Coulter & Smith, Ltd. v. Russell

• Decision Date: 25 September 1998
• Docket Number: No. 960462,960462
• Citation: 966 P.2d 852
• Parties: 352 Utah Adv. Rep. 20 COULTER & SMITH, LTD., a Nevada corporation, Plaintiff and Petitioner, v. Roger RUSSELL, Roger Richards, and Kristen Russell, Defendants and Respondents.
• Court: Utah Supreme Court

Page 852

966 P.2d 852

352 Utah Adv. Rep. 20

COULTER & SMITH, LTD., a Nevada corporation, Plaintiff and Petitioner, v. Roger RUSSELL, Roger Richards, and Kristen Russell,

Defendants and Respondents.

No. 960462.

Supreme Court of Utah.

Sept. 25, 1998.

Richard A. Rappaport, Leslie Van Frank, Salt Lake City, for plaintiff.

Adam S. Affleck, John N. Brems, Michael N. Zundell, Salt Lake City, for defendants.

On Certiorari to the Utah Court of Appeals

DURHAM, Associate Chief Justice:

We granted Coulter & Smith, Ltd.'s (Coulter) petition for a writ of certiorari to review the Utah Court of Appeals' invalidation, under the rule against perpetuities, of Coulter's option to purchase land from respondent Roger Russell. We also granted Russell's cross petition for certiorari to determine whether the court of appeals correctly held that Coulter's option was supported by consideration. We affirm in part, reverse in part, and remand this case to the court of appeals for proceedings consistent with this opinion.

In the spring of 1991, Coulter and Russell entered into a letter agreement whereby Coulter was to develop Russell's property in conjunction with adjacent property it owned. Pursuant to their agreement, Coulter had the option to purchase the lots located on Russell's property after Coulter had completed the initial stages of development and subdivision. The letter agreement read, in its entirety, as follows:

Dear Dr. Russell:

In response to your request for a written proposal to purchase your lots west of 1700 East at 10800 South, I submit the following offer which you may accept by signing below:

Price: $26,000 per lot during the 1st month following completion of the lots; price of each lot to increase $100 per lot each month thereafter until each lot is closed.

Upon completion of the subdivision development we offer to pay you $1,500 per lot; the balance of the purchase price ($25,000 at the outset) to be paid upon closing of each lot. We understand that the cost of the land and lot improvements will be paid upon closing of each lot.

The enclosed Work Exchange Agreement will initiate our cooperative efforts. We will proceed posthaste to annex and develop our tracts jointly. I believe that working in concert will greatly facilitate zoning and all other development concerns.

Respectfully,

/s/ Nathan Coulter

Nathan Coulter

Coulter & Smith Ltd. is hereby granted an option to purchase lots as per terms detailed above: This option terminates 2 years from the date of completion of the subdivision.

/s/ Roger Russell 4/27/91

Dr. Roger Russell Date

In order to jointly develop the Coulter and Russell parcels, Coulter had to negotiate the purchase of several parcels located between them. Coulter also needed to get zoning and annexation approval from Sandy City. He agreed to "proceed posthaste" to develop the property, and both parties anticipated that the development would be completed by spring of 1992.

The development did not proceed as expeditiously as planned. There is a dispute regarding the cause of the development's delay. Russell asserts that Coulter failed to diligently pursue development; according to Russell, Coulter did not submit an annexation application to Sandy City, did not perform the necessary physical work on the properties, and did not purchase the required nearby properties. Coulter counters that it did in fact proceed with the development. Coulter claims that it redesigned the subdivision drain system to accommodate Russell's property at an expense of approximately $35,000, signed contracts with two of the four neighboring property owners, and negotiated agreements with the other two. Coulter further claims that beginning in November 1992, Russell thwarted its efforts to develop the property by refusing to cooperate because Russell wanted instead to sell his property to the Church of Jesus Christ of Latter Day Saints (LDS Church).

The LDS Church did not buy Russell's property, but did purchase a portion of the Coulter property and a portion of one of the neighboring properties. In May 1994, another developer became interested in the Russell property. That developer immediately submitted an annexation application to Sandy City. On September 13, 1994, Sandy City approved the annexation and zoned the property for 20,000 square foot residential lots. As a result of the low-density zoning, Russell could divide his property into only six lots.

One day after the Russell property was annexed and zoned by Sandy City, Coulter filed a complaint in the district court alleging a breach of the option contract contained in the letter agreement. Russell moved for summary judgment, which the district court granted. The court issued findings of fact and conclusions of law holding that the option in the letter agreement was unenforceable for the following reasons: (1) The letter agreement violated the statute of frauds because it did not contain an adequate description of the subdivision lots; (2) the option itself violated the rule against perpetuities; (3) Coulter had not exercised his option within a reasonable time; (4) the option was not supported by consideration; and (5) Russell rescinded any offer or option to purchase the property created by the letter agreement.

Coulter appealed the trial court's grant of summary judgment. A majority of the court of appeals' panel reversed on the issue of the adequacy of consideration, finding that the option was supported by consideration. Coulter & Smith, Ltd. v. Russell, 925 P.2d 1258, 1262 (Utah Ct.App.1996), cert. granted, 936 P.2d 407 (Utah 1997). However, the court upheld the trial court's finding that the option violated the rule against perpetuities because the letter agreement did not expressly require the transfer of the property to be completed within the perpetuities period. Id. at 1263. Because the court of appeals upheld the district court's invalidation of the option, it did not address the other issues raised on appeal. Id.

We granted Coulter's petition for certiorari to address the applicability of the rule against perpetuities to its option agreement, and granted Russell's cross petition to determine whether the court of appeals correctly found adequate consideration to support the option. Coulter & Smith, Ltd. v. Russell, 936 P.2d 407 (Utah 1997). In his brief, Russell includes arguments on the following points which were not included in his cross petition for certiorari: (1) The option is void under the statute of frauds; (2) Coulter did not exercise the option within a reasonable time and; (3) the letter agreement was merely a continuing offer to sell. Coulter moved to strike the arguments raised in Russell's brief which were not included in his cross petition for certiorari. We deferred ruling on the motion to strike.

On a writ of certiorari, we review the decision of the court of appeals, not that of the district court, and apply the same standard of review used by the court of appeals. Utah Code Ann. § 78-2-2(3)(a) (1996); Hebertson v. Willowcreek Plaza, 923 P.2d 1389, 1392 (Utah 1996); Butterfield v. Okubo, 831 P.2d 97, 101 n. 2 (Utah 1992). This case involves summary judgment and therefore we consider the evidence in the light most favorable to Coulter; we will affirm only if there is no dispute of material fact and Russell is entitled to judgment as a matter of law. Utah R. Civ. P. 56(c); Butterfield, 831 P.2d at 99. Because summary judgment involves only legal issues, we accord no deference to the lower court's factual conclusions. A.C. Fin., Inc. v. Salt Lake County, 948 P.2d 771, 773 (Utah 1997).

Before addressing the merits of the matters raised in the petition and cross petition, we wish to clarify the scope of our review on certiorari. Review on certiorari is limited to examining the court of appeals' decision and is further circumscribed by the issues raised in the petitions. Utah Code Ann. § 78-2-2(3)(a); Utah R.App. P. 49(a)(4); DeBry v. Noble, 889 P.2d 428, 443 (Utah 1995) (stating issues not raised in the petitions for certiorari not properly before the court); Butterfield, 831 P.2d at 101 n. 2 (declaring certiorari review is limited to examining the court of appeals' decision); see also Sevy v. Security Title Co., 902 P.2d 629, 637 (Utah 1995); Willardson v. Industrial Comm'n, 904 P.2d 671, 673 (Utah 1995). On certiorari "[o]nly the questions set forth in the petition or fairly included therein will be considered by the Supreme Court." ¹ Utah R.App. P. 49(a)(4).

Therefore, we will consider only the issues raised in Coulter's petition and in Russell's cross petition, namely: (1) whether the court of appeals properly voided Coulter's option under the rule against perpetuities, and (2) whether the court correctly concluded that the option was supported by consideration.

I. RULE AGAINST PERPETUITIES

The rule against perpetuities states that a future interest "must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest." Clark v. Shelton, 584 P.2d 875, 876 (Utah 1978) (citing John C. Gray The Rule Against Perpetuities § 201 (4th ed.1942)). Coulter's option to purchase the Russell property is an interest in real estate, which falls within the ambit of the rule. See Clark, 584 P.2d at 876; Coombs v. Ouzounian, 24 Utah 2d 39, 41, 465 P.2d 356, 358 (1970).

The letter agreement between Coulter and Russell did not specifically state a time within which Coulter had to complete the development of the property and exercise its option to purchase Russell's land. Because the option does not require the transfer of the property to occur within the perpetuities period, a majority of the court of appeals panel declared it void. Coulter, 925 P.2d at 1263. Judge Jackson dissented, explaining that for public policy reasons, the ordinary rules of contract construction should be applied prior to employing the rule against perpetuities. Id. at 1263-70.

In addition to urging the analysis...