Faneuil Investors v. Bd. of Selectmen of Dennis

• Decision Date: 28 September 2009
• Docket Number: No. 08-P-1222.,08-P-1222.
• Citation: 75 Mass. App. Ct. 260,913 N.E.2d 908
• Parties: FANEUIL INVESTORS GROUP, LIMITED PARTNERSHIP v. BOARD OF SELECTMEN OF DENNIS & another.<SMALL><SUP>1</SUP></SMALL>
• Court: Appeals Court of Massachusetts

913 N.E.2d 908

75 Mass. App. Ct. 260

FANEUIL INVESTORS GROUP, LIMITED PARTNERSHIP v.BOARD OF SELECTMEN OF DENNIS & another.¹

No. 08-P-1222.

Appeals Court of Massachusetts, Suffolk.

Argued March 10, 2009.

Decided September 28, 2009.

Dana Alan Curhan, Boston, for the plaintiff.

Jeffery D. Ugino, Boston (Kathleen M. O'Donnell with him) for the defendants.

Present: LENK, MILLS, & KATZMANN, JJ.

KATZMANN, J.

PlaintiffFaneuil Investors Group, Limited Partnership(Faneuil), filed an action to reinstate the mortgage it had held on property formerly owned by the Dennis Housing Authority (DHA) and described in a deed from the town of Dennis(town) to the DHA.The property reverted to the town after violation of the restrictions set forth in the deed, namely, the grant of a mortgage by the DHA to Citizens Bank of Massachusetts (Citizens).Faneuil is the current holder of the note and mortgage by assignment from Citizens.

Faneuil filed a verified complaint in the Land Court against members of the town's board of selectmen (board) and the DHA, seeking, inter alia, a declaratory judgment that a right of reverter—contained in the deed—was not triggered by the mortgage.Faneuil also filed a motion for endorsement of a memorandum of lis pendens.The judge ruled that Faneuil did not have a valid mortgage on the property and ordered all references to that mortgage and Faneuil's other interests struck from the certificate of title.Additionally, the judge denied the lis pendens motion and dismissed Faneuil's claims under Mass. R.Civ.P. 12(b)(6), 365 Mass. 755(1974).Faneuil now appeals.We affirm.

Background.²The property is a 6.41-acre parcel of land that the town acquired by eminent domain on August 14, 2001, with the consent of its prior owners.The taking occurred pursuant to a town meeting vote which, inter alia:

"authorize[d] the [board] to acquire by eminent domain ... for the purposes of affordable housing, the [6.41 acre parcel] ...; and further ... authorize[d] the [board] to transfer ownership and/or control to the [DHA] ... for the purpose of providing affordable housing ... [and specified that][a]ny deed transferring the property shall provide that in the event the property ceases to be used for the purposes provided herein, the title to said parcel shall revert to the [town], acting by and through its [board]"[emphasis supplied].

The town subsequently took the property and, by deed dated February 22, 2002, conveyed it for nominal consideration to the DHA.The conveyance, however, explicitly was made subject to "a condition subsequent, with a possibility of reverter retained by the Town," which, in pertinent part, stated:

"The Town shall have the right to enter upon the Property and revest title back to it upon the occurrence of any of the following events:

"(1) The Grantee ceases to exist or function as a municipal housing authority, or be recognized as a housing authority by the Commonwealth of Massachusetts Department of Housing and Community Development and its successors.

"(2)The Property is conveyed or transferred without the written consent of the [board].

". . .

"Notwithstanding the foregoing, no such entry shall occur until such time as the Town has notified the [DHA] of such occurrence and the [DHA] fails to cure such event to the reasonable satisfaction of the Town within thirty (30) days of receipt of such notice."(Emphasis supplied.)

The deed was executed by the board, with its conditions "accepted and agreed to as perpetual conditions by the [DHA] as authorized by vote of its board."³The deed was filed with the registry of deeds on March 7, 2002, and noted on the certificate of title's encumbrance sheet with the "restrictions."

Prior to the conveyance of the property from the town to the DHA, the DHA secured a $400,000 construction and permanent loan commitment from Citizens.The commitment letter provided that "the [l]oan shall be secured by a valid first mortgage upon the fee simple title on the [p]roperty," with "[t]he final legal description of the [p]roperty [to be] approved by [Citizens] and its counsel."The commitment also required the DHA to provide Citizens with "a Standard American Land Title Association ... mortgagee's title policy binder containing no exceptions other than those approved by [Citizens]."Under the terms of the commitment, Citizens had "no obligation to close the Loan in the event of (iv)[the] failure of [the DHA] or any Guarantor to comply with the terms and conditions of [the] commitment letter; or (v)[if] any collateral offered for the Loan or any documents, instruments, agreement or information furnished to [Citizens] pursuant to [the] commitment [was] not in all respects in form and substance satisfactory to [Citizens]."

By subsequent agreement between Citizens and the DHA, the time for performance and completion of the closing was extended to March 4, 2002.By that time, the property had been deeded from the town to the DHA.Citizens closed the loan with knowledge of the limitations on the DHA's interest.The DHA's certificate of title, issued on March 7, 2002, referenced the DHA's deed (explicitly noting on the encumbrance sheet a description of the deed as "restrictions") and, immediately thereafter, the Citizens mortgage, the DHA's collateral assignment of contracts, licenses, permits, leasehold interests, and other rights to Citizens, and the Citizens financing statement.Citizens assigned all of these interests to Faneuil on July 11, 2007, as noted on the certificate of title.

On February 21, 2008, at the request of the board, town counsel sent notice to the DHA of the board's intent to exercise the right of reverter on the ground that the DHA impermissibly granted the mortgage to Citizens in contravention of provision 2 (provision or reverter provision) in the deed that prohibited the transfer of the property without the written consent of the board.On March 5, 2008, the DHA voluntarily conveyed the property to the town by means of a deed recorded on March 12, 2008.

The judge in the Land Court ruled that the mortgage was a "conveyance of title, Maglione v. BancBoston Mort[.] Corp.,29 Mass.App.Ct. 88, 90-91, 557 N.E.2d 756(1990), and [that] the mortgagee [could] only acquire such title as the mortgagor possesse[d] and [had] the capacity to grant, seeCoraccio v. Lowell Five Cents Sav[.] Bank,415 Mass. 145, 151-152, 612 N.E.2d 650(1993);Brewster v. Weston,235 Mass. 14, 17, 126 N.E. 271(1920)....By the terms of [the] deed, the [DHA's] title terminated when it mortgaged the property to Citizens (a conveyance of title) without the written consent of the Board, the Board gave notice, the [DHA] failed to `cure' within thirty days, and the town reentered the property and revested title back to it."The judge further ruled that the reverter provision contained in the deed was authorized by the vote of the town meeting.

Discussion.Faneuil challenges the judge's denial of its motion for endorsement of a memorandum of lis pendens, dismissal of its claims, and striking of all references to its mortgage and other interests from the town's certificate of title, claiming, in essence, that (1) the mortgage did not trigger the reverter provision; and (2), even if the mortgage triggered the reverter provision, that provision was unauthorized and therefore unenforceable.

1.Triggering of reverter provision.The provision in the deed that is at the heart of this case provides for a reverter where "[t]he Property is conveyed or transferred without the written consent of the [board]."Faneuil argues that the judge erred in treating the mortgage as a conveyance that triggered the reverter.⁴Specifically, Faneuil contends that the reverter provision should not apply because: (1) no Massachusetts appellate case has addressed whether the granting of a mortgage constitutes a conveyance of title as defined in a reverter provision such as the one at issue here, and case law from other jurisdictions supports the conclusion that the mortgage did not trigger the instant reverter provision; and (2) the language of the reverter provision is ambiguous.

a. Mortgage theory.General Laws c. 260, § 35, inserted by St.1957, c. 370, defines a mortgage as a "conveyance made for the purpose of securing performance of a debt...."Under our title theory of mortgages, "[a] mortgage of real estate is a conveyance of the title or of some interest therein defeasible upon the payment of money or the performance of some other condition."⁵Murphy v. Charlestown Sav. Bank,380 Mass. 738, 747, 405 N.E.2d 954(1980), quoting fromPerry v. Miller,330 Mass. 261, 263, 112 N.E.2d 805(1953).SeeAtlantic Sav. Bank v. Metropolitan Bank & Trust Co.,9 Mass.App.Ct. 286, 288, 400 N.E.2d 1290(1980).See alsoEno & Hovey, Real Estate Law§ 9.2 (4th ed. 2004);Mendler, Massachusetts Conveyancers' Handbook§ 20.1 (4th ed. 2008)."Literally, in Massachusetts, the granting of a mortgage vests title in the mortgagee to the land placed as security for the underlying debt."Maglione,29 Mass.App.Ct. at 90, 557 N.E.2d 756."The payment of the mortgage note ... terminates the interests of the mortgagee ... and revests the legal title in the mortgagor."Pineo v. White,320 Mass. 487, 489, 70 N.E.2d 294(1946).

It is true that our case law has placed some limitations on the mortgagee's right to title.See, e.g., Vee Jay Realty Trust Co. v. DiCroce,360 Mass. 751, 753, 277 N.E.2d 690(1972), quoting fromDolliver v. St. Joseph Fire & Marine Ins. Co.,128 Mass. 315, 316(1880)(although "a mortgagee has legal title to the mortgaged real estate ... `as to all the world except the mortgagee, a mortgagor is the owner of the mortgaged lands, at least till the mortgagee has entered for possession'");Negron v. Gordon,373 Mass. 199, 204, 366 N.E.2d 241(1977)("It is only for the purpose of securing the debt that the mortgagee is to be considered owner of the property");Maglione, supra(...