Iglehart v. Phillips

Decision Date13 March 1980
Docket NumberNo. 52503,52503
Citation383 So.2d 610
PartiesStewart IGLEHART et al., Appellants, v. Walter PHILLIPS, Jr., Appellee.
CourtFlorida Supreme Court

John S. Call, Jr., of Stewart, Van der Hulse, Call & Byrd, Palm Beach, for appellants.

Richard V. Neill of Neill, Griffin, Jeffries & Lloyd, Fort Pierce, for appellee.

OVERTON, Justice.

This cause is before this Court upon a request from the United States Court of Appeals for the Fifth Circuit to answer certified questions concerning whether a repurchase option contained as a covenant in a deed is void as being a violation of the rule against perpetuities or the rule against unreasonable restraints on alienation, and, if so, whether the deed is subject to rescission or cancellation. Phillips v. Iglehart, 558 F.2d 737 (5th Cir. 1977). We have jurisdiction. 1

The stipulated facts are as follows:

Statement of Facts:

This case for declaratory relief involves a repurchase option in a deed. Plaintiff maintains that the repurchase option should be declared invalid, void and of no force and effect. Defendants say that it is valid and should be upheld, but if it is held invalid, the Defendants maintain that the Court should rescind the deed and restore the parties to the status quo prior to the execution of the deed.

By deed dated March 12, 1959, filed June 24, 1959, recorded in Deed Book 249, Page 246, public records of St. Lucie County, Florida, Defendants conveyed to Plaintiff's now deceased father 306.35 plus or minus ( k -- ) acres of land subject to a repurchase option specifically set forth in the deed.

The deed recites as follows:

"Witnesseth that the said parties of the first part (Defendants) for and in consideration of the sum of $10.00 and other valuable considerations, to them in hand paid, the receipt whereof is hereby acknowledged, have granted, bargained, sold, transferred, and by these presents, do grant, bargain, sell and transfer unto the said party of the second part and his heirs and assigns forever, all that certain tract of land lying and being in the county of St. Lucie and the State of Florida more particularly described as follows:

(Legal Description omitted)

This conveyance is made subject to the following restrictive covenant which is construed as a covenant running with the land and shall inure to the benefit of and be enforceable by the grantors, their heirs, legal representatives and assigns, and shall be applicable and be binding upon the grantee, and his heirs, legal representatives and assigns:

1. The grantee does hereby covenant that in the event the grantee herein desires to sell the property conveyed by this deed, together with improvements, if any, then said property shall be offered for sale to the grantors at a price, which shall equal the amount paid by the grantee to the grantors for said property plus the cost of all permanent improvements placed on said property by the grantee and the grantors shall have sixty (60) days within which to exercise their option to repurchase said property; and should the grantors fail or refuse within sixty days after receipt of written notice of grantee's desire to sell the property to exercise their option to repurchase said property, based upon a price hereinabove mentioned, then the grantee of said property shall have the right to sell said property to other parties.

By accepting this deed the grantee agrees that the foregoing covenant and condition is made as a part of the consideration Together with all the tenements, hereditaments, and appurtenances, with every privilege, right, title interest and estate, dower and right of dower, reversion remainder and easement thereto belonging or in any wise appertaining:

for this conveyance and is a part of the purchase price of the above described land.

TO HAVE AND TO HOLD the same in fee simple forever."

Affixed to the deed are twenty cents in Florida documentary stamps reflecting a tax (at that time) on a cash consideration of between $1.00 and $100.00. The land at that time was worth approximately $200.00 per acre.

Plaintiff, in his deposition, testified that he didn't know what his father paid for the property in question but that he had been given to understand that his father paid only the $10.00 recited in the deed. Defendants contend there was no cash consideration and that the repurchase option was the only consideration for the deed. Plaintiff claims this fact is irrelevant, but doesn't deny it, and further contends that any evidence as to consideration for the deed was hearsay and violative of both the Florida Dead Man's Statute, Fla.Stat. § 90.05 and the parol evidence rule.

Plaintiff received the subject property as a gift from his mother after his father's death, and paid nothing for it. Defendants have never received any notice of a desire to sell nor has the property been offered to Defendants pursuant to the repurchase option. Defendants were requested to subordinate the repurchase option to a mortgage lien, which they did.

Plaintiff and his father before him have been in possession of the subject real property since 1959, have maintained it, paid taxes on it since that time and have made improvements thereon, including construction of a house, improvement of pasture and construction of fences.

The subject covenant has not been breached, however, Plaintiff has filed this action to have the Court determine validity or invalidity. Defendants, by answer and counterclaim, sought to have the repurchase option upheld, or in the alternative, to have the deed rescinded and the parties placed in status quo.

The Plaintiff-Appellee contends that the repurchase option is void as violative of the rule against perpetuities and the rule against unreasonable restraints on alienation and is therefore unenforceable and that he is therefore entitled to a judgment declaring that he holds title unencumbered by the repurchase option. The Defendants-Appellants, on the other hand, contend that the repurchase option is not subject to the rule against perpetuities nor the rule against unreasonable restraints on alienation, but if it is, the entire transaction should be rescinded. Plaintiff-Appellee replies to the prayer for rescission by pointing out that granting the relief of rescission would have the same effect as enforcement of the invalid covenant.

Summary judgment was granted Plaintiff based upon the amended complaint, answer, counterclaim, answer to counterclaim, request for admission and answers thereto, deposition of Plaintiff Walter Phillips, pre-trial stipulation, and motion for summary judgment.

The United States District Court for the Southern District of Florida, the original trial court in this proceeding, held the repurchase option provision void. The trial court expressly found the option restraint was unreasonable because (1) there was no purpose for which the restraint is imposed; (2) the duration of the restraint was unlimited; and (3) the method of determining the price to be paid was unreasonable in light of the value of the land today, thus creating a substantial restraint on the alienation. The court rejected the grantors' claim that this finding entitled them to rescission or cancellation of the deed because of a material mistake of fact or law. In so doing, the trial court determined that the option provision appeared to have been inserted by the grantor for his own benefit, and, consequently, equity should not grant him relief. The court further held that although the The Fifth Circuit certified four questions to this Court. 2 We have restated the questions, and our response is in two parts.

subject invalid covenant was consideration for the conveyance, it was only a part of such consideration and that inadequacy of consideration is not a sufficient basis for rescinding or canceling a deed unless it is so gross as to indicate fraud. The trial court concluded that affording defendants the relief of rescission would effect the same result as upholding the option, and this would circumvent the rule against unreasonable restraint on alienation.

PART I

THE RULE AGAINST PERPETUITIES AND UNREASONABLE RESTRAINTS ON THE ALIENATION OFPROPERTY

We restate the first certified question as follows:

Under Florida law, is a repurchase option, expressly set forth in a deed as a covenant running with the land and as part of the consideration for the conveyance, void as being in violation of the rule against unreasonable restraints on alienation or the rule against perpetuities, under circumstances where the option is unlimited as to time, the price is fixed, and no purpose other than consideration is stated in the deed?

We must determine whether the repurchase option is void because it violates (1) the rule against perpetuities, or (2) the common law rule against unreasonable restraints on the alienation of property. Although distinct entities, these rules share a common public interest and purpose. They each came into existence to facilitate the marketability and continued utilization of property. In simple terms, their purpose is to ensure that property is reasonably available for development by prohibiting restraints that remove property from a beneficial use for an extended period of time. L. Simes and A. Smith, The Law of Future Interests § 1135 (2d ed. 1956); Leach, Perpetuities

in a Nutshell, 51 Harv.L.Rev. 638, 640 (1938). To answer the first question, it is necessary to distinguish and define these two rules and apply them to the stipulated facts of this case.

Rule Against Perpetuities

Professor Gray's statement of the rule against perpetuities is as follows: "No interest is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest." J. Gray, The Rule Against Perpetuities § 201 (4th ed. 1942). We adopted the rule in Story v. First National Bank & Trust Co., 115 Fla. 436, 441, 156 So. 101, 104 (1934), stating: "(T)he vesting of...

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