Summary
noting that the benefit received must be substantial to support estoppel under a quasi-estoppel theory
Summary of this case from Snow Enter. v. Bankers Ins. Co.Opinion
No. 69A90
Filed 27 January 1992
1. Deeds 59 (NCI4th); Vendor and Purchaser 2.1 (NCI3d) — preemptive right — purchase of water and sewer systems — rule against perpetuities The rule against perpetuities applied to a preemptive right in a consent judgment giving the Village Council of Pinehurst a right of first refusal to purchase on behalf of the Village of Pinehurst residents the water and sewer systems serving those residents in the event that Pinehurst, Inc. decided to sell such systems. Therefore, the preemptive right was unenforceable where it was not limited in time.
Am Jur 2d, Perpetuities and Restraints on Alienation 65.
Pre-emptive rights to realty as violation of rule against perpetuities or rule concerning restraints on alienation. 40 ALR3d 920.
2. Deeds 59 (NCI4th); Vendor and Purchaser 2.1 (NCI3d) — preemptive right — rule against perpetuities — property used in business A preemptive right will not be excepted from the rule against perpetuities because the real property which plaintiff desires to purchase is used in the operation of a business.
Am Jur 2d, Perpetuities and Restraints on Alienation 65.
Pre-emptive rights to realty as violation of rule against perpetuities or rule concerning restraints on alienation. 40 ALR3d 920.
3. Vendor and Purchaser 2.1 (NCI3d) — preemptive right — purchase of water and sewer systems — not charitable or benevolent use — rule against perpetuities A preemptive right granted by Pinehurst, Inc. to the Village Council of Pinehurst to purchase its water and sewer systems for the benefit of residents of the Village of Pinehurst was not for a charitable or benevolent use so as to be exempted from the rule against perpetuities by N.C.G.S. 36A-49.
Am Jur 2d, Perpetuities and Restraints on Alienation 65.
Pre-emptive rights to realty as violation of rule against perpetuities or rule concerning restraints on alienation. 40 ALR3d 920.
4. Deeds 59 (NCI4th); Vendor and Purchaser 2.1 (NCI3d) — preemptive right — Village Council as grantee — rule against perpetuities — right not personal to grantee A preemptive right granted to the Village Council of Pinehurst to purchase its water and sewer systems for the benefit of the residents of the Village of Pinehurst was not personal to the grantee so as to exclude it from the operation of the rule against perpetuities since the period cannot be measured by the life of the Village Council but must be measured by a human life or lives.
Am Jur 2d, Perpetuities and Restraints on Alienation 65.
Pre-emptive rights to realty as violation of rule against perpetuities or rule concerning restraints on alienation. 40 ALR3d 920.
5. Estoppel 15 (NCI4th) — preemptive right — consent judgment — acceptance of benefits — insufficiency for estoppel Defendants were not estopped from contesting the validity of a preemptive right granted by a consent judgment to the Village Council of Pinehurst to purchase the water and sewer systems serving Village of Pinehurst residents by their acceptance of benefits under the consent judgment because those alleged benefits were insufficient to support an estoppel where they consisted of (1) defendants' avoidance of further litigation; (2) defendants' right to appoint three members of an expanded architectural committee which approves plans for the construction of residences within the Village, a right they already had; and (3) defendants' references to the beneficial terms of the consent judgment when selling property within the Village.
Am Jur 2d, Perpetuities and Restraints on Alienation 10, 65.
APPEAL by plaintiff pursuant to N.C.G.S. 7A-30(2) from the decision of a divided panel of the Court of Appeals, 97 N.C. App. 114, 387 S.E.2d 222 (1990), affirming a summary judgment of Seay, J., at the 15 December 1988 Session of Superior Court, MOORE County. Heard in the Supreme Court 7 September 1990.
Brinkley, Walser, McGirt, Miller, Smith Coles, by Gaither S. Walser, D. Clark Smith, Jr. and Stephen W. Coles, for plaintiff appellant.
Hunton Williams, by Edward S. Finley, Jr., for defendant appellees.
Justice MEYER dissenting.
Chief Justice EXUM joins in this dissenting opinion.
The plaintiffs brought this action to enforce a preemptive right or a right of first refusal to purchase from the defendant Pinehurst Enterprises, Inc., the water and sewage facilities serving the Village of Pinehurst. In 1973, a lawsuit was filed in superior court against the Diamondhead Corporation, which was then the principal owner of land in Pinehurst, by persons representing the class of the residents of Pinehurst. The Village of Pinehurst was not at that time incorporated and the purpose of the lawsuit was to stop certain practices in the development of the Village.
A consent judgment was entered, one part of which provided that in the event the defendant decided to sell the sewage and water systems, the Village Council of Pinehurst would have the right to purchase the systems on behalf of the residents of the Village of Pinehurst at a price and on terms at least equal to the price and terms of the highest offer by a bona fide purchaser. The consent judgment provided that in the event the stock or assets of Pinehurst, Inc. were sold, the right of first refusal would survive the sale. Pinehurst Enterprises, Inc., a wholly-owned subsidiary of Resort Holding Corporation has succeeded to the assets of Pinehurst, Inc.
On 2 December 1986, Regional Investments of Moore, Inc. offered to purchase the water and sewer systems for $2,500,000. The plaintiff offered to pay this amount, but Pinehurst Enterprises, Inc. sold the water and sewer systems to Regional Investments of Moore, Inc. on 27 February 1987. The plaintiff brought this action to have its rights determined.
The superior court entered an order of summary judgment for the defendants and the Court of Appeals affirmed. The plaintiff appealed to this Court.
The Court of Appeals held that summary judgment was properly entered for the defendants because the right of first refusal was not limited in time and this duration violated the rule against perpetuities. We hold that we are bound by Smith v. Mitchell, 301 N.C. 58, 269 S.E.2d 608 (1980), to affirm the Court of Appeals. In Smith, we held that a preemptive right was not void because it terminated within the period of the rule against perpetuities. We said that a preemptive right or a right of first refusal to be valid must not extend beyond the period of the rule against perpetuities. It is true, as the plaintiff argues, that this part of our opinion in Smith could be considered dictum. It is clear, however, that in Smith it was this Court's intention to make the rule against perpetuities applicable to preemptive rights. We would have to overrule Smith to say the rule does not apply, which we decline to do.
The plaintiff, relying on cases from other jurisdictions, Metropolitan Transp. Auth. v. Bruken Realty Corp., 67 N.Y.2d 156, 501 N.Y.S.2d 306 (1986) and Singer Co. v. Makad, Inc., 213 Kan. 725, 518 P.2d 493 (1974), argues that there should be an exception to the application of the rule against perpetuities in this case because the preemptive right is for the purchase of a business. In Metropolitan Transp. Auth., the New York Court of Appeals held that certain preemptive rights do not have to comply with the rule against perpetuities. In that case, the State of New York, acting through a public authority, gave a subsidiary of the Pennsylvania Railroad a preemptive right to purchase real estate owned by the Long Island Railroad, which was owned by the State of New York. The New York Court of Appeals said that the enforcement of the rule in that case would invalidate an agreement which promoted the use and development of property while imposing only a minor impediment to free transferability. The New York Court of Appeals held that the rule against perpetuities does not apply to preemptive rights in commercial and governmental transactions. In Singer, the Supreme Court of Kansas held that the rule does not apply to commercial leases.
We do not believe we should make an exception to the rule because the real property which the plaintiff desires to purchase is used in the operation of a business. If 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. We note that in Smith the restriction was put on the lot in connection with the development of a tract of land as a real estate development. This made it part of a commercial transaction.
The plaintiff contends that the preemptive right should not be subject to the rule against perpetuities because of N.C.G.S. 36A-49 which says in part:
No gift, grant, bequest or devise . . . to religious, educational, charitable or benevolent uses . . . shall be invalid . . . by reason of the same in contravening any statute or rule against perpetuities.
The plaintiff says the creation of the preemptive right was a grant for a charitable or benevolent use and is exempt under this section from the application of the rule against perpetuities. Assuming the creation of the preemptive right was a grant, it was not for a charitable or benevolent use. A municipal corporation's ownership and operation of a water and sewer service is a proprietary function operated for a profit. See Bowling v. Oxford and R.R. v. Oxford, 267 N.C. 552, 148 S.E.2d 624 (1966).
The plaintiff next argues that the preemptive right was personal to the grantee which keeps it from violating the rule. The action in which the consent judgment was entered was a class action in which the plaintiff represented all persons owning property in the Village of Pinehurst. The Village Council of Pinehurst received the preemptive right. If the Village Council was a corporation, the period cannot be measured by its life. If we allowed the measuring life to be the life of a corporation, which may be perpetual, we would eviscerate the rule. The measuring life or lives must be a human life or lives.
The plaintiff next contends that the defendants should be estopped from contesting the validity of the preemptive right. The plaintiff says, relying on Redevelopment Comm. v. Hannaford, 29 N.C. App. 1, 222 S.E.2d 752 (1976), Shuford v. Oil Co., 243 N.C. 636, 91 S.E.2d 903 (1956) and Oil Co. v. Baars, 224 N.C. 612, 31 S.E.2d 854 (1944), that the facts in this case support a quasi-estoppel. The plaintiff contends that the defendants have accepted the benefits of the consent judgment and cannot now attack its validity to the detriment of the plaintiff who relied on the validity of the judgment.
The plaintiff says the defendants accepted benefits under the judgment in three ways. First, the entry of the judgment ending litigation was a benefit to the defendants in that they were allowed to avoid further litigation and carry on the development of Pinehurst. The plaintiff also says that the defendants were allowed under the consent judgment to have three members of an architectural committee which approves plans submitted for construction of residences on property within the Village. The plaintiff finally says the defendants have referred to the beneficial terms of the consent judgment when selling property within the Village.
Assuming an 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 estoppel. The mere signing of a judgment which ends litigation does not create an estoppel. We can assume that both sides wanted to end the litigation and they bargained so that each gave up something. This is not the acceptance of benefits under the judgment.
We cannot say that the defendants' right to appoint three members of the architectural committee was a benefit whose acceptance by the defendants created an estoppel. The record shows that prior to the litigation there were three members of the committee, all of whom were appointed by the defendants. Under the terms of the consent judgment, the committee was increased to five members, two of whom were appointed by the plaintiffs in that case. The defendants did not benefit from this change in the committee.
The plaintiff has failed to show how the reference to prospective customers of the consent judgment is a benefit to the defendants. The record shows that Pinehurst Enterprises was required to deliver a "HUD statement" to prospective purchasers which referred to the use of consent judgment as a possible restriction on the use of the property. This would not be a benefit to the defendants.
The plaintiff, relying on Thompson v. Soles, 299 N.C. 484, 263 S.E.2d 599 (1980), contends that under the doctrine of elections, judgment should be entered in its favor. In Thompson, we held there was evidence of an election by the defendant by which he relinquished all other interest in the real property left by his father and mother when he accepted a deed to property which said, "this conveyance is accepted as an advancement to Richard V. Soles of his entire interest in the real property of the estate of the grantor and of his father." Thompson v. Soles, 299 N.C. 484, 489, 263 S.E.2d 599, 603. We held that by accepting the property conveyed by the deed, the grantee had elected to relinquish his right to all other real property which had been owned by his father and mother.
The plaintiff contends that the defendants, by electing to accept the benefits of the consent judgment, are bound by this election so that the preemptive right must be enforced. Assuming that the doctrine of elections would be applicable, the defendants have not received sufficient benefits to make it applicable in this case.
The decision of the Court of Appeals is affirmed.
Affirmed.