Witt v. Disque

• Decision Date: 16 March 1981
• Citation: 436 N.Y.S.2d 890,79 A.D.2d 419
• Parties: Eloise WITT et al., Appellants, v. August J. DISQUE, as specific devisee, etc., Respondent.
• Court: New York Supreme Court — Appellate Division

Page 890

436 N.Y.S.2d 890

79 A.D.2d 419

Eloise WITT et al., Appellants, v. August J. DISQUE, as specific devisee, etc., Respondent.

Supreme Court, Appellate Division, Second Department.

March 16, 1981.

Farley, Jutkowitz, LoCascio & Balint, Yonkers (J. David Jutkowitz, Lee S. Wiederkehr and Joseph R. LoCascio, Yonkers, of counsel), for appellants.

Paul F. Perreten, Hastings-On-Hudson, for respondent.

Before MOLLEN, P. J., and HOPKINS, TITONE and WEINSTEIN, JJ.

HOPKINS, Justice.

Special Term has granted summary judgment dismissing the complaint and declared an option held by the plaintiffs to purchase land owned by the defendant void as a restraint on the power of alienation.

We reverse. Summary judgment should not be granted in favor of either party, since there are questions of fact to be determined at trial relating to the circumstances under which the option agreement was executed.

I

In 1950 Percy N. Boddy, now deceased, operated a gasoline service station on certain premises in the Town of Greenburgh; a one-family house was also located on adjoining property. Apparently, both properties were under foreclosure by the Town of Greenburgh. The owner of the properties at that time is not disclosed by the record. Apparently, too, although this is not clear from the record, Henry Witt, also now deceased, entered into a contract with Boddy to the effect that Witt would purchase the properties and then sell them to Boddy for $17,100 (the amount which Witt was to pay for the properties originally). ¹ The contract as finally made in writing provided that (1) the premises to be sold would be conveyed as two parcels, one to include the house, and the second to include the service station, and (2) the deed to the service station would contain an option in favor of Witt to repurchase that property at a price to be determined by subtracting from the contract price of $17,100 the net proceeds of a sale of the house, the option to become effective if Boddy should either decide to sell the service station or should die.

Thereafter Boddy contracted to sell the parcel on which the house was situated to a third party for $5,500. On June 29, 1950 Witt acquired title to the properties and conveyed them to Boddy. Simultaneously, Boddy and Witt executed a purchase money mortgage to the Dobbs Ferry Bank in the sum of $8,800 on the parcel containing the service station. Boddy then conveyed the parcel containing the house pursuant to his contract upon receipt of $5,500. As a result of these transactions Boddy remained the owner of the service station, subject to the mortgage held by the bank.

The deed of June 29, 1950, conveying the service station by Witt to Boddy, included a repurchase option (presumably to carry out the intent of the contract between them), reading as follows "It is hereby expressly understood and agreed that in the event the party of the second part shall decide to sell the above described premises the party of the first part, his heirs or assigns, shall have an option to repurchase the same for the sum of Eleven Thousand Six Hundred ($11,600) Dollars plus the reasonable value of any improvements which may hereafter be made by the purchaser, said reasonable value not to exceed the sum of One Thousand ($1,000.00) Dollars, with taxes and insurance to be apportioned in the usual manner, said option to be exercised within 30 days of written notice given.

"It is hereby expressly understood and agreed that the party of the first part, his heirs or assigns shall have an option to repurchase the said premises at the price stated above upon the death of the party of the second part, said option to be exercised by the giving of written notice to the heirs or legal representatives of the party of the second part within 30 days of the receipt of notice of death, which notice shall be deemed to be received if sent by registered mail to the last known address of the party of the first part."

On January 24, 1955 Witt and Boddy executed an agreement which fixed the value of the improvements referred to in the repurchase option at $1,000, thus making the total option price $12,600. On the same day an additional mortgage on the property was executed by Witt and Boddy to the Dobbs Ferry Bank for $5,000, and that mortgage was then consolidated with the purchase money mortgage.

So matters stood until the death of Boddy on November 17, 1976. In the meantime Witt had died in 1960 and the plaintiffs are the executors and trustees of his estate. The defendant is the executor of the estate of Boddy and the specific devisee of the land within the option. ²

The plaintiffs assert, and this is not denied by the defendant, that no notice of Boddy's death was ever given to them. They assert that they did not learn of Boddy's death until February, 1979. On February 13, 1979 plaintiff Eloise Witt exercised the option on her behalf, and on February 26, 1979 plaintiff Norman H. Witt exercised the option on his behalf. Both plaintiffs requested in their notices that the defendant communicate with them to agree on a closing date for the conveyance of the property or in the event that the defendant did not respond, title was to close on March 16, 1979. The defendant neither responded nor appeared on March 16, 1979.

This action for the specific performance of the option was then commenced. The defendant's answer, though denying the allegations of the complaint concerning the failure of the defendant to notify the plaintiffs of Boddy's death and the effect of the plaintiffs' exercise of the option, generally admitted the remaining allegations of the complaint with respect to the transactions between Witt and Boddy prior to their deaths. The defendant's answer, in addition, contained a counterclaim alleging unjust enrichment of the plaintiffs, upon the basis that the defendant had made improvements amounting to $250,000 on the property, and several defenses, one of which averred that the option agreement violated the rule against perpetuities by suspending the power of alienation.

The plaintiffs moved for summary judgment; the defendant cross-moved for summary judgment. The moving papers presented on behalf of both sides in general described the documents executed by Witt and Boddy. However, the plaintiffs also asserted that because the schedule for estate tax purposes filed with the Surrogate's Court by the defendant claimed the value of the property as $12,600 (since it was subject to the exercise of the option at that figure), the defendant was estopped from asserting the invalidity of the option. The defendant, however, produced an affidavit from a real estate appraiser who valued the property at $110,000 at the time of Boddy's death, and at $125,000 at the time of the appraisal on September 7, 1979, which, as the defendant contended, indicated a gross disparity between the value of the property and the price stipulated in the option.

II

Special Term granted summary judgment in favor of the defendant. Relying on Kowalsky v. Familia, 71 Misc.2d 287, 336 N.Y.S.2d 37, the court held that though the option agreement did not violate the rule against perpetuities, nevertheless it was an unreasonable restraint on alienation, for the reasons that there was a substantial difference between the option price and the market value of the property, no compelling purpose justifying the enforcement of the option had been shown, and the option was of unlimited duration.

On appeal, the plaintiffs argue that the option was not a restraint on alienation. They contend that the option was for a fixed amount, determined by the two original parties to the option under the circumstances existing at that time, and that in fact the option's duration was not unlimited, but conditioned on the happening of the contingency either of Boddy's decision to sell the property during his lifetime or upon his death. Further, they urge that the increase in value of the property during the intervening years has no effect on plaintiffs' right to exercise the option. Further, they claim that Kowalsky is distinguishable on its facts from this case.

On the other side, the defendant argues that the option imposes a restraint on alienation on the grounds stated by Special Term. Moreover, he contends that the option was actually unlimited in time, because there is no duty under the terms of the option on Boddy's successors in interest to notify Witt or his successors in interest of Boddy's death. The defendant also urges that plaintiffs have shown no compelling purpose to enforce the option, and that the fixed price, in the light of the present value of the property, constituted a practical destruction of the right of Boddy to sell the property during his lifetime, since Boddy would have no incentive to sell it.

III

The rules against perpetuities and restraint on alienation are reflections of the public policy of the State. That public policy, once ingrained in the common law and now incorporated in statute (EPTL 9-1.1), declares society's interest in the free transfer of property, without restrictions by the living on the ownership of property by posterity (Carrier v. Carrier, 226 N.Y. 114, 122, 123 N.E. 135). It is needless in the context of this appeal to consider the involuted development of the rule against perpetuities under our statutory pattern (cf. Chwatal v. Schreiner, 148 N.Y. 683, 690, 43 N.E. 166; Law Revision Commission Report (1936) 502-505, 512-513), because, as Special Term, found, the rule against perpetuities does not apply to the option agreement.

In a general sense, the rule against perpetuities limits the power of an owner to create future interests, whereas the rule against restraint on alienation prohibits the owner from creating provisions blocking his grantee from disposing of the property. More to the point, here the terms of the option do not extend beyond the period of lives in being and a term of 21 years (Matter of City of New York (Upper...