Izzo v. Brooks

• Decision Date: 19 December 1980
• Citation: Izzo v. Brooks, 435 N.Y.S.2d 485, 106 Misc.2d 743 (N.Y. Sup. Ct. 1980)
• Parties: Anna H. IZZO, Plaintiff, v. Julia T. BROOKS, Defendant.
• Court: New York Supreme Court

Page 485

435 N.Y.S.2d 485

106 Misc.2d 743

Anna H. IZZO, Plaintiff, v.Julia T. BROOKS, Defendant.

Supreme Court, Rockland County.

Dec. 19, 1980.

GERARD E. DELANEY, Acting Justice.

The issue before the Court is whether a right of pre-emption on the sale of real property for a fixed price, termed as perpetual for the parties and their heirs, violates the rule against perpetuities, E.P.T.L. § 9-1.1(a) or (b), or constitutes a restraint on the alienation of the land.In the facts and circumstances of this case no such violations are found.

Plaintiff, ANNA H. IZZO, and her late husband, Anthony, had resided at 85 Washburn Lane, Stony Point, New York since approximately October 2, 1947.On October 25, 1967, the plaintiff and her husband entered into a contract with the defendant, JULIA BROOKS, for the sale and purchase of a parcel of real property which the Izzos owned, designated 79 Washburn Lane, which property was adjacent to 85 Washburn and had a building housing a grocery store erected upon it.The purchase price of 79 Washburn was $23,500.00.

As defendant wished to continue the operation of the grocery store at 79 Washburn, and certain portions of the premises at 85 Washburn were needed to allow access for trucks supplying the grocery store, plaintiff, her husband and defendant, on the same day of sale of the 79 Washburn premises to the defendant, October 25, 1967, executed an agreement captioned "option to purchase", the pertinent provisions of which are as follows:

"In consideration of the sum of $10.00 and other good and valuable considerations paid by (defendant) ... (plaintiff) hereby grants, bargains and sells to (defendant) her heirs, executors, administrators, successors and assigns, the exclusive option to purchase ... 85 Washburn Lane ... upon the following terms and conditions:

1.This option and all the rights and privileges ... shall be perpetual, until the notice hereinafter set forth is given.

2.This option is to be exercised at such time as (plaintiff) desires to sell the subject premises, it being the obligation of (plaintiff to give written notice to defendant of her intent to sell and defendant then to have 60 days to exercise her option to purchase).

3.The total purchase price shall not be more than $20,000.00...

6.(the option, etc. was made freely assignable.)

7.This option shall be binding on the heirs, executors, administrators, successors and assigns of (plaintiff)." (emphasis added).

Such option agreement was recorded on November 7, 1967.

On or about December 24, 1973, Anthony Izzo wrote to defendant and stated in essence, that the plaintiffs had the 85 Washburn premises appraised and had "changed the price" to $27,000.00 net and then recited different mortgage terms than under the previous "option" agreement.Mr. Izzo asked defendant to consider the "offer" and required a "refusal after (sic) 60 days."

On January 14, 1974, defendant's attorney rejected such offer to change the terms of the "option" agreement and to the extent that Anthony Izzo's letter might have been considered notice of his intention to sell the property, he stated that defendant would exercise her "option."Defendant then personally advised plaintiffs of her intention by letter dated February 11, 1974.

Apparently no further steps were taken by the Izzos since the next communication received by defendant was a September 30, 1977 letter from a local real estate agent who was "contemplating the sale" of the Izzo property and asked if defendant wished to exercise her option.Defendant's attorney, by return letter dated October 4, 1977, advised the agent that defendant would exercise her option if the Izzos intended to sell.

Anthony Izzo died on December 1, 1979 and plaintiff instituted the instant action for declaratory judgment so as to void the option agreement and cancel the agreement as recorded on the grounds that:

1.The agreement is void as it violates that portion of the Rule against Perpetuities which prohibits the suspension of the power of alienation (E.P.T.L. § 9-1.1(a)), and,

2.The agreement is void on the grounds that it violates that portion of the Rule against Perpetuities which prohibits remoteness of vesting (E.P.T.L. § 9-1.1(b)), and,

3.A court of equity should not enforce the agreement due to the increased value of the property, i. e. that such agreement constituted an unenforcible "restraint" on the land.

In this instant application for summary judgment, based upon all grounds mentioned, plaintiff has produced her own affidavit, stating that while she considered the price of $20,000.00 to be adequate consideration in 1967, inasmuch as she is now aware that the property has greatly increased in value (to $33,500.00 as of December 1, 1979 according to the included affidavit of a local real estate agent), she"cannot conceive of any circumstances in which (she) would sell the property."

Before the court, by necessity, enters the never-never-land of a rule and statute whose rationale and continued existence may well be an anomaly in this contemporary society (SeeFetters, Perpetuities: The Wait and See Disaster A Brief Reply to Professor Maudsely, etc., 60 CornellL.Rev. 380, 383-388), it must first determine what interest was or was not created by the parties or intended to be created by their agreement of October 25, 1967.Plaintiff claims what was attempted to be granted was a "preemptive right,"(Garcia v. Callender, 125 N.Y. 307, 26 N.E. 283), whereas defendant claims she received an "option" to purchase.

The parties, in their agreement, chose to term such rights, as granted, "the exclusive option to purchase" the premises at 85 Washburn Lane.In the classic sense "a first right option and privilege of purchasing is not an absolute option, but merely an option conditional upon the owner's willingness to sell, or a first refusal if he offers to sell, Warren's Weed, New York Law of Property, Options, § 3.02, Cf.§§ 1.01,6.02.By whatever name "it should be noted that the 'first refusal' option differs materially from the absolute option contract in that the optionee is given a power to compel the owner of property to sell it at a stipulated price, whether or not he is willing to part with ownership, while the holder of the 'first refusal' option is not given the power to compel an unwilling owner to sell, but merely to require the owner, when and if he decides to sell, to offer the property first to the holder of the option ..."SeeAnnot., 17 A.L.R.3rd, § 1, n. 1;Cf.77 Am.Jur.2d, Vendor and Purchaser§ 49.The pre-emptive right ripens into an option when the owner has elected to sell, Id., and may be enforced by specific performance.62 N.Y.Jur., Vendor and Purchaser, §§ 16, 19.

The term (pre-emptive right) is used ... to express the idea that someone has the first right to purchase when the land is offered for sale, or the option of buying first," Garcia v. Callender, supra at 311, 26 N.E. 283(emphasis added).It is said that pre-emptive rights provisions must comply with the Rule Against Perpetuities (Restatement of the Law of Property§ 413(1) and Comment).They are "analogous to options upon a condition precedent. "Id.SeeAtchison v. City of Englewood, 170 Colo. 295, 463 P.2d 297(1970).Newstadt v. Pearce, 145 Conn. 403, 143 A.2d 437;Roberts v. Jones, 307 Mass. 504, 30 N.E.2d 392.But see6 American Law of Property§ 24.1, pages 7 and 8.CompareIllinois Rev. Statutes § 194(ch. 30, 1969)(wherein pre-emptive rights and options in gross were made not within the Rule Against Perpetuities, however, options in gross were limited to 40 years).See40 A.L.R.3rd, Perpetuities Pre-Emptive Rights to Realty§ 2.What we are concerned with in this case, may be a pre-emptive right (right of first refusal, "option" to purchase, etc.) and not a true option; however, the determining factor is whether this Court will construe such provision as a condition precedent or one subsequent.See§ Cinfra.

SECTION A. SUSPENSION OF THE POWER OF ALIENATION

E.P.T.L. § 9-1.1(a)(1), (2) deals with present or future estates created so as to suspend the power of alienation of land, by any condition, for a period longer than lives in being at the creation of the estate plus twenty-one years.However, the power of alienation is not suspended when there are persons in being by whom an absolute fee or estate in possession can be conveyed or transferred.E.P.T.L. § 9-1.1(a)(1);Accord, Matter of New York (Upper New York Bay), 246 N.Y. 1, 29, 157 N.E. 911.Williams v. Montgomery, 148 N.Y. 519, 43 N.E. 57;Epstein v. Werbelovsky, 193 App.Div. 428, 432, 184 N.Y.S. 330, aff'd233 N.Y. 525, 135 N.E. 902, amend of remitt. den. 233 N.Y. 567, 135 N.E. 920;Blankman v. Great West. Food Distr., 57 Misc.2d 754, 756, 293 N.Y.S.2d 368;Matter of Quigley, 37 Misc.2d 320, 323, 236 N.Y.S.2d 180.Cf.Matter of Abbondongolo, 10 Misc.2d 418, 168 N.Y.S.2d 251;See generally1 Rasch, Real Property Law and Practice§ 549, pp. 335-336, Cf.§ 518, 520.

At the time of the creation of the agreement in 1967, plaintiff and her husband owned the subject property as tenants by the entirety, and remained in such status until the husband's death in December 1979, wherein plaintiff continued to hold under the original grant, no further devise or transfer of title being necessary.In Re Maguiere's Estate, 251 App.Div. 337, 296 N.Y.S. 528.During the lives of plaintiff and her husband, they could unite in action on consent and dispose of the property by contract of sale to third parties at any time they wished.Cf.Azzara v. Azzara, 1 A.D.2d 1011, 151 N.Y.S.2d 458, rearg. den. 2 A.D.2d 760, 154 N.Y.S.2d 429, app. dism.2 N.Y.2d 829, 159 N.Y.S.2d 962, 140 N.E.2d 860;Cf.Reister v. Town Bd. of Town of Fleming, 18 N.Y.2d 92, 271 N.Y.S.2d 965, 218 N.E.2d 681.Following the death of her husband, plaintiff was singularly in possession of a fee simple absolute on the property, and could and can sell it at any time she...