449 Mass. 193 | Mass. | 2007
In a deed recorded in 1981 at the Barnstable County registry of deeds, executors under the will of the defendant’s father, Robert F. Hayden,
The following undisputed facts are drawn from the summary judgment record. The subject property, located at 3630 Falmouth Road, Marstons Mills, was part of a larger tract of land originally owned by Hayden. In 1976, Hayden had transferred his ownership in the tract of land to Hayden Land Development Co., Inc. (HLD). Hayden, Mattson, and Robert G. Kesten were partners in a joint venture to develop, operate, and manage a shopping center on a portion of the tract of land, which included the subject property. At the time of his death in 1980, Hayden
“The grantee of these premises and his heirs, executors, administrators and assigns shall not sell or otherwise dispose of said premises except after first offering the same for sale to the grantors, their heirs and assigns upon the same terms and conditions as those contained in a bona fide offer received by and acceptable to the grantee. In the event of the receipt of such an offer, the grantee shall notify said grantors and shall set forth in full in such notice all the terms and conditions of the said offer in detail and offer to sell the same to said grantors upon the same terms. Within twenty (20) days after the receipt of such notice, said grantors may accept such offer, and upon making the payments required thereby, purchase the premises upon such terms and conditions. In the event that within said 20-day period said grantors do not accept such offer (or shall indicate in writing their intention not to do so), the grantee shall be free to sell the premises to the person making such bona fide offer.”
The deed was recorded as document no. 284,458 at the Barn-stable County registry of deeds on August 4, 1981. The deed contained a second restriction, not at issue in this appeal, that, with certain stated exceptions, no future use could be made of the property that would in any manner compete with the normal and usual businesses associated with a shopping center. The restrictions contained in the deed were, in part, imposed to protect the value of the larger tract of land owned by HLD, which was subsequently developed as a shopping center, and in part to preserve the economic and sentimental value of the remaining land owned by the Hayden family under trusts created by Hayden’s will and under HLD.
In 1996, the plaintiff purchased lots 95 and 96 from Kesten. At that time, the defendant and his sisters (as Hayden’s heirs) signed two documents entitled “Assent to Sale,” which were recorded at the Barnstable County registry of deeds, and which expressly waived the right of first refusal, pursuant to document no. 284,458, with respect to the sale of each lot.
In December, 2004, Kesten and the plaintiff entered into a purchase and sale agreement concerning lot 94. The agreement makes no mention of the right of first refusal contained in document no. 284,458. The time for performance under the agreement originally was January 31, 2005, but Kesten and the plaintiff extended the closing to March 18, 2005. On February 14, the plaintiff’s attorney, on behalf of the plaintiff, notified the defendant of the purchase and sale agreement and of the twenty-day period in which he could respond and match the terms and provisions set forth in the agreement. The letter requested, should the defendant choose not to match the offer, that an enclosed “Assent to Sale” be signed and returned to the plaintiff. On or about March 7, the defendant’s attorney hand delivered a letter to Kesten’s attorney, notifying Kesten of the defendant’s intention to purchase the property. Enclosed in the letter was a check for the deposit amount required by the purchase and sale agreement. Kesten accepted the letter and check. The closing, which had been scheduled for March 18, however, never took place. On March 17, the plaintiff commenced this action, and a judge in the Superior Court (a different judge from the one who allowed the plaintiff’s motion for summary judgment) allowed the plaintiff’s ex parte motion for a memorandum of lis pendens to be recorded against the subject property.
1. We first address the issue of standing. The defendant asserts that the plaintiff may not challenge his proposed purchase of lot 94 from Kesten because the plaintiff is privy neither to
A decision of the Supreme Court of Rhode Island relied on by the defendant, Brough v. Foley, 525 A.2d 919 (R.I. 1987), is distinguishable. Like the plaintiff in this case, the Brough plaintiffs had a fully executory purchase and sale agreement to purchase property that was not honored by the seller due to the exercise of a third-party’s right of first refusal. See id. at 921. The purchase and sale agreement in the Brough case, however, was expressly subject to the condition that the defendant seller would honor the right of first refusal that had previously been granted, and, if the third party chose to purchase the subject property, the seller’s agreement with the plaintiffs would become “null and void.” Id. There was no such contractual provision here.
The record supports the defendant’s assertion (and the plaintiff does not argue otherwise) that, regardless of the absence of any express reference to document no. 284,458 in the purchase and sale agreement between the plaintiff and Kesten, the plaintiff was fully aware of the right of first refusal in connection with lot 94 before entering into the agreement. We reject the suggestion that the plaintiff, who proceeded with his plans to purchase the property without regard to his prior knowledge of the right of first refusal, by implication abandoned, or lost, his standing to challenge the restriction’s validity. To so hold would discourage third-party offers on property that may be affected by preemptive restrictions of this type and place a would-be purchaser “in the precarious position of being unable to vindicate its contractual rights, while allowing a seller to rely on any spurious claim so long as it implicated a third party’s
2. There are no Massachusetts cases directly addressing whether a right of first refusal contained in a deed, which grants the right to purchase property on the same terms as any bona fide offer that may be acceptable to the grantee in the future, falls within the scope of the rule against perpetuities. In considering the parties’ cross motions for summary judgment, the judge looked for guidance to decisions of this court, and of the Appeals Court, addressing options to purchase (a related but, as we shall explain, dissimilar interest); to appellate decisions of other jurisdictions applying the rule against perpetuities to first refusal rights; and to the position taken by the American Law Institute (ALI) in the 1944 Restatement of Property.
As has been stated, the judge ordered the entry of partial
The rule against perpetuities is a doctrine that places a strict limit on how long certain types of property interests may continue. There is no disagreement that, if the right of first refusal fell within the scope of the Uniform Statutory Rule Against Perpetuities, G. L. c. 184A, as appearing in St. 1989, c. 668, § 1 (USRAP), it would be valid pursuant to G. L. c. 184A, § 5, which provides that “a preemptive right in the nature of a right of first refusal in gross with respect to an interest in land or minerals becomes invalid if it is not exercised within thirty years after its creation.” The USRAP, however, only applies to interests in land created after June 30, 1990. St. 1989, c. 668, § 2. Prior to that time, Massachusetts adhered to the common-law rule against perpetuities, inserted by St. 1954, c. 641, § 1.
Our cases make clear that an option to purchase real estate at a fixed price falls within the common-law role against perpetuities. See Certified Corp. v. GTE Prods. Corp., supra at 825-826; Eastman Marble Co. v. Vermont Marble Co., 236 Mass. 138, 152-153 (1920); Winsor v. Mills, 157 Mass. 362, 366 (1892). In Uno Restaurants, Inc. v. Boston Kenmore Realty Corp., 441 Mass. 376, 382 (2004), however, we drew a clear distinction between a right of first refusal, as it is classically understood, and interests this court has considered, in the past, to fall within the role against perpetuities. Our decision established that “[a] right of first refusal is not an option to purchase property at a certain price, but a limitation on the owner’s ability to dispose of property without first offering the property to the holder of the right at the third party’s offering price.” Id.
The legal meaning of a true right of first refusal involving real estate was described in Roy v. George W. Greene, Inc., 404 Mass. 67, 69-71 (1989), S.C., 408 Mass. 721 (1990). Such a right becomes operational when the “owner has decided to accept a third person’s outstanding and enforceable offer and the holder of the right has been informed of the details of that offer
The rule against perpetuities is a rule that invalidates interests that vest too remotely. The underlying rationale behind the rule (now hundreds of years old) is classically understood as a means whereby courts could “curb excessive dead-hand control of property through intergenerational transfers” that might render property unmarketable for decades, or longer. Restatement (Third) of Property (Servitudes) § 3.3 comment b, at 427 (2000). See Certified Corp. v. GTE Prods. Corp., supra at 825; 6 American Law of Property § 24.6, at 22-23 (AJ. Casner ed. 1952); Leach, Perpetuities in a Nutshell, 51 Harv. L. Rev. 638 (1938). Because the holder of a right of first refusal may only choose to purchase property on the same terms as a bona fide offer, if and when the owner decides to sell, there is no power
Revising the position adopted by the Restatement of Property almost sixty years earlier, the ALI now expresses the position that the common-law rule against perpetuities does not apply to a right of first refusal to purchase land. See Restatement (Third) of Property (Servitudes), supra at § 3.3, at 425. The Restatement’s position is supported by the view expressed by the authors of the 1952 American Law of Property. Section 26.67 of that treatise states that, “[w]hile the rule against perpetuities may technically be applicable [to a preemptive right to purchase property], it ought not to be applied, since the future interest of the pre-emptioner constitutes no impediment to transfer of the property.” Id. at 511.
The plaintiff cites several cases involving the issue presented here, where a right of first refusal, without a fixed price and purporting to benefit the parties’ heirs and assigns, was held to be void under the common-law rule against perpetuities. See Neustadt v. Pearce, 145 Conn. 403, 405 (1958); Fallschase Dev. Corp. v. Blakey, 696 So. 2d 833, 837 (Fla. Dist. Ct. App. 1997); Ferrero Constr. Co. v. Dennis Rourke Co., 311 Md. 560, 576 (1988); Coxe v. Wyatt, 83 N.C. App. 131, 134 (1986). We find these cases unpersuasive. In Ferrero Constr. Co. v. Dennis
The rule against perpetuities is not the only judicially created doctrine that historically has limited attempts by property owners to retain control of land by transfers of property interests to future generations. The rule against restraints on alienation “had similar purposes, but [was] more specifically designed to insure that particular assets remained available for commerce.” Restatement (Third) of Property (Servitudes), supra at § 3.3 comment b, at 427. See id. at § 3.4 & comment b, at 440-441 (stating that certain rights of first refusal may be void as unreasonable restraint on alienation); 6 American Law of Property, supra at § 26.66 (suggesting that rule against restraints on alienation applies to preemptive options such as right of first refusal). The plaintiff does not set forth any persuasive argument, or point to any facts in the record, that would support the conclusion that the challenged right of first refusal is unenforceable as an unreasonable restraint on alienation. We nonetheless consider the issue briefly.
As has been discussed, a right of first refusal to purchase real estate of the nature considered here works a de minimis restraint on the alienation of property.
So ordered.
Documents in the record also refer to the defendant’s father as Robert F. Hayden, Sr.; Robert F. Hayden, Jr.; and Robert F. Hayden, Third. We shall in this opinion refer to the defendant’s father as “Hayden.”
The plaintiff’s verified complaint also sought specific performance in the form of an order compelling the current owner of one lot of the property conveyed by the 1981 deed, Robert G. Kesten, Sr., to convey the lot to the plaintiff rather than the defendant, and sought damages sustained as a result of Kesten’s failure to perform under the terms of a fully executed purchase and sale agreement between Kesten and the plaintiff. The plaintiff filed a motion for summary judgment on these claims (which the judge denied), and Kesten filed a cross motion for summary judgment (which the judge also denied). Kesten remains an active party in the Superior Court, but has not joined in the defendant’s appeal to this court. Unopposed assertions in the record indicate that Kesten takes no position on the primary issue before us, namely, whether the right of first refusal contained in the 1981 deed is valid and enforceable.
In an affidavit submitted in connection with his summary judgment mo
Section 413(1) of the Restatement of Property (1944) states:
“A promissory restraint or forfeiture restraint on the alienation of a legal estate in land which is in the form of a provision that the owner of the estate shall not sell the same without first offering to a designated person the opportunity to meet, with reasonable expedition, any offer received, is valid, unless it violates the rule against perpetuities.”
General Laws 184A, inserted by St. 1954, c. 641, § 1, effected slight modifications to “ease the harshness of the traditional rule.” Hochberg v. Proctor, 441 Mass. 403, 407 n.10 (2004). Those modifications affect interests in property determined by reference to life estates or “lives in being” or contingent on any person’s attaining, or failing to attain, an age in excess of twenty-one years, and are not relevant to our analysis. See St. 1954, c. 641, § 1. See also Certified Corp. v. GTE Prods. Corp., 392 Mass. 821, 823 (1984); Young, USRAP to the Rescue: Taming the Rule Against Perpetuities, 73 Mass. L. Rev. 126, 129 (1988) (1954 reform legislation did not “help . . . commercial transactions inadvertently caught by the rule”). The 1954 statute was replaced in its entirety, effective June 30, 1990, with the passage of the Uniform Statutory Rule Against Perpetuities, G. L. c. 184A, as appearing in St. 1989, c. 668, § 1 (USRAP).
The preeminent authority on the rule against perpetuities, W. Barton Leach, also was critical of the application of the rule against perpetuities to purchases of land. See Leach, Perpetuities in Perspective: Ending the Rule’s Reign of Terror, 65 Harv. L. Rev. 721, 737 (1952). Noting that the rule was formulated to discourage “[e]xcessively long family settlements,” Leach observed wryly that “[t]o derive from a rule thus motivated a general concept applicable to commercial transactions is a step of doubtful wisdom.” Id.
The issue of unreasonable restraint on alienation was not reached by the judge, who entered summary judgment in favor of the plaintiff entirely on the basis of the rule against perpetuities.
The defendant concedes that a right of first refusal at a fixed price could effect an unreasonable restraint on alienation.
We caution that there might be a case where, because of passage of time, a reasonable inquiry would not disclose the heirs, assigns, or others who hold the right of first refusal to real estate. In such a case, a court could, on equitable grounds, decline to enforce the right of first refusal, which, in those circumstances, would adversely affect the free alienation of the property and, thus, be unreasonable.
We reject the defendant’s argument that a right of first refusal is the type of restrictive covenant covered by G. L. c. 184, § 23, providing, in relevant part, that “[cjonditions or restrictions, unlimited as to time, by which the title or use of real property is affected, shall be limited to the term of thirty years after the date of the deed . . . creating them . . . .” That statute involves land use restrictions, see, e.g., Brear v. Fagan, 447 Mass. 68, 73-74, 77 (2006); Stop & Shop Supermarket Co. v. Urstadt Biddle Props., Inc., 433 Mass. 285, 288 (2001), and does not cover preemptive rights with respect to interests in land, which, as has been stated, are now subject to G. L. c. 184A, § 5. A court might use the thirty-year window imposed by G. L. c. 184, § 23, and G. L. c. 184A, § 5, as a general guide, however, and, if more than thirty years have passed since the creation of a right of first refusal not subject to G. L. c. 184A, § 5, and circumstances otherwise demonstrate a good reason not to enforce the right, then enforcement could be declined on equitable grounds.
The defendant argues that equitable principles of estoppel, or of waiver, should operate to bar the plaintiff’s action. The defendant’s position focuses on the February 14 letter sent to the defendant’s attorney on the plaintiff’s behalf, in which the plaintiff’s attorney undertook the responsibility of notifying the defendant of the offer and prospective sale of lot 94, and allowing the defendant twenty days in which to assert his right of first refusal. The defendant’s estoppel argument would be more persuasive were there in the summary judgment record any (undisputed) evidence of detrimental reliance on the part of the defendant. The defendant’s waiver argument rests on the inference that, by his conduct in sending the letter, which, essentially, invited the defendant to exercise his preemptive right of first refusal (which had, at that time, become an option to purchase), the plaintiff relinquished any right to challenge the validity of the defendant’s preemptive right to the property. See, e.g., Dynamic Mach. Works, Inc. v. Machine & Elec. Consultants, 444