Old Port Cove Holdings v. Condo. Ass'n

• Decision Date: 10 July 2008
• Docket Number: No. SC07-1032.,SC07-1032.
• Citation: 986 So.2d 1279
• Parties: OLD PORT COVE HOLDINGS, INC., et al, Petitioner, v. OLD PORT COVE CONDOMINIUM ASSOCIATION ONE, INC., Respondent.
• Court: Florida Supreme Court

986 So.2d 1279

OLD PORT COVE HOLDINGS, INC., et al, Petitioner, v. OLD PORT COVE CONDOMINIUM ASSOCIATION ONE, INC., Respondent.

No. SC07-1032.

Supreme Court of Florida.

July 10, 2008.

Jack J. Aiello and Nicole K. Atkinson of Gunster, Yoakley and Stewart, P.A., West Palm Beach, FL, for Petitioners.

Daniel S. Rosenbaum, Richard Valuntas and John M. Siracusa of Becker and Poliakoff, P.A., West Palm Beach, FL, for Respondent.

CANTERO, J.

We consider the parameters of a doctrine that has been "long cherished by law school professors and dreaded by most law students: the infamous rule against perpetuities." Byke Constr. Co. v. Miller, 140 Ariz. 57, 680 P.2d 193, 194 (Ct.App.1984); see also Shaver v. Clanton, 26 Cal.App.4th 568, 31 Cal.Rptr.2d 595, 596 (1994) (describing the rule against perpetuities as "every first-year law student's worst nightmare"). Specifically, we must decide whether section 689.225, Florida Statutes (2000), which addresses the same rule, retroactively abrogated the common law rule. We also consider whether the rule applies to rights of first refusal, which are at issue here. We review Old Port Condominium Ass'n One, Inc. v. Old Port Cove Holdings, Inc., 954 So.2d 742 (Fla. 4th DCA 2007), which held that section 689.225 retroactively abrogated the rule. Id. at 745. That court certified conflict with Fallschase Development Corp. v. Blakey, 696 So.2d 833 (Fla. 1st DCA 1997). We have jurisdiction to resolve the certified conflict. See art. V, § 3(b)(4), Fla. Const.

We first resolve the conflict by holding that section 689.225 did not retroactively abolish the common law rule against perpetuities. We then explain why the rule against perpetuities does not apply to rights of first refusal anyway. We therefore approve the result in Old Port Cove, 954 So.2d 742, and disapprove Fallschase, 696 So.2d 833, to the extent it finds that the common law rule applies to rights of first refusal.

I. FACTS AND PROCEDURAL HISTORY

This case stems from an agreement ("the Agreement") executed over thirty years ago (in 1977) in which Old Port Cove Investment granted Old Port Cove Condominium Association One, Inc. ("the Association") a right of first refusal in a parcel of property. The Agreement provides, in pertinent part:

In the event that OPCI elects to sell the real property ... other than to the persons or corporations which form the OPCI JOINT VENTURE, or to any corporation or other entity owned or controlled by OPCI or by any member of said JOINT VENTURE, or a successor or successors "to the interest of any member in the JOINT VENTURE", the ASSOCIATION shall have the right of first refusal for the purchase of said real property upon the same terms and conditions as are proposed for its sale and purchase by OPCI, said right of first refusal to be exercised by the ASSOCIATION within thirty (30) days following written notice to it of such proposed sale, following which said right of first refusal shall terminate.

Old Port Cove Holdings, Inc. and Old Port Cove Equities, Inc. ("Owners") the successors-in-interest to the OPCI Joint Venture, now own the property, which is used as a parking lot for an adjacent marina they own.

Twenty-five years after the Agreement, in 2002, the Owners sued to obtain a declaratory judgment and to quiet title to the property, arguing that the right of first refusal violates the common law rule against perpetuities. The Association contested the suit, raising several defenses and counterclaiming for a declaratory judgment and reformation of the Agreement. The trial court declared the right of first refusal void ab initio and quieted title in the Owners' favor. Relying primarily on Fallschase, 696 So.2d 833, the court concluded that the Agreement violated the rule against perpetuities and rejected the Association's argument that section 689.225, Florida Statutes, retroactively abolished the rule.

On appeal, the Fourth District Court of Appeal reversed. Old Port Cove, 954 So.2d at 743. Although not deciding the issue, the court noted that a right of first refusal does not involve remote vesting and doubted "that the common law rule against perpetuities ever applied to this kind of right of first refusal." Old Port Cove, 954 So.2d at 743. The court then held that, assuming the rule did apply, section 689.225, Florida Statutes, retroactively abrogated it. Id. at 745. The court certified conflict with Fallschase. Old Port Cove, 954 So.2d at 746-47.

In Fallschase, 696 So.2d at 833, the First District considered two issues: (1) whether a right of first refusal in a contract violated the common law rule against perpetuities; and (2) whether the right of first refusal should be reformed under section 689.225(6)(c), Florida Statutes (1995) (allowing reformation of a nonvested property interest created before October 1, 1988, where the property interest violated the rule against perpetuities as it existed when the interest was created). As to the first issue, the First District acknowledged "some authority for the proposition that the rule against perpetuities should not be applied to a right of first refusal," but concluded that "the stronger view is `that the agreement for the right of first refusal must not violate the rule against perpetuities.'" Id. at 835 (quoting Watergate Corp. v. Reagan, 321 So.2d 133, 136 (Fla. 4th DCA 1975)). It held that because the agreement at issue purported to create "an unlimited duration for exercise of the right of first refusal," it violated the rule. Id. Judge Wolf dissented in part, noting that he was "unaware of a vested right to have a court strike down an obligation voluntarily undertaken as part of an enforceable written legal agreement." Fallschase, 696 So.2d at 838 (Wolf, J., concurring in part and dissenting in part); see also Old Port Cove, 954 So.2d at 746 (agreeing with Judge Wolf). On the second issue, the First District concluded that the Legislature intended retroactive application of the reformation provision in subsection (6)(c), id. at 836, but that the statute could not be applied retroactively to defeat the owner's "vested right to dispose of the property to whomever he chose." Id. at 837.

We now resolve the conflict.

II. THE HISTORY OF THE RULE AGAINST PERPETUITIES

The rule against perpetuities developed through a series of English cases beginning in 1682 and spanning about 150 years. See 10 Richard R. Powell, Powell on Real Property § 71.02 (Michael Allan Wolf ed.2007). At one time, the common law rule was a part of the law of nearly every jurisdiction in the United States. Id. § 71.03. By the end of the twentieth century, however, only a handful of jurisdictions still followed it. Id. Today, perpetuities law varies from state to state. See Lynn Foster, Fifty-One Flowers: Post-Perpetuities War Law and Arkansas's Adoption of USRAP, 29 U. Ark. Little Rock L.Rev. 411, 411-13 (2007); Frederick R. Schneider, A Rule Against Perpetuities for the Twenty-First Century, 41 Real Prop. Prob. & Tr. J. 743, 747-48 (2007).

In Florida, the rule has had a rocky history. It was first adopted judicially, as part of the common law. It was later adopted legislatively, then replaced with a uniform rule, and now it has been legislatively abolished. To provide context for our discussion, we briefly discuss this history.

A. The Common Law Rule against Perpetuities

The rule against perpetuities is generally stated with deceptive simplicity 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." Iglehart v. Phillips, 383 So.2d 610, 614 (Fla.1980) (quoting John Chipman Gray, The Rule Against Perpetuities, § 201 (4th ed.1942)). The rule "was designed to prevent the perpetual entailment of estates and give them over to free and unhampered conveyance." Story v. First Nat'l Bank & Trust Co., 115 Fla. 436, 156 So. 101, 104 (1934); see also Iglehart, 383 So.2d at 613 (recognizing that the rule's "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"). We have explained that the rule is "more accurately speaking, the rule against remoteness or remote vesting of an estate or interest therein." Adams v. Vidal, 60 So.2d 545, 549 (Fla.1952). "It is not a rule that invalidates interests which last too long, but interests which vest too remotely. In other words, the rule is concerned not with the duration of estates but with the time of their vesting." Iglehart, 383 So.2d at 614.

B. The Statutory Rule and Its Various Amendments

The rule against perpetuities has been adopted by statute, amended, and later abrogated. The Legislature first codified the rule in 1977. The statutory rule provided:

STATEMENT OF THE RULE. — No interest in real or personal property is valid unless it must vest, if at all, not later than 21 years after one or more lives in being at the creation of the interest and any period of gestation involved. The lives measuring the permissible period of vesting must not be so numerous or designated in such a manner as to make proof of their end unreasonably difficult.

Ch. 77-23, § 1, Laws of Fla. (codified at § 689.22(1), Fla. Stat. (1979)). The statute exempted various interests, including "[o]ptions to purchase in gross or in a lease or preemptive rights in the nature of a right of first refusal," but limited them to forty years. Ch. 77-23, § 1, Laws of Fla. (codified at § 689.22(3)(a)(7) (1979)).¹

In 1988, the Legislature "replac[ed] the existing statutory rule with the `Florida Uniform Statutory Rule Against Perpetuities.'" Ch. 88-40, Laws of Fla. It states the rule as follows:

(2) STATEMENT OF THE RULE.—

(a) A nonvested property interest in real or personal property is invalid unless:

1. When the interest is created, it is certain to vest or terminate no later than 21 years after the death of an individual then...