the Condominium. Specifically, the twenty Phase I Units would hold an interest in 31.41% of the common area and the Phase II unit owners would hold an interest in the remaining 68.59% of the common area. The Development Rights were set out in the original Master Deed as reserved rights of the Declarant, who was authorized, without the consent of any other unit owner, to execute and record consistent amendatory documents and plans after completing construction of the new phase. These rights under Section 14 of the Master Deed were included, according to Section 14 in order to comply with certain legal requirements including without limitation conditions contained in a Special Permit issued by the Town of Falmouth on August 26, 1987 ... and an Order of Conditions dated August 5, 1987....
3. In 1996, the Development Rights were assigned to Cape Codder Enterprises Limited Partnership (CCE), also an entity in which Palandjian was a principal. In August of 1996, CCE, which indicated that it wanted to change the size of the New Building, requested the Phase I unit owners to consent to revise the 31.41% : 68.59% allocation of percentage interests between the Phase I and Phase II unit owners. The Phase I unit owners did not give their consent to these proposed new terms. CCE terminated its plans to construct the New Building and on January 9, 1997 assigned the Development Rights to Stuborn Limited Partnership (Stuborn) for value. The Assignment of Development Rights, recorded the following day with the Registry in Book 10565, Page 265, recites consideration of $1,035,000. The Development Rights and the rights of the declarant later were assigned to the limited partnership of which the Intervenor is general partner; these entities are affiliates of Stuborn. Stuborn, acting through its principal, Stuart Bornstein (Bornstein), proposed to the rustees the development of Phase II in a manner inconsistent with the Master Deed. The Stuborn plan for Phase II, among other things, contemplated a different number and configuration of units being included in the new phase. The Trustees rejected the proposal. Stuborn pressed forward nevertheless, and when its new plans came before the Falmouth Zoning Board of Appeals, the Trustees opposed it there. They then instituted in this court the Zoning Appeal, filed September 15, 1997. Stuborn, the municipal defendants, and the Trustees all were represented by counsel in the litigation. Stuborn was unable to proceed with the exercise of its development rights, in the modified manner it sought to build out the next phase, without the resolution of the Zoning Challenge which the Trustees had leveled at Stuborn; its Master Deed development rights had not been the subject of any extension, and were due to expire in October, 1999.
4. On or about July 31, 1998, the Trustees and Stuborn entered into the Settlement Agreement, resolving the then pending Zoning Appeal. Stuborn paid the Trustees $50,000 when the Settlement Agreement was executed. In it, Stuborn undertook to install or upgrade certain infrastructure items, including irrigation, paving and utility work. Stuborn waived any right under the Master Deed to construct or sell to the Trustees the Clubhouse Unit. The Settlement Agreement allowed Stuborn to build Phase II under agreed-upon revised construction plans for the New Building, reducing its size from the original (six stories with forty-seven units and approximately 81,200 square feet) to a 228 by 100 foot building, not to be higher than 45 feet, all as depicted on plans and specifications attached to the Settlement Agreement, and to comprise only 20 residential units. The revised plans for the New Building left it about a third smaller than contemplated when the Master Deed first was recorded. The Settlement Agreement attached forms of amendments to the Master Deed and Declaration of Trust that were to be executed and recorded. The result, under the Settlement Agreement, was that, notwithstanding the creation of these revised Phase II units, the allocation of percentage interests between Phase I and Phase II unit owners was to remain unchanged as originally allocated in the Master Deeds provisions regarding the addition of Phase II. Units in Phase II were to end up with a 68.59 % allocation, and those in the first phase with 31.41%. The By-Laws were to be restated and expanded. The new provisions would state, among other things, that any and all expenses relating to the maintenance, repair and/or replacement (including reserves) of the New Building and its common areas would be borne only by the owners of units in the New Building; that management fees would be allocated evenly between the first and second phase owners, and that all other common expenses of the Condominium shall be allocated as per Section 14 of the Condominiums Master Deed (i.e., 31.41% to the Owners of the 20 currently-existing Units, and the remaining 68.59% to the Units to be constructed in the New Building). The Settlement Agreement further provided that the Board of Trustees shall be comprised of five Members once the New Building has been completed and phased into the Condominium, with two Members to be elected by the Unit Owners of the 14 so-called Naushon Units, two Members elected by Unit Owners of the New Building... and one Member to be elected by the Unit Owners of the so-called Cuttyhunk Units. The Settlement Agreement further provided that [t]here may be no subsequent amendments to either the Master Deed or the Declaration of Trust and By-Laws which would adversely affect the interest of the 20 current Unit Owners at the Condominium without the approval of 67% of the beneficial interest of such existing units. The Settlement Agreement further provided that Stuborn shall require that each and every Unit Purchaser in the New Building evidence his/her/their acknowledgment of the foregoing in writing prior to or at the time of the purchase of the Unit in question. The Settlement Agreement called for execution and delivery of a stipulation of dismissal of the Zoning Appeal, which was filed with this court on February 10, 1999, ending that litigation. On October 18, 1999, in the Registry in Book 12608, Page 80, there was recorded an extension of the Development Rights; the Trustees and Stuborns affiliate, the Intervenor, were parties to this instrument, which makes specific reference to the Settlement Agreement, and lays out its terms. This document, on carefully delineated terms, extended the Development Rights through December 31, 1999, with a conditional opportunity to extend it further.
5. Stuborn proceeded to construct and complete the New Building in its new shape and size. Once construction was finished, Stuborn, with the approval and consent of the Trustees and Phase I Unit Owners, recorded the Amendments in keeping with those referenced in the Settlement Agreement: an Amendment to Master Deed was recorded with the Registry on October 7, 1999 (just days in advance of the original expiration date of the Development Rights) which added the twenty Phase II Units, and reallocated the percentage interests of the Phase I Units in accordance with the Settlement Agreement (i.e., 31.41% allocated among the twenty Phase I Units, and the remaining 68.59% allocated among the twenty Phase II Units). (This instrument actually is executed by the Stuborn affiliate, Olde Cape Codder Limited Partnership, which, according to the record, had been assigned and was then holding the Development Rights.) On May 17, 2000, the Trustees recorded the Master Deed, Trust and By-Laws amendment in accordance with the Settlement Agreement. These amendments memorialized, among other things, in a manner generally consistent with the Settlement Agreement, the procedures used to elect the Board of Trustees and the procedures used to pass amendments to either the Master Deed or the Declaration of Trust and By-Laws which would adversely affect the interest of the twenty original Unit Owners at the Condominium, as described above.
6. Beginning around this time, Stuborn proceeded to sell the twenty Phase II Units added by the Amendments to third-party purchasers. These buyers, or their successors in title, are the plaintiffs in this action. Nothing in the record suggests that Stuborn has retained any unit or other tangible property interest in the Condominium. Beginning with the first sales out of the Phase II Units, their owners have been assessed and have paid the common expenses of the Condominium essentially in accordance with the Settlement Agreement and implementing Amendmentsbearing 68.59% of those expenses. The governance and voting procedures of the Settlement Agreement and Amendments generally have been followed. Around the end of 2003, the Trustees retained an appraisal company to assess the fair market values of both the Phase I and Phase II Units as of the October 9, 1999 recording of the Amendment to the Master Deed. The report of the appraiser was that as of that date the Phase I Units value was 51.49 % of the total; the Phase II Units were valued at 48.49% of the total. In May, 2004, the Trustees considered a proposal to amend the documents of the Condominium to establish an allocation of the common elements and facilities (and the corresponding obligation to bear expenses) that would equalize the Phase I and Phase II Units. Consent of the required number of unit owners was not secured for this change, the owners of six Units in Phase I declining to join in the amendment, and the effort did not succeed. Similar undertakings to alter the constituency of the Board of Trustees were considered but failed, because the measure did not receive 67% support from the Phase I Unit owners.
After a review of the summary judgment record, considering it in the light most favorable to each non-moving party, I decide that there are no genuine issues of material fact precluding disposition as a matter of law. See Ng Bros. Constr. v. Cranney, 436 Mass. 638 , 643-44 (2002).
For the reasons set forth below, I conclude defendants, the Phase I owners, are entitled to a summary judgment declaring that the Master Deed and the Declaration of Trust, as amended by the Amendments in accordance with the terms of the Settlement Agreement as to the percentage interests of the unit owners of the Condominium, their financial responsibility for the common expenses of the Condominium, the election procedures for the members of the Board of Trustees, and the challenged provisions governing amendment of the Condominium Trust and Master Deed, are valid and enforceable.
I. Percentage Interests as Established in the Negotiated Settlement Agreement
Plaintiffs ask this court to alter the allocation of percentage interests among the Phase I and Phase II unit owners set forth in the Master Deed and the Amendments. The primary basis for this request originates with G.L. c. 183A, §5(a) which provides that [e]ach unit owner shall be entitled to an undivided interest in the common areas and facilities in the percentage set forth in the master deed. Such percentage shall be in the approximate relation that the fair value of the unit on the date of the master deed bears to the then aggregate fair value of all the units. A related provision, G.L. c. 183A, §5(b)(1), provides that the percentage interest of each unit owner in the common areas and facilities as expressed in the master deed shall not be altered without the consent of all unit owners whose percentage of the undivided interest is materially affected, expressed in an amendment to the master deed duly recorded.... There is no dispute that the undivided interest which each unit owner of the Condominium now holds is in the percentage set forth in the master deed following the recording of the phasing Amendments. The plaintiffs attack on this allocation is not based on any claimed discrepancy of their unit deeds with the Master Deed. They acknowledge that the instruments conveying out the units of Phase II to their third-party buyers reflected accurately the percentages allocated to those units in the amended Master Deed. The plaintiffs objection is based on the ensuing language of section 5(a), which provides that the percentage established in the master deed for a given unit be in approximate relation to the percentage that the units fair value bears to the combined fair value of all units. Plaintiffs urge strongly that the Amendments are faulty and improper under this statutory requirement, because, as the appraisal that was submitted tends to show, there was, as of the recording of the Amendments adding Phase II, general equality of value between the twenty Phase I Units and the twenty Phase II Units, but the Amendments produced a disproportionate allocation of the two phases condominium common interests.
Because this case is before me on summary judgment, I must grant every reasonable inference in plaintiffs favor on the question of what the proportionate values of the units were at the time the Master Deed amendments went to record. If, on the undisputed facts in the record, section 5(a) would allow the plaintiffs to maintain their challenge to the allocation of common interests based on a disproportionate valuation at the time the new units were added, then I must, for summary judgment purposes, accept that the valuation was disproportionate, and, if necessary, hold the case for trial, including on the question of what the values were at the time of the phasing amendments.
However, on the record before me, I conclude that, as matter of law, the challenge plaintiffs wish to advance is not open to them, notwithstanding that the values of the units in the two phases may have been disregarded when the Master Deed was amended in the manner called for by the Settlement Agreement.
Primarily, this is because the Amendments cannot be analyzed in a vacuum. While there is without doubt a strong policy reflected in the section 5(a) requirement that there be valuation proportionality when common element interests are allocated, there is at play in this case another, countervailing policythat of respecting and treating with finality the settlement agreements of litigating parties. This particularly is so where such an agreement compromises valuable pending claims in a way upon which all involved materially rely, and which is fully intended by all to settle definitively the property rights of every party involved.
Reallocation of the Phase I and Phase II Unit Owners percentage interests in a manner that departs materially from the bargained for and fully implemented provisions of the Settlement Agreement would impair the rights of the Phase I Owners who entered into that agreement with the full expectation that they would receive the substantial benefits of the agreement. The record supports the conclusion that the Phase I owners in 1998 had firmly insisted on the terms that, after negotiation among sophisticated parties represented by able counsel, came to be embodied in the Settlement Agreement and implemented by, among other things, the Amendments.
It is important to recognize that the then owners of Phase I Units were entitled to take the position with Stuborn, the then owner of the Development Rights, that those rights were not being exercised in the manner contemplated when the original Master Deed was recorded and the Phase I Units first were sold by Stuborns predecessor. The revisions that Stuborn wanted to make to Phase II were not consistent with the plans laid out in the Master Deed and in the municipal permits (which were specifically referenced in the original phasing provisions of the Master Deed). Stuborn did not have a unilateral right at that time to revise materially what Phase II would be. An effort on Stuborns part to make those changes would require agreement with the Phase I owners and the organization of unit owners, as well as with the zoning board and other local officials.
And Stuborn did not have all that much time remaining in which to act. His Development Rights had to be exercisedwhich means, given the requirement that construction of the new units be substantially complete before amendatory plans and documents could go to record (see G.L. c. 183A, §8(f), requiring as built plans)by October, 1999. Phase II, of course, was to be built on land that was open, unimproved, and part of the common elements and facilities of the waterfront Condominium. If Stuborn could not achieve, by some means or another, the timely addition of Phase II, or secure the extension of the Development Rights, they might be treated as having lapsed, with the result being that the organization of unit owners, controlled by the Phase I Unit Owners, would be the only arbiter of whether any further development would take place on the land which had been designated for the New Building.
From the standpoint of the then Phase I Unit Owners, their position was a strong one. They were being asked to go along with a revision to the phasing plans for the Condominium, and they certainly advanced the view that their acquiescence, or more, was required to bring those revisions to fruition. They maintain now, as they well may have in 1998, that they should be compensated in a material way, financial and otherwise, for agreeing to a resolution that allowed Stuborn to get its approvals and to build the revised New Building before expiration of the Development Rights. The measures put into place by the Settlement Agreement reflect this position by the then Phase I Unit Owners. Because they at the time took the view (which they continue to have) that without their settlement with Stuborn, there would be no New Building and no Phase II Units, the then Phase I Unit Owners wanted the holder of the Development Rights to agree to a binding arrangement that would relieve the existing owners of the ongoing expenses of operating and maintaining an enlarged condominium that included the new units.
Whatever the wisdom of this agreement, and its ultimate economic effect on the parties to it, there is little doubt that the Settlement Agreements terms were clear, unambiguous, and entered into by sophisticated, well-counseled parties. Courts strongly favor settlement agreements to promote efficiency and avoid costly litigation. Moloney v. Boston Five Cents Sav. Bank FSB, 422 Mass. 431 , 435 (1996). When parties to a lawsuit have agreed upon all of the essential elements of settlement and a settlement agreement is reached, the agreement will be an enforceable contract notwithstanding one of the parties' subsequent attempts to set aside the agreement. Basis Technology Corp. v. Amazon.com, Inc., 71 Mass. App. Ct. 28 (2008); Thomas v. MBTA, 39 Mass. App. Ct. 537 , 544-45; see Peters v. Wallach, 366 Mass. 622 , 628 (1975). In upholding the integrity of a settlement agreement, the Appeals Court has stated: It defies logic and fundamental principles of fairness to allow a represented party who has sought justice in a forum to contradict and undermine an agreement it reached and acknowledged in that same forum. Correia v. DeSimone, 34 Mass. App. Ct. 601 , 604 (1993)
The record provides no room for doubt that the entry into the Settlement Agreement was, however happy the parties to it may have been, a thorough, well thought-out undertaking by them. This was not simply a case where a report of a settlement was made to a court in the midst of ongoing litigation, but then promptly put in contest (see, eg., Basis Technology, supra, in which such a reported, and then disputed, settlement was enforced). Here, the Settlement Agreement is complete in every necessary detail. Particular plans, and the forms of the condominium document amendments the parties envisioned, accompanied the signed Settlement Agreement. It left no doubt about the reordering of the common elements (and the associated responsibility for expenses) which the Phase I Unit Owners were to receive the benefit of, nor the control provisions that were to leave them with a large measure of authority over matters that might adversely affect the original Unit Owners (or which otherwise might be employed to undo the material terms for which they had bargained.)
And following the execution of the Settlement Agreement, the Phase I Unit Owners (who constituted the Trustees at that time) did end the pending litigation. Given that their Zoning Appeal, brought under G.L. c. 40A, §17, could only have been brought within a short twenty-day statute of limitations, the relinquishment of the litigation right was significant, because a second filed action would have been barred.
Following the completion of construction of the revised New Building, the Condominiums documents were amended of record as called for in the Settlement Agreement. There is nothing in the record which reasonably would show that Stuborn, however unhappy it may have been with the Settlement Agreement, made any seasonable attempt to repudiate it, to obtain judicial invalidation of it, or to do anything other than move forward with the construction and sale of the Phase II Units as the Settlement Agreement provided and allowed Stuborn to do. There also is nothing in the record that would support a reasonable inference that those individuals who purchased the Phase II Units from Stuborn were not fully on notice, by virtue of the recorded instruments and otherwise, of the implemented provisions of the Settlement Agreement which are challenged now in this case. (In particular, the certificate of extension of development rights recorded on October 18, 1999, is within the chain of title to every Phase II Unit, and explicitly references and describes the provisions of the Settlement Agreement.) These individual Phase II Unit buyers all hold their rights and title derivatively of Stuborn, who, acting through its affiliate as Declarant at the time the Development Rights were established by the Amendments, was the owner of the new units. The title the plaintiffs hold to these units comes down to them from Stuborn and its affiliate, and is fully subject to the unambiguous terms of the Amendments as recorded in the Registry in keeping with the Settlement Agreement.
Defendants also argue that Stuborn, and its principal, Bornstein, entered into the Settlement Agreement under duress. Bornsteins deposition testimony suggests strongly that he entered into the Settlement Agreement, and then proceeded to carry it out, because he felt that the aggressive posture of the then Phase I Unit Owners jeopardized his entire investment in the Development Rights, which he dared not see evaporate with the passage of time while he continued to litigate. This case is before me on summary judgment, so I accept as true for present purposes that Bornstein accepted the terms of the Settlement Agreement, which he considered harsh and entirely one-sided, under strong pressure. Nevertheless, this is not sufficient to invalidate the Settlement Agreement, given the remainder of the undisputed facts in the record. Bornstein did not ever, prior to building out and selling off the Phase II Units, take any steps to repudiate or challenge the Settlement Agreement as being overreaching or entered into under duress. He did not come into this court to forestall the filing of the stipulation of dismissal of the Zoning Appeal, which was docketed half a year after the date of the Settlement Agreement. He started no other lawsuit to undo the settlement into which he had entered. To the contrary, for several years after agreeing to the terms of the Settlement Agreement, Stuborn pressed forward building, selling, and deriving the sales proceeds from the Phase II Units. Stuborn did not in any timely way assert the position that it entered into the Settlement Agreement under duress. Bornstein did so judicially only in the case now before me, and only in response to its initiation by the plaintiffs.
Plaintiffs are even less entitled than Stuborn to rely on a claim that the Settlement Agreement was the product of duress. They all hold their title under Stuborn and its affiliate. The documents that created Phase II were all fully of record and obvious to any purchaser; those documents spell out clearly enough the aspects of the Settlement Agreement about which the current Phase II Unit Owners now complain. Indeed, the recorded instrument extending the development rightspart of the source of the plaintiffs title to their units-- explicitly refers to and sets out the salient provisions of the Settlement Agreement. The Settlement Agreement provides that it binds Stuborns successors. There is nothing on these facts that would allow the current owners of Phase II Units to say that they were forced to buy their units under any duress at all. If anything, the better view of the record is that the Phase II Unit Owners ought to have taken into account, when they bought, the extra conditions and financial burdens associated with owning a unit in Phase II, and ought to have adjusted their purchase prices accordingly.
By its terms, the Settlement Agreement amounted to a waiver of rights otherwise afforded by G. L. c. 183A, §5(a). Waiver is a voluntary and intentional relinquishment or abandonment of a known existing right or privilege, which, except for such waiver, would have been enjoyed. It may be expressed formally or it may be implied as a necessary consequence of the waivers conduct inconsistent with an assertion of retention of the right. Attorney Gen. v. Industrial Natl. Bank of Rhode Island, 380 Mass. 533 , 537 n.4 (1980), quoting Buffum v. Chase Natl Bank, 192 F.2d 58, 60-61 (7th Cir. 1951).
The plaintiffs take the position that the waiver brought about by the Settlement Agreement ought to be disregarded by the court because the waiver, and the challenged terms of the Settlement Agreement, are enough at odds with public policy, as expressed in the condominium statutes, to be incapable of judicial enforcement.
Of course, as a general matter, public policy requires compliance with statutes, and courts should be reticent to deviate from them. This is, however, not an iron rule, and in hard cases, like the one now before me, the courts task is to analyze the nature of the right or interest which the statute addresses, to discern whether it does establish a public policy which ought not be disregarded, even where the benefit of the statute has been overtly waived. The law draws a distinction between statutes which order private and proprietary rights, on the one hand, and those which establish rights of broader public dimension, on the other. Where laws are enacted on grounds of general policy their uniform application for the protection of all citizens alike is desirable, and an agreement to waive their provisions is generally declared invalid, but, where they are designed solely for the protection of rights of private property, a party who may be affected can consent to a course of action which if taken against his will would not be valid. Continental Corp. v. Gowdy, 283 Mass. 204 , 217 (1933).
The Appeals Court has addressed this in the context of the condominium statutes, and has recognized a unit owners ability to waive provisions of G. L. c. 183A: Where the statutes purpose is the protection of the property rights of individual parties rather than the protection of the general public, waiver of statutory rights is permissible the provisions of G. L. c. 183A in this regard clearly go to the protection of the property rights of the individual condominium owners, and not to the general public, and waiver is not barred as contravening public policy. KACT, Inc. v. Rubin, 62 Mass. App. Ct. 689 , 696 (2004), quoting Canal Elec. Co. v. Westinghouse Elec. Corp., 406 Mass. 369 , 378 (1990), and Continental Corp. v. Gowdy, supra. In KACT, the issue was whether or not the court was correct in inferring that plaintiffs had waived their right to object to the condominiums rules imposed by the trustees controlling the plaintiffs use of the premises. In KACT, the restrictions sought to be applied, limiting the owners internal use of their units, were not recorded in the Master Deed, in violation of 183A § 8(g). KACT, Inc., 62 Mass. App. Ct. at 695. However, the plaintiffs acquiesced during the period of their ownership and occupancy, and thus waived the right to claim that the trustees had violated the statutory protections afforded the unit owners as to the institution of restrictions and their inclusion in the condominium documents. Id. The KACT court noted that both the provisions of the by-laws and provisions of the statute could be waived without undermining public policy. This was so because the rights being protected were not provided for protection of the general public, but rather for the individual condominium unit owners. Id. at 696.
In the case before me, the rights arising under G.L. c. 183A, which were undeniably and unambiguously waived in the Settlement Agreement and the Documents, are property rights of individual parties. The waiver in the instant case is much more explicit, emphatic, and obvious (including from the record title) to all involved with the Condominium than the waiver considered approvingly in the KCAT case.
I conclude that the statutory policy underlying section 5(a) falls into the category of statutory rights intended primarily to protect individuals in their private property rights and dealings, and thus belongs in the category of statutory rights which may be waived. In reaching this determination, I have in mind that the effect of a waiver of the right involved here--to valuation proportionality in the allocation of common element interests--results largely in a financial disadvantage to the owners of units which, as a result of the waiver, may bear the cost of running and maintaining the condominium in a percentage not fully aligned with the units values on the date the master deed is recorded. When a unit owner consents to pay a fraction of the expenses that is greater than the fraction the initial value his or her unit is of the total initial value of all units, all that results is that the disproportionately assessed owner will pay more money towards the common expenses than another unit owner might. Without diminishing in any way the financial burden which the Phase II Unit Owners may feel they disproportionately shoulder as a result of the Settlement Agreement and related Amendments, what the plaintiffs carry is essentially a financial obligation. There is no claim that they are deprived of use and enjoyment of their units or of any of the common elements and facilities of the Condominium to which, under the recorded documents, they are entitled. A waiver which affects what it costs to own and use a condominium unit is not of the sort that public policy ought to invalidate. [Note 4]
I also conclude that disregard of the value proportionality provisions of section 5(a) does not, without more, work a serious insult to a vital public policy. The plaintiffs were unable to identify, in the reported Massachusetts cases, one in which the courts, relying on the Section 5(a) requirement of valuation proportionality, have ordered the reallocation of the percentage interests of units. The statutory rule is itself somewhat difficult to follow and enforce strictly. All that the statute deals with is the relative valuation of units at a single moment in timeat the recording of the master deed. Valuation of residential real estate is often fluid and sometimes hard to pinpoint. The statute itself only requires that approximation be used where value is concerned. Even without the recording of a master deed amendment, values of units certainly can change anyway. This might happen, for example, when a given unit owner decides to renovate and modernize the units interior. In such a case, the statute would not require readjustment of the percentage interest each unit holds even though the proportionate values of the units are no longer the same as they were when the master deed was recorded. The newly fixed up unit is worth much more, but nothing about its proportionate interest changes. All this suggests that the proportional valuation requirement of section 5(a) does not rise to the level that makes it immune from waiver.
The parties have called to my attention the decision of the United States Court of Appeals for the First Circuit in In Re Northwood Properties, LLC (Bourne v. Northwood Props., LLC), 49 Bankr. Ct. Dec. 34 (1st Cir. 2007), decided while the cross-motions for summary judgment were pending. The parties received the opportunity to file supplemental briefs regarding this case, and counsel for the Phase I Unit Owners and for plaintiffs have done so.
After consideration of these supplemental submissions, I conclude that the holding in Northwood does not directly apply in the case now before me. Northwood involved a challenge by several unit owners to a developers effort to add a new phase to an existing condominium. These unit owners had not consented to the extension of the development rights. They fought the extension because, under G.L. c. 183A, §5(b)(1), the result of the extension would be the alteration of their percentage interests in the common elements of the condominiumsomething to which they had not agreed.
The response was that the extension of development rights in that case had been brought about by the execution of an instrument by the organization of unit owners under authority of G.L. c. 183A, §5(b)(2). In relevant part, this statute grants [t]he organization of unit owners, acting by and through its governing body,... the power and authority, as attorney in fact on behalf of all unit owners from time to time owning units in the condominium, except as provided in [the] ... subsection, to:.... (iii) [e]xtend... rights to develop the condominium, including the right to add additional units... provided, however, that the rights to add additional units are set forth in.. the master deed....
This section of the statute goes on to say that [a]ny action taken pursuant to this subparagraph shall be taken upon such terms and conditions as the organization of unit owners may deem appropriate, including the method or formula by which the percentage interest of each unit is to be set in accordance with subsection (a) of section 5, or in accordance with another method which the organization of unit owners reasonably determines is fair and equitable under the circumstances, following such extension... if not specified in the master deed.... A prerequisite to proceeding this way (that is, by instrument of the organization of unit owners, and absent the assent of all owners) is, under §5(b)(1), that the master deed at the time of the recording of the unit deed provided for the addition of units ... and made possible an accurate determination of the alteration of each units undivided interest that would result therefrom. It is this last clause that occupied the attention of the Northwood court. The district court had determined that the master deeds phasing provisions were not precise enough in laying out the altered percentage interests that would result from the addition of the new units. The Court of Appeals disagreed, reversing the district court, finding that the master deed had sufficiently forecast the changes to each units undivided interest that would follow the phasing amendment.
It remains to be seen if, and to what extent, Massachusetts state appellate courts will follow the First Circuits interpretation of the specific statutory provision involved in Northwood. The issue at the heart of Northwood, however, is not present in the case before me. This is so because the Amendments, which added the Phase II Units, were not executed in reliance on the authority of the unit owners, nor of the organization of unit owners as their attorney in fact. The Amendments were by the successor declarant, Stuborn or its affiliate. The addition of the Phase II Units, with the corresponding reallocation of percentage interests, took place under the reserved rights of the declarant to add phased units to the Condominium. For this reason, there is no occasion to consider the concern in Northwoodthat the addition of the new units, and the corresponding change in percentages, was not proper absent the joinder of all the unit owners. Moreover, there is in our case nothing to show that anything less than all unit owners agreed to the phasing amendment that added the Phase II Units. The Phase I Owners certainly were in full support. And Stuborn, through its affiliate, unquestionably executed the amendment. The provisions of §5(b)(2) were not involved when the amendment was recorded, on October 7, 1999, which made the Condominium a forty-unit one, with the reallocated interests shown in the exhibit to that amendment.
In a more general sense, the decision in Northwood supports the result I reach in the case now before this court. Northwood supports flexibility and pragmatism in the use and interpretation of the provisions of the condominium statutes generally, and particularly where the question of the reallocation of percentage interest in common elements is concerned. As the court noted, [p]hasing allows developers to sell units as they are built, which in turn eases construction costs and financing arrangements. The flexibility to revise plans as market and financing conditions change also greatly assists condominium development. (slip op. at 12). One principle dominant in the Northwood courts view of the phasing of condominia under Massachusetts law is that the statutes should be interpreted to promote somewhat more, rather than somewhat less, flexibility in the way the addition of later phases and units take place over time.
For all these reasons, I decide that any lack of valuation proportionality in the establishment, by the Amendments, of the percentage interests when the Phase II Units were added to the Condominium does not render those Amendments invalid or ineffective, and does not require judicial reallocation of those interests.. II. Board of Trustees Election Procedure and Master Deed Amendment Limitations The plaintiffs challenge the validity of the provisions of the Settlement Agreement and the Amendments which have the effect of limiting the Phase II Unit Owners ability to elect Trustees. There is no factual disagreement about how the documents operate. The Phase II Unit Owners, who own twenty of the forty units at the Condominium, and who are responsible for payment of 68.59% of the common expenses, may only select two of the five Trustees. The plaintiffs object to this, citing G.L. c. 183A, §10(a), which provides, in part: [e]ach unit owner shall have the same percentage interest in the corporation, trust or unincorporated association provided for in the master deed for the management and regulation of the condominium as his proportionate interest in the common areas and facilities. From this, plaintiffs advance the argument that the system of voting established in the Settlement Agreement and the related Amendments fails to pass muster under the statute. The plaintiffs contend that what is required in the governance of all condominia is, effectively, a one man, one vote process.
The Phase I Unit Owners do not dispute that the Phase II Unit Owners are limited to choosing a minority of the Trustees. The Phase I Unit Owners dispute that directly proportional voting for trustees is a requirement of the statute or otherwise something that a court must or can order implemented without authority in a condominiums governing documents.
G. L. c. 183A has been described as essentially an enabling statute. Although it lays out certain minimum requirements for setting up condominia, it also provides planning flexibility to developers and unit owners. Tosney v. Chelmsford Village Condominium Association, 397 Mass. 683 , 686-87 (1986); Barclay v. Deveau, 384 Mass. 676 , 682 (1981). Unless expressly prohibited by clear legislative mandate, unit owners and developers may validly contract as to the details of management. Id..
There is nothing in G. L. c. 183A that specifically requires a unit owners percentage interests in the common elements to be directly correlated to his or her voting or governing power within the condominium. Plaintiffs have not referred the court to any appellate cases in which imbalances in voting power within a condominium have been invalidated or corrected judicially under the authority of section 10(a). To grant such a remedy in this case would be to take away from the parties to the organic documents of the Condominium their privilege to agree to a flexible--if one-sided and out of the ordinary--arrangement about who gets to serve on the governing board of the organization of unit owners.
The arrangement challenged here has, of course, its origins in the 1998 Settlement Agreement which ended the Zoning Appeal and opened the way for the creation of Phase II of the Condominium. The provisions affording a majority of control to the Phase I Owners were fully negotiated and agreed to at the time the settlement was struck, and then were implemented in the recorded documents. The procedure for selecting Trustees which the parties to that settlement arrived at is not a model of equal treatment for all unit owners. But the same can be said of the Settlement Agreement as a whole. The hard and somewhat unequal bargain that the Phase I Unit Owners insisted upon, as part of their agreement to settle and to allow the creation of the second phase of the Condominium, was something to which Stuborn plainly signed on, even if the outcome of the settlement was an unwelcome one for this successor developer.
To a great degree, the decision to give the Phase I Owners majority control flows from the decision that the Phase II Owners bear a larger percentage of the common expenses of the Condominium. The Phase I Unit Owners may well have insisted on the level of control of the unit owners organization that they did, because they were aware that their arrangement, with its allocation of more of the costs to the new units, would lead the Phase II Unit Owners to oppose decisions the Trustees would make to incur expenses on behalf of the Condominium. To prevent dispute, and to avoid the gridlock that would result from equal voting power for the two phases, the extra Trustee was to be awarded to the Phase I Unit Owners. This arrangement, though it indisputably favors one side, does have the advantage of avoiding ongoing disagreement and litigation over each decision the Trustees make. A court cannot undo a pragmatic solution to a knotty governance problem simply because the solution results in greater control to one side. Here, all those who own units in Phase II bought them charged with full knowledge that they would be under-represented at the Trustees table. The decision to agree to this unequal control was accepted by the creator of the new units, Stuborn, and was accepted by those who bought their units from him. The court will not undo this aspect of the negotiated settlement.
The same is true for the document provisions that limit the ability to pass amendments to the Master Deed, Declaration of Trust, and By-Laws which would adversely affect the interests of the Phase I Unit Owners without a 67% vote by them. These provisions, also fully and openly included in the Settlement Agreement and the related documents, were instituted to protect against document changes that would have the effect of unraveling the unequal common expense and voting control aspects of the settlement. These were undoubtedly going to be unpopular with the Phase II Unit Owners, and the supermajority requirement for certain condominium document amendments were established to keep these features of the settlement intact. Nothing suggests that this provision, one-sided though it may be, strays outside the band of what condominium owners lawfully may establish as the ground rules for their coexistence.
The plaintiffs motion for summary judgment is DENIED. The Intervenor Olde Cape Codder Corporations motion for partial summary judgment is DENIED. The Phase I Unit Owner defendants motion for summary judgment is GRANTED.
With this decision, the court should have disposed of the issues requiring determination by the court, leaving the case in a position to proceed to final judgment. I will afford the prevailing parties the opportunity to propose the form of judgment that they believe ought to enter. They are to file and serve their proposed form of judgment within twenty days of the date of this decision, and all other parties are to file and serve any alternative versions of the judgment within ten days thereafter. (If the parties contemplate that the judgment will be recorded in the Registry, they are to draft their proposals accordingly.) The court then will settle the form of judgment, and enter it without further hearing, unless otherwise ordered.
Gordon H. Piper
Dated: July 10, 2008.
[Note 1] The plaintiffs are 1) Kenneth Benjamin; 2) Gloria Benjamin; 3) Stephen J. Scully Trustee of S & J Cape Realty Trust; 4) Evelyn Macdonald Trustee of 28 Cape Codder Road Unit A1; 5) Richard J. Napoli Trustee of 28 Cape Codder Road Unit A10; 6) Karen F. Napoli Trustee of 28 Cape Codder Road Unit A104; 7) Thomas J. Reardon; 8) Anne D. Reardon; 9) Dennis Desgrosseilliers; 10) Herbert M. Dean; 11) Stephen Churchill Trustee of Churchill Family Trust; 12) Graham T. Allison Jr.; 13) Elizabeth Allison; 14) Stephen J. Scully Trustee of SCC Trust No. 2; 15) Diane L. Scully Trustee of Dls Cape Realty Trust; 16) Stephen J. Scully Trustee of Sjs Cape Realy Trust; 17) Janice C. Dinger; 18) Edward P. Grimes; 19) Carolyn M. Zelop; 20) John S. Davagian, li; 21) Joyce N. Davagian; 22) Leslie J. Cohen; 23) Richard K. Yost; 24) Judith A. Yost; and 25) Brian F. Bint Trustee of Brian F. L. Blint Realty Trust
[Note 2] The defendants are 1) Dennis Stern; 2) Stephen Waxman and Deborah A. Kaufman; 3) William P. Balz; 4) Laurance Lieberman and Gloria Lieberman; 5) Jeffery L. McCarty; 6) Laurance D. Koplan and Beverly J. Koplan; 7) Steven L. Diamond and Joanne L. Diamond; 8) John M. Nelson; 9) Emily W. Hughey; 10) Shari D. Dress; 11) William P. Murphy and George M. Locarno as Trustees of Sippewisset Realty Trust; 12) Iris Berstein as Trustee of Iris Seader Family Realty Trust; 13) Frank D. Aronson as Trustee of NAL Nominee Trust; 14) James A. Goldstein, Laura J. Goldstein and Edward A. Goldstein as Trustees of Goldstein Joint Qualified Personal Residence Trust; 15) Kathleen C. Taylor; 16) Laura P. Heras as Trustee of Heras Family Real Estate Trust; and 17) Gerald Schuster as Trustee of Cape Codder Real Estate Trust.
[Note 3] This case (the Zoning Appeal) is entitled Laurence Lieberman, A. E. Michon, Edward Goldberg, Leonard Goldstein, and Herald Resnick, Trustees of The Cape Codder Condominium Trust v. John Druley, Chris Lebherz, John P. Vidal, C. Veronica Zvlinski, Michael S. Freeman and Dana K. Smith, as they are Members and Alternative Members of the Zoning Board of Appeals for the Town of Falmouth, Stuborn Limited Partnership, and Stuborn Corporation, General Partner of Stuborn Liminted Limited Partnership.
[Note 4] It is for this reason, as well, that the decision in Strauss v. Oyster River Condominium Trust, 417 Mass. 442 (1994) does not require any relief on the facts in the case in front of me, which does not involve any loss of use or enjoyment of common property as a result of the challenged provisions of the condominium documents. In Strauss, the court invalidated provisions of condominium documents that had the effect of keeping unit owners from possessing portions of the common areas, something not implicated in the case at bar.