Bourne v. Northwood Properties, LLC (In Re Northwood Properties, LLC)

United States Court of Appeals
For the First Circuit

No. 07-1146

IN RE NORTHWOOD PROPERTIES, LLC,
Debtor

SIDNEY BOURNE; CLAUDIO M. DELISE; RALPH S. TYLER,

Plaintiffs, Appellees,

v.

NORTHWOOD PROPERTIES, LLC,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. William G. Young, U.S. District Judge]

Before

Torruella, Circuit Judge,
Campbell, Senior Circuit Judge, and
Lynch, Circuit Judge.

Jeffrey D. Ganz and Riemer & Braunstein LLP on brief for
appellant.
Robert J. Galvin, Christopher J. Marino, and Davis, Malm &
D'Agostine, P.C. on brief for the Abstract Club and the Real
Estate Bar Association for Massachusetts, Inc., amici curiae.
Sidney Bourne, Claudio M. Delise, and Ralph S. Tyler on
brief pro se.

November 30, 2007
 LYNCH, Circuit Judge. In this case we interpret

Massachusetts General Laws chapter 183A, section 5, which governs

condominium owners' rights and powers vis-à-vis the phased

development of condominium projects. We reverse the district

court, In re Northwood Props., LLC, 356 B.R. 81 (D. Mass. 2006),

because its statutory interpretation was in error.

Northwood Properties, LLC, ("Northwood") is the developer

of Northwood at Sudbury, a partially completed condominium project.

Northwood is currently attempting to reorganize under Chapter 11 of

the Bankruptcy Code. At every turn, its reorganization has been

opposed by three individuals: Sidney Bourne, Claudio Delise, and

Ralph Tyler. Bourne and Delise are residents of Northwood at

Sudbury; all three are creditors of Northwood. Bourne and Delise

vigorously oppose Northwood's attempt to extend its rights to

finish developing Northwood at Sudbury, rights which were set by

the original master deed to expire in 2005. Without the extension

of these rights, Northwood's efforts at reorganization will likely

fail.

This discrete dispute turns on a provision in the

Massachusetts condominium statute which provides that a condominium

owner constructively consents to the addition of further units "if

the master deed at the time of the recording of the unit deed . . .

made possible an accurate determination of the alteration of each

unit's undivided interest that would result therefrom." Mass. Gen.

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Laws ch. 183A, § 5(b)(1). This provision has yet to be interpreted

by the Supreme Judicial Court or the Massachusetts Appeals Court.

Further, Bourne, Delise, and Tyler all oppose Northwood's

reorganization plan, offering their own in its place. Under their

plan, they would take control of the reorganized development

company, Bourne and Delise would be paid for their consent to

further development, and Tyler would receive a large settlement for

his long-running litigation against Northwood at Sudbury. The

three appellees also argue that Northwood's final plan denied them

a vote in its confirmation by leaving their rights as creditors

unimpaired.

The bankruptcy court held that Northwood had successfully

extended its development rights; rejected Bourne, Delise, and

Tyler's voting complaint; and confirmed Northwood's plan. The

district court, sitting as an intermediate appellate court,

interpreted section 5 of chapter 183A to hold that Northwood had

not successfully extended its development rights. In re Northwood

Props., 356 B.R. at 89. Because it remanded the issue of

confirmation of Northwood's plan for reconsideration in light of

this ruling, it did not consider the voting argument. Id.

We hold that we have jurisdiction over both disputes,

hold that the district court's interpretation of the condominium

statute was in error, reverse the district court's ruling on the

validity of Northwood's development rights, find the district

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court's remand moot on the grounds stated, and affirm the

bankruptcy court's confirmation of the reorganization plan.

I.

Northwood at Sudbury was originally envisioned as a six-

building complex that would offer residential care to the residents

of its sixty-six condominium units. The master deed for the

condominium was recorded on December 9, 1998, following the

completion of the first phase of development, which consisted of

one twelve-unit building. As the Massachusetts Appeals Court has

explained, "[i]n a phased condominium development, groups or stages

of units are completed over a period of several years and become

part of the condominium by successive amendments to the master

deed. 'Phasing' is not a statutory term, but is a usage that has

grown out of the general enabling provisions" of the condominium

statute. Podell v. Lahn, 651 N.E.2d 859, 860 n.3 (Mass. App. Ct.

1995). The deed allowed for four additional phases of construction

to complete the project, but it set those development rights to

expire on December 9, 2005.

The master deed was amended on May 20, 2002, to account

for the completion of the second phase, which consisted of another

twelve-unit building and a clubhouse. Bourne and Delise each

purchased a unit built in this second phase. No further phases

have yet been undertaken.

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 In advance of the expiration of its development rights,

Northwood negotiated an extension of those rights with the

condominium unit owners' association ("Association") in exchange

for $700,000. Even though Northwood had filed for bankruptcy in

the interim, twenty unit owners approved the extension, two

abstained, and two -- Bourne and Delise -- voted against it. This

eighty-three percent approval was more than sufficient under the

master deed to extend the development rights until December 9,

2010.

When Northwood filed for bankruptcy in September 2005,

there were five unsecured claims held by non-insider creditors: (1)

$50.00 owed to NStar; (2) $50.00 owed to KeySpan; (3) $305.92 owed

to GZA GeoEnvironmental; (4) $622,270 allegedly owed to Ralph

Tyler; and (5) approximately $1.5 million owed to the Association.

Northwood disputed the debt claimed by Tyler; the legitimacy of

that claim is still pending before the bankruptcy court.1

Bourne and Delise filed a Phasing Rights Motion in

Northwood's bankruptcy proceedings in February 2006, seeking a

determination that the extension of development rights was not

valid without their consent. In March 2006, Bourne, Delise, and

Tyler each purchased, respectively, the NStar debt, the GZA

GeoEnvironmental debt, and the KeySpan debt. By becoming creditors

1
The alleged debt is related to ongoing legal battles over
zoning and permitting stretching back to the initiation of the
Northwood at Sudbury development in 1998.

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of Northwood, they improved their ability to oppose Northwood's

Chapter 11 reorganization plan and gained the opportunity to submit

their own.

Northwood filed its first proposed reorganization plan in

May 2006. Under this plan, the five unsecured, non-insider claims

were grouped together and would initially receive approximately

five percent of the allowed amount of those claims. Proceeds from

either future condominium sales or the sale of Northwood's

development rights would then be distributed pro rata among the

claims. As relevant here, a claim is impaired under a

reorganization plan if the plan does not "leave[] unaltered the

legal, equitable, and contractual rights to which such claim . . .

entitles the holder of such claim." 11 U.S.C. § 1124(1). Because

their interests were impaired under this plan, Bourne, Delise, and

Tyler had a controlling vote over the plan's confirmation, which

they opposed.

Northwood then submitted a revised version of its plan in

July 2006. This version grouped the NStar, KeySpan, and GZA

GeoEnvironmental debts into a convenience class; these claims,

including interest, would be paid in full immediately. Tyler's

original claim was placed in its own class and would be paid in

full with interest once a final, non-appealable order allowing the

claim was entered. This left the Association's claim in its own

class, to be paid over time by Northwood's future earnings as under

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the first proposed plan. Because the interests of Bourne, Delise,

and Tyler were no longer impaired under this plan, their votes were

not required for the plan's confirmation. The Association, whose

interests remained impaired, voted to accept the plan.

In July 2006, the bankruptcy court denied Bourne and

Delise's Phasing Rights Motion, rejecting their argument that,

despite the vote of the Association, no development rights could be

extended without their specific consent. The court then conducted

a confirmation hearing on Northwood's revised plan and approved it.

Bourne, Delise, and Tyler objected to the reclassification of

claims under the revised plan, arguing that it impermissibly

nullified their votes. The court rejected this argument, however,

because the revised plan fulfilled all their interests as

creditors. Bourne, Delise, and Tyler moved for reconsideration,

primarily of the phasing rights issue; the court denied the motion.

They then appealed to the district court, which took a different

view of the matter than did the bankruptcy court.

Before the district court, Bourne, Delise, and Tyler

argued that their Phasing Rights Motion should have been granted

and that the revised plan should not have been confirmed. On the

confirmation question, they argued in part that the plan was

infeasible if Northwood did not have legitimate development rights

and in part that Northwood's reclassification of their claims was

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an impermissible "gerrymander" meant to deprive them of a say in

Northwood's reorganization.

The district court held a hearing on November 16, 2006,

which focused on the appellees' Phasing Rights Motion. The court

issued its order three weeks later, essentially granting the

Phasing Rights Motion and holding that Northwood's development

rights had not been legitimately extended. In re Northwood Props.,

356 B.R. at 89. It vacated the confirmation of the plan on the

grounds that the plan was not feasible without the development

rights. Id. In so concluding, the court interpreted the

condominium statute as demanding a great degree of precision. That

is the first merits issue before us.

Because the court found the revised plan not feasible and

thus vacated the plan's confirmation on that ground, the court did

not address the reclassification argument. Id. That is the second

issue before us.

The district court suggested that Northwood could

successfully extend its development rights with less than unanimous

consent of the unit owners if the Association first agreed that the

percentage interests of the opposed unit owners (Bourne and Delise)

in the condominium's common areas would remain unchanged. This, of

course, would necessitate a greater decrease in the percentage

interests of the remaining owners. Id. at 88.

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 Upon Northwood's motion, the district court modified its

order, remanding the plan confirmation to the bankruptcy court so

that Northwood could pursue this suggestion for curing the problem

found by the district court. Northwood has appealed to this court

both the district court's ruling on the Phasing Rights Motion and

its remand of the plan confirmation to the bankruptcy court.

II.

A. Standard of Review

In an appeal from district court review of a bankruptcy

court order, this court independently examines the bankruptcy

court's decision, reviewing findings of fact for clear error and

conclusions of law de novo. Official, Unsecured Creditors' Comm.

v. Stern (In re SPM Mfg. Corp.), 984 F.2d 1305, 1310-11 (1st Cir.

1993). The district court decision is given no deference. Id. at

1311.

B. Phasing Rights Motion

1. Appellate Jurisdiction

Appeals in bankruptcy proceedings are governed primarily

by 28 U.S.C. § 158, although in Connecticut National Bank v.

Germain, 503 U.S. 249 (1992), the Supreme Court clarified that

jurisdiction under § 158 was in addition to, not in lieu of, the

normal appellate jurisdiction provided by 28 U.S.C. §§ 1291-1292.

Id. at 253. Sitting as an intermediate appellate court, the

district court exercised jurisdiction under § 158(a)(1) in

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reviewing the "final judgments, orders, and decrees" of the

bankruptcy court. Both of the bankruptcy court's decisions --

denying the Phasing Rights Motion and confirming the revised plan

-- were final as required by § 158(a)(1).

The circuit courts have further appellate jurisdiction

over "all final decisions, judgments, orders, and decrees" issued

by the district court sitting in its appellate capacity in

bankruptcy proceedings. 28 U.S.C. § 158(d)(1); see also 28 U.S.C.

§ 1291. This limitation on our appellate jurisdiction recognizes

that "the 'finality' of a bankruptcy court's decision may be

affected by the district court's disposition of the appeal."

Bowers v. Conn. Nat'l Bank, 847 F.2d 1019, 1022 (2d Cir. 1988).

Requiring the bankruptcy court's decision to be truly final, which

requires the district court's appellate review to be final, avoids

piecemeal appellate review before this court, thereby conserving

judicial resources. In re St. Charles Pres. Investors, Ltd., 916

F.2d 727, 729 (D.C. Cir. 1990). However, "because bankruptcy cases

typically involve numerous controversies bearing only a slight

relationship to each other, 'finality' is given a flexible

interpretation in bankruptcy." In re G.S.F. Corp., 938 F.2d 1467,

1473 (1st Cir. 1991), abrogated on different grounds by Conn. Nat'l

Bank, 503 U.S. 249.

The district court's ruling on the Phasing Rights Motion

is a final determination under § 158(d). "To be final, a

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bankruptcy order need not resolve all of the issues in the

proceeding, but it must finally dispose of all the issues

pertaining to a discrete dispute within the larger proceeding."

Perry v. First Citizens Fed. Credit Union (In re Perry), 391 F.3d

282, 285 (1st Cir. 2004); see also In re G.S.F. Corp., 938 F.2d at

1473; In re Saco Local Dev. Corp., 711 F.2d 441, 444 (1st Cir.

1983). The Phasing Rights Motion is essentially a declaratory

action, seeking a judicial determination as to whether Northwood's

development rights have been legitimately extended. Although the

motion does not finally resolve all disputes between Northwood and

Bourne and Delise, it does resolve a discrete dispute that was

instigated before Bourne and Delise became creditors of Northwood.

That is, it definitively resolves Bourne and Delise's rights as

condominium owners, even if not their rights as creditors.2 We

have jurisdiction over this question under § 158(d).

2. The Condominium Statute

2
Although the district court remanded the bankruptcy
court's ruling on the Phasing Rights Motion, that remand pertained
to a purely ministerial task, the entry of an order granting the
motion. This does not affect the finality of the district court's
determination. See In re Gould & Eberhardt Gear Mach. Corp., 852
F.2d 26, 29 (1st Cir. 1988) ("When a remand leaves only ministerial
proceedings, . . . then the remand may be considered final [in
terms of § 158(d)]."); see also, e.g., Aegis Specialty Mktg. Inc.
v. Ferlita (In re Aegis Specialty Mktg. Inc. of Ala.), 68 F.3d 919,
921 (5th Cir. 1995) (considering "the entry of an order by the
bankruptcy court in accordance with the district court's decision"
to be only a ministerial proceeding such that the district court's
remand was a final order).

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 Condominiums are governed in Massachusetts by chapter

183A of the Massachusetts General Laws. Chapter 183A "is

essentially an enabling statute, setting out a framework for the

development of condominiums in the Commonwealth, while providing

developers and unit owners with planning flexibility. Such

flexibility is particularly important with respect to phased

condominium developments where long-term financial and market

conditions may be uncertain." Queler v. Skowron, 780 N.E.2d 71, 77

(Mass. 2002) (citation omitted); see also Tosney v. Chelmsford

Vill. Condo. Ass'n, 493 N.E.2d 488, 490 (Mass. 1986); Barclay v.

DeVeau, 429 N.E.2d 323, 326 (Mass. 1981).

Phasing allows developers to sell units as they are

built, which in turn eases construction costs and financing

arrangements. The flexibility to revise plans as market and

financing conditions change also greatly assists condominium

development. The state legislature significantly revised the

condominium statute in 1998, adding the key provision in question

here and increasing the powers of unit owners' associations vis-à-

vis individual unit owners. It did so in recognition of "a

shortage of affordable housing stock based upon the expiration of

the right to add additional condominium units and land in numerous

condominiums created pursuant to chapter 183A." 1998 Mass. Adv.

Legis. Serv. 242 (LexisNexis).

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 We turn to section 5 of chapter 183A with these policy

concerns in mind. Because neither the Supreme Judicial Court nor

the Massachusetts Appeals Court has interpreted the relevant

provisions of section 5 since it was last amended in 1998, we

address the question ab initio. As with all statutory

interpretation questions, we focus on the language of the statute

itself.

Section 5(b)(2) describes the authority and powers of a

condominium's unit owners' association, which includes the power to

"[e]xtend, revive or grant rights to develop the condominium,

including the right to add additional units or land to the

condominium." Mass. Gen. Laws ch. 183A, § 5(b)(2)(iii). It is not

disputable that the Association's extension of Northwood's

development rights met the requirements of section 5(b)(2)(iii).

As required by that provision, the master deed authorized

additional units, and the eighty-three percent approval rate by the

Association's members of the extension surpassed the seventy-five

percent set by the statute as a default percentage. See id.

The extension of the time to exercise development rights,

however, is distinct from the ability to exercise those rights

under the statute. The addition of units reduces the percentage

interest each unit owner holds in the condominium's common areas.

State law provides some protection for unit owners in this context.

Under section 5(b)(1), a unit owner's percentage interest in the

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common areas cannot be "materially affected" without his or her

consent.

Northwood broadly argues that section 5(b)(2)(iii)

operates independently from section 5(b)(1) and that unit owners

have necessarily waived their rights under section 5(b)(1) through

their acceptance of any master deed. We disagree in light of the

language in section 5(b) that "[i]n the event of any conflict

between the provisions of this subsection and of the master deed,

. . . this subsection shall control."

Nonetheless, state law also provides that the requisite

consent can be inferred from the unit owner's acceptance of the

master deed if, at the time the unit deed was recorded, the master

deed (1) provided for the additional units and (2) "made possible

an accurate determination of the alteration of each unit's

[percentage] interest that would result" from the construction of

the additional units. Id. § 5(b)(1). The master deed in this case

clearly provided for additional units. The ability of Northwood to

exercise its development rights thus hinges on the interpretation

of this second clause, particularly the phrase "an accurate

determination of the alteration of each unit's [percentage]

interest."

The district court interpreted this phrase too narrowly.

On its reading, an "accurate determination" is the same as "precise

calculations." In re Northwood Properties, 356 B.R. at 87.

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Because the master deed did not make it possible for Bourne and

Delise "to calculate precisely what their new percentage interests

would be following the completion of any additional phases," the

court concluded, Northwood must obtain their express consent before

constructing any further units. Id. at 89 (emphasis added).

To impose a requirement of precise calculations of what

the new percentage interests would be upon development, however,

runs counter to the statute's underlying policies of flexibility

and pragmatism as well as the language of related provisions. It

is also inconsistent with the approach taken by the state courts in

interpreting this statute.

As a matter of statutory construction, section 5(a) is

closely related to the provision in dispute here, and that section

states that a unit owner's percentage interest "shall be in the

approximate relation that the fair value of the unit . . . bears to

the . . . aggregate fair value of all the units" at the time the

unit deed is recorded. Mass. Gen. Laws ch. 183A, § 5(a). Terms

like "approximate" and "fair value" reflect a statutory approach of

allowing developers flexibility within a reasonably limited range,

not an approach requiring absolute precision. We see no reason why

greater requirements for precision would be imposed under section

5(b)(1).

Further, in practice, the district court's reading would

tie the hands of developers, making it impossible for them to

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respond to changing market conditions. This would seriously

jeopardize developers' ability to secure financing to complete

projects. This in turn could have an adverse impact on present

owners of units. And it implicates the legislature's concern about

removing impediments to developing more housing in the

Commonwealth. Thus we read the key phrase, "made possible an

accurate determination," as not requiring the degree of precision

the district court posited.

Our reading is more consistent than that of the district

court with the approach taken by state courts in interpreting

Chapter 183A. That statute as a whole is an enabling statute.

Tosney, 493 N.E.2d at 490. It sets forth minimum requirements but

also provides for flexibility. Included in that flexibility, and

meant for the benefit of both unit owners and developers, is the

ability to adapt the size and scope of a project in response to

market conditions by phasing the development over some years. See

Queler, 780 N.E.2d at 77; Podell, 651 N.E.2d at 860 n.3.

We need not determine here the bare minimum a master deed

need include to satisfy the constructive consent provision of

section 5(b)(1). And it is better for the state courts to

themselves articulate the correct standard to apply. What was in

the master deed in this case, in our view, was enough.

The master deed stated how the percentage interests would

be calculated. It explained that the original schedule of

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percentage interests had been calculated "in conformance with

Chapter 183A, upon the approximate relation which the fair market

value of each Unit . . . bears to the aggregate fair market value

of all the Units"; that is, the deed treats "conformance with

Chapter 183A" as equivalent to the standard set by section 5(a).

In the same paragraph, the master deed states that "such percentage

interests [shall be] modified in conformance with Chapter 183A"

following the construction of additional phases. Thus Bourne and

Delise knew that their percentage interest would continue to track

the approximate ratio of the value of their units to the value of

all the units.

The master deed also provided enough information about

future phases to allow a reasoned and reasonable approximation of

what the aggregate fair value might be. There would be at most

sixty-six units, the construction of which would be of equal

quality to the existing units. The blueprint of the proposed full

development, included with the master deed, showed that two

additional buildings would have the same footprint as the two

existing buildings and that the remaining building would be

slightly larger; this implies that the future units would not be

grossly disproportional in size to the existing units. The master

deed, by definition, cannot precisely predict the future at the

time of its execution. It can, however, set forth reliable and

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accepted methodologies and provide an accurate description of

planned development.

This amount of information is sufficient to allow both

the Association and Bourne and Delise to accurately determine how

their percentage interests would be affected. They were not caught

by surprise or unfairly treated. Bourne and Delise argue that the

fact that Northwood and the Association offered two different

predictions of their future percentage interests in itself proves

that no "accurate determination" was possible, but the very small

range between Northwood's prediction of 1.52% and the Association's

prediction of 1.43% -- a 0.09% difference -- does not mean that no

"accurate" determination was possible.

The master deed "made possible an accurate determination

of the alteration of each unit's [percentage] interest that would

result" from the completion of further phases. As such, Bourne and

Delise consented to the future alteration of their percentage

interests when they recorded their unit deeds. Northwood may thus

exercise the development rights legitimately extended by the

Association under section 5(b)(2)(iii).

C. Confirmation of the Reorganization Plan

We have jurisdiction, in these circumstances, to reach

the issue of the confirmation of Northwood's plan. The district

court did not consider two other objections made by Bourne, Delise,

and Tyler to that confirmation. As our review of these issues is

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de novo and on the record from the bankruptcy court, we can and do

resolve them ourselves. See Advanced Testing Techs., Inc. v.

Desmond (In re Computer Eng'g Assocs., Inc.), 337 F.3d 38, 45 (1st

Cir. 2003) ("Our review of the district court's decision amounts to

review of the bankruptcy court's decision in the first instance.");

In re SPM Mfg. Corp., 984 F.2d at 1310-11 ("In an appeal from

district court review of a bankruptcy court order, the court of

appeals independently reviews the bankruptcy court's decision . .

. .") (emphasis added). Given the lengthy history of this dispute

and the need to avoid piecemeal litigation, we decline to remand to

the district court, with the attendant expense and delay, to

address issues fully briefed before us that we can resolve. We

turn to the two other objections.

We reject the claim that there has been a violation of

the Statute of Frauds. No separate written document was needed as

this dispute concerns no sale of real property. See Mass. Gen.

Laws ch. 259, § 1 ("[n]o action shall be brought . . . [u]pon a

contract for the sale of lands, tenements . . . or of any interest

in or concerning them" unless the contract is in writing and signed

by the party to be charged).

The appellees' second objection is that they were

erroneously grouped into an artificial convenience class in the

revised plan in order to orchestrate acceptance of the plan. The

bankruptcy court found that "the reclassification improves the

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financial position of Bourne, Delise, and Tyler by providing for

full payment of their claims and, hence, does not adversely affect

them." There was no error, much less clear error, in this finding.

Once their interests as creditors are fully protected, Bourne,

Delise, and Tyler have no legitimate grounds for objecting to the

reorganization plan.

III.

We reverse the decision of the district court, affirm

the bankruptcy court's confirmation of the reorganization plan,

and remand the case to that court for any further proceedings

consistent with this opinion. Costs are awarded to Northwood.

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