Court Opinion

ID: 8895564
Source: CourtListenerOpinion
Date Created: 2022-11-26 23:56:24.87295+00
Date Added: 2024-06-11T17:07:27.416415
License: Public Domain

TYSON, Judge
dissenting.
I respectfully dissent from the majority’s opinion as I would hold that the Rule Against Perpetuities (“RAP”) does not render the contract and addendum in this case void. The majority applies the RAP to void a contract provision for “deferred compensation” found in a land sales contract. I would hold that the deferred compensation fee arrangement does not violate the RAP because: (1) the RAP does not apply because there is no restraint on alienation or marketability of the property as proscribed by the Rule, and (2) it is inequitable to allow defendant to own and sell the property acquired by deed from plaintiff, yet avoid an essential term of the acquisition.
1. No Restraint on Marketability or Alienation
[W]hen one attempts to sort out the applications of the Rule to interests other than the traditional future interests associated with gratuitous transfers, he quickly encounters a set of seemingly contradictory holdings. In contrast to the usual perpetuities cases on gifts, wills and trusts, in which a doctrinaire application of the Rule usually results in the correct ‘answer’, in the commercial interest cases a logical approach based on the face of the Rule does not always yield a predictably correct result. Rather, one must look to some ad hoc reasons behind the black letter of the rule.
Ronald C. Link, The Rule Against Perpetuities in North Carolina, 57 N.C.L. Rev. 727, 804 (1979) (emphasis supplied).
The underlying reason behind the Rule Against Perpetuities is “the protection of society by allowing full utilization of land.” Village of Pinehurst v. Regional Investments of Moore, 330 N.C. 725, 732, 412 S.E.2d 645, 648 (1992) (Meyer, J., dissenting). “The rule 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.” Id. (emphasis supplied) (citation omitted). In Rodin v. Merritt, 48 N.C. App. 64, 68, 268 S.E.2d *309539, 542, disc. rev. denied, 301 N.C. 402, 274 S.E.2d 226 (1980), this Court wrote:
The Rule grew up as a limitation on family dispositions of property, and the measuring stick of lives in being plus 21 years is well adapted to disposition of property by will and other family gift transactions. However, it is difficult to perceive that the same reasons for its creation would have any application to today’s sophisticated, arms-length commercial real estate transactions. We find it difficult to believe that either lives in being or 21 years have much relevance to business and their affairs.
Cf. Village of Pinehurst, supra, (a preemptive right will not be excluded from the RAP because the transaction is commercial in nature). Applying these principles to the present case, it is clear that the addendum to the contract providing for the “deferred compensation fee” to be paid upon the sale of each lot, does not affect the alien-ability or marketability of the property.
The trial court made the following findings of fact:
4. Defendant executed the addendum calling for the $600.00 per lot fees at the advice of its attorney in anticipation that it would acquire the property from LFM Properties and build residential houses on that portion of the property which could be developed.
* * *
6. At the time of closing on April 25, 1995 the parties mutually agreed and intended that the $600.00 fee would be paid when each of the 37 lots sold.
* * *
9. On April 22, 1998 defendant conveyed a lot and did not pay plaintiff the sum of $600.00 dollars as required by the agreement.
10. On April 22,1998 defendant did not intend to pay plaintiff this $600.00 per lot fee on any of the lots it sold or would sell in the subdivision now known as Carolina Village.
* * *
12. Nine lots have been sold thus far in the first phase of the subdivision.
The parties clearly contemplated and agreed to the fee as a method for payment of deferred compensation to the plaintiff. The require*310ment that defendant pay the “deferred fee” to plaintiff upon the sale of each lot does not hinder defendant’s ability to market or alienate the lots. Based on these facts, I would hold that the RAP is inapplicable to this “deferred compensation fee” arrangement.
Such a holding is consistent with our Supreme Court’s holding in Village of Pinehurst, supra. In Village of Pinehurst the Supreme Court held that a municipality’s preemptive right to purchase certain water and sewer systems was void under the RAP. The municipality argued, inter alia, that “there should be an exception to the application of the Rule Against Perpetuities ... because the preemptive right is for the purchase of a business.” Village of Pinehurst, 330 N.C. at 728, 412 S.E.2d at 646. Rejecting this argument, the Supreme Court held that “ filf 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.” Id. at 729, 412 S.E.2d at 646-47 (emphasis supplied). A preemptive right, like the one in Village of Pinehurst, is a “restraint on the alienability of property in that it has the potential to deter would-be buyers by creating uncertainty and unwillingness to invest time and energy into purchasing the burdened property.” Village of Pinehurst v. Regional Investments of Moore: Perpetuating the Rule Against Perpetuities in the Realm of Preemeptive Rights-North Carolina Refuses to Accept an Exception to the Rule, 71 N.C. Law Rev. 2115, 2130 (1992). In the present case, the deferred fee arrangement does not impose a similarly offensive “restraint on alienation” on the defendant. It is merely an agreed upon means to compensate plaintiff for the purchase of its property.
Further, in Smith v. Mitchell, 301 N.C. 58, 62, 269 S.E.2d 608, 611 (1980), our Supreme Court wrote:
the policy absolutely favoring alienability has always conflicted with another common law tenet that one who has property should be able to convey it subject to whatever condition he or she may desire to impose on the conveyance. Id. at p. 2380. See also J. Webster, Real Estate Law in North Carolina § 344 at 432 (1971).
Faced with this tension, the law has evolved in such a way that some direct restraints on alienation are permissible where the goal justifies the limit on the freedom to alienate, 4 Restatement of the Law of Property, Introductory Note, supra at p. 2380, or where the interference with alienation in a particular case is so *311negligible that the major policies furthered bv freedom of alienation axe not materially hampered, id. Thus the general rule is that a restraint on alienation which provides that the property cannot be alienated, a disabling restraint, Simes & Smith, supra at 1131, Restatement of the Law of Property § 404, is per se invalid, Simes & Smith, supra at § 1137; Restatement of the Law of Property § 406, while restraints 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. Restatement of the Law of Property § 406. (emphasis supplied).
2. Estoppel
Recognizing a quasi-estoppel argument to bar the application of the RAP, the Smith Court wrote:
In Pure Oil Co. v. Baars, 224 N.C. 612, 31 S.E.2d 854 (1944), the grantor deeded land to defendants but retained an option to repurchase. Defendants asserted the option was void [as violative of the RAP]. The Court upheld the option and refused to void it because it was ‘an integral part of the transaction and it would be inequitable to allow the defendants to claim the property under deed . . . and at the same time annul the essential terms of its acquisition. If the option is to go out so must the deed which induced it.’
Smith, 301 N.C. at 63, 269 S.E.2d at 612; Cf. Village of Pinehurst, 330 N.C. at 730, 412 S.E.2d at 647 (“Assuming 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 estop-pel.”). In the present case, defendant accepted the deed to the property from plaintiff and benefitted from the sale of portions of the property to others. The trial court found that defendant had alienated nine of the thirty-seven lots without payment of the agreed upon fees to the plaintiff. Defendant now wishes to avoid one of the essential terms of its acquisition of the property.
The majority’s holding is contrary to precedent, and inequitable to plaintiff. I would hold that the deferred compensation fee arrangement does not violate the RAP because: (1) it is not a restraint on alienation or marketability of the property as proscribed by the Rule, and (2) it is inequitable to allow defendant to own and to sell the property acquired from plaintiff, yet avoid an essential term of the acquisition.
*312After review, I find all of defendant’s assignments of error without merit. Therefore, I dissent from the majority’s holding and would affirm the decision of the learned trial court.