The town of Sudbury appeals from a judgment of the Land Court declaring that the town did not have a right of first refusal as to Charles F. Scott's offer to purchase a seventy-acre parcel of land (locus) that was valued, assessed, and taxed as agricultural land under G. L. c. 61A. The locus had been sold to Scott without prior notice to the town of the terms of Scott's offer because Scott had agreed with the seller to continue the agricultural use of the locus and to notify the town accordingly. As a result of events in the two months that preceded and the five months that followed conveyance of the locus to Scott, the town brought an action for specific performance of its option to purchase the locus on the same terms as Scott, pursuant to G. L. c. 61A, § 14, alleging that the sale to Scott was for nonagricultural purposes. On cross motions for summary judgment, a judge in the Land Court granted summary judgment for Scott. He concluded that the town's evidence did not show that at the time Scott acquired the locus he intended to use it entirely for nonagricultural purposes. Because there are questions of material fact as to Scott's intentions for the use of the locus at the time he acquired title, we vacate the entry of summary judgment and remand the case to the Land Court for trial.
1. Facts. The following facts are undisputed. From 1975 until March 18, 1999, the locus consisted of five lots containing approximately seventy acres of land located in Sudbury. Beginning in 1975 the locus was assessed and taxed as agricultural land pursuant to G. L. c. 61A. During this time the locus was primarily in the ownership of the Mahoney family. On an annual basis the Mahoneys applied to the town for, and received, classification of the locus as agricultural land under G. L. c. 61A, § 4, and, as a consequence, paid a lower amount in property taxes each year than they would have paid if the locus had been assessed at its full market value.
On April, 12, 1999, Strawberry Hill entered into a purchase and sale agreement to sell the locus to Scott, as trustee of the Evergreen Realty Trust (trust), for $1.3 million. The purchase and sale agreement included a rider containing a statement that the locus was valued, assessed, and taxed under G. L. c. 61A, and Scott's warranty that he would continue to use the locus for agricultural purposes.
On May 5, 1999, eight percolation tests and eleven deep observation holes were dug on the locus for purposes of determining the suitability of the soil for septic disposal systems. Those tests were witnessed by an agent of the town's board of health. The tests were done for Tom Inman, who was known to the health director for the town to be a "local developer," and who, as later discovered, was a coguarantor with Scott on the mortgage loans Scott obtained to acquire the locus. Before July, 1999, the town planner met with Scott and discussed possible uses for the locus, including a horse riding ring, a senior residential community, and single-family homes.
The mortgage commitment letter from Scott's lender, dated July 2, 1999, states in paragraph eleven, "Loan Purpose: Business Purpose"; in paragraph twelve, "Borrower has represented, and Borrower's attorney must certify, that the `rollback taxes' that must be paid in order to remove the Property from its
On July 8, 1999, Scott executed two promissory notes in favor of his mortgage lender. The notes state: "The undersigned does hereby attest, certify, represent, warrant and covenant that neither the premises nor any portion thereof described in any mortgage securing this note are used or are intended to be used by the undersigned or by any person liable hereunder as a dwelling, or as a home, and that the proceeds of this transaction are solely to be used for commercial and business purposes and not for agricultural or consumer purposes, and the undersigned acknowledges that this attestation, certification, representation, warranty and covenant has been relied upon by the holder hereof" (emphasis added).
On July 8, 1999, Strawberry Hill executed a deed of the
On September 29, 1999, Scott filed the necessary applications with the town under G. L. c. 61A, § 6, seeking continued assessment of approximately 48.14 acres of the seventy-acre locus under c. 61A for fiscal year 2001. By October, 1999, all horses that had been kept on the locus were removed. On October 7, 1999, six additional percolation tests and seven deep observation holes were dug on the locus and, once again, witnessed by an agent of the board of health. On October 12, 1999, Scott's wife attended a meeting with members of the board of selectmen, the conservation coordinator, and the chairman of the town's planning board, at which time she discussed potential uses for the locus, including senior residential housing and single-family development.
On November 22, 1999, Scott entered into a purchase and sale agreement with Brendon Homes, Inc., to sell approximately twenty-four acres of the locus (twenty-four acres) for the sum of $3 million. On November 29, 1999, counsel for Scott notified the town, pursuant to G. L. c. 61A, § 14, of Scott's intent to sell the twenty-four acres for residential development, and he advised the town of the terms of the offer. On March 27, 2000,
2. Statutory background. A summary of the relevant portions of G. L. c. 61A will assist in an understanding of the issues raised in this case.
Chapter 61A provides, in general terms, that the owner of
In return for the lowered assessment, and hence lower taxes, the landowner is required to compensate the municipality if and when the land is sold for or converted to residential, commercial or industrial use. Such compensation may take one of three forms. First, under G. L. c. 61A, § 12, the selling landowner may be liable for a conveyance tax.
If only a portion of land assessed under c. 61A is sold for or
3. Summary judgment. The town argues that it was error to grant summary judgment for Scott, where the town produced sufficient evidence that, if believed, would show that at all material times Scott intended to use the locus for nonagricultural purposes and that he concealed his true intent so as to defeat the town's right of first refusal. The town further argues that it was thus entitled to receive notice of the intended sale from Strawberry Hill to Scott that would trigger its right of first refusal. The town contends that Scott's intentions could be inferred from the development-related activity evidenced by meetings between town officials and Scott or persons acting on Scott's behalf, by the arrangements for percolation and other tests, and by various mortgage documents (the plan showing a subdivision of a portion of the locus, the two promissory notes,
Scott did not file a counter affidavit, but he filed an affidavit in opposition to the town's motion for a preliminary injunction in which he stated that he purchased the locus as a horse farm for his wife and daughter. His affidavit further states that he sold the standing hay for $725 during the summer of 1999, as well as one cord of wood for $75, and that the horses that had been on the farm remained there after he acquired title, staying until October, 1999. Scott and Brendon Homes argue that only an actual change of use should trigger the town's right of first refusal, and that Scott's subjective intent does not constitute a sufficient basis to trigger the right.
At common law, a right of first refusal ripens into an option to purchase when the condition set forth in the instrument
"[A]n option may be exercised only in strict compliance with its terms." Id. at 527. If the holder of the right does not receive the notice to which he is entitled under the instrument creating the right, then any specified period within which the option must be exercised does not start to run. See id. However, circumstances may place the holder on constructive notice that his right of first refusal has been implicated, in which case the holder must investigate and exercise his option within a reasonable period of time. See id. at 526, 527.
Under G. L. c. 61A, § 14, a town's right of first refusal ripens into an option to purchase when the town receives notice of an
Scott and Brendon Homes argue that only an actual change of use should trigger the town's right of first refusal. The statute states otherwise. Section 14 provides that there shall be no sale or conversion of land under c. 61A to a nonagricultural use unless the town has been given notice of the intended sale or change of use, and 120 days has passed without an exercise of the town's option to purchase or the town notifies the owner within that period that it will not exercise its option. Under the statute, the town's option to purchase is triggered by notice, not by an actual change of use, and notice must precede the sale or change of use.
Scott and Brendon Homes next argue that § 14 "cannot be read to require notice whenever the then owner's (or prospective purchaser's) subjective thoughts reach some undefined level of commitment to convert the farmland (or a portion of it) to a nonagricultural use at some undefined time in the future." The statute does not require someone who is merely considering his options to notify the town of his thoughts. The town's right under § 14 to be "notified of intent to sell for ... [nonagricultural] use" necessarily includes notice of a buyer's intent to acquire land under c. 61A where the buyer has no intention of continuing the agricultural use of the land. The statute refers
The legislative history supports our conclusion. As earlier noted, G. L. c. 61A was enacted under the authority of art. 99 of the Amendments to the Massachusetts Constitution, which was approved in 1972. The Legislature was concerned with the rapidly decreasing number of farms in the Commonwealth during the 1940's and 1950's, and the resulting loss of a vital resource for the people of the Commonwealth. Between 1955 and 1970 the Legislature commissioned five studies to explore ways to reverse this trend, including the assessment and taxation of agricultural lands at agricultural value.
The Legislature's concern about the loss of farmland to
The right of first refusal created by § 14 manifests a legislative intent to do more than help to make farming economically feasible by providing a tax incentive. The right of first refusal was intended to help preserve and protect the agricultural use of land by requiring notice to a town before land under G. L. c. 61A is converted or sold for nonagricultural use.
The town has presented evidence that, if believed, indicates
A person's intent is a question of fact "to be determined from his declarations, conduct and motive, and all the attending circumstances." Galotti v. United States Trust Co., 335 Mass. 496, 501 (1957), quoting Casey v. Gallagher, 326 Mass. 746, 749 (1951). Scott's affidavit to the opposite effect merely places his intent in dispute. Because the issue of Scott's intent at the time he took title is material to the outcome of the case, and because his intent is in dispute, summary judgment was not appropriate. See Attorney Gen. v. Desilets, 418 Mass. 316, 331 (1994); Quincy Mut. Fire Ins. Co. v. Abernathy, 393 Mass. 81, 86 (1984), and cases cited ("The granting of summary judgment in a case where a party's state of mind or motive constitutes an essential element of the cause of action is disfavored").
We take the opportunity to discuss an issue that is likely to arise at trial. Because the town seeks to exercise its option only with regard to the sale between Strawberry Hill and Scott, if it is determined that Scott did acquire the locus for nonagricultural use, then it will be necessary to determine (a) when the
The judgment is vacated and the matter is remanded to the Land Court for further proceedings consistent with this opinion.
CORDY, J. (dissenting, with whom Marshall, C.J., and Sosman, J., join). The obligation imposed by G. L. c. 61A, § 14, that the town be notified of the "intent to sell" property for development purposes is an obligation imposed on the seller, and not the buyer of agricultural land. Because the town neither alleged nor produced evidence that the seller knew or intended anything other than that the sale be for agricultural use, and did not allege or produce any evidence of fraud on the part of the seller, I would affirm summary judgment for Charles F. Scott, as trustee of the Evergreen Realty Trust (trust).
Background. On July 8, 1999, Strawberry Hill Farms, LLC, a corporation owned by the Mahoney family, sold five parcels of adjoining land, totaling approximately seventy acres to the trust. The land was sold on the express written representation of the trust that it would continue in use as agricultural land. The total purchase price was $1.3 million.
At the time of the sale, all five parcels were taxed as agricultural land pursuant to G. L. c. 61A, because the Mahoneys had submitted applications for that status on behalf of each of the parcels for the tax year commencing January 1, 1999, and continuing through December 31, 1999. Such applications are required to be submitted annually for approval by the town on or before October 1 of the year preceding the tax year. G. L. c. 61A, § 6. Once approved, the landowner must notify the town in writing of "any subsequently developing circumstance within his control or knowledge which may cause a change in use of the land" before October 1 of the tax year for which the agricultural tax status has been approved. Id. On July 9, 1999,
On September 29, 1999, for the upcoming tax year 2001, the trust filed agricultural tax status applications for only four of the five parcels, totaling forty-nine of the seventy acres. On November 22, 1999, the trust entered into a purchase and sale agreement with Brendon Homes, Inc., to sell it approximately twenty-four acres of the land for the construction of a senior residential community. Twenty-one of these acres were contained in the parcel for which no agricultural tax status had been sought by the trust for 2001, and the remaining three acres were contained in a larger parcel for which such status application had been made on September 29, 1999. The purchase price for the land was $3 million. On November 29, 1999, the trust notified the town of its intent to sell the twenty-four acres for residential development, as required by G. L. c. 61A, § 14. This notification triggered the town's option of either imposing and collecting a "conveyance tax" or a "roll-back tax" (whichever amount was greater) or of purchasing the property for $3 million (assuming it was a bona fide offer). G. L. c. 61A, §§ 12-14. The town had 120 days within which to exercise its option to purchase the property.
On March 24, 2000, the town responded by claiming an option to purchase all five parcels, i.e., the entire seventy acres, for the price of $1.3 million, and on March 27, 2000, it filed this action specifically to enforce that option. The town proceeded on a theory that if, at the time of purchase, a buyer of agricultural land intends to convert, develop, or sell it for residential, industrial, or commercial purposes, sometime in the future, the town's option under G. L. c. 61A to purchase the parcel is triggered. In its view, the trustee (as the buyer) harbored such an intent with respect to the five parcels when the trust acquired the land from the Mahoneys on July 8, 1999. Therefore, the town concluded, it had acquired the option to purchase the seventy acres at the price paid to the Mahoneys by the trust, and the 120-day exercise period had not run its course because the town had not received notice of the buyer's intention to convert at the time of sale.
Discussion. General Laws c. 61A, § 14, provides that land
The town has not alleged that the Mahoneys sold the property for any purpose other than agricultural use, that the Mahoneys had any awareness of the buyer's contrary intent, that the Mahoneys failed to fulfil their responsibilities under the statute, or that the Mahoneys conspired in any manner with the buyer (the trust) to defraud the town of any rights it had under G. L. c. 61A. Rather, the town contends that the notice requirement of § 14 contemplates notice to it of the prospective purchaser's undisclosed intentions for the future use of the property. This is neither consistent with the language of the statute nor necessary to its important purposes. To the contrary, such an interpretation will cast a troubling shadow over the sale of agricultural land if any future conversion of all or even a part of the land for development would permit a town to bring an action seeking to undo the original transaction on the basis that the purchaser had intended all along to convert the property. I cannot conclude that the Legislature intended to create such uncertainty in the conveyance of land. The statute fully protects the interests of cities and towns at such time as agricultural land is about to be
The statutory scheme is directed to owners of agricultural land. It provides a mechanism and a tax incentive by which such landowners can economically continue to use their land for agricultural purposes in the face of increased land values and the increased property taxes that would otherwise follow. It is the landowner who must apply to the local board of assessors each year for the tax exemption, G. L. c. 61A, §§ 4, 6, and the landowner who must notify that board of any likely change in use in the land that might occur within the tax year for which the exemption has been granted. Id. It is also the landowner who must pay the roll-back tax (by which the town recaptures the last five years of tax benefits) if the land is sold or converted to development use, even if the landowner has only recently acquired it and did not receive the tax benefits in those prior years.
Similarly, if a landowner intends to convert the land to a use other than the one for which he has sought the agricultural exemption, either by converting the land himself or by selling it for such conversion, he must notify the town of that intention. The town then has an option to purchase the land for its "full and fair market value" (if the landowner is converting it himself),
If the landowner sells the land for agricultural purposes, as happened here, the land continues to be encumbered by the town's rights. If and when the new landowner sells or converts the land for development purposes, the town may exercise its purchase option or enforce its statutory liens for roll-back and conveyance taxes. No matter when the new landowner decides to convert some (or all) of the land, those encumbrances remain in place and the town will receive all of the protections intended by G. L. c. 61A.
What if, as is alleged here, the seller (the Mahoneys) sells the land at a relatively modest price contingent on its continued use as agricultural land (i.e., at its agricultural value) but the buyer (here the trust) secretly harbors the intention to develop the land and sell it for a higher price? The answer is that the seller, not the town, has suffered the harm, if any. General Laws c. 61A does not entitle a municipality to purchase land at its earlier established "agricultural value" when a later sale or conversion to development use occurs. Rather, if the landowner sells the land for development, the town may acquire it at the development price agreed on between the landowner and the prospective developer or, if the landowner intends to develop the land himself, at its "full and fair market value." Under no scenario is the town given an option to purchase the land at its agricultural value. Here, by the explicit terms of the transaction, $1.3 million was the price the Mahoneys received for their land conditioned on its continued use as agricultural land, as the buyer then represented. If the Mahoneys were deceived in this regard, they have resort to their own civil remedies. The town, however, has suffered no loss; it was never entitled to purchase the land at that value.
Finally, the court directs our attention, ante at 290-291, to the loan obtained to finance the purchase of the land, and the language set forth in the loan documents to the effect that the loan was for "commercial" or "business" and not for agricultural purposes. While potentially probative of the trust's
In sum, I would affirm summary judgment for the trust. The obligation is on the landowner-seller to notify the town of the purpose of the sale, and there was no material fact in dispute regarding the seller's intent or knowledge. As far as the Mahoneys knew, Scott was buying the land for agricultural purposes, and, by law, would be subject to all of the requirements of G. L. c. 61A, § 14, if those purposes later changed.
We acknowledge the amicus brief filed by the New England Legal Foundation.
A constitutional amendment was necessary to assess and tax agricultural lands based on the land's agricultural use value because art. 10 of the Declaration of Rights requires that no taxpayer's burden should be "relatively greater or relatively less than that imposed upon other taxpayers." Bettigole v. Assessors of Springfield, 343 Mass. 223, 230 (1961), quoting Opinion of the Justices, 332 Mass. 769, 777 (1955). In addition, Part II, c. 1, § 1, art. 4, of the Massachusetts Constitution "forbids the imposition of taxes upon one class of persons or property at a different rate from that which is applied to other classes." Id., quoting Opinion of the Justices, 341 Mass. 738, 750 (1960). By statute, property must be assessed at its full and fair cash valuation. G. L. c. 59, §§ 2A, 38. Thus, without the amendment, assessment and taxation at use value would be unconstitutional.
Were § 17 to be literally construed, a landowner could reap the benefits of reduced taxes, and then avoid the municipality's right of first refusal under § 14, by first converting all but a five-acre qualifying portion of his property to a nonagricultural use. He would be liable for roll-back or conveyance taxes on the separated land, but the municipality would not have the right to meet an offered bona fide purchase price or to purchase the separated land at fair market value. The Legislature probably did not intend this result.
An interpretation of § 17 that is consistent with the purpose of the statute and in harmony with the statute as a whole, see Pentucket Manor Chronic Hosp., Inc. v. Rate Setting Comm'n, 394 Mass. 233, 240 (1985), would allow the municipality to exercise its first refusal rights as to that portion of the land that is to be separated from the remainder, when sold or converted, as set forth in § 14 of the statute, while the remainder of the land may remain in c. 61A. The language of § 14 is inclusive, referring only to "land [in c. 61A]." Scott's notice to the town of his intent to sell a portion of the locus appears to have been based on this same construction of the statute.