Court Opinion

ID: 4094259
Source: CourtListenerOpinion
Date Created: 2016-11-01 12:09:34.926389+00
Date Added: 2024-06-11T14:36:59.919376
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                  No. COA16-400

                              Filed: 1 November 2016

Dare County, No. 13 CVS 388

MELVIN L. DAVIS, JR. and J. REX DAVIS, Plaintiffs,

             v.

DOROTHY C. DAVIS and MKR DEVELOPMENT, LLC, a Virginia Limited Liability
Company, Defendants.

      Appeal by Plaintiffs from judgment entered 21 October 2015 by Judge Gregory

P. McGuire in Dare County Superior Court. Heard in the Court of Appeals 20

September 2016.

      Williams Mullen, by Camden R. Webb and Elizabeth C. Stone, for the Plaintiffs-
      Appellants.

      Vandeventer Black LLP, by Ashley P. Holmes and Norman W. Shearin, and
      LeClairRyan, by Thomas M. Wolf and Gretchen C. Byrd, for Defendant-
      Appellee.

      DILLON, Judge.

      This matter involves a family dispute over a beach property in Dare County

(the “Property”). Defendant Dorothy C. Davis owns a life estate in the Property. The

remainder interest is held by nominal Defendant MKR Development, LLC (the

“LLC”), a limited liability company owned by and benefitting three of Mrs. Davis’s

children – Kaye Davis and Plaintiffs Melvin L. Davis, Jr., (“Mel”) and J. Rex Davis

(“Rex”).   Plaintiffs commenced this suit to enjoin Mrs. Davis from renting the
                                       DAVIS V. DAVIS

                                      Opinion of the Court

Property during her lifetime to vacationers, contending that certain language in the

deed conveying Mrs. Davis her life estate interest (the “Deed”) restricts her from

renting out the Property.

       This matter was designated a mandatory complex business case by Chief

Justice of our Supreme Court Mark D. Martin and assigned to Judge Gregory P.

McGuire, a Special Superior Court Judge for Complex Business Cases.

       The parties filed cross motions for summary judgment.                 Judge McGuire

granted Mrs. Davis summary judgment, holding that the restrictive language in the

Deed - to the extent that it could be construed to restrict Mrs. Davis’s ability to rent

the Property - was void. We affirm Judge McGuire’s order.

                                       I. Background1

       Sometime in the 1980s, Mrs. Davis and her husband (“Mr. Davis”) purchased

the Property.     In order to help pay for Property expenses, Mr. and Mrs. Davis

occasionally rented the Property to vacationers through a real estate agency.

       In 2009, Mr. and Mrs. Davis decided to transfer a remainder interest in the

Property to three of their children (including Plaintiffs). Accordingly, Mr. and Mrs.

       1 Judge McGuire’s order contains a more comprehensive factual background and can be found
at Davis v. Davis, No. 13 CVS 288, 2015 WL 6180969 (N.C. Super. Oct. 21, 2015).

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                                       DAVIS V. DAVIS

                                      Opinion of the Court

Davis executed the Deed and conveyed a remainder interest in the Property to the

LLC, reserving for themselves (Mr. and Mrs. Davis) a life estate.2

       In July 2012, Mr. Davis died, leaving Mrs. Davis as the Property’s sole life

tenant. Less than two weeks later, Plaintiffs prepared a letter advising their mother

that the Deed required that the Property "remain available for [her] personal use and

[could] not be used to provide income to [her].”

       Notwithstanding this letter, Mrs. Davis entered into an agreement with a real

estate agency in 2013 to rent the Property to vacationers, just as she and her husband

had done in years past.

       In July 2013, Plaintiffs filed this declaratory judgment action to enjoin their

mother from renting the Property without the express permission of the LLC.

       In May 2015, both parties filed summary judgment motions. Judge McGuire

granted Mrs. Davis’s summary judgment motion. Plaintiffs timely appealed.

                                         II. Analysis

       On appeal, Plaintiffs argue that the Deed contains a restriction which prevents

their mother from renting out the Property during her life tenancy. Specifically, they

point to the following language in the Deed:

              The Grantors [Mr. and Mrs. Davis] hereby reserve unto
              themselves, a life estate in the Property, said life estate to
              be personal to the use of the Grantors, or the survivor
              thereof, and may not be utilized by any other person, nor

       2  Mr. and Mrs. Davis’s other child Tommy had no role in LLC. In lieu of granting Tommy a
position or interest in LLC, Mr. and Mrs. Davis instead paid off a debt secured by Tommy’s home.

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                                    DAVIS V. DAVIS

                                   Opinion of the Court

             may it be reduced to a cash value for the benefit of the
             Grantors, or the survivor thereof, but must remain always
             during the lifetime of said Grantors, or the survivor
             thereof, available for their individual and personal use
             without interference from either the remaindermen or any
             other person.

We disagree. We hold that the Deed language creates an unreasonable restraint on

the alienation of Mrs. Davis’s life estate and is therefore void. Accordingly, we affirm

Judge McGuire’s summary judgment order.

      Restraints on alienation are generally disfavored in North Carolina due to the

“necessity of maintaining a society controlled primarily by its living members and the

desirability of facilitating the utilization of wealth.” Smith v. Mitchell, 301 N.C. 58,

62, 269 S.E.2d 608, 611 (1980). Nevertheless, it is fundamentally important that a

property owner “should be able to convey [property] subject to whatever condition he

or she may desire to impose on the conveyance.” Id.

      To balance these competing policy interests, our Supreme Court has held that

any unlimited restraint on alienation “is per se invalid.” Id. However, restrictions

which “provide only that someone’s estate may be forfeited or be terminated if he

alienates, or that provides damages must be paid if he alienates, may be upheld if

reasonable.” Id. (emphasis added). That is, our courts will generally uphold any

reasonable restraints on alienation except unlimited restraints, which are per se

unreasonable.

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                                     DAVIS V. DAVIS

                                    Opinion of the Court

      Our Supreme Court has applied this restraints doctrine to life estates. Lee v.

Oates, 171 N.C. 717, 721, 88 S.E. 889, 891 (1916). (“[T]his Court has for many years

consistently held that the doctrine as to restraints of alienation applies as well to

estates for life as to estates in fee simple[.]”). See also Crockett v. First Fed. Sav. &

Loan Assoc. of Charlotte, 289 N.C. 620, 624, 224 S.E.2d 580, 583 (1976) (reaffirming

caselaw that applies restraints doctrine to life estates); Pilley v. Sullivan, 182 N.C.
493, 496, 109 S.E. 359, 360 (1921) (“The clause which purports to ingraft upon the

devise an unlimited restraint on alienation is not only repugnant to the [life] estate

devised, but is in contravention of public policy, and therefore void.”); Wool v.

Fleetwood, 136 N.C. 460, 465-66, 48 S.E. 785, 787 (1904) (voiding a will provision

prohibiting the life tenant from selling the life estate).

      In the present case, Plaintiffs concede that the Deed creates an unlimited

restraint on Mrs. Davis’s ability to alienate her life estate. Indeed, as noted in the

summary judgment order, “[P]laintiffs contend that not only is [Mrs. Davis]

prohibited from selling the life estate, she cannot rent or even permit others to use

the Property.” To justify this position, Plaintiffs aver that the caselaw prohibiting

unlimited restraints does not apply as Mrs. Davis is both the grantor who created the

restraint and the life tenant who is subject to the restraint. Plaintiffs contend that

Lee is distinguishable as the restraint at issue attached to a conveyance between a

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                                     DAVIS V. DAVIS

                                   Opinion of the Court

grantor and a life tenant, whereas here, Mrs. Davis reserved a life estate for herself

and therefore voluntarily restricted that interest.

      We hold that whether the life estate was created by conveyance by a third party

or by reservation by the life tenant herself is irrelevant. An unlimited restraint is

against public policy; it makes no difference if the restraint is self-imposed. Plaintiffs

have failed to cite precedent, either from North Carolina or from another jurisdiction,

that would recognize this distinction. Indeed, the adverse party in Lee argued that

the conveyance restraint should nonetheless be upheld as the life tenant herself

signed the deed, “thereby agree[ing] . . . not to alien her estate[.]” Lee, 171 N.C. at

724, 88 S.E. at 892. Our Supreme Court, however, rejected this argument, holding

that an otherwise invalid restraint on alienation is not validated merely because the

life tenant assented to the restraint by signing the instrument:           “[To conclude

otherwise] would enforce a restriction by estoppel[,] which the law declares void. The

covenant was a ‘dead letter’ when it was entered into, and we do not think it can be

vitalized in this way.” Id. Based on our Supreme Court’s reasoning in Lee, we

conclude that the restraint on Mrs. Davis’s ability to rent her Property is per se void

even though Mrs. Davis was also the person who created the restraint. We therefore

affirm Judge McGuire’s order granting summary judgment to Mrs. Davis.

      AFFIRMED.

      Judges BRYANT and STEPHENS concur.

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