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A Case Worth Sharing: Sullivan v. O'Connor

Sometimes you just run across decided cases that are so full of concise, black letter law, well-reasoned issues of first impression and multiple, alternate law-based rationales supporting the decision (read: iron-clad), that you have to share them. Sullivan v. O'Connor, 81 Mass. App. Ct. 200 (2012), decided almost a year ago in January, is one of those cases.

Basic Facts

The gist of the case is this. In 1977, a husband and wife (plaintiffs) purchased their home within a residential neighborhood called Westwood Hills.

Many decades prior to that in 1929, a declaration of trust had been recorded, forming an unincorporated association for the neighborhood. The purpose of the association was to provide services and amenities to the neighborhood, and pay taxes, assessments and liens levied on property held by the association. Pursuant to the declaration of trust, property owners were to pay their share of annual assessments and the like to the association. The trustees were to issue certificates (referencing obligations, restrictions and benefits) to the initial property owners to such effect, and the certificates were supposed to be transferred to any subsequent property owners during future conveyances.

While the plaintiffs' 1977 deed did not reference the declaration of trust specifically, it did reference a 1947 deed, which, in turn references the declaration of trust. The plaintiffs' deed expressly stated, inter alia, that the property was subject to "any and all restrictions of record which are now in force and applicable thereto." The deed did not expressly state that membership in the association is required or reference the mandatory payment of assessments to the association. The plaintiffs also did not receive a certificate from either the prior owner or the association when they purchased the property.

Initially, for the first six years, the plaintiffs paid the semiannual assessments upon notice from the association. However, after June 1983, the plaintiffs stopped all payments and requested that the association provide a basis for enforcement of such requirement to pay assessments.

The plaintiffs' failure to pay assessments from 1983 onward was the basis of the association's lawsuit.

Court's Analysis

In what appears to be an airtight analysis, the Appeals Court affirmed (with modification) the Land Court's summary judgment ruling in favor of the association. There were three distinct, mutually exclusive bases for the Court's holding that the plaintiffs are, in fact, required to pay the assessments:

  • Title-based theory;
  • Common-scheme theory; and
  • Implied-in-fact contract theory.

The decision fleshes each of these theories out fully, and it will be helpful for attorneys to have each angle at their disposal in similar cases.

Title-Based Theory

Let's start with the general rule (which is followed in Massachusetts), which is that

land 'is free of encumbrances that are not noted on the certificate of title' nor in the chain of title.

Sullivan, 81 Mass. App. Ct at 205.

Now, the two exceptions:

'(1) an encumbrance may bind an owner if what the certificate of title recites in the way of prior documents, plans, restrictions, rights and reservations would prompt a reasonable purchaser to investigate further the referenced documents, or (2) the purchaser has actual knowledge of the encumbrance.'

Id.

The Appeals Court (and the Land Court) determined that even though the plaintiffs' deed did not contain any express provision that required membership in the association or payment of the assessments, the facts supported a finding that both exceptions to the general rule were met in this instance. As to the first exception, there was "sufficient notice to stimulate a search for obligations imposed by the association, which would have led to the 1929 declaration of trust." Id. at 206. The court determined that it was irrelevant that the plaintiffs did not receive the "certificate" from their predecessor because it was their property ownership, rather than the certificate, that resulted in a beneficial interest in the association and its related burdens. The second exception was also easily applied given that the plaintiffs had actual knowledge of their obligation to pay assessments both through their payment for six years and the fact that they benefited from the related private services and amenities.

Common Scheme / Common-Interest Community Theory

This is perhaps the most intriguing of the three theories upon which the court held in favor of the association because it seems to be a case of first impression on the issue of levying assessments in equity. It also is the lengthiest of the three analyses within the decision and worth reading.

In a nutshell, the Land Court analogized the facts to the common scheme analysis found in Houghton v. Rizzo, 361 Mass. 635, 642 (1972), as follows:

'if a developer conveys enough lots on a subdivision plan by deeds including uniform restrictions which prove the existence of a uniform or common scheme for the development but without expressly agreeing to insert the same restrictions on later conveyances of other lots on the plan, an agreement to do so may be nevertheless implied and enforced in equity . . . .'

Id. at 208 (quoting Houghton). Because up until the instant case the Massachusetts courts had not decided the issue of levying assessments in equity, the court referred to § 2.14 of the Restatement (Third) of Property (Servitudes) (and other states) for guidance:

[a] conveyance by a developer that imposes a servitude on the land conveyed to implement a general plan creates an implied reciprocal servitude burdening all the developer's remaining land included in the general plan, if injustice can be avoided only by implying the reciprocal servitude.

Id. Much detailed analysis follows after that, which is probably best dealt with as an entirely separate post to come at a later time. But in essence, the court, in relying upon this provision of the Restatement (as well as §§ 1.7, 1.8 and 6.2 comment a) and interpretations in other jurisdictions, as well as the holding in the oft-cited Snow v. Van Dam, 291 Mass. 477, 481 (1935) (the existence of a building scheme "show[s] an intention that the restrictions imposed upon the several lots shall be appurtenant to every other lot in the tract included in the scheme"), found that there was sufficient evidence that a common scheme was created in 1929 and existed at the time of the plaintiffs' purchase of their property. For this reason, the plaintiffs shared in the responsibility to pay assessments to the association, just like all other owners in the development.

Implied-In-Fact Contract Theory

Lastly, the Appeals Court supported the notion that the plaintiffs were required to pay assessments under an implied-in-fact contract theory. The analysis was brief, but effectively relied upon the parties' conduct and relationship. Here, the plaintiffs purchased the property with "perceptible services"-like snow removal and road repair-and thus were "on notice that the property was part of a private community", not to mention that they also actually paid the assessments for a short while after their purchase. By benefitting from these services, the court found that the plaintiffs "'manifested acceptance of the obligation to pay for the services provided by the Association.'" Id. (citation omitted).

Final Thoughts

This is the kind of case that should, at minimum, prompt prospective homebuyers (through their attorneys) to take a very close look at the record title before purchasing a home within a residential development like Westwood Hills. Clearly, mistakes and omissions happen, with the result being that some of the relevant and governing documents might not be expressly set forth within the deed being drafted for the sale. Instead, pertinent documents might appear further back within the chain of title, but remain entirely enforceable and effective at the time of the sale. These kinds of documents will contain the obligations, benefits and burdens that affect property owners and should be reviewed prior to purchase (rather than after) so that the prospective buyers understand what they are getting themselves into.

Moreover, the old adage of "if it seems too good to be true..." comes to mind. Prospective property owners contemplating a home in a residential development-no matter how old-should determine what services and amenities exist (if any), and whom is responsible for payment. Since nothing comes for free, buyers should do their homework up front and determine whether the snow removal, road repairs and the like are being assessed through municipal property taxes or some other kind of private arrangement like a homeowners association.

Happy Holidays, readers! We will resume blog posts after the New Year.

Written by Kristen M. Ploetz, Esq., of Green Lodestar Communications & Consulting, LLC, on behalf of Jeffrey T. Angley, P.C. Edited by Jeffrey T. Angley, Esq.

Copyright (c) 2011-2012 by Jeffrey T. Angley, P.C. All rights reserved.

Disclaimer: The information contained in this post is general in nature and for educational purposes only. No personal legal advice is being provided. If you have an actual legal issue that needs to be addressed, you should seek the advice of competent legal counsel. This post does not create an attorney-client relationship between the reader and Jeffrey T. Angley, P.C., Phillips & Angley or their attorneys.

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