Rodin v. Merritt, 7915SC639
| Decision Date | 05 August 1980 |
| Docket Number | No. 7915SC639,7915SC639 |
| Citation | 48 N.C.App. 64,268 S.E.2d 539 |
| Parties | Sylvia RODIN and Gertrude Groten v. Eben MERRITT. |
| Court | North Carolina Court of Appeals |
Powe, Porter, Alphin & Whichard by Charles R. Holton and Eugene F. Dauchert, Jr., Durham, for plaintiff-appellant.
Alexander & McCormick by Sydenham B. Alexander, Jr., and John G. McCormick, Durham, for defendant-appellee.
Plaintiffs' one assignment of error is directed to the court's ruling that the agreement is void and unenforceable as a matter of law. Plaintiffs contend that the agreement is not violative of the rule against perpetuities. We agree.
Under the terms of the contract, "Seller agrees to sell and convey, and the Purchaser agrees to purchase all that certain plot, piece or parcel of land, with the buildings and improvements thereon erected, situate, lying and being in the Township of Chapel Hill, State of North Carolina, being more particularly described in Schedule A, annexed hereto and being more particularly shown and delineated on the map annexed hereto and made a part hereof." No date was set for the transfer of title. The purchase price was $1,800,000. Fifty thousand dollars of that was to be placed in escrow upon the execution of the contract in an interest bearing account pending performance by the parties of the obligations under the contract. Four hundred thousand dollars was to be paid in cash or by certified check "on closing of title". The remaining $1,350,000 was to be represented by a note bearing interest at the rate of 8% per annum and to mature seven years "after the closing of title". The note was to be secured by a deed of trust conveying the property. The contract was "subject to and conditioned upon the ability of the Purchaser, at Purchaser's own cost and expense:
a) to cause the property which is the subject of this contract to be annexed to the City of Chapel Hill;
b) to cause the property which is the subject of this contract to be rezoned to a zoning use classification or classifications to permit the comprehensive development of the subject property with a blend or mix, acceptable to Purchaser of commercial use; multi-family/condominium use; one family residential use;
c) the obtaining of all state and local agency approvals for such comprehensive development of the property including, but not limited to, state road approvals;
d) sufficient and satisfactory evidence of availability and capacity to serve the proposed development of water supply and sewage disposal;
e) the filing of subdivision plats or site plans as may be required by any and all state of (sic) municipal agencies;
f) the issuance of valid and enforceable building permits in such number and for such use as Purchaser may require consistent with the zoning use classification above enumerated.
The closing of title to be had pursuant to this contract shall be had thirty (30) days subsequent to the completion of items a through f enumerated above.
The conditions of this contract shall be deemed to be conditions only and not representations, it being expressly understood that the failure of a condition shall entitle Purchaser to a cancellation of this contract and a refund of the moneys paid hereunder.
The Purchaser may elect to waive any condition set forth in this contract."
The Rule Against Perpetuities is stated 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." Gray, Rule Against Perpetuities § 201, p. 191 (4th ed. 1942). It precludes the creation of any future interest in property which does not necessarily vest within 21 years after a life or lives presenting in being, and the period of gestation, where gestation is, in fact, taking place. Where the 21-year period has no reference to lives in being, it has been said to be in gross, and the grant is not too remote if the contingency must happen within 21 years. "If . . . a contract creates an interest in property which equity can enforce, then the rule against perpetuities applies." 61 Am.Jur.2d Perpetuities and Restraints on Alienation § 42, pp. 44-45 (1972); Starcher Bros. v. Duty, 61 W.Va. 373, 56 S.E. 524 (1907).
If the contract is construed, as we think it must, as postponing the vesting of the title to the land until all conditions are performed, vesting could, conceivably be delayed longer than 21 years from the date of the execution of the contract.
The Rule grew up as a limitation on family dispositions of property, and the measuring stick of lives in being plus 21 years is well adapted to disposition of property by will and other family gift transactions. However, it is difficult to perceive that the same reasons for its creation would have any application to today's sophisticated, arms-length commercial real estate transactions. We find it difficult to believe that either lives in being or 21 years have much relevance to business and their affairs, or that this judge made rule should be applied to commercial transactions. See generally Leach, Perpetuities: New Absurdity, Judicial and Statutory Correctives, 73 Harv.L.Rev. 1318 (1960) (hereinafter "Leach"). Note, Rule Against Perpetuities: Application to a Lease to Commence Upon Completion of Building, 47 Calif.L.Rev. 197 (1959); Note, Property: Rule Against Perpetuities: Applicability to Commercial Lease, 6 U.C.L.A.L.Rev. 165 (1959).
Rules which bear such birthmarks assume a different aspect when they are applied to contracts or leases in a modern society whose economic structure rests upon planning for the future and whose life blood is credit. Since the rule against perpetuities was born in a society which extolled the tight ownership of inherited real property, it does not facilely operate as to commercial agreements in today's dynamic economy.
Wong v. DiGrazia, 60 Cal.2d 525, 35 Cal.Rptr. 241, 247, 386 P.2d 817, 823 (1963).
We think the facts in some recent cases involving "on completion" leases are similar enough to the facts in the case sub judice to merit discussion. Frequently, leases for spaces in shopping centers are executed as early as prior to the beginning of construction of the shopping center. The leases generally provide that the term shall begin either upon completion or within a stated number of days from completion of the premises, and, of course, the term could conceivably be delayed beyond 21 years. In order to avoid the application of the Rule, some courts have construed the transaction as one which creates a vested interest with the term and possession to take effect in the future. E. g., Francis v. Superior Oil Co., 102 F.2d 732 (10th Cir. 1939); Isen v. Giant Food, Inc., 295 F.2d 136 (D.C.Cir.1961); City of Santa Cruz v. MacGregor, 178 Cal.App.2d 45, 2 Cal.Rptr. 727 (1960). Some courts have held the contract void as violative of the rule. Johnson v. Preston, 226 Ill. 447, 80 N.E. 1001 (1907); Dallapi v. Campbell, 45 Cal.App.2d 541, 114 P.2d 646 (1941) (); Haggerty v. City of Oakland, 161 Cal.App.2d 407, 326 P.2d 957 (1958) ("on completion" lease); Southern Airways Co. v. DeKalb County, 101 Ga.App. 689, 115 S.E.2d 207 (1960) (); United Virginia Bank Citizens & Marine v. Union Oil Co. of Cal., 214 Va. 48, 197 S.E.2d 174 (1973) (). 1
We believe the better reasoned result is reached in Wong v. DiGrazia, supra. There the parties entered into a 10-year lease to commence upon filing of notice of completion of a building to be constructed. The lessor's obligation to construct was subject to "material and/or labor shortages, strikes, lockouts, governmental actions and all causes beyond control of the lessor", the obtaining of a building permit, and approval of the completed plans and specifications. The agreement required the lessor to begin construction "forthw...
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