Background
In 2005, Wonderland Greyhound Park Realty, LLC (WGPR) financed its Revere racetrack with two mortgages: an $8.82 million first mortgage from Anglo Irish Bank and a $3.929 million second mortgage from plaintiff E. Mark Noonan. The Noonan promissory note included a “Capital Event” provision requiring mandatory prepayment whenever WGPR or its parent obtained any equity or debt financing “in excess of EIGHT MILLION EIGHT HUNDRED AND TWENTY THOUSAND and 00/100ths DOLLARS ($8,820,000.00)” — a threshold that matched exactly the Anglo Irish Bank loan amount taken out that same day.
After Massachusetts voters banned parimutuel greyhound racing effective January 1, 2010, CBW Lending, LLC — an affiliate of the owners of Suffolk Downs — purchased the first mortgage from Anglo Irish Bank (2010) and acquired title to the Wonderland property by quitclaim deed (2012), becoming simultaneously owner and mortgagor. A 2011 settlement agreement resolved earlier litigation by resetting the priorities and amounts of both mortgages, providing for a 50-50 split of future disposition proceeds, but containing no express modification of the capital event provision.
In 2017, the city of Revere ordered demolition of the Wonderland grandstands. Without notifying Noonan or tendering mandatory prepayment, CBW’s members formed VNO Belmont Wonderland LLC and borrowed $5 million from it, secured by a new mortgage on the Wonderland property. CBW recorded the VNO mortgage without Noonan’s knowledge. Noonan discovered it in February 2021 and sued; CBW discharged the VNO mortgage a month later. In January 2023, the city of Revere took the property by eminent domain and paid Noonan approximately $6.8 million — satisfying the debt, but only six years after the alleged breach.
A Superior Court judge granted summary judgment to CBW on all counts: no event of default arose because Noonan never served the written cure notice required by § 21(g) of the Noonan mortgage; the $5 million VNO loan fell below any triggering threshold under the capital event provision; and the 2017 mortgage was not a “disposition” under the settlement agreement. Noonan appealed.
The Court’s Holding
Reversed and remanded for entry of judgment in Noonan’s favor. Writing for a unanimous panel, the Massachusetts Appeals Court resolved the case on the capital event provision and the mortgage’s cross-default clause, leaving all other claimed breaches undecided.
The court found the capital event provision ambiguous: the $8,820,000 threshold did not specify whether it referred to future borrowing in excess of the Anglo Irish Bank loan alone, or in excess of the combined debt incurred that day (the Anglo Irish loan plus the Noonan note, roughly $12.75 million combined). Consulting extrinsic evidence under Massachusetts’s de novo ambiguity standard, the court found the determinative clue in the choice of threshold itself: the provision used precisely the Anglo Irish Bank loan amount, and CBW offered no commercially explicable reason why the parties would have chosen that exact figure as a future-borrowing ceiling under CBW’s reading. The more natural construction, the court held, was that $8,820,000 referred to the first mortgage taken out that same day — making the provision a prohibition on any further debt or equity financing beyond the Noonan note. CBW’s reliance on a single ambiguous sentence in Noonan’s deposition could not overcome both the text and Noonan’s consistent characterization of the note as a “no new money mortgage” throughout two lawsuits.
The panel held that breach of the capital event provision — a covenant of the Noonan note — constituted an automatic event of default under § 21(e) of the Noonan mortgage, which cross-defaulted on breaches of “any of the Security Documents other than this Mortgage.” Unlike § 21(g) (which required written notice before certain direct mortgage-covenant breaches triggered a default), § 21(e) contained no notice-and-cure requirement. Noonan’s failure to send a § 21(g) notice was therefore irrelevant; the full mortgage balance became due and payable when CBW granted the VNO mortgage in 2017, not when eminent domain paid it out in 2023.
The court also rejected CBW’s no-harm argument. The 2023 eminent domain payment did not cure the 2017 breach: the capital event provision entitled Noonan to payment in 2017, and CBW’s four-year delay denied him the use of his capital — a cognizable injury under G.L. c. 231, § 6C. See Salvi v. Suffolk County Sheriff’s Dep’t, 67 Mass. App. Ct. 596, 609 (2006) (prejudgment interest compensates for loss of use of money). Nor did CBW’s discharge of the VNO mortgage in 2021 retroactively cure a 2017 default.
Key Takeaways
- When a contract threshold exactly mirrors a contemporaneous transaction amount, that symmetry is powerful extrinsic evidence of the provision’s intended scope. Courts construing ambiguous financing covenants will look to what the chosen figure meant on the day it was written, not to a commercially inexplicable interpretation advanced by the party who later breached.
- Cross-default clauses in subordinate mortgages (like § 21(e) here) can accelerate the entire mortgage balance without notice-and-cure requirements that govern direct mortgage-covenant breaches under a separate clause. Practitioners advising lenders on successor acquisitions should map each “Security Document” against the full cross-default grid before any new financing is placed on the property.
- Mandatory prepayment obligations cannot be mooted by eventual payment from a third party. If a breach triggers acceleration, the accruing loss of use of capital between the breach and ultimate payment is independently compensable — meaning damages survive even if the underlying debt is fully paid years later.
- A settlement agreement that amends notes and mortgages by resetting priorities and amounts does not extinguish specific covenants (like a capital event provision) unless the settlement expressly supersedes them. Boilerplate “as amended by the settlement” language is not sufficient.
Why It Matters
Noonan v. CBW Lending is a useful decision for Boston commercial real estate and lender-side practitioners. It illustrates how “dead letter” provisions in pre-recession mortgage documents — drafted for a property whose original use (greyhound racing) has since been banned — can retain full legal force when the property changes hands and the successor mortgagor takes on new financing. Any attorney conducting due diligence on a real estate acquisition that involves assumption or succession to prior mortgage obligations should carefully inventory each Security Document referenced in the mortgage’s cross-default provisions, because a § 21(e)-type clause can accelerate the entire mortgage balance without notice the moment a subordinated note obligation is breached.
The decision also reinforces an underappreciated remedy in Massachusetts commercial litigation: where a mandatory prepayment clause is breached, the creditor is entitled to prejudgment interest from the date prepayment was contractually due — not merely from the date of eventual payment. In disputes over mezzanine debt, seller financing, or subordinated notes secured by Massachusetts real property, Noonan supplies a clean Appeals Court citation for the proposition that denial of use of capital is compensable even when the breach is ultimately “cured” by external events years later.