MISC 16-000236

April 13, 2020

Plymouth, ss.



The Court begins this decision by quoting from Trustees of the Beechwood Village Condominium Trust v. USAlliance Fed. Credit Union, 95 Mass. App. Ct. 278 , 279 (2019) (footnote omitted, bracketed material added):

Beechwood Village Condominiums is an age-restricted condominium development built in phases. After some but not all of the phases had been built, the developer [defendant Jeffrey S. Reale, the trustee of the Beechwood Village Realty Trust, or "Realty Trust"] ceased operations at the site. A dispute arose between the developer's mortgage lender [defendant USAlliance Federal Credit Union, or "USAlliance"] and the condominium trust [the Beechwood Village Condominium Trust, or "Condominium Trust," the organization of unit owners created pursuant to the condominium's master deed to handle the condominium's affairs] concerning the right to construct additional units. On cross motions for summary judgment, a judge of the Land Court granted partial summary judgment to [USAlliance] and intervener Sean P. Fallon. The judge declared that USAlliance held a mortgage interest in the undeveloped common area, and that the developer's reserved phasing rights were largely intact, but that two easement rights had expired. After entry of final judgment [the "2017 Judgment"], the [Condominium Trust], USAlliance, and Fallon each appealed.

The Appeals Court affirmed the 2017 Judgment in part and vacated and remanded it in part. According to the Appeals Court, the final judgment in this case should declare the following:

1. (Original ¶ A of the 2017 Judgment.) USAlliance is the assignee of a mortgage granted by Trustee Reale to Mark S. Gardner, Trustee of the Mark S. Gardner Trust (the "Gardner Trust"), on May 11, 2006 (the "Gardner Mortgage," recorded with the Plymouth County Registry of Deeds (the "Registry") in Book 32664, Page 217).

2. (Original ¶ C of the 2017 Judgment.) The Gardner Mortgage secures the payment of a $1.9 million Promissory Note executed by Trustee Reale in favor of the Gardner Trust and dated May 11, 2006. The Gardner Trust has assigned that note to USAlliance. Trustee Reale has not fully paid that note, and thus the Gardner Mortgage has not been discharged.

3. (Original ¶ D of the 2017 Judgment.) The Gardner Mortgage also secures "payment of or performance of all other debts" of or by Trustee Reale to or for the benefit of the Gardner Trust and "any holder or holders" of the Gardner Mortgage, which now includes USAlliance.

4. (Original ¶ E of the 2017 Judgment.) USAlliance holds a $4.7 million Adjustable Rate Promissory Note executed by Trustee Reale and dated April 11, 2007. A mortgage (the "2007 Mortgage," recorded with the Registry in Book 34375, Page 148) secures the repayment of that note. Trustee Reale has not fully paid the note, and thus the 2007 Mortgage has not been discharged.

5. (Original ¶ F of the 2017 Judgment.) In the 2007 Mortgage, Trustee Reale granted to USAlliance a security interest in, among other things, Trustee Reale's rights under article 4 of The Master Deed for Beechwood Village Condominium dated March 7, 2007 (the "Master Deed," recorded at the Registry in Book 34222, Page 19).

6. The fee interest in the premises described in the Gardner Mortgage and the 2007 Mortgage ("Lot 7") is part of the common area of the Beechwood Village Condominium (the "Condominium"), and as such is held in common by the Condominium's unit owners.

7. USAlliance's mortgage interest in the Condominium under both the Gardner Mortgage and the 2007 Mortgage is limited to Trustee Reale's reserved rights.

8. Trustee Reale's phasing rights reserved in article 4A of the Master Deed have not expired.

9. Trustee Reale's easement rights reserved in article 4B(i) of the Master Deed have expired.

10. Trustee Reale's easement rights set forth in article 4B(ii) and (iii) of the Master Deed have not expired, but are insufficient to allow Trustee Reale access to construct additional condominium units.

Beechwood Village, 95 Mass. App. Ct. at 292.

The Appeals Court also directed that the judgment include a declaration that "the phasing rights reserved [by developer Reale] in article 4A [of the Master Deed] have not expired." Id. But near the conclusion of its decision, the Appeals Court noted that the Condominium Trustees had sought on appeal, for the first time in this case, a further declaration, that "'the common area of the [c]ondominium is not subject to any development without the consent . . . of 75% of the owners of the beneficial interest.'" Id. at 291 (brackets in original). The Trustees rested their claim for that declaration on M.G.L. c. 183A, §5(b)(2)(iii), and parts of the Master Deed. The Appeals Court observed that the parties' arguments to this Court on summary judgment "did not raise this issue in any meaningful way, and the briefs in this court did not anticipate our disposition of the issues on appeal." Beechwood Village, 95 Mass. App. Ct. at 291. The Appeals Court thus declined to reach the Trustees' request for an additional declaration, which (if granted) would be in tension with a declaration that developer Reale's phasing rights hadn't expired. The Appeals Court instead left the matter "to the parties and the judge on remand whether to further consider this issue." Id. at 291-292.

Three of the four parties to this case are now before the Court on remand. Two of the parties, the Condominium Trustees and USAlliance, have filed a second round of cross-motions for summary judgment. A third party, developer Reale, remains a passive observer, although one who's stipulated that he's bound by the outcome of this action, whatever it may be. See id. at 278 n. 1. Intervenor Fallon has dropped out; he and USAlliance have resolved the issues that caused Fallon to intervene in this case.

The Condominium Trustees have expanded their list of requested declarations to three. They are that (1) developer Reale's phasing rights have been extinguished, as he can't exercise them and are otherwise without purpose; (2) as a result of the alleged extinguishment of Reale's phasing rights, the Condominium Trustees may exercise, under c. 183A, §5(b)(2)(iii), the right to add additional units to the Condominium [Note 1]; and (3) as a further result of the alleged extinguishment, the Gardner Mortgage and the 2007 Mortgage are "nullities," as Reale's phasing rights were the final interests in the Condominium property that were subject to both Mortgages. See, for example, Bongaards v. Millen, 55 Mass. App. Ct. 51 , 55 (2002). USAlliance argues that Reale's phasing rights and the Mortgages continue to exist, as the Appeals Court was prepared to hold (but for this Court resolving on remand any extinguishment issues).

The facts relating to the extinguishment issues are undisputed. Developer Reale's phasing rights arise under article 4A of the Master Deed, which is entitled "Reservation of Right to Create Additional Phases." Article 4A provides that Reale (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. 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. . . .

Notwithstanding article 4A, the Condominium Trustees argue that Reale has lost his phasing rights under Comeau v. Manzelli, 344 Mass. 375 , 381 (1962). Comeau states that when one has an easement that was once "capable of being used for the purpose for which it was created," but subsequent events "have rendered impossible its use for [that] purpose," the easement is deemed to be extinguished. Id. The Trustees point to the Court's earlier holding, upheld on appeal, see Beechwood Village, 95 Mass. App. Ct. at 290-291, that Reale's rights under article 4B(i) of the Master Deed to "pass and repass . . . upon and over and to the Common Areas and Facilities of the Condominium . . . for all purposes" have lapsed. The Trustees contend that, if Reale lacks the right to cross Condominium property, then he's incapable of exercising his article 4A rights, and therefore they have lapsed.

USAlliance's first response is that Comeau doesn't apply to developer Reale's phasing rights, for two reasons. USAlliance submits that Comeau concerned a traditional easement, a right of way, whereas Reale's phasing rights aren't easement rights. The Court disagrees. An easement is "a nonpossessory right to enter and use land in the possession of another . . . ." Restatement (Third) of Property (Servitudes) §1.2(1) (2000). See also Patterson v. Paul, 448 Mass. 658 , 663 (2007) (quoting §1.2(1)). While the Master Deed doesn't label Reale's article 4A phasing rights as easements (in contrast to Reale's rights under article 4B of the Master Deed - in that article, the word "easement" appears repeatedly), article 4A nevertheless gives Reale a non-possessory right to use undeveloped portions of the Condominium property for the purpose of building new Condominium units.

Developer Reale's phasing rights are like those associated with profits à prendre. "'A profit [à prendre] is a right in one person to take from the land of another either a part of the soil, such as minerals of all kinds from mines, stones from quarries, sand and gravel; or part of its produce, such as grass, crops of any kind, trees or timber, fish from lakes or streams, game from the woods, seaweed, and the like. . . .'" Gray v. Handy, 349 Mass. 438 , 441 (1965), quoting 2 William F. Walsh, Commentaries on the Law of Real Property §229 (1947) (brackets in Gray). While Reale's phasing rights don't give him the power to remove the "produce" of the Condominium property, they do give him the nonpossessory right to reap the profits of that property, as a profit à prendre would. But see Commercial Wharf E. Condominium Ass'n v. Waterfront Parking Corp., 407 Mass. 123 , 134 n.4 (1990), quoting Gray, 349 Mass. at 441 (developer's retained parking-easement rights, allowing developer to take "artificial" profits from what otherwise would be condominium property, are not an actual profit à prendre, as developer wasn't given the right to take "natural" products of the property). And as will be further examined below, under Massachusetts common law, profits à prendre are as susceptible to extinguishment as easements. [Note 2]

USAlliance next argues that Comeau addresses easement rights that arise by grant, whereas Trustee Reale's phasing rights arise from a reservation in article 4A. USAlliance is correct that Comeau concerns a right of way granted by deed. But nothing in Massachusetts law suggests that the continued viability of an easement depends on how the easement originated. An easement arising from a reservation in a deed, even if that deed is a condominium's master deed, is still an easement. See Busalacchi v. McCabe, 71 Mass. App. Ct. 493 , 496-501 (2008) (analyzing whether an easement reserved in master deed had lapsed on account of the common-law doctrine of merger).

The Court thus concludes that Trustee Reale's phasing rights could be extinguished. But have they been? Two cases, Konner, 373 Mass. 463 , and McCartin Leisure Indus. v. Baker, 376 Mass. 62 (1978), outline the two ways in which profits à prendre may terminate absent the agreement of the parties: by abandonment or by obsolescence. Abandonment requires nonuse "coupled with an intent to abandon. Nonuser [Note 3] alone, no matter how long continued, will not suffice." Konner, 373 Mass. at 466; see also McCartin, 376 Mass. at 68 (same holding). As for obsolescence, McCartin describes the test as whether it is "factually or legally impossible" for the holder of the profit à prendre to enjoy the profit for the purposes for which it was created. Id. at 68-69. Konner and McCartin contrast their "impossibility" test with one that would find obsolescence "when it would be commercial impractical or economically wasteful to attempt to revive the activity which the profit was created to serve." Konner, 373 Mass. at 469; see also McCartin, 376 Mass. at 68 (same holding).

The Condominium Trustees concede there's no evidence that developer Reale or his mortgagee, USAlliance, has abandoned Reale's article 4A phasing rights. (Four years of litigation by USAlliance proves the opposite.) They rest their case for extinguishment solely on obsolescence, and that argument rests in turn solely on Reale's lack of easement rights. USAlliance counters that Reale's present lack of easement rights doesn't amount to a permanent deprivation of such rights. USAlliance argues that he could obtain sufficient easement rights in at least two ways. The first is by purchasing one of the Condominium's units. USAlliance submits that appurtenant to every Condominium unit "is the right to use the Common Area and Facilities . . . , in common, with the other dwellings in the Condominium. . . ." Master Deed, art. 3D(vii). Beyond that right, if Reale in particular were to purchase a Unit, he'd be able to invoke (or so USAlliance contends) article 8B of the Master Deed. That article provides in part:

Notwithstanding anything to the contrary herein, so long as the Declarant owns any unit in the Condominium, the Declarant shall have the right, at any time and from time to time, to amend this Master Deed without the consent of any other Unit Owners or any of the [Condominium] Trustees, . . . to cure any ambiguity, inconsistency or formal defect or omission.

USAlliance's Unit-purchase arguments are unpersuasive. Article 6A of the Master Deed states that "[e]ach of the Units is intended to be used solely for single-family residence purposes . . . and recreation ancillary thereto . . . ." Article 6A prevents Unit owners from using Common Areas to facilitate commercial development of the Condominium. And while article 8B could trump article 6A (that's the legal effect of 8B's language, "Notwithstanding anything to the contrary herein"), USAlliance has pointed to no "ambiguity, inconsistency or formal defect or omission" in the Master Deed's phasing-right or easement provisions. USAlliance thus lacks the predicate for invoking article 8B to reinvigorate developer Reale's easement rights.

USAlliance fares better with Reale's second path to getting an easement: getting one from the Condominium. Article 8A allows amendment of the Master Deed by suitable votes of the Unit owners, those holding first mortgages on the Units, and the Condominium Trustees. The Condominium Trustees contend that those votes are out of Reale's control, and hence his article-8A path to obtaining an easement is an "impossible" one within the meaning of the case law on obsolete easements. The Court disagrees. The appellate case law on obsolete easements requires far more in the way of impossibility than what the Condominium Trustees have demonstrated. Comeau, for example, involved an easement that took the holder of the dominant estate nowhere. A railroad that was the original owner of the servient estate, and which had granted the easement, had no power to extend the easement to where the dominant owner wanted it go. For that reason, "and there being no other purpose for which the easement area can be used, the result is that the [dominant owner] never had, and has not now, the right to use the easement area for any purpose. The purported grant of the easement was a nullity." Comeau, 344 Mass. at 382. In Makepeace Bros. v. Barnstable, 292 Mass. 518 , 524-525 (1935), an easement granted for the purpose of facilitating the cutting up and rendering of whales was held to have perished along with the Cape Cod whaling industry.

The case before this Court involves neither an easement that was a nullity at its inception nor one whose purpose (adding phases to the Condominium) has become anachronistic. It's true that developer Reale's ability to obtain an easement depends on his success in convincing Unit owners, their mortgagees, and the Condominium Trustees to grant him an easement. The parties' four years of litigation also may make it difficult for Reale to seal that bargain. But difficult doesn't equal impossible within the meaning of the cases governing obsolete easements. See Rigo v. Israel, 22 LCR 447 (2014) (Foster, J.), aff'd, 88 Mass. App. Ct. 1119 (2016) (easement to a beach that crossed wetlands and rare-species habitat, whose use depended on obtaining discretionary relief from a local conservation commission, not obsolete under Konner and Makepeace).

There's one further, undisputed fact that shows that adding phases to the Condominium, in and of itself, isn't impossible: the Condominium Trustees themselves are asking this Court to declare that, in fact, additional phases can be built, but just by the Condominium Trustees. Against the backdrop of the Massachusetts common law governing obsolete easements, that undisputed fact demonstrates that at this particular point, the impediment to building additional units is not one of phasing rights that can't be exercised as a factual or legal matter. Instead, the problem is one of simple commerce. This Court and the Appeals Court have interpreted the Master Deed as reserving to developer Reale, on the one hand, the exclusive right to add additional phases to the Condominium; and now has granted to the Unit Owners, their first mortgagees, and the Condominium Trustees the right to decide on what terms Reale may access the Condominium's common areas. What happens next depends on whether and on what terms the parties are prepared to reach a deal.

The Court thus DENIES the Condominium Trustees' motion for summary judgment and GRANTS, in part, USAlliance's cross-motion for summary judgment. The final judgment in this case, like the original judgment, will declare that developer Reale's reserved phasing rights are unlimited in time and have not been extinguished. Because Reale continues to hold such rights, and since the Master Deed commits such rights exclusively to Reale, the Condominium Trust is not entitled to exercise those rights under M.G.L. c. 183A, §5(b)(2)(iii). Lastly, because Reale's phasing rights continue to have a purpose and value, Bongaards, 55 Mass. App. Ct. at 55, does not apply, and hence the Gardner and 2007 Mortgages remain in force.

Judgment to enter accordingly.


[Note 1] Section 5(b)(2)(iii) gives an organization of condominium unit owners, provided it complies with all of §5(b)(2)(iii)'s terms, the right to "[e]xtend, revive or grant rights to develop the condominium, including the right to add additional units . . . to the condominium; provided, however, that the rights to add additional units are set forth in or specifically authorized by the master deed, and . . . withdraw [sic] any portion of the common area of the condominium upon which, at the time of said withdrawal, no unit has been added to the condominium in accordance with the master deed; and provided further, that said withdrawal is not specifically prohibited by the master deed."

[Note 2] Because the Court holds that developer Reale's phasing rights are a form of easement, Massachusetts common law regarding extinguishment of easements governs those rights. That common law serves the public-policy interest of freeing land from servitudes; this Court may not weaken the current common-law standard absent legislation. See First Nat'l Bank of Boston v. Konner, 373 Mass. 463 , 470 (1977). Likewise, because Reale's phasing rights are a form of easement, those rights aren't subject (as the Condominium Trustees contend) to statutory or common-law limits on the exercise of restrictive covenants. See Patterson, 448 Mass. at 663 ("affirmative" easements, ones giving the owner of the dominant estate the right to enter the servient estate's property, are not "restrictions" that are subject to c. 184, §§26-30).

[Note 3] The word "nonuser" is not a typo. Black's Law Dictionary (2019) defines "nonuser" as "the failure to exercise a right (such as a franchise or easement), as a result of which the person having the right might lose it." It's the second instance in Konner, in addition to "profits à prendre," where the court dazzles the reader with Law French. See Bryan A. Garner, Garner's Dictionary of Legal Usage, 325 (3d ed. 2011) (describing the etymology of "nonuser").