Agenda - Planning Commission - 04/03/2008

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(\ , ! , , . '.~ March 25, 2008 rVolume 21 No.6 because the town failed to obtain the consent of the bank as required by state law. State law, Mass. Gen. 1. c. 41, S 81 W, prohibited a re- scission of the approval of a subdivision plan or changes to a subdi- vision plan that affected the lots in the subdivision which had been mortgaged in good faith and for a valuable consideration after ap- proval of the plan without the consent of the owner of the lots and the holder of the mortgage. The town appealed. The town argued that it was not prohibited from rescinding the approval without the bank's consent because the entire site was mortgaged and not "the lots," as specified in the stat- ute. The town also argued that Terrill failed to show the mortgage was entered into in good faith. DECISION: Affirmed. The court rejected the town's first argument that since the entire site was mortgaged it was not prohibited from rescinding the ap- proval without tl1e mortgagee's consent. The court noted that an earlier version of ~81W did not prohibit rescission without owner or mortgagee consent where there was "a conveyance or a mortgage to a single grantee or mortgagee." However, the most recent amend- ment to the statute eliminated that exception and substituted the language to allow exception from the prohibition only when there had "been a sale to a single grantee." The court concluded that a mortgage on an entire parcel, which was once vulnerable to rescls- sion without the mortgagee's consent, was now protected by S 81 W from rescission without the mortgagee's consent. Therefore, where a town sought to rescind an approved subdivision plan that had been mortgaged, the consent of the mortgagee was required. The court also rejected the town's second arguIj:J.ent that it did not need mortgagee consent because Terrill failed to show the mortgage was entered into in good faith. Section 81 W prohibited rescission of a conditional approval of a subdivision without consent of the mortgagee when the subdivision had been "mortgaged in good faith and for valuable consideration." The court reviewed the factual pro- gression of how Terrill obtained the construction loan. The court found the facts indicated that the bank relied on the certificate of constructive approval, the recorded subdivision plan, an appraisal, and common commercial documents. The. court concluded that the mortgage was therefore granted in an "arms-length transaction" in- volving valuable consideration, and the purpose of that transaction was to secure a loan for construction of the subdivision. The court said an attack on good faith was the same as an allegation of fraud, 11 147