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Daily Development for Thursday, June 12,
2003
by: Patrick A. Randolph,
Jr.
Elmer F. Pierson Professor of
Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper
Martin
Kansas City, Missouri
dirt@umkc.edu
RULE AGAINST PERPETUITIES; VESTING: In order to
protect a
future interest from
destruction under the Rule Against Perpetuities,
Court will infer the intent of the parties that actions triggering
the
creation of an interest in the future
must be carried out within a
reasonable
time.
Kobrine v. Metzger, No. 1487, 2003 Westlaw
21246038 (5/30/03)
A developer created a seaside subdivision with 56 "for
sale" lots that
included a an
additional lot that was to be used for water access for the
other lots in the subdivision. The Declaration
provided, that until all the
lots were
sold, the lot and other easement areas would be owned and
maintained by the Developer or its successors, and
that each lot owner
was to pay 1/56 of
the cost of such maintenance. When all 56 of the lots
were sold, however, the property was to pass to the
owners of the sold
lots as tenants in
common, with each lot owner holding a 1/56 undivided
interest.
Much later, all the lots were finally sold, after many
lots and the
developer's interest and the
fee in the access lot had all passed through
several hands. The lot owners brought suit to require that
the covenant
be specifically performed
and that they received their cotenancy interests.
Among other things, the current owner of the lot
disputed the ownership
claims of the
other lot owners because, he argued, the interest over in fee
was void under the Rule Against
Perpetuities.
The court had to deal with Maryland precedent - Dorado
Limited
Partnership v. Broadneck
Development Corp., 317 Md. 148 (1989),
which had held that a contract for the sale of land was void under
the
Rule because the option to purchase
stated that a the optionee would
purchase
the land no later than ninety days after the optionor
delivered
proof that the county had
granted sewer allocations for the land. The
county at the time had declared a moratorium on new
sewer permits, and
there was no certainty
as to when that moratorium would be lifted. The
Maryland Court of Appeals rejected the notion that it
could infer that the
parties intended
that the notice be given and the option exercised within a
reasonable period of time because, it held, such a
construction is not
possible when the
condition precedent to the interest is "beyond the
control of the parties."
In a subsequent case, a lower appellate court had
refused to apply
Dorado in a case in
which the condition precedent was completion of
water percolation tests and the issuance of building permits.
The court
here maintained that the two
cases were distinguishable because, in the
latter case, the carrying out of the percolation tests was within
the control
of a party. It does not
discuss whether the same would be true of the
issuance of building permits, apparently assuming that such permits
are a
matter of right once satisfactory
percolation results are shown (a
conclusion that might be disputed.) Because the condition was
within
the control of a party, the court
in this second case had ruled that the
parties intended that the tests be completed and permits issued
within a
reasonable time, less than the
perpetuities period.
Similarly, the court here ruled that the marketing and
selling of the lots
was an action within
the control of the developer. Perhaps recognizing
the weakness of its argument, due to the fact that
for a lot to be sold there
must be both a
buyer and a seller, so the developer did not in fact control
the sales - the court went on to read the Dorado
authority out of the
precedent - stating
that it is always an available option for the court to
conclude that the creator of the right intended that
it be exercised within
a reasonable time,
and certainly within the Perpetuities Period.
"In addition, we have held
that 'the intent of the grantor must be
ascertained before determining whether the
Rule Against
Perpetuities applies. We have repeatedly stated that "a
contract
'should
be interpreted if feasible to avoid the conclusion that it
violates the Rule Against
Perpetuities . . . under the doctrine that
a construction should be favored which
gives effect to intention
rather than one which defeats it.' Even if
the Rule Against
Perpetuities might otherwise apply to the agreement to convey
contained in the Declaration
in this case, we believe the
developer's intention would mandate not
applying the rule."
[citations omitted]
The court, perhaps recognizing that this language
basically does away
with the binding
precedent expressed in Dorado, where the same
arguments could have been made, comments that this part of the
holding
is "subordinate" to its earlier
ruling that the condition was within the
control of the parties.
Comment 1: The Rule Against Perpetuities issue is only
a small part of
the case, and likely
would not justify an appeal to the Maryland Court of
Appeals by itself, so it is very likely that there
will be no appeal here.
But if there
were, the editor would be very, very interested in seeing how
the court's analysis here fits within the Court of
Appeals view of the
precedent. In
the editor's view, both parts of this holding are
inconsistent with the precedent. A condition
that 56 lots be sold to as yet
unidentified strangers places the satisfaction of the condition
beyond the
control of the current
owner. Unless the court is willing to say that a
"sham sale" to a controlled buyer would satisfy the
condition, it is clear
that in addition
to the seller, buyers are needed. The case is wrong on
the
precedent.
Comment 2: Whether the case is right on the analysis
is another question
of
course. It does seem that one might construe most real
estate
transfers with provisions
potentially triggering application of the rule to
include the implied provision that the interests will
not continue beyond
the period of a life
in being plus twenty one years. Except where the
papers clearly create an expectation of remote
vesting, such a
construction does seem
appropriate, even though we're then left with the
puzzle of exactly what "reasonable" termination point
was intended.
Readers are encouraged to respond to or criticize this
posting.
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