TRUSTEES OF THE KETTLE BROOK LOFTS CONDOMINIUM TRUST v. KETTLE BROOK LOFTS, LLC, COMMERCE BANK AND TRUST COMPANY and HAYMARKET CAPITAL, LLC.

The Trustees of the Kettle Brook Lofts Condominium Trust (the "Trust") seek summary judgment on the sole remaining issue in this case, corresponding with Count VIII of their Complaint in Miscellaneous Case No. 15 MISC 000302 (for declaratory judgment). Specifically, the Trust seeks a declaration that mortgages held by Defendants Commerce Bank and Trust Company ("Commerce") and Haymarket Capital, LLC. ("Haymarket") (collectively, the "Lenders") are subordinate to the condominium Master Deed and Declaration of Trust by virtue of multiple partial discharges executed by the Lenders which released the units together with the undivided percentage interest which those units hold in the common areas of the Kettle Brook Lofts Condominium ("Condominium"). For the reasons discussed below, I allow Plaintiff's Renewed Motion for Summary Judgment on Count VIII of their Complaint.

PROCEDURAL BACKGROUND

On October 5, 2018, in dueling actions regarding the validity of amendments to the Master Deed of the Condominium, this Court (Scheier, J.) issued a Decision on Cross-Motions for Summary Judgement (the "2018 Decision"). [Note 1] The 2018 Decision concluded that the Fifth and Sixth Amendments to the Master Deed were invalid (and did not add any additional units to the Condominium), and that the phasing rights of declarant Kettle Brook Lofts, LLC ("Declarant" or "LLC") expired on July 22, 2015 (such that no additional units could be phased into the Condominium without the vote of the current owners of the then existing 53 units), consistent with the requirements of the Master Deed and G. L. c. 183A, §5(b). The 2018 Decision found that issues raised in Count VIII of the Trust's Complaint, seeking a declaration regarding the status of mortgages held by the Lenders, were not ripe for summary judgment because of material facts in dispute. The parties thereafter undertook additional discovery and the question of whether the mortgages are subordinate to the Master Deed and Declaration of Trust is now before the court.

FACTS

The following material undisputed facts are taken from the 2018 Decision, the Trustees' Statement of Undisputed Material Facts in Support of Re-newed Motion for Summary Judgement on Count VIII of the Amended Verified Complaint ("Trust's St."), Appendix to Trustees of the Kettle Brook Lofts Condominium Trust's Renewed Motion for Summary Judgment on Count VIII ("Trust's App."), Response to Plaintiff's Statement of Undisputed Material Facts and Statement of Additional Material Facts of Defendants Commerce Bank and Trust Company and Haymarket Capital, LLC. ("Defendants' St."), Additional Appendix Exhibits of Defendants Commerce Bank and Trust Company and Haymarket Capital LLC ("Defendants' App."), and Plaintiff's Responses to Statement of Additional Facts of Defendants Commerce Bank and Trust Company and Haymarket Capital, LLC in Response to Plaintiff's Renewed Motion for Summary Judgment on Count VIII ("Trust's Response"). [Note 2]

1. The Trust is the organization of unit owners of the Condominium. 2018 Decision, Findings of Fact No. 2 (hereinafter simply, "FOF").

2. The LLC is a Massachusetts limited liability corporation with a principal place of business at 1511 Main Street in Worcester. The LLC was the declarant of the Condominium. FOF No. 1.

3. Commerce was a chartered banking institution formerly with a place of business at 386 Main Street in Worcester and is now a division of Berkshire Bank. Haymarket is a Massachusetts limited liability company, formerly with a principal place of business at 12 Clock Tower Place, Suite 200, in Maynard and now located at 88 Waverly Street in Framingham. Defendants' St., ¶¶ 4-5; FOF No. 3.

4. There are five mortgages at issue, as follows (collectively, the "Mortgages"):

A. On June 23, 2006, the LLC executed a mortgage deed granting and conveying to WA Funding I, LLC certain land and improvements thereon located at 1511 Main Street in Worcester recorded on June 26, 2006, in Book 39245, at Page 366, later assigned to Haymarket by assignment dated April 23, 2009, recorded on April 28, 2009, in Book 44153, at Page 39. Defendants' St., ¶ 8; FOF No. 7.

B. On December 8, 2006, the LLC executed and recorded two additional mortgage deeds granting and conveying certain land and improvements thereon located at 1511 and 1541 Main Street in Worcester to WA Funding I, LLC, which were duly recorded at Book 40311, Page 176 and Book 40311, Page 197. Trust's St., ¶ 9, Defendants' St., ¶ 9; Trust's App. at Tab C.

C. On July 30, 2007, the LLC executed a mortgage deed granting and conveying to Commerce certain land and improvements thereto located at 1511 and 1541 Main Street in Worcester, recorded on July 31, 2007 in Book 41570, at Page 174. Defendants' St., ¶ 7; FOF No. 8.

D. On June 2, 2008, the LLC executed a mortgage deed granting and conveying certain land and improvements thereon identified with an address at 1511 Main Street in Worcester to Haymarket recorded on March 25, 2009, in Book 43989 at Page 1. Defendants' St., ¶ 10; FOF No. 9, Trust's App. at Tab D. The First Amendment to Security Agreement, dated April 9, 2009 at Book 44063, Page 244, defines the property as being 1511 and 1541 Main Street. The Amended mortgage substituted a new Exhibit A describing the property to now include 1511 and 1541 Main Street.

5. The Condominium was created on July 22, 2008, when the LLC recorded a Master Deed and Declaration of Trust with the Worcester County Registry of Deeds in Book 43114, at Page 27, and Book 43114, at Page 54, respectively. FOF No. 4.

6. The LLC submitted the land to condominium status when the Master Deed was recorded, as described in Schedule A of the Master Deed, and is shown on a plan of land dated July 2, 2008, recorded in Book of Plans 869, at Page 23 (Condominium Land). FOF No. 5.

7. The Master Deed, in its introductory paragraph, provides in part, as follows:

The undersigned, KETTLE BROOK LOFTS, LLC, a Massachusetts Limited Liability Company having a principal office at 390 Main Street, Suite 901, Worcester, Massachusetts, (hereinafter "Declarant") being the sole owner of the land with the buildings thereon more commonly known as 1511 Main Street, Worcester, Worcester County, Massachusetts, ("Land"), by duly executing and recording this Master Deed, does hereby submit said Land, together with the buildings and improvements erected thereon, and all easements, rights and appurtenances belonging thereto, (hereinafter collectively called the "Property"), to the provisions of Massachusetts General laws, Chapter 183A, (hereinafter "Chapter 183A"), and does hereby state that it proposes to create, and does hereby create, a condominium (hereinafter referred to as the "Condominium"), with respect to the Property, to be governed by and subject to the provisions of said Chapter 183A.

FOF No. 13; Trust's App. at Tab H.

8. Section III.A of the Master Deed provides, in part, as follows:

The land upon which the buildings and improvements of the Condominium is located consists of the land situated at 1511 and 1541 Main Street, Worcester, Massachusetts, as shown on the Site Plan to be recorded herewith and is more particularly described in "Exhibit A" attached hereto.

FOF No. 14; Trust's St., ¶ 16; Trust's App. at Tab H, Master Deed at P. 2, § III.A.

9. Article V(A)(1) of the Master Deed provides, as follows:

The Units comprising the Condominium Units and the designations, locations, approximate areas, Common Elements (as hereinafter defined) immediately accessible thereto, exclusive use areas and the percentage interest of each Unit in the Common Elements (the "Beneficial Interest") are as set forth in Schedule C attached hereto and made a part hereof. The owner or owners of a Unit are hereinafter (jointly, if more than one) referred to as the "Unit Owner." The determination of Beneficial Interest is based upon the approximate relation that the fair value of the Unit bears to the then aggregate fair value of the Units in the Condominium.

Trust's St., ¶ 17; Trust's App. at Tab H, Master Deed at Article V(A)(1).

10. Section VI of the Master Deed provides, in part, as follows:

The common areas and facilities of the Condominium consist of the entire property described on Exhibit "A" of this Master Deed and all parts of the buildings as described in Part III of this Master Deed, other than the Units described on Exhibit "C" hereto, which specific Units include the appurtenant storage Units and parking spaces as described herein: [. . .]

(b) The foundations of the buildings and all portions thereof, and all structural columns, structural lintels, girders, beams, slabs, supports, and floor, ceiling and roof beams and joists and all structural member appurtenant to such floor, ceiling and roof beams and joists, and exterior walls which shall include all bricks from the exterior plane of the interior-most brick, any and all wall studs in partition-walls between Units, the sub-flooring below the upper surface thereof, elevators and all apparatus, controls, and wiring appurtenant thereto, roofs, building entrances and exits, and all structural portions of the buildings[.]

FOF No. 16; Trust's St., ¶ 20; Trust's App. at Tab H.

11. Article VII of the Master Deed provides, in part, as follows:

The owner of each Unit shall be entitled to an undivided interest in the common areas and facilities of the Condominium in the percentages outlined on Exhibit "C" attached hereto, all of which have been calculated on the basis of the approximate relation that the fair market value of the individual Unit bears to the total fair market value of all of the Units in the Condominium on the date of the execution of this Master Deed.

Trust's St., ¶ 18; Trust's App. at Tab H, Master Deed at Article VII.

12. Section V(A)(iii) of the Master Deed provides, in part, as follows:

In any Special Amendment to this Master Deed prepared and recorded as described above, the Declarant or Trustees shall (to the extent necessary or advisable) create new Unit numbers or designations. Such Special Amendment shall also reallocate the Beneficial Interests of the Unit(s) in the approximate relation that the fair market value of each new Unit bears to the fair market value of the original Unit(s) involved, such that the resulting Beneficial Interests of any . . . percentages of all Units in the Condominium equal 100.

Trust's St., ¶ 19; Defendants' St., ¶ 19; App. at Tab H, Master Deed at Article VII(A)(iii).

13. Exhibit A to the Master Deed, entitled Description of Land, states as follows: "The land in Worcester, Worcester County, Massachusetts, with the buildings thereon situated," and lists four tracts of land, Tracts I-IV.

Trust's St., ¶ 21; Trust's App. at Tab H, Master Deed, p. 22, Exhibit A.

14. The Master Deed contains no reserved right or other power vesting in the Declarant the right to remove from the Condominium any portion of the common area. FOF No. 45; Trust's St., ¶ 22.

15. The Master Deed established a seven-year period in which the LLC was authorized to construct the Condominium, with an initial phase and five potential additional development phases and sub-phases, to include up to a total of 109 Units. 2018 Decision; Trust's App. at Tab H (Master Deed, Articles IV and VIII). The initial development included 33 Units, Phase II added 18 Units by virtue of the First Amendment to Master Deed and Phase III added two Units by virtue of the Second Amendment to Master Deed (totaling 53 Units). Trust's App. at Tab H.

16. The 2018 Decision concluded that as of July 22, 2015, the final number of units in the Condominium was fixed at 53, no additional units could thereafter be phased into the Condominium without the vote of the then existing 53 unit owners. The 2018 Decision also concluded that the LLC's attempt to add Phase IV with an additional 56 Units (to create 109 Units) was invalid. (Those 53 units are listed in Exhibit C to the Third Amendment to Master Deed, recorded in Book 43277, at Page 15.) The LLC sold 48 of the 53 units to third parties, as to each of which the Lender has issued a Partial Release. Trustees' Memorandum of Law in Support of Renewed Motion for Summary Judgment on Count VIII, at p. 6, citing App. E, F and G (Partial Releases).

17. WA Funding I, LLC executed two "Partial Release of Mortgage" Instruments for the following Condominium units: B-104, B-201, B-203, B-305, B-204, B-PH5, C-201, C-203, C-206, C-301, C-303, C-305, C-402, C-408, C-409, C-PH4, C-PH5, B-304, B-PH2, C-401, G-200A and C-202. FOF No. 10; Trust's App. at Tab E.

18. Commerce executed several Partial Release of Construction Mortgage, Assignment and Security Agreement and Assignment of Leases and Rents, some with a Scrivener's Affidavit and UCC Financing Statement, for the following Condominium units: B-104, B-201, B-203, B-204, B-305, B-PH5, C-201, C-203, C-206, C-301, C-303, C-305, C-402, C-408, C-409, C-PH4, C-PH5, B-PH2, B-304, C-401, G-200A, C-202, B-101, B-301, C-204, C-205, C-306, C-PH3, C-PH9, B-302, C-308, B-PH1, B-PH3, C-406, C-403, C-302, C-407, B-202, B-PH4, C-404, C-PH2, C-PH7, B-102, C-PH1, B-303 and C-307. FOF No. 1; Trust's App. at Tab F.

19. Haymarket executed several "Partial Release of Mortgage" Instruments for the following Condominium units: B-101, C-204, C-205, C-306, C-PH3, C-PH9, B-301, B-PH1, B-PH3, B-302, C-308, C-302, C-403, C-406, C-407, B-202, B-PH4, C-404, C-PH2, C-PH7, B-102, B-304, B-303, C-PH1, C-PH6, G-200B, B-101, C-204, C-205, C-306, C-PH3, C-PH9, B-301, C-307, and C-408. FOF No. 12; Trust's App. at Tab G.

20. Commerce and Haymarket do not dispute the authenticity of the partial releases or that signatures on those documents are those of authorized representatives of the lenders. Trust St., ¶ 14; Def. St. ¶ 14.

21. The partial releases were executed at the request of the developer. Trust's St., ¶ 26; Defendants' St., ¶ 26.

DISCUSSION

I. Standard of Review

"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. 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. Constr., 436 Mass. at 644. In viewing the factual record presented with a motion for summary judgment, the court is to draw "all logically permissible inferences" from the facts in favor of the non-moving party. Willits v. Roman Catholic Archbishop of Boston, 411 Mass. 202 , 203 (1991).

Count VIII of the Trust's Amended Verified Complaint seeks a declaration that the Mortgages of the Lenders are subordinate to the Master Deed and Declaration of Trust. The import of such a declaration is that the Trust would own the common area of the Condominium free and clear of these Mortgages. The Lenders maintain that their Mortgages continue to encumber the common areas of the Condominium, remain available as collateral and, if foreclosed upon, would extinguish the Master Deed and Declaration of Trust. While the Trust acknowledges that the Mortgages were recorded prior to the Master Deed and Declaration of Trust, the Trust contends that the Mortgages no longer have priority over the Master Deed and Declaration of Trust because each time the Declarant sold a unit, the Lenders executed a partial mortgage discharge releasing that unit and its undivided percentage interest in the common areas.

I. Beechwood Village Condominium Trust

On May 15, 2019, while supplemental discovery was underway in this case following issuance of the 2018 Decision, the Appeals Court issued its decision in Trustees of the Beechwood Village Condominium Trust v. USAlliance Federal Credit Union, 95 Mass. App. Ct. 278 (2019), further app. rev. denied, 482 Mass. 1108 (2019). The Beechwood decision substantially controls the outcome of this case. Beechwood also involved claims by lenders that their mortgages to a condominium developer remained in full force and effect despite the lenders' issuance of partial mortgage discharges upon the developer's sale of each condominium unit. Based upon its review of the condominium documents and the partial discharges, the Appeals Court concluded:

[A]ll of the land associated with the condominium development, including the common area, was submitted to the provisions of G. L. c. 183A, the Condominium Act (act or statute), by the master deed, and that the effect of the subsequent mortgage discharges by the relevant lenders upon the sale of each unit was to release the lenders' mortgage interest in all of the common area. The unit owners became the fee simple owners of all of the common area as tenants in common, including the undeveloped common area.

Id. at 279 (footnote omitted). After making this finding, Beechwood went on to consider certain phasing and easement rights which had been reserved by the declarant and whether those reserved rights were released by the partial discharges. In this case, an analysis of the LLC's reserved declarant rights is not necessary because the 2018 Decision concluded that the LLC's phasing rights expired on July 22, 2015, and its attempt to extend those rights and add units to the Condominium was invalid. The sole issue now before the court is whether the Mortgages are subordinate to the Master Deed.

II. The Kettle Brook Lofts Condominium Documents

As in Beechwood, "[i]nterpretation of the master deed and partial releases is the heart of this dispute." Id. at 284. "The principles governing interpretation of a deed are similar to those governing contract interpretation. In the case of the latter, '[a]n interpretation which gives a reasonable meaning to all of the provisions of a contract is to be preferred to one which leaves a part useless or inexplicable.'" 2018 Decision, at p. 22, quoting Jacobs v. United States Fid. & Guar. Co., 417 Mass. 75 , 77 (1994); Barclay v. DeVeaux, 384 Mass. 676 , 684 (1981) (applying contract law to master deed interpretation). "Where the language of a contract is clear and unambiguous, summary judgment is an appropriate vehicle for judicial interpretation because the court may interpret the meaning of the contract as a matter of law without resort to extrinsic evidence or the determination of fact." Beachwood, 95 Mass. App. Ct. at 284-285, quoting Sullivan v. Southland Life Ins. Co., 67 Mass. App. Ct. 439 , 440 (2006). As discussed below, I conclude that the terms of the governing documents are clear and unambiguous.

Review begins with the Master Deed. The Condominium was created on July 22, 2008, when the LLC recorded a Master Deed and Declaration of Trust at the Worcester County Registry of Deeds. The Master Deed for the Condominium provided that all land and appurtenances were submitted to Chapter 183A. Specifically, the first paragraph of the Master Deed stated the LLC:

being the sole owner of the land with the buildings thereon more commonly known as 1511 Main Street, Worcester . . . ('Land'), by duly executing and recording this Master Deed does hereby submit said Land, together with the buildings and improvements erected thereon, and all easements, rights and appurtenances belonging thereto . . . to Chapter 183A . . . .

Section VI of the Master Deed defines the common area of the Condominium broadly to encompass: "the common area and facilities of the Condominium consist of the entire property described on 'Exhibit A' of this Master Deed and all parts of the buildings as described in . . . the Master Deed, other than the Units . . . ." Likewise, Section III.A describes the land submitted to the Condominium to include "the land situated at 1511 and 1541 Main Street, Worcester, Massachusetts," as described more particularly in Exhibit A. In turn, Exhibit A to the Master Deed, entitled Description of Land, consistently reflects that the entirety of the LLC's property was submitted to the Condominium Statute. It states as follows: "The land in Worcester, Worcester County, Massachusetts, with the buildings thereon situated," and lists four tracts of land, Tracts I-IV.

As noted above, although the Master Deed structured the Condominium as a phased development, no issues related to reserved phasing rights are currently before the court. The 2018 Decision concluded that the LLC's attempt to extend its phasing rights was invalid and those rights were waived as of July 22, 2015. Nor is there a contention that the LLC, as Declarant, has a right to withdraw land from the Condominium. As such, all of the LLC's land was placed into the Condominium at the time of recording of the Master Deed and remains as common area.

Consistent with Chapter 183A and pertinent case law, the Condominium land is held by the unit owners as tenants in common in proportion to their respective individual interests in those common areas. Beachwood, 95 Mass. App. Ct. 286 -287, citing Berish v. Bornstein, 437 Mass. 252 , 262 (2002); Flynn v. Parker, 80 Mass. App. Ct. 283 , 288 (2011); DiBiase Corp v. Jacobowitz, 43 Mass. App. Ct. 361 , 366 (1997). See also id. at 286 n. 21. "A condominium unit owner is entitled to the exclusive ownership and possession of its unit, G.L. c. 183A, §4, and to an undivided interest in the common areas in the same proportion as the value of [its] unit compared to the aggregate value of all of the units. G. L. c. 183A, §5." Kaplan v. Boudreaux, 410 Mass. 435 , 438 (1991).

The provisions of the Master Deed regarding the beneficial interest of the unit owners are consistent with Chapter 183A. Article V(A)(1) of the Master Deed defines the Units to include the percentage interest of each Unit in the common areas, as follows:

The Units comprising the Condominium Units and the designations, locations, approximate areas, Common Elements (as hereinafter defined) immediately accessible thereto, exclusive use areas and the percentage interest of each Unit in the Common Elements (the "Beneficial Interest") are as set forth in Schedule C attached hereto and made a part hereof. The owner or owners of a Unit are hereinafter (jointly, if more than one) referred to as the "Unit Owner." The determination of Beneficial Interest is based upon the approximate relation that the fair value of the Unit bears to the then aggregate fair value of the Units in the Condominium.

Likewise, Article VII of the Master Deed entitled "Percentage Interest in Common Areas and Facilities," provides:

The owner of each Unit shall be entitled to an undivided interest in the common areas and facilities of the Condominium in the percentages outlined on Exhibit "C" attached hereto, all of which have been calculated on the basis of the approximate relation that the fair market value of the individual Unit bears to the total fair market value of all of the Units in the Condominium on the date of the execution of this Master Deed.

Article VII goes on to provide that even in the event of a phased expansion of the Condominium, the unit owners' percentage beneficial interest would be reallocated so that in all instances the resulting beneficial interest of all of the unit owners totals 100 percent. [Note 3]

The 2018 Decision established that the final number of units in the Condominium was fixed at 53 and that no additional units could thereafter be phased into the Condominium without the vote of the then existing 53 unit owners. [Note 4] As such, as of July 22, 2015, those 53 unit owners owned the entirety of the common area, as well as exclusive ownership and possession of their individual units. More specifically, they own an undivided interest in the common areas as tenants in common together with all the other unit owners.

III. The Partial Discharges and Releases

Although the 2018 Decision declined to resolve the status of the partial releases, that decision summarized the status of the partial releases as follows:

[T]his court does not understand the parties to dispute the validity and binding nature of any of the recorded partial releases issued by Commerce or Haymarket, or WA Funding I, LLC. The recorded partial releases listed . . . above release the units and each unit's undivided percentage interest in the Condominium's common area from the applicable mortgages as a matter of law. [Note 5]

2018 Decision, p. 31. It is undisputed that the Lenders executed a number of partial releases, covering 48 of the 53 units at the Condominium. [Note 6] The Lenders acknowledge execution of the partial releases at the request of the developer, but dispute that the effect was to release the common area of the Condominium along with the designated units.

In Beechwood, the Appeals Court concluded that the partial mortgage discharges executed by those lenders released not only the units, but also the appurtenant undivided interest of the units in the common area, because the appurtenant interest cannot be separated from the unit. Beechwood, 95 Mass. App. Ct. at 288 ("We agree with the condominium trust that when [the lender] executed the partial discharges of the first three units, and with each release granted thereafter, [the lenders] necessarily released their mortgage interests in all of the fee simple interest in the common area."). The Appeals Court rejected the lenders' argument that their mortgages were entitled to superiority over the master deed because the mortgages were recorded prior to the master deed. As the Appeals Court explained: "These contentions ignore . . . the fact that when [the lender] executed partial discharges of the first three units, he also released each of the three unit's appurtenant undivided one-third interest in the common area. The interest in the common area cannot be separated from the unit." Id. at 288. This is consistent with Chapter 183A, which plainly provides that the "percentage of the undivided interest in the common areas and facilities shall not be separated from the unit to which it appertains, and shall be deemed to be conveyed or encumbered with the unit even though such interest is not expressly mentioned or described in the conveyance or other instrument." G. L. c. 183A, §5(b) (1). For this reason, the fact that the Beechwood partial discharges did not explicitly mention each unit's undivided interest in the common area was not controlling. Beechwood, 95 Mass. App. Ct. at 288 n. 22.

I turn now to the Lenders' partial mortgage releases in this case. WA Funding I, LLC, by its Treasurer, issued two partial releases, each encompassing a number of units in the Condominium. Its first Partial Release of Mortgage issued states:

For consideration paid, release to the present owner(s) its interest acquired under said mortgages, only, in the following described portions of the mortgaged premises: B-104, B-201, B-203, B-305, B-204 B-PH5, C-201, C-302, C-206, C-301, C-303, C-305, C-402, C-408, C-409, C-PH4, C-PH5, Kettle Brook Lofts, LLC, 1511 Main Street, Worcester, Massachusetts 01603. [Note 7]

Commerce, by its Vice President or Senior Vice President, executed a number of partial releases each entitled "Partial Release of Construction Mortgage, Assignment and Security Agreement and Assignment of Leases and Rents and Scrivener's Affidavit." Each of these states that Commerce "for consideration paid, releases to: present owners . . . " all interest acquired under its mortgages "in the following described portions of the mortgaged premises:" and then lists a number of units, such as "B-104, B-201, B-203, B-204, B-305, B-PH5, C-201, C-203, C-206, C-301, C-303, C-305, C-402, C-408, C-409, C-PH4, C-PH5." Haymarket, by its Treasurer, also executed a number of Partial Release of Mortgage documents, each of which states: "For consideration paid, release to present the owner(s) all interest acquired under said mortgages in the following described portions of the mortgage premises," and again listing a number of units in the Condominium.

All of the partial releases at issue in this case use the same essential terms. They release the Lenders' interest "in the following portions of the mortgaged premises," followed by a list of unit numbers. When each Lender released its interest in the "mortgage premises" (in other words, the listed Condominium units), the Lenders necessarily released each unit's appurtenant interest in the common areas as well. The Lenders advance several arguments to counter this conclusion and in support of their request that the Mortgages not be subordinated to the Master Deed and Declaration of Trust as a result of their execution of the partial releases. The Lenders attempt to distinguish the language of their Partial Releases from those in Beechwood by pointing out that the latter expressly referenced the "undivided percent in the common areas." In fact, however, Beechwood considered two different forms of partial release, only one of which included this additional language. The other form of release was substantially the same as those now before the court. In Beechwood, the Appeals Court concluded that the additional express reference did not create a "material distinction," since both forms of release necessarily included each unit's percentage interest in the common areas as a matter of law. [Note 8]

The Lenders also attempt to distinguish the facts of this case from those in Beechwood. They point out that the unfinished portions of the development in Beechwood included only a handful of unbuilt lots, whereas the unfinished portions of Kettle Brook Lofts include partially renovated industrial buildings, with 56 partially constructed and unsold units. The Lenders argue that the Partial Releases do not evidence the Lenders' intent to release these partially finished portions of the development. This argument is unavailing because it is inconsistent with the language of the both Master Deed and the Partial Releases. "[D]eeds should be construed as to give effect to the intent of the parties, unless inconsistent with some law or repugnant to the terms of the grant." Id. at 285, quoting Queler v. Skworon, 438 Mass. 304 , 311 (2002) (quotation and citation omitted). The Master Deed clearly states in Section VI that the common areas include "all parts of the buildings" other than the units. Section VI(b) further provides a long list of building components, such as foundations, structural columns, girders, beams, supports, ceilings, roofs, joists, exterior walls, and designates these as common area. Since the Master Deed does not distinguish between finished and unfinished buildings and categorizes all building components (other than the units) as common area, the partially constructed buildings must necessarily be common area. No third category of property interests exists separate from the units and common areas. Moreover, the partial releases themselves take no exception to any unfinished buildings or partially constructed, but unsold units. By releasing all interest in the units, the Lenders necessarily released the entirety of the common areas including those portions of the land where the unfinished units are located. [Note 9]

To further respond to the Lenders' argument that the partially constructed units are somehow not accounted for in the Master Deed or covered by the Partial Releases, it is critical to consider the 2018 Decision. As discussed in the 2018 Decision, the Master Deed reserved to the LLC, as declarant, "certain rights, including the right to add additional land, buildings and units in up to five additional phases, by means of one or more phasing amendments to the Master Deed." 2018 Decision at p. 17. The Master Deed, at Section XI(c), sets forth a precise procedure whereby the LLC could build additional units and phase them into the Condominium. Section XI (c) provides, in part, as follows:

Notwithstanding any of the provisions of this Master Deed, the Trust, including the By-laws, or of Chapter 183A, the Declarant reserves for itself, its successors and assigns, the right, power, authority, and ability to construct additional Units and common areas in additional phases and sub-phases of the Condominium, and when such improvements are substantially completed, to amend this Master Deed to include said additional phases and sub-phases in the Condominium, all without the consent of the then existing Unit Owners or their applicable mortgage holders.

The 2018 Decision concluded that the LLC failed in its efforts to timely take advantage of these procedures such that Fifth and Sixth Amendments to the Master Deed, which purported to add 56 units to the Condominium as Phase IV (increasing the number of units from 53 to 109, the maximum allowable), were invalid and did not have the effect of adding any additional units to the Condominium. 2018 Decision, at p. 30. As such, the Master Deed did contemplate the possibility that additional units might be constructed and be phased in by the LLC by way of an amendment, but the LLC lost its opportunity to complete those buildings and sell additional units. With the LLC having lost its reserved rights, the partially constructed buildings remain as common area.

IV. Unjust Enrichment and Unclean Hands

Alternatively, the Lenders ask this court to exercise its equitable powers to afford them relief even if the Mortgages are subordinated to the Master Deed and Declaration of Trust. The Lenders contend that they are owed millions of dollars pursuant to notes given by the LLC, secured by the Mortgages at issue, and the Trust would be unjustly enriched if the Mortgages are subordinated to the Master Deed. The theory of unjust enrichment provides that a "person who has been unjustly enriched at the expense of another is required to make restitution to the other. "Salamon v. Terra, 394 Mass. 857 , 859 (1985), quoting Restatement of Restitution §1 (1937). Although there is no requirement in Massachusetts for a showing of wrongdoing, it is necessary to show that retention of the benefit was unjust. Such a showing turns on the reasonable expectations of the parties. Community Builders, Inc. v. Indian Motorcycle Assocs., 44 Mass. App. Ct., 537, 560 (1998). "Even where a person has received a benefit from another, he is liable to pay therefor only if the circumstances of its receipt or retention are such that, as between the two persons, it is unjust for him to retain it." Crapser v. Bondsville Partners, Inc., 14 LCR 432 , 436 (2006) (Misc. Case No. 300634) (Sands, J.), quoting Restatement of Restitution §1 cmt. c.

From the summary judgment record before me, it is far from clear whether the unfinished portions of the development will enrich and benefit the Trust or whether the half-constructed buildings are a liability. Even if I assume that a benefit has been bestowed on the Trust, the reasonable expectations of the parties are established by the governing Condominium documents. Based on review of those documents, the 2018 Decision concluded that the LLC lost its right to add additional units to the Condominium after July 22, 2015. There is no reason to believe (or evidence to support an argument) that the LLC, the Lenders, or the Trust had any expectation that the Trust would control or even participate in decisions about the pace or extent of development or phasing to add new units. To the contrary, the Condominium documents place those decisions squarely upon the LLC. See Crapser, 14 LCR at 436 ("neither [the condominium trust] nor the [developer] had any reasonable expectation that the [condominium trust] would pay [the developer] for its cost for development of Phase VII"). The Lenders made loans to the LLC, bargained with the LLC for the terms of the associated security, and upon request by the LLC, chose to execute the partial releases releasing their security. The Lenders had ample opportunity to protect their interests. The Trust, on the other hand, which is comprised of the association of unit owners, has only received that which was bargained for when the unit owners purchased their units from the LLC -- their individual units together with a proportionate beneficial interest in the common areas.

In any event, the Lenders waived this defense when they failed to plead unjust enrichment as an affirmative claim, or as an affirmative defense in their answer, as required by Mass. R. Civ. P. 8(c). During oral argument on October 21, 2019, the Lenders acknowledged that they did not bring a counterclaim for unjust enrichment in this case. A defending party must put all known affirmative defenses in their first responsive pleading or those defenses will be deemed waived. Aronovitz v. Fafard, 78 Mass. App. Ct. 1 , 8 (2010), citing Sharon v. Newton, 437 Mass. 99 , 102, 769 (2002) ("[t]he omission of an affirmative defense from an answer generally constitutes a waiver of that defense."). While pleadings "shall be so construed as to do substantial justice," Mass. R. Civ. P. 8(f), the Defendants failure to plead this claim, coupled with their lack of evidence of any expectation that the Trust would be responsible in any way for phasing of the development, precludes recovery under this theory. See also Global Investors Agent Corp. v. National Fire Ins. Co. of Hartford, 76 Mass. App. Ct. 812 , 826 (2010) (court rejecting plaintiff's charge for unjust enrichment based on the posture of the case, given that plaintiffs did not plead unjust enrichment in their complaint nor did they present any evidence that the defendants were unjustly benefited). Under these circumstances, notwithstanding the fact that the Trust brought the motion for summary judgment and as a result all inferences must be drawn against them, I conclude the Trust has not been unjustly enriched.

The Lenders also suggest the Trust comes to the court with unclean hands because it has allowed the common areas where the partially complete units are located to fall into disrepair. If the Trust has failed to maintain the common areas, then any harm flowing from any such lack of maintenance would be to its own detriment, as the owner of those common areas. Equitable relief is not warranted.

CONCLUSION

For the reasons stated above, the court concludes that the mortgages held by Commerce Bank and Trust Company and Haymarket Capital, LLC are subordinate to the Master Deed and Declaration of Trust. Therefore, Plaintiff's renewed motion for summary judgment on Count VIII is Allowed. Judgment to enter accordingly.