In the case first set forth above, Miscellaneous Case No. 91125, the plaintiff, International Mortgage Company, seeks a determination as against the Board of Managers of Greenbrook Condominium Association that at the time of a foreclosure sale by it as first mortgagee of a condominium unit at the Greenbrook Condominium in Stoughton in the County of Norfolk, the mortgaged premises were free of any lien for common expenses theretofore incurred and not paid by the mortgagor, Ann M. Malo. The plaintiff also seeks the issuance of a certificate pursuant to G.L. c. 183A, §6(d) to this effect. [Note 1] In the other case, Miscellaneous Case No. 91710, transferred by the assent of the parties to this Court from the Superior Court where it initially was commenced, said Board of Managers is attempting to recover from the foreclosing mortgagee, who purchased the condominium unit at the foreclosure sale, the common expenses owed by the mortgagor. Originally, recovery also was sought of those expenses which accrued after the sale, but they have been paid and are no longer in question.
Both cases present the same basic question. G.L. c. 183A, §6(c) provides as follows:
The unit owner's share of the common expenses shall constitute a lien upon his unit and shall be enforced in the manner provided in section five of chapter two hundred and fifty-four. Such lien shall have priority over all other liens, except municipal liens and first mortgages of record, as to such portion of said common expenses as became due within six months prior to the commencement of an action to enforce such lien pursuant to said section five.
When International Mortgage Company exercised the power of sale set forth in the mortgage which it held on the Malo condominium unit, the notice of sale pursuant to G.L. c. 244, §14 recited that the sale was to be "subject to outstanding tax titles, municipal liens or assessments, outstanding condominium common expenses, all zoning changes and unpaid taxes, if any there be." The issue is whether this phraseology gave priority to the common expenses over the first mortgage which by virtue of section 6(d) they otherwise would not have.
Both cases have been submitted on this Agreed Statement of Facts:
1. The individuals mentioned as being members of the Board of Managers of Greenbrook Condominium Association in the two complaints filed herein have from time to time constituted the majority of the Board of Managers of said Greenbrook Condominium Association.
2. Greenbrook Condominium Association is an unincorporated condominium association of a condominium known as Greenbrook at Stoughton, Massachusetts, which was formed in accordance with General Laws Ch. 183A.
3. International Mortgage Company is an Illinois corporation qualified to do business within the Commonwealth of Massachusetts with a usual place of business at 11 Cottonwood Drive, Stoughton, Massachusetts.
4. Kaufman and Broad Homes, Inc. is a Massachusetts corporation with a usual place of business at 386 Island Street, Stoughton, Massachusetts.
5. Kaufman and Broad Homes, Inc. was the developer of Greenbrook Condominium.
6. International Mortgage Company is a wholly- owned subsidiary of Kaufman and Broad, Inc.
7. International Mortgage Company was used by the developer to provide financing for some original purchasers of units at Greenbrook Condominium.
8. On or about May 30, 1975, Kaufman and Broad Homes, Inc. sold a unit numbered 7-1 situated in building No. 7 in Stoughton, Massachusetts, a unit within Greenbrook Condominium to an individual by the name of Ann M. Malo.
9. International Mortgage Company loaned Ann M. Malo most of the funds necessary to purchase said condominium unit and took back a mortgage from her.
10. Ann M. Malo never paid for condominium common charges as provided in General Laws Ch. 183A, Section 6.
11. The condominium association instituted suit against Ann M. Malo in the Norfolk County Superior Court in an action bearing docket No. 82197. A copy of that complaint is hereto annexed and made a part hereof by reference.
12. As set forth in said complaint, a copy of said complaint was filed with the appropriate certificate of title in the Registry of Deeds.
13. The Plaintiff never obtained service upon said Ann Malo who owned said unit.
14. The ownership of that unit was recorded in Memorandum No. C-5-221 Registered Land Section of the Registry of Deeds for Norfolk County.
15. Said Ann Malo also defaulted in payments under her mortgage.
16. International Mortgage Company instituted foreclosure proceedings against said Ann Malo and on June 17, 1977 they held a public auction at the mortgaged premises.
17. The mortgagee sale of real estate as published in local newspapers said in part, "terms of sale: said premises will be sold subject to...outstanding common expenses..., if any there be."
18. The document hereto annexed as Exhibits B, C, D, and E, all form one document recorded with the Registered Land Section of the Norfolk County Registry of Deeds and is noted in Memorandum No. C-5-384. Said documents are made a part hereof by reference.
19. As of the date of the foreclosure sale, the outstanding condominium common charges owed by said unit and Ann Malo to the condominium association amounted to $1,929.22.
20. Subsequent to the foreclosure sale, in June, 1978, International Mortgage Company sold all of its right, title and interest in and to the foreclosed unit to Kaufman and Broad Homes, Inc.
21. Between the time of the foreclosure and the sale to Kaufman and Broad Homes, Inc., the outstanding common charges had risen to the sum of $2,977.04.
22. After Kaufman and Broad Homes, Inc. purchased the property from International Mortgage Company, Greenbrook Condominium Association entered a suit in the Norfolk County Superior Court against International Mortgage Company and Kaufman and Broad Homes, Inc. and recorded a copy of that complaint with the appropriate memorandum of title in the Registry of Deeds.
23. Shortly after the complaint against International Mortgage Company and Kaufman and Broad Homes, Inc. was recorded as aforesaid (which case has now been transferred to the Land Court and bears Misc. Case No. 91710), Kaufman and Broad Homes, Inc. paid all of the outstanding common charges on said unit with the exception of the $1,929.22 which was outstanding prior to and including the date of the foreclosure by International Mortgage Company.
24. Kaufman and Broad Homes, Inc. has received a certificate under Mass. General Laws Ch. 183A, Section 6(d) which states that all condominium common charges have been paid with the exception of the sum of $1,929.22 (the sum due prior to the foreclosure by International Mortgage Company).
25. At about the same time of the suit by the Association against International Mortgage Company and Kaufman and Broad Homes, Inc. was instituted, another suit was instituted by International Mortgage Company against the condominium association and its management company, Brooks Management Corp. That suit was entered in the Land Court and bears Misc. Docket No. 91125.
26. That suit alleges that the foreclosure by International Mortgage Company has effectively "wiped out" any lien that was filed, and that International Mortgage Company and its successors in interest are entitled to a certificate of no lien under General Laws Ch. 183A, Section 6(d).
27. Copies of the complaints in case No. 91710 and in case No. 91125 are hereto annexed and made a part hereof by reference.
28. On February 28, 1978, prior to purchasing the subject unit from International Mortgage Company, Kaufman and Broad Homes, Inc., being fully apprised of the dispute with regard to the outstanding common charges, as part of a settlement agreement with regard to construction problems, agreed in writing with the Association that among other suits and potential suits to survive the agreement would be a "suit by the Association against International Mortgage Company relating to units formerly owned by Ann Malo."
29. There are no other material facts at issue in this case.
The foregoing facts also are found by the Court. Based thereon, I find and rule that the mortgage to International Mortgage Company had priority over the common expenses; that the foreclosure sale was not subject to the latter; that title to the premises is free of any lien for such expenses which accrued prior to and up to the time of the sale; and that International Mortgage Company and Kaufman and Broad Homes, Inc. are entitled to a certificate to this effect pursuant to the provisions of G.L. c. 183A, §6(d). [Note 2]
It is true that in Antonellis v. Weinstein, 258 Mass. 323 (1927), it was held that the amount bid at the time of the fore- closure of a third mortgage was for the mortgagor's equity only and that the amounts due on the first and second mortgages should not be deducted from the sums bid by the purchaser at the fore- closure sale. In this case, the court made the following statements:
The evidence offered by the defendant that he intended to include the first and second mortgages when he made his bid of $9,050 was not admissible. It had no bearing upon the rights of the parties as disclosed by the record. As was said in Feuer v. Capilowich, 242 Mass. 560 , at page 565, "It must be assumed as a matter of law that the mortgagee intended to sell the interest of the mortgagor and his own interest in the property under the power; and he is estopped to claim any other understanding or intent of his own act in exercising the power and in becoming a purchaser at the sale, which was had in his presence and under his immediate supervision." See also Fowle v. Merrill, 10 Allen 350 ; Torrey v. Cook, 116 Mass. 163 ; Donohue v. Chase, 130 Mass. 137 .
The notice of sale for the foreclosure of mortgages, prescribed by G.L. c. 244, §14, provides that the premises shall be sold subject, among other things, to "existing encumbrances of record created prior to the mortgage ...."
It is plain that the sale in the present case could not legally include prior mortgages; to hold otherwise would not only be contrary to our decisions but would be in violation of the statute.
However, in Brooks v. Bennett, 277 Mass. 8 (1931), the court, referring to Antonellis, stated "It must be regarded as confined to its particular facts and as limited by the underlying principles on which this decision rests." In Brooks and in subsequent cases, the court has pointed out that the foreclosure sale must be conducted in such manner that it is fair to the mortgagor and those claiming in his right. See Sher v. South Shore National Bank, 360 Mass. 400 (1971). All that can be sold is the title conveyed by the mortgagor by the mortgage. Bids are for the value of the interest in the estate which will pass under the foreclosure deed. As the court stated in Brooks, "All this is made clear beyond peradventure by the terms of the statute."
By virtue of section 6(c), the mortgage had priority over the common expenses, and it was the duty of the mortgagee to obtain the highest possible price for the benefit of the mortgagor. To do this the mortgagee would have to recognize the statutory priority of its mortgage. The language used in the notice of sale and which has given rise to this proceeding apparently was set forth therein from an abundance of caution and doubtless was intended to follow the provisions of G.L. c. 244, §14. However, the reference to the matters to which the sale was subject was qualified by the phrase "if any there be". The short answer to the dispute is that there were none by virtue of the statute, and the language did not create a new priority in view of the qualification. It would seem that as in Milton Savings Bank v. United States, 345 Mass. 302 (1963), the statutory priority of the mortgage over the common expenses results in the termination of the lien of the latter upon the mortgage foreclosure sale. This was held to be the result in Milton Savings Bank as to federal tax liens and the employment security tax liens of the Commonwealth. The result here should be the same. If it is thought to lead to a result unfair to the other unit owners, the Legislature must have concluded that any other approach would have discouraged first mortgagees from financing the purchase of a condominium.
[Note 1] "A statement from the organization of unit owners setting forth the amount of unpaid common expenses which have been assessed against a unit owner shall operate to discharge the unit from any lien for any other sums then unpaid when recorded in the appropriate registry of deeds."
[Note 2] While the various entities concerned in the litigation have been involved in the construction and development of the Greenbrook Condominium, the Board of Managers does not rely on this circumstance as reason for a different result.