TRUSTEES OF THE BEECHWOOD VILLAGE CONDOMINIUM TRUST v. USALLIANCE FEDERAL CREDIT UNION and JEFFREY S. REALE, as he is Trustee of the Beechwood Village Realty Trust, and SEAN P. FALLON.

The outcome of this action – a dispute between a credit union that claims the right to add up to 25 units to an existing 54-unit, age-restricted condominium development, and the owners of those existing units – turns twice on the principle that a condominium "master deed" is still a deed.

A master deed is still a deed when one must figure out who has the superior interest (or "priority") in real estate that makes up the condominium. Priority determines several issues in this case, which is before this Court on the parties' cross-motions for summary judgment. The undisputed facts begin in May 2006. It was then that Mark S. Gardner, as trustee of an eponymous trust, sold to defendant Jeffrey S. Reale (he, the trustee of the Beechwood Village Realty Trust, or "Realty Trust") an undeveloped parcel in Rockland, Massachusetts. The parties call that parcel Lot 7.

Realty Trust financed its purchase of Lot 7 by borrowing $4.9 million from defendant USAlliance Federal Credit Union. Realty Trust granted USAlliance a mortgage in Lot 7 to secure repayment of Realty Trust's debt. Full repayment was due by June 2011. Realty Trust also signed a $1.9 million note in favor of the Gardner Trust (the "Gardner Note"), secured by a second mortgage on Lot 7 (the "Gardner Mortgage"). Like the USAlliance notes, the Gardner Note was to mature in June 2011.

The Gardner Note contains the earliest summary, in the record currently before this Court, of Realty Trust's expectations for Lot 7:

[Payment of principal and interest] is in consideration of seller take back financing arising out of the construction, sale and title transfer of each of the Units within the project referred to as the Beechwood Village Condominiums, A Residential Senior Housing Community in Rockland, Massachusetts which contains seventy-nine (79) single family detached age-restricted condominium units.

The phrasing, "the project referred to as the Beechwood Village Condominiums," likely was deliberate. That's because as of May 2006, the Beechwood Village Condominiums did not exist as a condominium under G.L. c.183A, the Massachusetts statute that governs such things. But it is undisputed that work was soon underway on Lot 7, and that by March 2007, Realty Trust had completed three single-family detached homes there.

Had the story ended in March 2007, the priority under Massachusetts law of the parties' various interests in Lot 7 and its three built houses would be clear: USAlliance would have first claim on those assets, followed by the Gardner Trust, followed by the Realty Trust. But things didn't end then. Instead, in March 2007, Realty Trust finally got around to creating the separate legal entity called the Beechwood Village Condominium (singular "Condominium," not plural as recited in the Gardner Note). Realty Trust did so in the fashion described in Queler v. Skowron, 438 Mass. 304 , 311 (2002) (citations omitted):

A condominium is created by a "declarant" who records a master deed that "submits" land to the provisions of G. L. c. 183A. The master deed sets forth the nature of the property interest being conveyed, describes the land, buildings, units [that is, individually owned areas] and common [that is, jointly owned] areas of the condominium, sets forth the purposes for and use restrictions on said buildings and units, and describes the method by which the master deed may be amended.

Queler pretty much describes what Beechwood's Master Deed did. The "land" placed into the Beechwood Condominium was Lot 7. The Condominium's site plan showed the locations of 79 "units," consisting of single-family detached homes (three built; 76 to go) and their associated lots. The "common areas," as of March 2007, included every unbuilt unit plus the Condominium's proposed roadways. The Master Deed also included age and other use restrictions, and a process for amending the Deed.

What if the story had ended there? Remember that USAlliance and the Gardner Trust had recorded their mortgages against Lot 7 months before it was placed into the Beechwood Condominium. Both mortgages were thus senior to the Beechwood Master Deed; Realty Trust's submission of Lot 7 into the Condominium did not strip USAlliance or the Gardner Trust of their previously granted mortgage interests. See Beaconsfield Towne House Condominium Trust v. Zussman, 416 Mass. 505 , 507-08 (1993); Graham v. GFI Longbrook, LLC, 21 LCR 87 , 93 n.21 (2013), modified in later proceedings, 22 LCR 161 (2014).

What about Realty Trust's interest in Lot 7? The trust chose to submit all of Lot 7 to the Beechwood Master Deed. (It didn't have to. See, for example, Commercial Wharf East Condominium Ass'n v. Waterfront Parking Corp., 407 Mass. 123 , 128-31 (1990).) But recall that Realty Trust had built only three of the 79 anticipated condominium units as of March 2007, and it was still on the hook to repay its USAlliance and Gardner Trust loans. With that in mind (and presumably hoping to share in the profits of further development), Realty Trust reserved in art. 4 of the Master Deed what the parties call "phasing rights." (Some courts call them "go- forward rights." See, for example, Dudley Corp. v. Pizzi Farms, Inc., 4 LCR 75 , 78 (1996).) Phasing rights typically give a condominium's declarant/developer express powers to plan, seek financing for, and build additions to the condominium, usually with little or no interference from the owners of existing condominium units. See Queler, 438 Mass. at 313-14. Such rights are useful in condominium projects that require several years to complete: the longer a project takes, the longer someone (usually the developer) is exposed to the risks associated with financing, constructing and selling condominium units. Retaining phasing rights allows the developer to manage these risks. See id. at 312; Podell v. Lahn, 38 Mass. App. Ct. 688 , 689 n.3 (1995). Queler holds that Massachusetts law allows a declarant/developer to retain such rights notwithstanding c. 183A's requirement that the developer "submit" to a master deed the land destined for a condominium. See Queler, 438 Mass. at 312.

So as of the creation of the Beechwood Village Condominium, the priority of interests in Lot 7 was USAlliance, first; Gardner Trust, second; Realty Trust (but only to the extent of its retained phasing rights), third; and the Beechwood Village Condominium Trust (the organization of unit owners created pursuant to the Master Deed to handle the Condominium's affairs) and Beechwood's unit owners, last. But the priority story doesn't end there. Chapter 183A allows a declarant/developer not only to retain phasing rights, but also to mortgage those rights. See, for example, Lebowitz v. Heritage Heights, Inc., 4 LCR 48 , 50 (1996); Crasper v. Bondsville Partners, Inc., 14 LCR 432 , 433-35 (2006); Graham, 22 LCR at 166-67. That's what happened here. Shortly after signing the Master Deed, Realty Trust refinanced its USAlliance loans. The trust replaced USAlliance's 2006 mortgage with a new mortgage (the "2007 Mortgage") and a new five-year note. The parties agree that the 2007 Mortgage encumbered the entirety of Lot 7 except for the seven Condominium units that had been completed as of the refinancing. And while USAlliance discharged its 2006 mortgage as part of the refinancing, the Gardner Trust agreed to subordinate the Gardner Mortgage to USAlliance's 2007 Mortgage. Thus, immediately following the 2007 refinancing, the priority of interests in Lot 7 (excluding the seven completed condominium units) was USAlliance, first (but only to the extent of Realty Trust's phasing rights); Gardner Trust, second (largely without limitation, since its mortgage predated creation of the Condominium); Realty Trust, third (again, only to the extent of its phasing rights); and the Beechwood Village Condominium Trust and the Beechwood unit owners, last.

Between March 2007 and December 2011, Realty Trust built 54 condominium units and a recreation center, in twenty phases. As units were built and added to the Condominium, the Gardner Trust executed in favor of the owner of each new unit a "Partial Discharge of Real Estate Mortgage." USAlliance executed similar discharges of its 2007 Mortgage for 44 condominium units. Unit-by-unit partial discharges or releases are common in the "construction phase" of a new condominium. See Graham, 21 LCR at 93.

This Decision will return to the Partial Discharges and their effect on priorities shortly. In the meantime, by 2009, Realty Trust was having problems developing and selling units in Beechwood Village. The parties have spared this Court the gory details, but it is undisputed that sometime after 2009, Mr. Reale (but not Realty Trust) filed for bankruptcy. It is also undisputed that Realty Trust fell behind on its obligations under the USAlliance and Gardner Trust loans. Negotiations ensued, and in February 2012, the Gardner Trust assigned its note and mortgage to USAlliance. At some point, USAlliance approached the plaintiffs, the board of trustees of the Beachwood Village Condominium Trust (the "Trustees"), with a proposal to build out the rest of the condominium if USAlliance were to foreclose on its 2007 Mortgage and the Gardner Mortgage. USAlliance and the Trustees couldn't come to terms on future development. It is further undisputed that no one completed construction of Beechwood Village's 79 units by March 9, 2014, the seventh anniversary of the recording of the Master Deed. That's the date on which, according to the Trustees, Realty Trust's phasing rights expired.

In April 2016, the Trustees sued USAlliance in this Court. They sought a declaration that Realty Trust's phasing rights lapsed in March 2014, and hence USAlliance's interest in those phasing rights, via the 2007 Mortgage, lapsed too. See Lebowitz, 4 LCR at 50-51 (mortgage in developer's phasing rights lapses when rights lapse); Crasper, 14 LCR at 434-35 (same). The Trustees also sought a declaration that USAlliance has no powers over the Condominium whatsoever, and that future development of the Condominium can't occur without the approval of 75% of the Condominium's unit owners, as provided in the Master Deed. USAlliance counterclaimed and eventually asked for two declarations: that the phasing rights haven't expired, and even if they have, USAlliance has priority over any interest in Lot 7 that arises under the Master Deed, because (a) USAlliance (as assignee of the Gardner Trust) now holds the Gardner Mortgage, and (b) that mortgage is senior to everything, including anything in the Master Deed.

In January 2017, the Trustees and USAlliance agreed to allow attorney Sean Fallon to intervene in this case for the limited purpose of opposing the Trustees' motion for summary judgment in this case. Attorney Fallon handled the 2007 refinancing for USAlliance. In May 2017, the parties agreed to add Mr. Reale, as trustee of the Realty Trust, as a defendant in this case. Reale subsequently asked for leave not to participate actively in the matter; the other parties assented after Reale promised to be bound by the outcome of this case, whatever it is.

Back to priorities. USAlliance contends that, as assignee of the Gardner Mortgage, it has an interest in Lot 7 (excluding those areas benefiting from Partial Discharges) that is senior to any later interest arising from the Master Deed. Beaconsfield and Graham support USAlliance's position. The Trustees counter that the Partial Discharges, as a matter of law, subordinate the Gardner Mortgage entirely to the Master Deed. The Trustees rely on KASL-Seabreeze, LLC v. Trustees of Seabreeze Condominium Trust, 29 Mass.L.Rptr. 599, 2012 Mass. Super. LEXIS 129 (Mass. Super. Ct. Apr. 5, 2012). Seabreeze observes that a mortgage recorded prior to the submission of the mortgaged premises to a condominium may become subject to the provisions of a condominium's master deed, but only if the mortgagee assents to subordination. Id. at *12. One can't find any such assent in the Partial Discharges. Their operative provisions read as follows (emphasis and capitalization in original):\

Mark S. Gardner, Trustee of Mark S. Gardner Trust, . . . the holder of a mortgage from Beechwood Village Realty Trust . . . releases the following described PORTION of the mortgage premises, described as follows: Unit [XX] on a certain "Condominium Master Plan BEECHWOOD VILLAGE Phase [YY] . . ." pursuant to a certain Master Deed for Beechwood Village (Phase [YY]) recorded [in the] Plymouth Registry of Deeds.

The Partial Discharges did nothing more than shrink, unit by unit, the areas subject to the security interests established in the Gardner Mortgage. The Partial Discharges did not subordinate the Gardner Mortgage to the Master Deed. Thus, USAlliance, as assignee of the Gardner Mortgage, has the senior interest in all of Lot 7, except for the areas occupied by units that have received Partial Discharges.

Declaring that USAlliance has a senior interest in the unreleased areas of Lot 7 (which includes the sites of the 25 undeveloped Condominium units) doesn't end this case. That's because, were USAllliance to foreclose on Lot 7 using the Gardner Mortgage, USAlliance would become a tenant of Lot 7 in common with the 54 Condominium unit owners who benefit from Partial Discharges. See Kaplan v. Boudreau, 410 Mass. 435 , 438 (1991). Intervenor Fallon asserts that, once USAlliance takes over the unreleased portions of Lot 7, USAlliance (like any other tenant in common) will have the right to build improvements in what are now Condominium common areas. Fallon claims that Brady v. City Council of Gloucester, 59 Mass. App. Ct. 691 (2003), supports his view. But Brady observes: "Permanent additions to the commonly owned property generally are deemed to be destructive of the common estate. That is because such additions appropriate to one cotenant an exclusive right to use and possession of the improved portion of the property." Id. at 695. There's nothing in the summary-judgment record that describes how USAlliance plans to build out Beechwood Village, if and when USAlliance forecloses. One thus cannot declare, on the current record, that USAlliance can build on Lot 7, free of Brady problems, even if USAlliance lacks Realty Trust's phasing rights.

Even if USAlliance could get over the Brady hurdle, it would hit a second one: the Gardner Mortgage, standing alone, doesn't give USAlliance any power to force the Condominium to accept new owners of whatever USAlliance builds. The only document that would allow USAlliance to add units to the Condominium over the objections of the current Beechwood owners is the Master Deed itself, via Realty Trust's phasing rights (if they haven't lapsed). Thus, the question of whether USAlliance can build and add to the Condominium 25 as-yet unbuilt units still turns on the status of Realty Trust's phasing rights.

Why would a declarant/developer agree to limit phasing rights in the first place? Because developers and their lenders aren't the only ones who have a stake in a condominium. Those who have purchased condominium units prior to the exercise of such rights (and their lenders) have a stake too. Development can affect a unit owner's exclusive rights to enjoy his or her individual unit. Development also can affect the condominium's common areas and facilities, which unit owners own as tenants in common in proportion to their respective undivided interests. See Kaplan, 410 Mass. at 438. Additions to a condominium often dilute (and do dilute in this case, see Master Deed, art. 4(E)) the existing unit owners' interests in the common areas and facilities. Additions can increase the wear and tear on common areas. Additions also can boost the costs of maintaining and administering common areas, notwithstanding the greater number of unit owners against whom such costs might be assessed. Additions (or the threat of additions) also can be perceived by existing unit owners simply as unwelcome change – perhaps doubly unwelcome if someone other than the original developer (say, the developer's foreclosing lender) threatens to seize those rights and have someone else build out the condominium.

Realty Trust reserved its phasing rights via the Master Deed, and thus we reach the second of the "a-master-deed-is-still-a-deed" moments in this case: a master deed is to be interpreted as a deed. See Queler, 438 Mass. at 311. Such deeds "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." Id. (internal quotations omitted). A master deed "prescribes the rules of the game," Strauss v. Oyster River Condominium Trust, 417 Mass. 442 , 452 (1994), and the court may not look beyond those rules as written unless their language is ambiguous. Hence,

"every phrase and clause must be presumed to have been designedly employed, and must be given meaning and effect, whenever practicable, when construed with all the other phraseology contained in the instrument, which must be considered as a workable and harmonious means for carrying out and effecting the intent of the parties." Conversely, it is not the province of the courts to read language into [deeds] where it is not present, nor to reform a [deed] for the parties.

Village at Bedford Woods Condominium Trust v. Century Bank & Trust Co., 23 LCR 356 , 360 (2015), quoting G.M. Abodeely Ins. Agency, Inc. v. Commerce Ins. Co., 41 Mass. App. Ct. 274 , 277 (1996).

The parties agree that the disputed phasing rights are contained entirely in art. 4 of the Master Deed, entitled "Condominium Phasing." A single paragraph follows that heading:

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 . . . 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.

These sentences don't say when Realty Trust intended to develop the additional phases, nor do they set a deadline by which Realty Trust had to complete those phases.

Next is art. 4(A), entitled "Reservation of Right to Create Additional Phases." Article 4(A) begins by stating that Realty Trust (also called the "Declarant" in the Master Deed)

reserves the right, but not the obligation, to create as many as 30 additional phases, including any part thereof, as shown on the plans hereinbefore mentioned. [Note 1] 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 future 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.

Article 4(A) answers some of the questions left open in the opening paragraph of art. 4. Article 4(A) allows Realty Trust to commence additional phases whenever it desires (or never – Realty Trust has no "obligation" to create additional phases). Article 4(A) also permits Realty Trust "to grant mortgages on future phases at any time and from time to time" – again, without time limits. It is lawful for a condominium developer to reserve such rights for an indefinite period. See Belo, LLC v. 175 Olde Canal Drive, LLC, 18 LCR 86 , 95-96 (2010), aff'd, 79 Mass. App. Ct. 1119 (2011) (unpublished decision).

The Condominium Trustees point to two provisions that follow these two seemingly unlimited (as to time) provisions. First, immediately after the sentences quoted above, the last sentence of art. 4(A) appears. The Last Sentence states:

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.

The Last Sentence's "right and easement hereby reserved by the Declarant" appears under art. 4(B), entitled "Reservation of Construction Easements and Well Water Easements." Article 4(B) has four subparts. In two subparts, arts. 4(B)(i) and 4(B)(iv), Realty Trust "reserves to itself, its successors and assigns, and its or their nominees," certain easement rights. Of those two subparts, only art. 4(B)(i) is important. Article 4(B)(i) states:

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 [Note 2] of the Condominium (including but not limited to driveways, walkways and any [Exclusive Use Area]) 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 its Facilities in the phases already added to the Condominium. Nothing in this paragraph shall be deemed to create any rights in the general public.

Article 4(B) has two other subparts. In art. 4(B)(ii), Realty Trust "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." In art. 4(B)(iii), Realty Trust "reserves the exclusive right to grant easements . . . over, under, through and across the common area of the Condominium Land for the purposes of installing any and all utility lines serving the units in the Condominium and such other equipment as may be necessary for the installation and operation of the same."

The Trustees argue that art. 4(B)(i)'s express seven-year limit applies to all of Realty Trust's phasing rights. Every case they cite in support of their reading of art. 4(B)(i) involves, however, a time restriction that is embedded in the master deed's very phasing provision. See, for example, Suprenant v. First Trade Union Savings, FSB, 40 Mass. App. Ct. 637 , 639 (1996) ("The Declarant's reserved rights to amend this Master Deed to add new Units to the Condominium as future phases shall expire seven (7) years after the date of the recording of this Master Deed…."); Lebowitz, 4 LCR at 49-50 (similar language); Crasper, 14 LCR at 434 (similar language). One does not see such language in the first paragraph of art. 4, in art. 4(A), or in arts. 4(B)(ii)-(iv). There also is no language in the Master Deed that states that art. 4(B)(i)'s time limits apply "notwithstanding anything in this Master Deed to the contrary," or words to that effect.

USAlliance argues the opposite extreme. It contends out that art. 4(B)(i) is similar to the three-year limitation at issue in Village at Bedford Woods, 23 LCR at 360-61. There the court concluded that the limitation controlled only the declarant/developer's right to build the first of three planned condominium phases. USAlliance presses for the same reading here. But Village at Bedford Woods reached its conclusion because the provision of the Village's master deed that set forth the developer's phasing rights said that they would last for 21 years, "notwithstanding any other provisions" of the master deed. That right clashed with the developer's alleged need to complete the Village in three years or lose its easement rights. See id. There's no such conflict here.

Yet Village at Bedford Woods reminds us that a master deed is a deed, and must be construed as such. A reading of art. 4 that gives "meaning and effect" to every one of its provisions requires not elevating art. 4(B)(i)'s time limit, as the Trustees urge, so as to insert into each of art. 4's phasing provisions a seven-year cutoff. Similarly, absent conflicting text of the kind seen in Village at Bedford Woods, this Court should not confine art. 4(B)(i) to Phase One of the Beechwood Condominium. Instead, it is reasonable to construe art. 4(B)(i) as reserving to Realty Trust, for a period that expired on March 9, 2014, two rights.

One of the now-expired rights appears in art. 4(B)(i) itself: "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…." The italicized language is key: it gave Realty Trust the right to use its easement over the Common Area and Facilities of the Condominium for any purposes it wished, and not just for building additional Condominium phases. Realty Trust could have used its reserved easement, for example, as access to land owned by Realty Trust outside of the Condominium, had Realty Trust owned such land. (Article 4(b)(iv) of the Master Deed expressly granted rights "for the benefit of Declarant's land abutting the Condominium . . . ." The parties agree that Realty Trust never owned any such land, but no one has contended it was an impossibility.) Realty Trust also could have farmed the unimproved land, or held outdoor concerts on it. Article 4(B)(i) gave Realty Trust that "for all purposes" right, but only for seven years.

The second now-expired right arises from the Last Sentence. The Last Sentence extended Realty Trust's art. 4(B)(i) "all-purposes" easement, which otherwise is confined to "the Common Area and Facilities of the Condominium," to "Phase One of the Condominium…." The art. 4(B)(i) easement nevertheless ended in March 2014; so too did the easement provided in the Last Sentence. Realty Trust's other phasing rights under the Master Deed, however, have not lapsed.

Judgment shall enter accordingly.