C & D Inv. Co. v. Gulf Transport Co., 57676

• Decision Date: 04 May 1988
• Docket Number: No. 57676,57676
• Citation: 526 So.2d 526
• Court: Mississippi Supreme Court
• Parties: C & D INVESTMENT CO. v. GULF TRANSPORT CO., et al.

Page 526

526 So.2d 526

C & D INVESTMENT CO. v. GULF TRANSPORT CO., et al.

No. 57676.

Supreme Court of Mississippi.

May 4, 1988.

Rehearing Denied June 3, 1988.

Patrick F. McAllister, Scott, Hetrick & McBee, Jackson, for appellants.

Erwin C. Ward, Thomas B. Alexander, Stennett, Wilkinson & Ward, Erskine W. Wells, Steven H. Begley, Wells, Wells, Marble & Hurst, Jackson, for appellee.

Before HAWKINS, PRATHER and ANDERSON, JJ.

ANDERSON, Justice, for the Court:

This is an appeal from a ruling of the Chancellor of Hinds County granting a motion to dismiss the appellant's complaint under Rule 12 (b) (6), MRCP for failure to state a claim upon which relief could be granted.

In substance, this is a dispute over ownership of a strip of land in the Pearlington Subdivision of Jackson. The defendant/appellant (hereinafter Gulf Transport) is a subsidiary of the Illinois Central Gulf Railroad. On July 6, 1972, the Gulf, Mobile and Ohio Railroad (now merged into the Illinois Central Gulf RR) concluded a master agreement with C & D Investment Co., a Mississippi corporation, to plan the use of various tracts of real property owned between the two of them in the Pearlington Subdivision.

Pursuant to the master agreement, Gulf Transport entered an agreement with C & D Investment dated September 13, 1972. This document, after describing certain property owned by the railroad, stated:

NOW, THEREFORE, in consideration of the premises, Railroad agrees with Company that should it, in its sole discretion, dispose of the property hereinabove described lying immediately west of the property previously conveyed to Company, it will convey to Company a 25-foot strip of land north and south and lying immediately west of the Old Maloney Building for purposes of ingress and egress to the Company property.

This document was recorded on November 9, 1972, at the chancery clerk's office.

On May 27, 1983, Gulf conveyed the subject property, including the 25-foot strip, to its parent corporation the ICG RR by warranty deed. Through two mesne ownerships this property was subsequently conveyed by warranty deed dated November 14, 1985, to Marlon Evans, who, with his partner John Overton, was doing business as the Evans Construction Co. Evans and Overton built an office building on the site.

On April 18, 1986, C & D Investment Co. filed a bill of complaint in the Chancery Court of Hinds County alleging that Gulf, Evans and Overton had violated the 1972 agreement and praying for an injunction against the construction of the Evans' building and against Gulf for specific performance of the agreement to convey the 25 foot strip, to confirm title in that strip in C & D, and for general relief. C & D failed to comply with a court order to increase the bond and Evans and Overton moved to dissolve the preliminary injunction. Shortly thereafter all of the defendants filed joint motions to dismiss the complaint under Rule 12(b)(6). On July 31, 1986, the chancellor dissolved the preliminary injunction and dismissed the complaint for failure to state a claim. The chancellor issued a short written opinion in support of his dismissal. He found the agreement of September 13, 1972, was so uncertain in its terms as to be incapable of supporting any practical remedy; that it failed to recite adequate consideration; that it failed to provide an adequate description of the property to be conveyed; and it violated the rule against perpetuities.

ARGUMENTS OF LAW

IS THE APPEAL MOOT?

After the preliminary injunction was dissolved, Evans and Overton continued their construction on the disputed property, ultimately completing their office building. They now move to dismiss the appeal for mootness, relying on the general rule that an injunction will not issue against a fait accompli. However, the injunction was not the only remedy sought by the plaintiff in the court below. The complaint also sought to confirm title in C & D and prayed for general relief. Our test for deciding the presence of mootness in such a situation was announced in Henley v. Kilbas, 188 Miss. 604, 607, 195 So. 582, 582 (1940). For mootness to extinguish an action, there must be circumstances "so that a judgment upon the merits, if rendered, would be of no practical benefit to the plaintiff or detriment to the defendant...."

By the Henley standard, the present action clearly is not moot. If the Court finds that title to the disputed strip of land should be confirmed in C & D, then C & D could conceivably have actions for damages against both Gulf and the Evans/Overton partnership. Therefore, there are still important legal and equitable issues to be resolved.

DOES THE AGREEMENT VIOLATE THE RULE AGAINST PERPETUITIES?

The instrument of September 13, 1972, by its terms was forged to create a contingent future interest in the grantees, C & D Investment Co. The agreement says that Gulf Transport, "should it, in its sole discretion, dispose of the property hereinabove described, ... will convey" the 25 foot strip of land adjacent to the old Maloney building to C & D. Thus, should the specified condition come about, C & D had a preemptive option to buy the 25 foot strip. This Court has held that the rule against perpetuities applies to such options. Pace v. Culpepper, 347 So.2d 1313, 1317 (Miss. 1977).

The rule against perpetuities requires that, C & D's interest in the 25-foot strip must either definitely vest or definitely fail within 21 years of some life in being at the time of the instrument. Thus, an important problem here is how to ascertain the "life" against which to measure the interest. The parties to an instrument may, if they chose, designate certain lives as measuring lives, but this was not done here. In such a case, courts often consult the instrument and use the lives of the parties or of other individuals mentioned in the instrument. Since this is an agreement between corporations and not natural persons, that will not work here either. In such a situation, the rule is that "when lives in being form no part of the period of suspension or postponement of vesting, the limit of time under the rule of perpetuity is 21 years." 70 C.J.S., Perpetuities, Sec. 18A. Thus, at common law C & D's interest, if it is to withstand the challenge of the rule, must have either definitely vested or definitely failed within 21 years of 1972.

It is readily apparent that under the "traditional" version of the rule against perpetuities, C & D's interest in the 25 foot strip was not good, since it would have vested only upon the occurrence of a contingency which would not necessarily occur within twenty-one years of the instrument. However, this does not end the inquiry, since the appellants argue against the applicability of the rule to the present action.

They rely on Mississippi's adherence to the "wait and see" doctrine. A large majority of jurisdictions hold that "the question of remoteness is to be determined by reference to possible, not actual, events.... If an interest is not good at its creation, no subsequent accidents or occurrences can make it so...." 70 C.J.S. Perpetuities Sec. 16A. In other words if it is possible for required contingency to happen outside of the perpetuities period, the interest is no good, and it is not saved if the required contingency actually happens during the perpetuities period.

However, a minority of jurisdiction adhere to the "wait and see" doctrine. Under this rule, if the required contingency actually happens during the perpetuity period, the future interest is held valid. 3 L. Simes & Smith, The Law of Future Interests Sec. 1256 (2d ed. 1956, 1985 supp.)

Appellants argue that Mississippi adopted the wait and see doctrine in Phelps v. Shropshire, 183 So.2d 158 (Miss. 1966). Phelps involved a will which created a trust in favor of a church and a masonic order and granted both the right to refuse the gift. In the event the gift was refused by the primary beneficiaries, the will created a shifting executory interest in the testatrix' descendants in the form of an option to purchase the property. The church and the Freemasons did decline the gift, whereupon the gift over to the descendants was attacked as contrary to the rule against perpetuities. This court held:

Since the contingency of the two charities declining their gifts actually occurred and this was within the period of the rule against perpetuities, the gift, consisting of the right of the family to purchase may be considered valid. There is no precedent in this state which compels us to close our eyes to the facts occurring after the death of the testatrix.

Phelps, 183 So.2d at 162.

The appellees retort that Mississippi does not follow the wait and see doctrine and rely on the fact that Phelps was not cited in the Pace decision, supra, while it is true that the Pace court did not mention the Phelps decision, the facts in Pace were different. The Paces' preemptive options in the land were to vest "if and when the approximately 6/10 acre of land being retained [by the Culpeppers] is desired to be sold ..." outside the Culpepper family. 347 So.2d at 1315. It is obvious that the gift to the Paces was bad under the traditional rule against perpetuities, since the contingency--"the land desiring to be sold"--could possibly have occurred outside the perpetuities period. However, in Pace the contingency had not actually occurred. The suit was brought by the Culpeppers while they were still in possession to have the Paces' future interest declared void. Therefore the wait and see doctrine has no applicability to the Pace case. On the other hand, the language in Phelps is explicit: It refers to...