Court Opinion

ID: 4744159
Source: CourtListenerOpinion
Date Created: 2021-08-12 17:38:26.646569+00
Date Added: 2024-06-11T08:08:30.818018
License: Public Domain

Kurtz, J.
(dissenting) — The rule adopted by the majority is that a reverter clause in a deed does not violate the doctrine of restraint on alienation if the property automatically reverts back to a person or entity that can alienate the property. Additionally, the majority reasons that the clause is not a restraint on alienation because it does not absolutely prohibit transfer. As applied here, the majority’s rule means that the automatic reverter clause in the Alby to Brashler deed is not a restraint on alienation because the property automatically reverts to Susan Alby, who is free to convey the property, subject to the clause. Finally, the majority argues that even if the reverter clause is a restraint on alienation, it is a reasonable restraint that does not violate the restraint on alienation doctrine.
As the majority recognizes, the general rule is that a provision directly barring all alienation of a fee simple estate is unenforceable. Richardson v. Danson, 44 Wn.2d *527760, 767, 270 P.2d 802 (1954); 17 William B. Stoebuck, Washington Practice: Real Estate: Property Law § 1.26 (1995) (Stoebuck). Restraints on alienation fall into two categories: direct and indirect restraints. The law of restraint on alienation condemns direct restraints. Lewis M. Simes & Allan F. Smith, The Law of Future Interests § 1112 (2d ed. 1956) (Simes & Smith). Direct restraints are those provisions in an instrument which, by their terms, purport to prohibit or penalize the alienation of property. Simes & Smith, supra, § 1112.
Direct restraints take one of three forms: a promissory restraint, a disabling restraint, or a forfeiture restraint. Simes & Smith, supra, § 1131. A promissory restraint is an agreement by the holder of an interest not to alienate, with contractual liability, if the agreement is breached. A disabling restraint is a provision in the document creating the interest that renders void any attempt to alienate the interest. A forfeiture restraint is a condition that terminates the fee upon an attempt to alienate. Lewis M. Simes, Handbook of the Law of Future Interests §§ 112-114, at 237-46 (2d ed. 1966) (Simes).
The automatic reverter clause here is a forfeiture restraint. Although there are no Washington decisions on point, the general rule is that forfeiture restraints interfere with the alienability of property and, if unreasonable, are void. Stoebuck, supra, § 1.26; Simes, supra, § 114, at 241-42. For example, § 4.2(3) of the Restatement (Second) of Property states the general rule as “[a] forfeiture restraint imposed on an interest in property, which restraint is not governed by subsections (1) or (2), is valid if, and only if, under all the circumstances of the case, the restraint is found to be reasonable.”2 Restatement (Second) of Property: Donative Transfers § 4.2(3), at 175 (1983).
*528The majority reasons the clause in question does not restrain the alienation of the subject property because the clause does not absolutely prohibit transfer. On this basis, the majority distinguishes Richardson v. Danson, which held that an attempt to prohibit an encumbrance or conveyance of a fee simple estate for 20 years was void. The fact that a clause does not absolutely prohibit transfer does not mean that the clause is not a direct restraint implicating the restraint on alienation doctrine; it only means the restraint in Danson is a disabling restraint, while the automatic reverter clause here is a forfeiture restraint. Both forfeiture and disabling restraints are restraints on alienation that implicate the doctrine. Stoebuck, supra, § 1.26; 1 Joyce Palomar, Patton and Palomar on Land Titles § 209 (3d ed. 2002); Restatement of Property §§ 404-417 (1944); Simes, supra, §§ 112-114.
Moreover, Washington case law suggests the ability to transfer the property is not determinative. For instance, in Bellingham First Federal Savings & Loan Ass’n v. Garrison, 87 Wn.2d 437, 553 P.2d 1090 (1976), the Supreme Court considered whether a “due-on-sale” clause in a deed of trust is a reasonable restraint on alienation. While a due-on-sale clause may make a sale more difficult, its presence in an instrument does not absolutely prevent the transfer of the property. Even so, the court held that a due-on-sale clause is presumed to be an unreasonable restraint on alienation unless the lender can show that the enforcement of the clause is necessary to protect the lender’s security.3 Id. at 441. According to the reasoning of the majority opinion, the holding in Garrison should have been that a due-on-sale clause is not a restraint on alienation because the clause does not absolutely prohibit transfer, i.e., the property is vested in a person or entity that can alienate the property subject to the clause. See also Miller v. *529Pac. First Fed. Sav. & Loan Ass’n, 86 Wn.2d 401, 545 P.2d 546 (1976).
Similarly, in Girard v. Myers, 39 Wn. App. 577, 694 P.2d 678 (1985), Lawson v. Redmoor Corp., 37 Wn. App. 351, 679 P.2d 972 (1984), and Tombari v. Blankenship-Dixon Co., 19 Wn. App. 145, 574 P.2d 401 (1978), our court considered whether fixed price preemptive rights were unreasonable restraints on alienation. While a fixed price preemptive right may make a sale less attractive, its presence in an instrument does not absolutely prevent the transfer of the property. In each case, our court followed the flexible approach of Bellingham, recognized the clause in question interfered with alienation, and decided the case on the issue of whether the restraint was reasonable or unreasonable. Girard, 39 Wn. App. at 582-86; Lawson, 37 Wn. App. at 353-55; Tombari, 19 Wn. App. at 148-50. According to the reasoning of the majority, the holdings of these cases should have been a fixed price preemptive right can never be an unreasonable restraint on alienation because the property is vested in a person or entity that can alienate the property subject to the right.
In deciding this case, I would adopt the simple rule stated in section 3.4 of the Restatement (Third) of Property.
A servitude that imposes a direct restraint on alienation of the burdened estate is invalid if the restraint is unreasonable. Reasonableness is determined by weighing the utility of the restraint against the injurious consequences of enforcing the restraint.
Restatement (Third) of Property: Servitudes § 3.4, at 440 (2000). This treatment of the issue is consistent with the language concerning a forfeiture restraint in section 4.2 of the Restatement (Second) of Property: Donative Transfers.
Here, the correct question is not whether the automatic reverter clause is a restraint on alienation, but whether it is reasonable or unreasonable. The answer to that question requires the resolution of a finely balanced issue. There are compelling arguments favoring Ms. Alby’s position, which *530the majority forcefully states and I need not repeat. Regardless, I would hold that after the real estate contract was paid in full, the inclusion of the automatic reverter clause in the fulfillment deed was an unreasonable restraint on alienation.
The automatic reverter clause in the Alby to Brashler deed prevents any encumbrance of the property for the remaining lifetime of Susan Alby. Such a restraint on alienation is generally held to be void. 3 Thompson on Real Property § 29.03(b), at 706-07 (David A. Thomas ed., 2d ed. 2001). This restriction significantly affects the marketability of the property for an unknown period of time. Furthermore, after the real estate contract was paid in full, Susan Alby had no present interest in the land to protect. Because she transferred a fee simple estate to the Brashlers, her only remaining interest is a contingent future interest that violates public policy by restraining alienation.
For these reasons, I respectfully dissent and would affirm the judgment of the trial court.
Review granted at 152 Wn.2d 1006 (2004).

 Sections (1) and (2) deal with “forfeiture restraints] imposed in a donative transfer,” such as a testate disposition or gift, and (3) deals with “[a] forfeiture restraint imposed on an interest in property,” such as the transaction between Ms. Alby and the Brashlers. Restatement (Second) of Property: Donative Transfers § 4.2, at 175 (1983).

 The federal Garn-St. Germain Depository Institutions Act of 1982 now preempts state laws that restrict the enforcement of due-on-sale clauses in real property loan cases, thereby making such clauses generally enforceable. 12 U.S.C. § 1701J-3.