Village of Pinehurst v. Regional Investments of Moore, Inc., 69A90

• Decision Date: 27 January 1992
• Docket Number: No. 69A90,69A90
• Citation: 330 N.C. 725,412 S.E.2d 645
• Court: North Carolina Supreme Court
• Parties: VILLAGE OF PINEHURST v. REGIONAL INVESTMENTS OF MOORE, INC., Wachovia Bank and Trust Company, N.A., Pinehurst Enterprises, Inc., Resort Holding Corporation, Pinehurst Water Company, Inc. Pinehurst Sanitary Company, Inc., the Citibank, N.A., First National Bank of Chicago, the Chase Manhattan Bank, N.A., Crocker National Bank, Wells Fargo, N.A., First Pennsylvania Bank, N.A., First National State Bank of New Jersey, J. Walter McDowell, III, John Karscig, Jr., Robert W. Van Camp and James R. Van Camp.

Page 645

412 S.E.2d 645

330 N.C. 725

VILLAGE OF PINEHURST v. REGIONAL INVESTMENTS OF MOORE, INC., Wachovia Bank and Trust

Company, N.A., Pinehurst Enterprises, Inc., Resort Holding

Corporation, Pinehurst Water Company, Inc. Pinehurst

Sanitary Company, Inc., the Citibank, N.A., First National

Bank of Chicago, the Chase Manhattan Bank, N.A., Crocker

National Bank, Wells Fargo, N.A., First Pennsylvania Bank,

N.A., First National State Bank of New Jersey, J. Walter

McDowell, III, John Karscig, Jr., Robert W. Van Camp and

James R. Van Camp.

No. 69A90.

Supreme Court of North Carolina.

Jan. 27, 1992.

Brinkley, Walser, McGirt, Miller, Smith & Coles by Gaither S. Walser, D. Clark Smith, Jr. and Stephen W. Coles, Lexington, for plaintiff-appellant.

Hunton & Williams by Edward S. Finley, Jr., Raleigh, for defendants-appellees.

WEBB, Justice.

The Court of Appeals held that summary judgment was properly entered for the defendants because the right of first refusal was not limited in time and this duration violated the rule against perpetuities. We hold that we are bound by Smith v. Mitchell, 301 N.C. 58, 269 S.E.2d 608 (1980), to affirm the Court of Appeals. In Smith, we held that a preemptive right was not void because it terminated within the period of the rule against perpetuities. We said that a preemptive right or a right of first refusal to be valid must not extend beyond the period of the rule against perpetuities. It is true, as the plaintiff argues, that this part of our opinion in Smith could be considered dictum. It is clear, however, that in Smith it was this Court's intention to make the rule against perpetuities applicable to preemptive rights. We would have to overrule Smith to say the rule does not apply, which we decline to do.

The plaintiff, relying on cases from other jurisdictions, Metropolitan Transp. Auth. v. Bruken Realty Corp., 67 N.Y.2d 156, 501 N.Y.S.2d 306, 492 N.E.2d 379 (1986) and Singer Co. v. Makad, Inc., 213 Kan. 725, 518 P.2d 493 (1974), argues that there should be an exception to the application of the rule against perpetuities in this case because the preemptive right is for the purchase of a business. In Metropolitan Transp. Auth., the New York Court of Appeals held that certain preemptive rights do not have to comply with the rule against perpetuities. In that case, the State of New York, acting through a public authority, gave a subsidiary of the Pennsylvania Railroad a preemptive right to purchase real estate owned by the Long Island Railroad, which was owned by the State of New York. The New York Court of Appeals said that the enforcement of the rule in that case would invalidate an agreement which promoted the use and development of property while imposing only a minor impediment to free transferability. The New York Court of Appeals held that the rule against perpetuities does not apply to preemptive rights in commercial and governmental transactions. In Singer, the Supreme Court of Kansas held that the rule does not apply to commercial leases.

We do not believe we should make an exception to the rule because the real property which the plaintiff desires to purchase is used in the operation of a business. If a restraint on alienation is bad, we see no reason why it is made good because it is part of a commercial transaction or the property is used for business purposes. We note that in Smith the restriction was put on the lot in connection with the development of a tract of land as a real estate development. This made it part of a commercial transaction.

The plaintiff contends that the preemptive right should not be subject to the rule against perpetuities because of N.C.G.S. § 36A-49 which provides in part:

No gift, grant, bequest or devise ... to religious, educational, charitable or benevolent uses ... shall be invalid ... by reason of the same in contravening any statute or rule against perpetuities.

The plaintiff says the creation of the preemptive right was a grant for a charitable or benevolent use and is exempt under this section from the application of the rule against perpetuities. Assuming the creation of the preemptive right was a grant, it was not for a charitable or benevolent use. A municipal corporation's ownership and operation of a water and sewer service is a proprietary function operated for a profit. See Bowling v. Oxford and R.R. v. Oxford, 267 N.C. 552, 148 S.E.2d 624 (1966).

The plaintiff next argues that the preemptive right was personal to the grantee which keeps it from violating the rule. The action in which the consent judgment was entered was a class action in which the plaintiff represented all persons owning property in the Village of Pinehurst. The Village Council of Pinehurst received the preemptive right. If the Village Council was a corporation, the period cannot be measured by its life. If we allowed the measuring life to be the life of a corporation, which may be perpetual, we would eviscerate the rule. The measuring life or lives must be a human life or lives.

The plaintiff next contends that the defendants should be estopped from contesting the validity of the preemptive right. The plaintiff says, relying on Redevelopment Comm. v. Hannaford, 29 N.C.App. 1, 222 S.E.2d 752 (1976), Shuford v. Oil Co., 243 N.C. 636, 91 S.E.2d 903 (1956) and Oil Co. v. Baars, 224 N.C. 612, 31 S.E.2d 854 (1944), that the facts in this case support a quasi-estoppel. The plaintiff contends that the defendants have accepted the benefits of the consent judgment and cannot now attack its validity to the detriment of the plaintiff who relied on the validity of the judgment.

The plaintiff says the defendants accepted benefits under the judgment in three ways. First, the entry of the judgment ending litigation was a benefit to the defendants in that they were allowed to avoid further litigation and carry on the development of Pinehurst. The plaintiff also says that the defendants were allowed under the consent judgment to have three members of an architectural committee which approves plans submitted for construction of residences on property within the Village. The plaintiff finally says the defendants have referred to the beneficial terms of the consent judgment when selling property within the Village.

Assuming an estoppel can bar the application of the rule against perpetuities, the benefits accepted must be more substantial than were accepted in this case to support an estoppel. The mere signing of a judgment which ends litigation does not create an estoppel. We can assume that both sides wanted to end the litigation and they bargained so that each gave up something. This is not the acceptance of benefits under the judgment.

We cannot say that the defendants' right to appoint three members of the architectural committee was a benefit whose acceptance by the defendants created an estoppel. The record shows that prior to the litigation there were three members of the committee, all of whom were appointed by the defendants. Under the terms of the consent judgment, the committee was increased to five members, two of whom were appointed by the plaintiffs in that case. The defendants did not benefit from this change in the committee.

The plaintiff has failed to show how the reference to prospective customers of the consent judgment is a benefit to the defendants. The record shows that Pinehurst Enterprises was required to deliver a "HUD statement" to prospective purchasers which referred to the use of consent judgment as a possible restriction on the use of the property. This would not be a benefit to the defendants.

The plaintiff, relying on Thompson v. Soles, 299 N.C. 484, 263 S.E.2d 599 (1980), contends that under the doctrine of elections, judgment should be entered in its favor. In Thompson, we held there was evidence of an election by the defendant by which he relinquished all other interest in the real property left by his father and mother when he accepted a deed to property which said, "this conveyance is accepted as an advancement to Richard V. Soles of his entire interest in the real property of the estate of the grantor and of his father." Thompson v. Soles, 299 N.C. 484, 489, 263 S.E.2d 599, 603. We held that by accepting the property conveyed by the deed, the grantee had elected to relinquish his right to all other real property which had been owned by his father and mother.

The plaintiff contends that the defendants, by electing to accept the benefits of the consent judgment, are bound by this election so that the preemptive right must be enforced. Assuming that the doctrine of elections would be applicable, the defendants have not received sufficient benefits to make it applicable in this case.

The decision of the Court of Appeals is affirmed.

AFFIRMED.

MEYER, Justice, dissenting.

I dissent from the majority opinion because I do not agree that the preemptive right held by the Village Council of Pinehurst is subject to the rule against perpetuities. By strictly applying the rule to the preemptive right at issue in this case, the majority ignores the purpose and policy underlying the rule as well as the unsuitability of the rule to the transaction at issue here.

Concerned with the ability of royalty and landed gentry to control indefinitely the disposition of their real and personal property, the courts of England first began prohibiting long-term inalienability of property. The early English cases gave rise to the common law rule against perpetuities recognized by the majority of American jurisdictions, including North Carolina. The underlying and fundamental purpose of the common law rule against perpetuities is the protection of society by allowing full utilization of land. As commonly noted, "[t]he rule [against perpetuities] evolved to prevent ... property from being fettered with future interests so remote that the alienability of the land and its marketability would be impaired, preventing its full utilization for the...