Opinion ID: 2091985
Heading Depth: 3
Heading Rank: 1

Heading: Duration Under Section 3 (a) of the Agreement

Text: Defendants alternatively claim that section 3 (a) of the agreement does not permit exercise of the option after expiration of the statutory perpetuities period. According to defendants, only the possible closing dates fall outside the permissible time frame. Where, as here, the parties to a transaction are corporations and no measuring lives are stated in the instruments, the perpetuities period is simply 21 years ( see , Metropolitan Transp. Auth. v Bruken Realty Corp. , 67 NY2d at 161, supra ). Section 1 of the parties' agreement allows the option holder to exercise the option at any time during any Exercise Period set forth in section three. Section 3 (a), moreover, expressly provides that the option may be exercised  at any time after July 1, 1979, so long as the closing date is scheduled during 1987, 1993, 1998 or 2003. Even factoring in the requisite notice, then, the option could potentially be exercised as late as July 2003  more than 24 years after its creation in December 1978. Defendants' contention that section 3 (a) does not permit exercise of the option beyond the 21-year period is thus contradicted by the plain language of the instrument. Nor can EPTL 9-1.3  the saving statute  be invoked to shorten the duration of the exercise period under section 3 (a) of the agreement. That statute mandates that, [u]nless a contrary intention appears, certain rules of construction govern with respect to any matter affecting the Rule against Perpetuities (EPTL 9-1.3 [a]). The specified canons of construction include that [i]t shall be presumed that the creator intended the estate to be valid (EPTL 9-1.3 [b]) and [w]here the duration or vesting of an estate is contingent upon    the occurrence of any specified contingency, it shall be presumed that the creator of such estate intended such contingency to occur, if at all, within twenty-one years from the effective date of the instrument creating such estate (EPTL 9-1.3 [d]). By presuming that the creator intended the estate to be valid, the statute seeks to avoid annulling dispositions due to inadvertent violations of the Rule against Perpetuities. The provisions of EPTL 9-1.3, however, are merely rules of construction. While the statute obligates reviewing courts, where possible, to avoid constructions that frustrate the parties' intended purposes ( see , Morrison v Piper , 77 N.Y.2d 165, 173-174, supra ), it does not authorize courts to rewrite instruments that unequivocally allow interests to vest outside the perpetuities period ( compare , EPTL 9-1.2 [reducing age contingency to 21 years, where interest is invalid because contingent on a person reaching an age in excess of 21 years]). Indeed, by their terms, the rules of construction in EPTL 9-1.3 apply only if a contrary intention does not appear in the instrument. Thus, as the Practice Commentary explains, [t]he court cannot validate an unambiguous disposition on the basis of the grantor's probable intent, but where construction is needed [subd (b)] will be useful in helping to establish the creator's intent (Turano, Practice Commentaries, McKinney's Cons Laws of NY, Book 17B, EPTL 9-1.3, at 543). For example, where a deed contains contradictory phrases, one of which is valid under the Rule ( see , Morrison v Piper , 77 N.Y.2d 165, 173-174, supra ), or where one of two possible interpretations of a term in an agreement would comply with the Rule ( see , Payne v Palisades Interstate Park Commn. , 204 AD2d 787), the court will adopt the construction validating the disposition ( see also , Restatement of Property § 375 [1944]). By contrast, an option containing no limitation in duration demonstrates the parties' intent that it last indefinitely, and EPTL 9-1.3 does not permit an extensive rewriting of the option agreement    so as to make it conform to the permissible period ( see , Buffalo Seminary v McCarthy , 86 AD2d at 446, supra ). The unambiguous language of the agreement here expresses the parties' intent that the option be exercisable at any time during a 24-year period pursuant to section 3 (a). The section thus does not permit a construction that the parties intended the option to last only 21 years. Given the contrary intention manifested in the instrument itself, the saving statute is simply inapplicable.