Opinion ID: 3213067
Heading Depth: 2
Heading Rank: 2

Heading: Life in Being

Text: ¶14 ANR urged and the Court of Civil Appeals accepted as true, both without supporting authority, that an LLC, such as ANR, could be a life in being for the purposes of the rule against perpetuity. We cannot agree. ¶15 ANR claims that a life in being includes entities such as a corporation and an LLC, based on this Court's determination in Cartwright v. Hillcrest Investments, Ltd. , 1981 OK 27, ¶ 10, 630 P.2d 1253, 1256, that at the time the Constitution was adopted, the term 'person' was generally understood to include corporations. ANR's reasoning is faulty due to an association fallacy: because a corporation may be a person does not make it a life in being. ¶16 At common law, a corporation did not qualify as a life in being. Restatement (First) of Property § 374, cmt. h (1944). The comment expounds on the meaning of life in being: The lives which can be used in measuring the permissible period under the rule against perpetuities must be lives of human beings. For many purposes in the law a corporation is a person, but not for the measurement of the period described in Clause (a). So also no such measurement may be expressed in terms of the life of any animal (other than man), even though the animal is one of a type having a life span typically shorter than that of human beings, as for example, a dog or a horse. The United States Supreme Court also found that the use of a corporation as a life in being under the common law would violate the rule against perpetuities. Fitchie v. Brown , 211 U.S. 321, 334 (1908). ¶17 When there is no measurable life in being, such as with a corporation or an LLC, the only definite period permitted by the rule against perpetuities is a term not exceeding 21 years. Melcher , 1967 OK 239, ¶ 20, 435 P.2d at 111. A provision without a measurable life in being that vests or distributes after twenty-one years violates the rule against perpetuities and is void. McLaughlin v. Yingling , 1923 OK 99, ¶ 42, 213 P. 552, 564. ANR urges that this twenty-one year rule shows that a corporation is a life in being under the rule. If a corporation or an LLC is a life in being, then the twenty-one-year rule for entities would be superfluous. ¶18 ANR states that they wish to amend their petition to show that they are a single member limited liability company with a 30 year duration. ANR urges that as a single-member LLC, the LLC should be disregarded as an entity for purposes of the rule against perpetuities, just as it can be for federal tax purposes. Here, we are not dealing with federal taxes; we are dealing with contractual rights. Oklahoma's statutory scheme makes an LLC a legal entity separate from its owners with the filing of its executed articles of organization. 18 O.S.2011, § 2004; 18 O.S.Supp. 2004, § 2004. Whether an LLC is for a specific or perpetual duration is not significant to its status as a separate entity. See 18 O.S.2011, § 2004; 18 O.S.2001, § 2004. An LLC generally remains a separate entity for state law purposes. Timothy M. Larason, Using One-Member L.L.C.s as Disregarded Entities , 73 Okla. Bar J. 1753, 1753 (2002). ANR executed the AMI agreement as a business entity, not as its owner. Here, ANR, as an LLC, is not a life in being regardless of whether it has an expiration date or it is perpetual. 1 Thus, the Option Provision is subject to the twenty-one-year limit imposed by the rule against perpetuities and Melcher. ANR's right to participate in future wells is indeterminable, does not vest within the twenty-one-year limit, and may never vest. Thus, the Option Provision violates the rule against perpetuity.