Buffalo Seminary v. McCarthy

• Decision Date: 14 May 1982
• Citation: Buffalo Seminary v. McCarthy, 451 N.Y.S.2d 457, 86 A.D.2d 435 (N.Y. App. Div. 1982)
• Court: New York Supreme Court — Appellate Division
• Parties: The BUFFALO SEMINARY, Respondent, v. Michael L. McCARTHY, Kathleen A. McCarthy and Estate of Anna Marie McCarthy, Appellants, Michael L. McCARTHY, Kathleen A. McCarthy and Estate of Anna Marie McCarthy, Third-Party Plaintiffs Appellants, v. ESTATE OF Ruth L. ROBB, Randolph L. Robb, David L. Robb, Elizabeth R. More, Marine Midland Bank, Hodgson, Russ, Andrews, Woods & Goodyear, James M. Wadsworth and Anthony L. Dutton, Third-Party Defendants Respondents.

Page 457

451 N.Y.S.2d 457

86 A.D.2d 435

The BUFFALO SEMINARY, Respondent, v. Michael L. McCARTHY, Kathleen A. McCarthy and Estate of Anna

Marie McCarthy, Appellants,

Michael L. McCARTHY, Kathleen A. McCarthy and Estate of Anna

Marie McCarthy, Third-Party Plaintiffs Appellants, v. ESTATE OF Ruth L. ROBB, Randolph L. Robb, David L. Robb, Elizabeth R. More, Marine Midland Bank, Hodgson, Russ,

Andrews, Woods & Goodyear, James M. Wadsworth and Anthony L.

Dutton, Third-Party Defendants Respondents.

Supreme Court, Appellate Division Fourth Department.

May 14, 1982.

Burd & McCarthy, Buffalo (Timothy McCarthy, Buffalo, of counsel), for appellants.

Hodgson, Russ, Andrews, Woods & Goodyear, Buffalo (Jerrold S. Brown, Buffalo, of counsel), for respondents.

Before SIMONS, J. P., HANCOCK, DOERR, MOULE and SCHNEPP, JJ.

HANCOCK, Justice:

Plaintiff and defendants own contiguous parcels of land in Buffalo. Special Term has granted summary judgment to plaintiff directing specific performance of an option agreement giving it the right to buy a 20-foot strip along the southerly border of defendants' property. Defendants voice several arguments on appeal, but the decisive question concerns the validity of the option agreement which they seek to invalidate on three principal grounds: 1) that it suspends the absolute power of alienation for a period longer than that permitted by EPTL 9-1.1 (subd. par. ¹; 2) that it violates the statutory rule against remoteness in vesting set forth in EPTL 9-1.1 (subd. ) ²; and 3) that it constitutes an illegal restraint on the free alienability of the property covered by the option. For reasons hereinafter stated, we hold that the option violates the statutory rule against remoteness in vesting in EPTL 9-1.1 (subd. ) and that it is, therefore, invalid. Accordingly, there must be a reversal in part and a grant of summary judgment to defendants dismissing plaintiff's complaint. We hold, however, that defendants' counterclaim has no merit and accordingly affirm the dismissal of it for the reasons stated at Special Term. We concur with Special Term that the option does not suspend the absolute power of alienation (EPTL 9-1.1, subd. par. ) and reject appellants' contentions on this point as well as their argument that the option constitutes an illegal restraint on alienation. Although our holding (see Part II, infra) with respect to the rule against remoteness in vesting is dispositive, we set forth our reasoning on the other two issues in Parts I and III because the appeal, in our opinion, presents unusual questions. Discussion of the legal points requires an examination of the option and the circumstances surrounding its execution.

The option in question is set forth in an agreement dated September 30, 1976 between plaintiff and defendants. The option is irrevocable and gives plaintiff the right to purchase "all or any part of a 20 foot strip of land comprising and extending along the entire southerly boundary" of defendants' property at the market value to be agreed upon at the time of purchase. In the event that the parties cannot agree, the price is to be set by three appraisers, one to be appointed by each party and the third to be chosen by the two appraisers. During the life of the option "no structures or other improvements shall be placed or created upon said 20 foot strip." Defendants have the right to terminate the option by serving a 30-day notice if "at any time hereafter" they receive a bona fide offer for the purchase of their entire premises. The option is granted to plaintiff, "its successors and assigns." In the final paragraph, the agreement is made binding upon "the heirs, executors, administrators, successors and assigns of the parties hereto." ³ The September 30, 1976 instrument replaces a prior option covering the same 20-foot strip. The first option, having terms virtually identical to the second, was granted by defendants' predecessor in title, Ruth L. Robb, to plaintiff's predecessor, Palma V. Tripi, on July 3, 1954 when Tripi acquired the property (the southerly parcel, now owned by plaintiff, hereinafter referred to as "the Tripi parcel") from Robb and is contained in the Robb-Tripi deed.

The present option resulted from negotiations between plaintiff and defendants when defendants were in the process of purchasing the property they now own from the Robb estate (the northerly parcel now subject to the option, hereinafter "the Robb parcel"). Upon receipt of defendants' purchase offer, the Robb estate served upon plaintiff the 30-day termination notice pursuant to the provisions of the original Robb-Tripi option. Plaintiff exercised the option to purchase the 20-foot strip but withdrew its exercise and permitted the original option to lapse when plaintiff and defendants entered into the September 30, 1976 agreement.

We are concerned only with plaintiff's right to exercise the option granted to it on September 30, 1976.

I.

As to defendant's argument that the option illegally suspends the absolute power of alienation, we agree with Special Term that "is no violation of par. inasmuch as at all times plaintiff or its assigns and defendants or those taking from them could have acted together and conveyed a fee absolute in (Buffalo Seminary v. McCarthy, 106 Misc.2d 707, 712, 435 N.Y.S.2d 228; see Matter of City of New York 246 N.Y. 1, 29-30, 157 N.E. 911; Epstein v. Werbelovsky, 193 App.Div. 428, 184 N.Y.S. 330, affd. 233 N.Y. 525, 135 N.E. 902; Kowalsky v. Familia, 71 Misc.2d 287, 336 N.Y.S.2d 37; Blankman v. Great Western Food Distrs., 57 Misc.2d 754, 293 N.Y.S.2d 368; Matter of Abbondondolo, 10 Misc.2d 418, 168 N.Y.S.2d 251). In Williams v. Montgomery 148 N.Y. 519, 526, 43 N.E. 57, the court defines the test of alienability as whether "there are persons in being who can give a perfect title"; thus, it follows that "there are living parties who have unitedly the entire right of ownership, the statute has no application. * * * The ownership is absolute whether the power to sell resides in one individual or in several. If there is a present right to dispose of the entire interest, even if its exercise depends upon the consent of many persons, there is no unlawful suspension of the power of alienation" (Williams v. Montgomery, supra, p. 526, 43 N.E. 57). In the leading case on the applicability of the rule to options to buy real property,Matter of City of New York (Upper New York Bay) (supra, 246 N.Y. at pp. 29-30, 157 N.E. 911 decided prior to the 1965 enactment of a broad rule against remote vesting, Real Property Law, § 43, subsequently EPTL 9-1.1, subd. ), the court held that an option to buy does not suspend the absolute power of alienation because all parties to the option are in being and can convey a fee by their united action. In the present case, optionor and optionee and their "heirs, executors, administrators, successors and assigns" at all times were and are able to join together to convey a fee simple. We see no basis for distinguishing Matter of City of New York and we find it controlling.

II.

Two questions must be examined in the discussion of whether the option on the Robb property creates an interest which may vest beyond the period permitted by EPTL 9-1.1 (subd. ): (1) whether the New York rule when adopted in 1965 (Real Property Law, § 43, added L. 1965, ch. 670, § 1, later EPTL 9-1.1, subd. ) was intended to embrace interests created under unlimited purchase options, and (2) if so, whether the option at bar is an unlimited option which violates the rule.

A.

The New York rules concerning suspension of the power of alienation and remoteness in vesting have been codified since 1830. The interests presently subject to the rule against suspension of the absolute power of alienation (viz., "every present or future estate," EPTL 9-1.1, subd. par. ) are essentially the same as those subject to the original rule (1 Rev.Stat., §§ 14-16, later Real Property Law, § 42; see Simes, Future Interests § 138). The New York rule against remoteness in vesting, however, prior to 1965, concerned only contingent remainders on terms of years and fees limited upon prior fees upon contingencies (Real Property Law, §§ 46, 50, formerly 1 Rev.Stat., §§ 20, 24; see Matter of Wilcox, 194 N.Y. 288, 298, 87 N.E. 497; Simes, supra, §§ 137, 138; 1936 N.Y.Law Rev.Comm., p. 545), and thus would not expressly have encompassed options to purchase (see Simes, supra, §§ 137, 138; 1936 N.Y.Law Rev.Comm., p. 548; cf. Walker v. Marcellus & Otisco Lake Railway Co., 226 N.Y. 347, 123 N.E. 736). At issue is whether the New York rule after the enactment in 1965 of a broad prohibition against remote vesting (Real Property Law, § 43 1965, ch. 670, § 1], later EPTL 9-1.1, subd. covers options to purchase real property.

Courts which have adopted the American common law rule against remoteness in vesting ⁴ have almost invariably applied it to unlimited options ⁵ (see Eastman Marble Co. v. Vermont Marble Co., 236 Mass. 138, 128 N.E. 177; United States Virginia Bank/Citizens and Marine v. Union Oil Co. of California, 214 Va. 48, 197 S.E.2d 174; Restatement, Property, § 393; Ann. 66 A.L.R.3d 1294; Simes, supra, §§ 132, 142). In so doing they have followed the early English case, London & South Western Railway Co. v. Gomm (20 Ch.D. 562). The Gomm court concluded that since an unlimited option to purchase is substantially the same as a conditional limitation, which is within the rule, it should therefore be subject to the rule against remoteness in vesting, stating: "There is in each case the same fetter on the estate and on the owners of the estate for all time" (London & South Western Railway Co. v. Gomm, supra, p. 582).

The question thus is: whether the New York Legislature when it enacted section 43 of the Real Property Law (later EPTL 9-1.1, subd. ) in 1965 intended to adopt the American common law rule against remote vesting which would apply to options as well as other interests or...