News
July 30, 2007
Christopher M. Morrison
617 226-3465
Associate
Areas of Concentration
Business Litigation
Office
Developers Add Weapon to Arsenal In Form of Required Suerty Bonds
Commercial developers hoping to level the playing field with their opponents may have added a new weapon to their arsenal when a Superior Court judge recently ordered one group of plaintiffs to post a surety bond to secure the developer’s increased construction costs.
The Massachusetts Zoning Statute, Mass. Gen. Law Chapter40A, already includes significant protections for developers, including myriad procedural hurdles for plaintiffs seeking to halt construction and a narrow definition of those who have standing to sue as “persons aggrieved” by a zoning decision. Still, until now, a developer who managed to obtain a variance or special permit at the local level and then prevailed in Superior Court, could find their project stalled for another year or more by a determined plaintiff, with no apparent remedy for the substantial costs of the delay. As construction costs continue to rise, developers often watch a sizable chunk of their profits slip away, while their case awaits appellate review. Even the statutory priority afforded to Chapter 40A appeals provides only a modicum of hope that the appellate process will conclude before all expected profits are lost to litigation delays.
In June 2006, a developer obtained a special permit from the town of Lunenberg to redevelop the former Whalom Amusement Park into a multi residential community, expected to include 240 townhouse- and garden-style residential units. As soon as the special permit was issued, a group of four abutters filed an appeal to the Superior Court, stopping the development in its tracks. Last September, Judge Peter Agnes dismissed the complaint, finding that the developer had overcome the plaintiff’s presumptive standing by proving that they would not suffer any particularized harm.
Final judgment was entered in favor of the developer on January 12, 2007. The plaintiffs filed their notice of appeal on February 8. While the record was being assembled, the developer was unable to proceed with construction and continued to suffer lost opportunity costs and unpredictable changes in the market for construction materials. On March 13, the developer filed a motion in Superior Court, asking that the plaintiffs be required to post a surety bond pending the appeal. The developer sought a bond in the amount of its expected cost increases associated with the further delay, which it estimated (and supported with an affidavit) to be $1.03 million, or in the amount of $391,677, the developer’s estimated taxes, maintenance costs and loan interest payments.
In Boston, developers have an express statutory right to a surety bond pursuant to M.G.L. Chapter 40A, Section 21, but no other statute expressly authorizes bonds in zoning decisions that arise outside of Boston. Until now, there has not been a reported case where such a bond was required outside of Boston. The decision was not entirely unexpected, however, as several cases have suggested that ordinary equity principles could support a requirement that surety be posted in zoning appeals.
Historical Background
More than 35 years ago, the Supreme Judicial Court laid the groundwork for Judge Agnes’ decision in Damaskos v. Board of Appeal of Boston, observing that requiring a bond “as a condition for judicial or other action [is] not unusual.” Although Damaskos involved a Boston zoning appeal, the court later relied on that observation to support the imposition of a bond even without express statutory authority “under usual equity principles … as a matter of judicial discretion.”(Burger Chef Sys. Inc. v. Servfast of Brockton Inc., 393 Mass. 287, 290 (1984).)
One year after Damaskos, the Supreme Judicial Court confirmed that a bond may be required in any appropriate zoning case, not just one in Boston. In Broderick v. Board of Appeals of Boston, 361 Mass. 472, 475-76 (1972), the Superior Court, after a trial on the merits of variances granted to the Faulkner Hospital to demolish and rebuild its facilities, ordered the opponents of the development to replace an extant $5,000 bond with a $100,000bond. Under the terms of the order, if the appellants filed the bond, the Superior Court would enter a final decree sustaining the decision and facilitate an appeal; otherwise, the Superior Court proposed to (and later did) dismiss the complaint.
Although the Supreme Judicial Court con-ceded that the additional bond requirement was procedurally improper in that case, it also cautioned that its holding “should not be construed as conferring on an appellant from a final decree in the Superior Court in a zoning case an absolute right to appeal … with-out filing a surety bond.” Instead of relying on the express statutory authority for a bond in Boston appeals, the court observed that all appeals “are subject to the same statutory rules as apply in other equity proceedings. Inappropriate circumstances after the entry of a final decree, a justice of the Superior Court or of this court under G.K. Chapter 214,Section 22, may order, pending appeal, that a surety bond be filed by the appellant in an amount which is sufficient to protect the interests of the appellee and is other wise appropriate.”
Broderick confirmed that the standard for the imposition of a bond applies to zoning cases in general, not just to those in Boston. For example, Section 21 of Chapter 40A,cited in Broderick, has since been replaced by G.L. Chapter 40A, Section 17, but neither version applies in cases under the Boston Housing Code, and neither version expressly contains a provision respecting a bond on appeal. Instead, both versions of the statute make all rights and remedies available at equity applicable to zoning appeals. Compare M.G.L. Chapter 40A. Section 21 (repealed)(“Any person aggrieved by a decision of the board of appeals … may appeal to the superior court … by filing a bill in equity”) with M.G.L. Chapter 40A, Section 17 (“the parties shall have all rights of appeal and exception as in other equity cases.”)
More importantly, G.L. Chapter. 214,Section 22. which was cited in Broderick and later was reauthorized without any substantive changes as G.L. Chapter 231, Section 117,empowers courts to protect the rights of the parties pending appeal, and applies broadly to zoning cases and to all other cases in equity. By citing statutes of general application in Broderick, the Supreme Judicial Court ensured that its holding would apply to zoning cases whether or not they are governed by the Boston Housing Code.
The Appeals Court followed the SJC in Schlager v. Board of Appeals of Boston, 9Mass. App. Ct. 72 (1980), where the developer, after the completion of briefs on the merits of the appeal, petitioned a single justice of the Appeals Court to impose a $100,000 bond as a condition of prosecuting the appeal. The single justice ultimately imposed a $45,000bond, and the opponents of the development appealed that order. The Appeals Court expressly recognized (and the appellants ultimately conceded) that although the single justice’s action exceeded the authority of the Boston Housing Code and Section 21 of Chapter 40A, the bond was authorized by Broderick and M.G.L. Chapter 231, Section117. When the appellant failed to file the required bond, the Appeals Court affirmed the dismissal of the appeal.
Relying in part on some of those cases, Judge Agnes became the first judge in more than 25 years to require a bond in a zoning case that did not arise in Boston. Whether other courts will endorse his approach in a case outside of Boston will not soon be resolved. Two weeks after he ordered the Lunenberg plaintiffs to submit evidence supporting a different bond amount or face a bond requirement in excess of $1 million, the plaintiffs withdrew their appeal, clearing the way for construction to begin.
