Atlanta Development Authority v. Clark Atlanta University, Inc.
298 Ga. 575
Ga.2016Background
- In 1940 Clark Atlanta University (CAU) conveyed three adjoining parcels (~13 acres) to Morris Brown College (MBC) for $1 by a one‑page deed containing a use restriction (educational purposes: undergraduate Arts & Sciences, optional graduate Theology) and a reverter clause if MBC ceased that use.
- The deed contains a single granting clause conveying the three parcels together, a Parcel 1 residential exception (a personal residence easement for an employee), the educational-use restriction applying to the “above property,” and a habendum clause granting the premises "in fee simple."
- MBC filed Chapter 11 in 2012 and sought bankruptcy-court approval to sell the Property; the bankruptcy court authorized sale to Invest Atlanta but preserved CAU’s alleged recorded interests.
- CAU sued for declaratory judgment that the deed conveyed a fee simple determinable (automatic reversion) and that MBC’s sale to Invest Atlanta triggered CAU’s reversionary interest.
- Invest Atlanta moved to dismiss, challenging validity/scope of the restriction/reverter and arguing alternative interpretations (e.g., covenant subject to statutory time limit). The superior court denied dismissal; Georgia Supreme Court granted interlocutory review.
- The Georgia Supreme Court affirmed: the restriction/reverter are valid under the charitable-purpose exception to restraints on alienation, apply to all three parcels, the estate is a fee simple determinable, and MBC’s sale did not qualify as the permitted "use."
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of restriction/reverter (restraint on alienation) | CAU: restriction valid as a charitable-purpose condition permitting perpetual restriction on alienation | Invest Atlanta: forfeiture/restraint invalid or subject to limitations | Court: Valid under Georgia’s charitable-purpose exception to restraints on alienation |
| Scope: whether restriction/reverter apply to all three parcels | CAU: deed language and single grant convey the three parcels as one tract; restriction applies to "above property" | Invest Atlanta: clause ambiguous / different language (easement, "premises") limits reach | Court: Deed unambiguous; restriction/reverter apply to all three parcels |
| Nature of estate conveyed | CAU: deed created an automatic reversion (fee simple determinable) | Invest Atlanta: contesting automatic reverter characterization; suggested alternative (e.g., covenant) | Court: Estate is a fee simple determinable (defeasible fee with automatic reverter) |
| Whether MBC’s sale to Invest Atlanta is a permitted “use” avoiding reverter | CAU: sale inconsistent with deed’s specified educational use; reverter triggered | Invest Atlanta: sale proceeds could be used for educational purposes; sale constitutes a permissible use | Court: Sale does not qualify as the specified "use" in deed; reverter was triggered by the sale |
Key Cases Cited
- First Rebecca Baptist Church, Inc. v. Atl. Cotton Mills, 263 Ga. 688 (recognizing charitable-purpose exception to restraints on alienation)
- Moore v. Wells, 212 Ga. 446 (education as a charitable purpose supports donors’ restrictions)
- Flaum v. Middlebury, 246 Ga. 682 (definition and hallmark of a fee simple determinable)
- Statham v. Kelly, 276 Ga. 877 (sale may conflict with specified residential use in reversion context)
- Wills v. Pierce, 208 Ga. 417 (use of "premises" and "property" interchangeably in deeds and reversionary contexts)
- City of Atlanta v. Mitcham, 296 Ga. 576 (standard for dismissals and appellate review of motions to dismiss)
- Turk v. Jeffreys-McElrath Mfg. Co., 207 Ga. 73 (deed construction governed like other contracts)