EXECUTIVE BOARD OF THE NORTH ATTLEBOROUGH PRESERVE HOMEOWNERS' ASSOCIATION, INC. v. STEPHEN J. SARCIA.

Stephen J. Sarcia purchased a lot in the common interest community known as the North Attleborough Preserve (Preserve) in April 2017. The lot, located at 53 Pearl Street, North Attleborough, Massachusetts (Property), was the site of a burned-down dwelling. Sarcia wished to construct a new house on the Property. The Preserve is overseen by the Executive Board (Board) of the North Attleborough Homeowners' Association, Inc. (HOA) under a recorded declaration and rules. The declaration requires Board approval for any "improvement" on a property in the Preserve. Sarcia began construction of his house without obtaining approval. His interpretation of the declaration is that a new house is not an improvement. The Board disagrees, and has brought this action to require Sarcia to submit to the Board's approval process. During the pendency of this action, Sarcia did so, and the Board denied approval of his proposed house. The parties have brought cross-motions for summary judgment. There are two issues in the cross-motions: whether Sarcia was required to seek approval from the Board, and, if so, whether the Board's denial was properly withheld. As set forth below, Sarcia's proposed house constitutes an "improvement" requiring approval from the Board, but whether the Board's denial was reasonable, the applicable standard of review, presents a question of fact requiring trial.

Procedural History

On July 27, 2017, the Board filed the Verified Complaint, Plaintiff's Motion for Preliminary Injunction, Plaintiff's Motion for Approval and Endorsement of Memorandum of Lis Pendens, Plaintiff's Motion for Short Order of Notice, and Motion to Appoint Special Process Server. On the same date, the court allowed the Plaintiff's Motion for Short Order of Notice. Sarcia filed the Memorandum in Opposition to Plaintiff's Motion for Lis Pendens on August 2, 2017. Also on the same date, the court heard the Plaintiff's Motion for Preliminary Injunction and Motion for Approval and Endorsement of Lis Pendens and ordered Sarcia not to convey, alienate, or further encumber the Property. The court further ordered Sarcia and the Board to confer about potential settlement.

The court allowed the Plaintiff's Motion for Preliminary Injunction on August 16, 2017, enjoining Sarcia from continuing construction on the Property (Preliminary Injunction Order). On November 7, 2017, the court ordered the parties to agree on Sarcia's winterizing his existing construction. The parties evidently came to an agreement on or before November 13, 2017. Sarcia filed the Motion to Vacate Preliminary Injunction on December 6, 2017. On December 8, 2017, the Board filed the Plaintiff's Opposition to Defendant's Motion to Vacate the Preliminary Injunction. On December 15, 2017, the court denied Sarcia's Motion to Vacate Preliminary Injunction.

The Board filed the Plaintiff's Motion for Summary Judgment (Plaintiff's Summary Judgment Motion or Pltf. Summ. Judg. Mot.), Plaintiff's Concise Statement of Material Facts Pursuant to Land Court Rule 4 in Support of its Motion for Summary Judgment (Pltf. R. 4 Stmt.), Memorandum of Law in Support of Plaintiff's Motion for Summary Judgment (Pltf. Mem.), and Plaintiff's Appendix (Pltf. App.) on February 9, 2018. On April 24, 2018, Sarcia filed the Defendant's Cross Motion for Summary Judgment (Defendant's Summary Judgment Motion or Def. Summ. Judg. Mot.), Memorandum in Support of Defendant's Cross Motion for Summary Judgment and Opposition to Plaintiff's Motion for Summary Judgment (Def. Mem.), Defendant's Response to Plaintiff's Concise Statement of Material Facts Pursuant to Land Court Rule 4 in Support of its Cross Motion for Summary Judgment and Opposition to Plaintiff's Motion for Summary Judgment (Def. Resp. to Pltf. R. 4 Stmt.), and Defendant's Concise Statement of Material Facts Pursuant to Land Court Rule 4 in Support of Defendant's Cross Motion for Summary Judgment and Opposition to Plaintiff's Motion for Summary Judgment (Def. R. 4 Stmt.). The Board filed the Plaintiff's Reply to Defendant's Memorandum in Support of Defendant's Cross Motion for Summary Judgment and Opposition to Plaintiff's Motion for Summary Judgment on May 4, 2018. The cross-motions for summary judgment were heard on May 7, 2018, and taken under advisement. This Memorandum and Order follows.

Summary Judgment Standard

Generally, summary judgment may be entered if the "pleadings, depositions, answers to interrogatories, and responses to requests for admission . . . together with the affidavits . . . show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Mass. R. Civ. P. 56(c). In viewing the factual record presented as part of the motion, the court draws "all logically permissible inferences" from the facts in favor of the non-moving party. Willitts v. Roman Catholic Archbishop of Boston, 411 Mass. 202 , 203 (1991). "Summary judgment is appropriate when, 'viewing the evidence in the light most favorable to the nonmoving party, all material facts have been established and the moving party is entitled to a judgment as a matter of law.'" Regis College v. Town of Weston, 462 Mass. 280 , 284 (2012), quoting Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117 , 120 (1991).

Undisputed Facts

The following facts are undisputed or deemed admitted:

1. The HOA was incorporated on June 30, 2004. On December 5, 2005, the HOA's Declaration of Protective Covenants and Declaration of Covenants, Conditions, and Restrictions (Declaration) were recorded in the Northern Bristol County Registry of Deeds at Book 15443, Page 333, and Book 15443, Page 1 respectively. Pltf. R. 4 Stmt. ¶ 1, Pltf. App. Exh. I (Roveda Aff.) ¶ 3; Def. Resp. to Pltf. R. 4 Stmt. ¶ 1.

2. The Preserve is a 41-lot cluster residential development. All houses in the Preserve are of a colonial style. Pltf. R. 4 Stmt. ¶¶ 2–3; Roveda Aff. ¶¶ 4–5 & Exh. B; Def. Resp. to Pltf. R. 4 Stmt. ¶¶ 2–3.

3. The Board manages the business, operations, and affairs of the Preserve's lot owners subject to the Protective Covenants, Declaration, the HOA By-Laws, and Architectural Guidelines. Pltf. R. 4 Stmt. ¶¶ 4-5; Roveda Aff. ¶¶ 7–8 & Exhs. A, C; Def. Resp. to Pltf. R. 4 Stmt. ¶ 4–5.

4. The Board has adopted Architectural Guidelines that, with the By-Laws, set forth the Preserve's policies and procedures for alterations, modifications, and improvements for Preserve lots. Pltf. R. 4 Stmt. ¶ 8; Roveda Aff. ¶ 7 & Exh. C; Def. Resp. to Pltf. R. 4 Stmt. ¶ 8.

5. Article XV of the Declaration (Article XV) governs use restrictions for Preserve lots. Section 15.01h of Article XV (Section 15.01h or § 15.01h) provides, in part:

No Lot Owner shall erect or permit to be erected on any Lot any fence, pool, tennis court or other outdoor game court, storage shed or other exterior building, addition or improvement without the prior written consent of the Executive Board which approval may be withheld in the Executive Board's sole and absolute discretion.

Pltf. R. 4 Stmt. ¶ 6; Roveda Aff. ¶ 8 & Exh. A; Def. Resp. to Pltf. R. 4 Stmt. ¶ 6.

6. Article XVI of the Declaration, entitled Architectural Review (Article XVI) reads "INTENTIONALLY DELETED." Roveda Aff. Exh. A.

7. Article XVII, section 17.01b of the Declaration (Section 17.01b or § 17.01b) reads, in relevant part:

The Executive Board shall have the power to adopt, amend, and enforce compliance with such reasonable Rules and Regulations relative to the operation, use and occupancy of the Lots . . . consistent with the provisions of this Declaration.

Pltf. R. 4 Stmt. ¶ 7 & Exh. A; Roveda Aff. ¶ 9; Def. Resp. to Pltf. R. 4 Stmt. ¶ 7.

8. Article XXII, § 22.12 (Section 22.12 or § 22.12) reads:

Nothing contained in this Declaration shall limit the right of . . . [the Board] to exercise its business judgment or act in a subjective manner with respect to any matter as to which it has been granted such right and any such exercise shall not be deemed inconsistent with any covenant of good faith or fair dealing implied by law to be part of this Declaration. . . . [The Board] . . . may . . . act in its sole, commercially responsible discretion and business judgment and, with respect to any requested consent and any such exercise, such action shall not be deemed to be inconsistent with any covenant of good faith and fair dealing otherwise implied by law to be a part of this Declaration.

Roveda Aff. Exh. A.

9. The Architectural Guidelines require a Preserve lot owner to submit an architectural modification application to the Board for the Board's approval. Among other guidelines, the Board has sixty days to review and approve or reject the application. Roveda Aff. Exh. C.

10. The previous house located on the Property was a two-story, four-bedroom, colonial-style house. Pltf. R. 4 Stmt. ¶ 9; Roveda Aff. ¶ 10; Def. Resp. to Pltf. R. 4 Stmt. ¶ 9.

11. On April 29, 2015, a fire destroyed the previous house located on the Property. Pltf. R. 4 Stmt. ¶ 10; Roveda Aff. ¶ 11; Def. Resp. to Pltf. R. 4 Stmt. ¶ 10.

12. Sarcia purchased the Property on April 28, 2017. Pltf. R. 4 Stmt. ¶ 11; Def. Resp. to Pltf. R. 4 Stmt. ¶ 11; Roveda Aff. ¶ 12; Def. R. 4 Stmt. ¶ 5 & Exh. A.

13. Relying on the advice of counsel, Sarcia concluded that there were no covenants or other restrictions that would prevent his constructing a single-story house on the Property's existing foundation without consent of the Board. Def. R. 4 Stmt. ¶ 3 & Exh. A.

14. Shortly after purchasing the Property, the Board informed Sarcia that any construction on the Property required Board approval before commencing. Def. R. 4 Stmt. ¶ 7 & Exh. A.

15. In May 2017, Sarcia submitted his construction plans for the Property to the Board. Pltf. R. 4 Stmt. ¶ 12; Def. Resp. to Pltf. R. 4 Stmt. ¶ 12; Roveda Aff. ¶ 12 & Exh. D; Def. R. 4 Stmt. ¶ 9 & Exh. A.

16. On May 26, 2017, Sarcia's attorney, Barry W. Plunkett (Plunkett), requested information from the Board regarding the Preserve's restrictions and construction approval process. Plunkett also informed the Board that Sarcia was obtaining town construction permits to build his new house on the Property, and that "time [was] of the essence." Pltf. R. 4 Stmt. ¶ 13; Def. Resp. to Pltf. R. 4 Stmt. ¶ 13; Roveda Aff. ¶ 13 & Exh. E; Def. R. 4 Stmt. ¶ 11.

17. At some point between May 26, 2017 and July 11, 2017, the Board informed Plunkett that any construction on the Property required the Board's approval to proceed. Pltf. R. 4 Stmt. ¶ 14; Roveda Aff. ¶ 14 & Exh. E; Def. Resp. to Pltf. R. 4 Stmt. ¶ 14.

18. On July 11, 2017, the Board informed Plunkett that it had rejected Sarcia's proposed plan. Pltf. R. 4 Stmt. ¶¶ 14–15; Roveda Aff. ¶¶ 14–15 & Exh. C; Def. Resp. to Pltf. R. 4 Stmt. ¶ 14-15; Def. R. 4 Stmt. ¶ 13 & Exh. D.

19. Sarcia proceeded with construction of his house on the Property despite the Board's denial of his construction plan. Pltf. R. 4 Stmt. ¶ 16; Roveda Aff. ¶ 16; Def. Resp. to Pltf. R. 4 Stmt. ¶ 16.

20. On August 8, 2017, Sarcia submitted the New Elevation Plan to the Board for approval. The Board rejected the New Elevation Plan on August 11, 2017. Def. R. 4 Stmt. ¶¶ 18, 22.

21. Between August 30, 2017 and September 9, 2017, Sarcia submitted the Third Elevation Plan to the Board for Approval. Sarcia withdrew the Third Elevation Plan from the Board before it issued a decision. Def. R. 4 Stmt. ¶ 31.

22. On September 9, 2017, Sarcia submitted the Application for Architectural Modification and New Elevation Plan to the Board for Approval. The Board rejected the same on September 29, 2017. Def. R. 4 Stmt. ¶ 32–33.

Discussion

The Board asks the court to enter summary judgment (1) finding that constructing a house on the Property constitutes an improvement subject to Board approval under the Declaration, (2) ordering Sarcia to dismantle existing construction on the property due to lack of Board approval, (3) enjoining Sarcia from constructing any structure on the Property absent Board approval, and (4) granting attorneys' fees to the Board. Sarcia requests that the court (1) find that construction of a house on the Property does not require Board approval under the Declaration, (2) find that the Board's denial of Sarcia's construction was arbitrary and capricious, (3) enter judgment declaring that Sarcia may build a house upon the Property, (4) award damages to Sarcia, and (5) award attorneys' fees to Sarcia.

Both parties essentially request the court to determine if the Declaration requires Sarcia to obtain Board approval of his construction and whether the Board's denial of Sarcia's proposed construction should be affirmed or reversed under the applicable standard of review. For the reasons discussed below, the Plaintiff's Summary Judgment Motion is ALLOWED IN PART and DENIED IN PART, and Defendant's Summary Judgment Motion is DENIED.

a. Applicability of the Declaration to Sarcia's Proposed Construction

The Declaration is a covenant, typical of common-interest communities, that burdens each parcel in the Preserve. The first question – whether the Declaration requires Sarcia to obtain approval of the architectural plans for his proposed house – turns on whether the Declaration requires approval of plans for the construction of an entire new house on the site of a previously-destroyed house. This requires an interpretation of the meaning and applicability of Article XV of the Declaration and, in particular, § 15.01h, which provides:

No Lot Owner shall erect or permit to be erected on any Lot any fence, pool, tennis court or other outdoor game court, storage shed or other exterior building, addition or improvement without the prior written consent of the Executive Board which approval may be withheld in the Executive Board's sole and absolute discretion.

The court must interpret a covenant "so as to give effect to the intent of the parties as manifested by the words used, interpreted in light of the material circumstances and pertinent facts known to them at the time it was executed." Twomey v. Comm'r of Food & Agric., 435 Mass. 497 , 501–502 (2001) (internal quotations and citations omitted), citing Restatement (Third) of Property (Servitudes) § 4.1 (1998). Where the language of a covenant is unambiguous, its interpretation is a question of law; its words will be given their plain or well-established meaning. Seaco Ins. Co. v. Barbosa, 435 Mass. 772 , 779 (2002); City of Haverhill v. George Brox, Inc., 47 Mass. App. Ct. 717 , 720 (1999). If a covenant's language is ambiguous, then its interpretation is a question of fact, and the circumstances surrounding its formation may be considered to resolve the ambiguity. Seaco Ins. Co., 435 Mass. at 779; Louis Stoico, Inc. v. Colonial Dev. Corp., 369 Mass. 898 , 902 (1976).

The first question, therefore, is whether § 15.01h of the Declaration is ambiguous or not. Whether a term of a covenant is ambiguous is a question of law. Eigerman v. Putnam Invs., Inc., 450 Mass. 281 , 287 (2007). A covenant term is ambiguous if its language supports reasonable differences of opinion as to its meaning. President & Fellows of Harvard College v. PECO Energy Co., 57 Mass. App. Ct. 888 , 896 (2003). The Board argues that "improvement," as used in § 15.01h of the Declaration, is unambiguous, so that the word's plain meaning controls. See City of Haverhill, 47 Mass. App. Ct. at 720. According to the Board, the unambiguous meaning of "improvement" includes a principal structure. Sarcia contends that "improvement" only includes accessory structures. The court, consistent with its ruling in its Preliminary Injunction Order, agrees with the Board. The word "improvement" is not defined in § 15.01(h) or elsewhere in the Declaration and does not indicate precisely what the term was meant to encompass. When construing a provision that does not define its words, "we give them their usual and accepted meanings." Commonwealth v. Zone Book, Inc., 372 Mass. 366 , 369 (1977); DeFreitas v. Cote, 342 Mass. 474 , 477 (1961). "Improvement" is defined broadly; courts generally apply the dictionary interpretation of an improvement as "a permanent addition . . . that enhances its capital value and that involves the expenditure of labor or money and is designed to make the property more useful or valuable as distinguished from ordinary repairs." Parent v. Stone & Webster Eng'g Corp., 408 Mass. 108 , 111 (1990), citing Webster's Third New Int'l Dictionary at 1138 (1971); Conley v. Scott Prods., Inc., 401 Mass. 645 , 647 (1988); Dighton v. Federal Pac. Elec. Co., 399 Mass. 687 , 697 (1987); Milligan v. Tibbetts Eng'g Corp., 391 Mass. 364 , 368 (1984); Peters v. Stone, 193 Mass. 179 , 185 (1906) ("The word 'improvements' is of broad signification."); Raffel v. Perley, 14 Mass. App. Ct. 242 , 245 (1982); Souza v. Southern Union Co., No. SUCV2010-03538-E, 2013 WL 10055891, at *1 (Mass. Super. May 15, 2013). Consistent with this broad interpretation, the reconstruction of a dwelling that was damaged in fire constitutes an "improvement" of the Property. Sarcia's plans for the Property are subject to approval under § 15.01h of the Declaration. [Note 1]

b. Reasonableness of the Board's Denial of Sarcia's Construction Application

In reviewing the Board's denial of Sarcia's construction permit, the first question is what standard of review the court must apply to the Board's decision. Section 15.01h provides that the Board may withhold approval of a request for an improvement in its "sole and absolute discretion." Pltf. App. Exh. A. That seemingly sweeping standard is tempered by § 22.12, which provides that the Board may "act in its sole, commercially responsible discretion and business judgment and, with respect to any requested consent and any such exercise, such action shall not be deemed to be inconsistent with any covenant of good faith and fair dealing otherwise implied by law to be a part of this Declaration." Id. Thus, the Board does not have the absolutely unfettered authority to deny approval without review; the question rather is what is the scope of its "responsible discretion and business judgment." Id. The Board argues that this language means that its decisions are reviewed under the so-called "business judgment rule," requiring the affirmance any of its decisions absent fraud or breach of fiduciary duty. Sarcia counters that the Board's rejection of his construction application is subject to a reasonableness standard that it has not met. The court finds that the applicable standard is reasonableness. A question of material fact exists with respect to the reasonableness of the Board's denial of Sarcia's application.

Few Massachusetts courts have addressed the applicable standard of review for homeowners' association executory board decisions. Decisions regarding the powers of condominium associations created under G. L. c. 183A are instructive because such schemes of use restriction are analogous to those of homeowners' associations. See Trustees of Prince Condominium Trust v. Prosser, 412 Mass. 723 , 725 (1992) (citing homeowners' association authority to support decision regarding condominium association).

Citing the Superior Court cases of Harris v. McIntyre and Pompei v. Fincham, the Board urges the court to adopt the business judgment rule, and therefore grant deference to its rejection of Sarcia's construction proposal. Pompei v. Fincham, 2007 WL 4626915, at *2 (Mass. Super. Nov. 16, 2007); Harris v. McIntyre, 2000 WL 942559, at *11–*12 (Mass. Super. Jun. 27, 2000). In Harris, the court imposed the business judgment standard for evaluating a condominium trust officer's oversight of faulty construction. Harris, 2000 WL 942559 at *11–12. Similarly, in Pompei, the court employed the business judgment standard to review a condominium fee discount scheme. Pompei, 2007 WL 4626915 at *2. In both Harris and Pompei, a business judgment standard was appropriate because the conduct at issue was financial: general contracting in Harris and fee assessment in Pompei. Id.; see Harris, 2000 WL 942559 at *11–12.

Where a common interest community restricts property use, however, courts limit deference to executive boards and look to whether the restriction is reasonable. In Noble v. Murphy, 34 Mass. App. Ct. 452 (1993), the Appeals Court declined—as unnecessary to their decision—to extend the business judgment standard to assessment of a condominium use restriction regarding pets. Id. 457-458, 460 n.7. Instead, the court looked to the restriction's reasonableness. Id. at 457-460. More recently, in Trustees of Muzzey High Condominium Trust v. Lexington, 2012 WL 1799736 (Mass. Super. 2012), the Superior Court rejected the business judgment rule in favor of a reasonableness standard for assessing a condominium association's parking ban. Id. at *12.

The current case concerns the Board's restriction on property use, not the oversight of the Preserve's finances. Like the restrictions in Noble and Trustees of Muzzey High Condominium Trust, the Board attempts to restrict Sarcia's use of the Property by imposing a review of his proposed construction. See id.; Noble, 34 Mass. App. Ct. at 457-459. The Board's decision-making process is therefore reviewed under a reasonableness standard rather than under the deferential business judgment rule.

All evidence available to the court regarding the reasonableness of the Board's rejection of Sarcia's construction plan is either disputed or inconclusive. The parties dispute whether Sarcia's proposed house would be inconsistent with others in the Preserve. The Board decisions denying Sarcia's proposed construction present only vague reasoning. Any conclusion that the court might draw from the evidence would rely on inference impermissible at summary judgment. Because the record lacks sufficient undisputed evidence to determine the reasonableness of the Board's denying Sarcia's construction plans, a dispute of material fact exists preventing the court from entering summary judgment.

Conclusion

For the foregoing reasons, the Plaintiff's Summary Judgment Motion is ALLOWED IN PART and DENIED IN PART, and the Defendant's Summary Judgment Motion is DENIED. A telephone status conference is set down for September 5, 2018 at 9:30 am.

SO ORDERED