384 Mass. 676

Beverly Anne Barclay, trustee, vs. William DeVeau & others1.

Suffolk.

September 18, 1981.

December 10, 1981.

Present; Hennessey, C.J., Wilkins, Liacos, Abrams, 6c Lynch, JJ.

Peter B. Farrow (M. Frederick Pritzker with him) for the plaintiff.

*677Wade M. Welch (Regina L. Quinlan with him) for the defendants.

Liacos, J.

At issue in this appeal is whether a provision contained in the declaration of a condominium trust that permits the condominium developer to appoint two of the three members of the board of trustees,2 even though the developer owns only a small percentage of the condominium units, is invalid under G. L. c. 183A, § 10 (a). The statute provides: “Each unit owner shall have the same percentage interest in the corporation, trust or unincorporated association provided for in the master deed for the management and regulation of the condominium as his proportionate interest in the common areas and facilities. Such interest shall not be separated from ownership in the unit to which it appertains and shall be deemed 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, § 10 (a), inserted by St. 1963, c. 493, § 1.

In apparent conflict with the statute is § 3.1.3 of the condominium trust which provides that “ [ujntil [the developer] owns less than 12 units, there shall not be more than three Trustees and it shall be entitled to designate two such Trustees.”

The plaintiff, trustee of the Vendóme Development Trust (development trust), filed a complaint in the Superior Court seeking to enjoin the defendants, who had been selected by the unit owners to replace the plaintiff’s appointees, from exercising any power as trustees. The judge entered judgment for the plaintiff. On appeal, the Appeals Court, with one judge dissenting, reversed. Barclay v. DeVeau, 11 Mass. App. Ct. 236 (1981). We granted the plaintiff’s application for further appellate review. G. L. c. 211A, § 11.

The facts are as follows. In 1975 the Franchi Development Trust, of which Pasquale Franchi is the sole beneficiary, established the Vendóme Condominium Trust (condomini*678um trust). See G. L. c. 183A, §§ 1, 10. The Vendóme is Boston’s first mixed commercial and residential condominium. After the Franchi Development Trust defaulted on a construction loan with its mortgagee, the Commonwealth Capital Investment Corporation (CCIC), the name of the trust was changed to Vendóme Development Trust, the former trustee resigned, and CCIC appointed the plaintiff as trustee to manage the condominium and market the unsold condominium units.3 The plaintiff, as trustee of the development trust, appointed two trustees to the condominium trust pursuant to § 3.1.3 of the condominium trust.

In late 1977 the trustees of the condominium trust approved a 38% increase in common area charges.4 At this time all but one of the 110 residential units had been sold. The developer, however, owned twenty-three of the commercial units, twenty of which were under long or short term leases, most with options to purchase.5 At a special meeting called by the unit owners on May 23, 1978, the unit owners voted, by approximately a 60 % majority, to remove the two appointed trustees, expand the board to seven, and appoint as new trustees the five persons who are the defend*679ants in this case.6 The unit owners purported to act under § 3.3 of the condominium trust, which grants the unit owners the power to remove a trustee by a vote of the owners of 51 % of the beneficial interest. By the terms of § 3.3, however, this right is subordinate to the right of the development trust under § 3.1.3 to retain the trustees of its choice until fewer than twelve units remain unsold.7

The defendants, newly elected as trustees, claim that §§ 3.1.3 and 3.3 of the trust violate G. L. c. 183A, § 10.8 The defendants argue that § 10 (a) requires that a unit owner’s percentage ownership interest in the association of unit owners, set up for the management and regulation of the condominium, be the same as his proportionate interest in the common areas and facilities. Although we agree that the unit owners have a proportionate interest in the association, we find nothing in the statute which prohibits the unit owners from entering into valid agreements for management and control of the condominium. The fact that the unit owners are entitled to a certain percentage interest in the association does not necessarily mean that the owners must have the same proportionate interest in management.

General Laws c. 183A, § 10 (a), states that “[e]ach unit owner shall have the same percentage interest in the . . . trust . . . provided for in the master deed for the management and regulation of the condominium as his proportionate interest in the common areas and facilities.” The defendants contend that this “interest” must include power to appoint and remove the trustees of the condominium trust and cannot be diluted *680through a developer control clause such as § 3.1.3. The plaintiff argues that a proportionate interest in the unit owners’ association may be a beneficial one that includes, for example, rights in event of casualty losses (G. L. c. 183A, § 17) and the right to make and the obligation to pay for capital improvements (G. L. c. 183A, § 18), without including proportionate management rights.

1. Legislative history of G. L. c. 183A. We are mindful of the often-stated principle of statutory construction requiring us first to turn to the statutory language where it is plain and unambiguous for insight into the legislative purpose. Hoffman v. Howmedica, Inc., 373 Mass. 32, 37 (1977). But where the language of a provision is unclear, we may look to outside sources for assistance in determining the correct construction of the statute. Massachusetts Mut. Life Ins. Co. v. Commissioner of Corps, & Taxation, 363 Mass. 685, 690 (1973). Cf. Rosenbloom v. Kokofsky, 373 Mass. 778, 781 (1977). The crucial language of G. L. c. 183A, § 10 (a), is not free of ambiguity. To ascertain what the Legislature intended when it provided in G. L. c. 183A, § 10 (a), that unit owners have a proportionate “interest” in the trust set up for the management of the condominium, we turn to the legislative history.

The legislative history of G. L. c. 183A indicates that the Legislature was aware of precisely this issue when it enacted the statute, i.e., whether and by what means the unit owners would be able to control the management association. What is now G. L. c. 183A was first reflected in 1963 House Doc. No. 1708. Under §§ 2 (d), 18 & 19 of House 1708, the condominium would be administered by an unincorporated association whose by-laws were to be recorded as part of the declaration. This bill went further to structure that association and particularly referred to voting. Section 2 (k) defined a majority for voting purposes as those “apartment owners with fifty-one per cent or more of the votes in accordance with the percentages assigned in the declaration to the apartments for voting purposes.” Section 19 of House 1708 required that the by-laws provide for election of a board *681of directors for staggered terms from “among the apartment owners.”

It was 1963 House Doc. No. 3324 that ultimately became G. L. c. 183A. Although retaining the concept of percentage interests expressed in House 1708 as the vehicle for shared ownership in the condominium (compare 1963 House Doc. No. 1708, §§ 6 [o] and 6 [b], with G. L. c. 183A, §§ 5 [a] and 5[b]), the provisions of House 1708 dealing with voting rights and the specific structure of the owners’ organization were deleted and § 10 (a) was substituted. Use of a corporate or trust form for the owners’ association was approved, rather than the unincorporated form found in House 1708. The Legislature refrained from including any specific language as to voting rights in § 10 (a), which outlines the unit owners’ powers of management, but retained certain limitations on majority rule by unit owners as set forth in House 1708.9 The Legislature apparently intended to leave the matter of who shall control the management of the common areas and facilities of the condominium to discretionary agreement among the unit owners and the developer.10 To infer that “interest” means “voting interest” would be to impose a structure in the association that the Legislature did not intend to require.* 11 Cf. Point East Management Corp. v. Point East One Condominium Corp., 282 So.2d 628, 629-630 (Fla. 1973), cert, denied, 415 U.S. 921 (1974) (legislative mandate that “operation of condominium shall be by the association” does not preclude association from contracting for management of condominium).

*6822. Validity of § 3.1.3. Although arguably the concept of a condominium12 was not unknown to the common law, condominium as a form of real estate ownership did not flourish until statutory authorization. See Berger, Condominium: Shelter on a Statutory Foundation, 63 Colum. L. Rev. 987, 1002 (1963); Schwartz, Condominium: A Hybrid Castle in the Sky, 44B.U. L. Rev. 137,139-144 (1964). The apparent purpose of c. 183A “was to clarify the legal status of the condominium in light of its peculiar characteristics.” Grace v. Brookline, 379 Mass. 43, 52 (1979). Statutes like c. 183A which imprint the condominium with legislative authorization are essentially enabling statutes. Rosenstein, Inadequacies of Current Condominium Legislation — A Critical Look at the Pennsylvania Unit Property Act, 47 Temple L.Q. 655, 683 n.75 (1974). Schwartz, supra at 138. This statute provides planning flexibility to developers and unit owners. See P. Rohan & M. Reskin, Condominium Law & Practice § 5.04, at 5-26 (1981). Unless expressly prohibited by clear legislative mandate, unit owners and developers may validly contract as to the details of management.

Absent overreaching or fraud by a developer,13 we find no strong public policy against interpreting c. 183A, § 10 (a), to permit the developer and unit owners to agree on the details of administration and management of the condominium unit.14 Public policy actually favors this in*683terpretation. See Beaver Lake Ass’n v. Beaver Lake Corp., 200 Neb. 685 (1978) (provisions of by-law giving corporate developer authority to appoint majority of board of directors of homeowners’ association not void ab initio as against public policy). Expert testimony at trial established that developer control clauses similar to § 3.1.3 of the condominium trust are common in Massachusetts. See generally Condominium Law 37, 64 (MCLE-NELI 1978) (including use of developer control clauses in drafting condominium documents). The developer and its mortgagee risk a great deal undertaking a condominium and, to protect their large investment, may need to maintain control of the project for a specific period of time. See Uniform Condominium Act (1977), 7 U.L.A., § 3-103, Comment 3 (Master ed. 1978) (recognizing practical necessity of developer control during development phase of condominium project); 1 A. Ferrer & K. Stecher, Law of Condominium § 473, at 314 (1967) (developer desires effective role in project management if unsold units remain). Cf. D. Clurman & E. Hebard, Condominiums and Cooperatives 52 (1970) (unit mortgagees ordinarily impose controls on major management decisions by condominium boards).

The condominium trust in this case contains no express time limit on the developer’s control. Under the express terms of the condominium trust the developer may retain control of the unit owners’ association as long as twelve units are unsold. The defendants filed requests for rulings of law, *684one of which stated: “Because no time unit [sic] is placed on the power granted to the Vendóme Development Trust by Article III, Section 3.1.3, the power, even if valid, will only be enforced for a reasonable period of time.” The trial judge allowed this request, and the plaintiff concedes that a limitation of a reasonable period of time is properly placed on such a clause. Consequently, we need not determine whether such a limitation of time is necessarily implicit or will be imposed as a matter of policy on such provisions.15

It is arguable, however, that an agreement designed to protect the developers’ interests during the development and marketing phase of a condominium implicitly contains limitations of time on such a phase. See Miller v. Campello Co-op. Bank, 344 Mass. 76, 79 (1962). See also Catania v. Hallisey, 352 Mass. 327, 331 (1967) (contractual clauses that restrict another’s rights, unlimited in time, enforceable for reasonable period of time). “What is a reasonable time is a question of law, to be determined in reference to the nature of the contract and the probable intention of the parties as indicated by it.” Warren v. Ball, 341 Mass. 350, 353 (1960), quoting from Campbell v. Whoriskey, 170 Mass. 63, 67 (1898). A reasonable period of time is the period necessary to carry out the supposed intention of the parties, see 1 S. Williston, Contracts § 38 (3d ed. 1957), i.e., protect the developer while it is at risk. - Such a view would be consistent with the basic concept of condominium, i.e., that unit owners will be afforded a proportionate voice in the management of the common areas and facilities. Schwartz, supra at 144.

We note that the judge treated the “marketing phase” of a condominium project as a reasonable period of time in which the developer may maintain control of the unit owners’ association. The marketing phase of the condominium is that time during which the developer actively engages in selling *685the condominium units.16 Notwithstanding this good faith effort, however, a point in time may be reached where, despite the presence of unsold units, the developer must relinquish control.17

The record before us does not clearly indicate what criteria the judge considered in determining that the Vendóme Condominium was still in the marketing phase, nor does it reveal whether he considered the question of reasonable time apart from marketing efforts. In the amended findings and judgment, the judge stated that “[t]he primary aim of the *686Vendóme Development Trust under Franchi’s and the mortgagee's direction, has been to sell the units and since twenty-three (23) commercial units were unsold, the Vendóme Condominium was still in the marketing phase.” As stated earlier, however, the inquiry is not whether a particular number of units remain unsold, but whether the developer is actively engaged in a bona fide effort to sell the units, and whether, in any event, the circumstances, considered as a whole, require a conclusion that control must pass to the unit owners.

3. Conclusion. We set aside the judgment and remand the case to the Superior Court for further proceedings consistent with this opinion.

So ordered.

Barclay v. DeVeau
384 Mass. 676

Case Details

Name
Barclay v. DeVeau
Decision Date
Dec 10, 1981
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384 Mass. 676

Jurisdiction
Massachusetts

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