Volume 11 Number 3(?)

 

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Volume 11, Number 2
(Summer Fall 2005)

 

Dear Tute:

            

            What is the Rule Against Perpetuities?  I ran across this language in a deed, and an attorney said I might have a problem with the rule.  Why?  And do I have a problem?

 
            The deed conveyed property to Sam and Helen, or the survivor of them, for and during their natural lives, and upon the death of the last one living, the property would go to the persons who would be the grantor's heirs at law if he had lived until the death of the last life tenant.

 
                                                                                    Perpetua Perplexed

 

Dear Perpetua:

That's a tough question.  Why did the attorney you talked to think you "might" have a problem?  Did his eyes, like those of so many attorneys, sort of glaze over when he mentioned the Rule? 

The common law rule against perpetuities is a rule against remoteness of vesting.  It strikes down contingent future interests which many not vest or fail to vest within a certain time period, generally defined in terms of a "life in being" or twenty-one years.  It traces its history back to the Duke of Norfolk's Case, 3 Ch.Cas. 1 (1682), 53 (1685).  In American legal literature, John Chipman Gray's treatise on the rule, published in 1886, was so definitive that little has been done since then on the subject, except to rewrite, revise or repeal the rule.

Gray summarized the rule in one sentence:  "No interest is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest."  He then wrote an entire book explaining that one sentence.  Your humble columnist is not about to try to do the same, taking to heart the wisdom of the justices of the Virginia Supreme Court  which said:  "We do not propose to enter that field of unending discussion and controversy to which we are invited. We shall not vex ourselves with the niceties of executory devises, and contingent and vested remainders, but shall content ourselves with deciding what seems to be a very obvious proposition."  Scott v. Patterson, 104 Va. 455, 457, 51 S.E. 848, ___ (1905).

In Skeen v. Clinchfield Coal Corp., 137 Va. 397, 403, 119 S.E. 89, 90, Judge Kelly quoted with approval the rule against perpetuities as thus stated in Graves' Notes on Real Property, section 215:

“Any executory interest which, by possibility, may not take effect until after lives in being and twenty-one years and ten months is ipso facto and ab initio void. In other words, the executory interest is void for remoteness if, at its creation, there exists a possibility that it may not take effect during any fixed number of now existing lives, nor within twenty-one years and ten months after the expiration of such lives, even though it is highly probable, or indeed, almost certain, that it will take effect within the time prescribed.”

 

“Nor is it material in such cases how the fact actually turns out. The possibility that the event may, in point of time, exceed the limits allowed, vitiates the limitation ab initio.” Minor on Real Property (2d Ed.), section 820, p. 1060; Griffith v. Thomson, 1 Leigh (28 Va.) 321, 329.

Claiborne v. Wilson, 168 Va. 469, 473-474 (1937)

To go to deeply into this question, requires a discussion of a number of other ancient doctrines, the mere thought of which causes yours truly to try to remember why title examination looked like honest work, lo, these many years ago.  Such a topic includes The Rule in Shelley's Case, recognized in the Fourteenth Century, and definitively stated by Lord Coke in that case, reported in 1 Co.Rep. 93b (1579-1581 or thereabouts).  The abolition of The Rule in Shelly's Case is memorialized in the Code of Virginia as § 55-14.

            A relatively modern review of the Rule is found in a case dealing with a right of first refusal.  In that case, the court did not invalidate the interest, stating:

. . . a right is void ab initio if, at its creation, there is a possibility the right might not be exercised until after the expiration of the time period fixed by the rule, which is measured by a life or lives in being plus 21 years and 10 months. Lake of the Woods Ass'n, Inc. v. McHugh, 238 Va. 1, 4-5, 13, 380 S.E.2d 872, 873, 874-75 (1989); United Virginia Bank v. Union Oil, 214 Va. 48, 51, 197 S.E.2d 174, 177 (1973). The right of first refusal in the case before us was specifically granted to “Charles Whitehead and Martha A. Whitehead, or the survivor.” The relevant lives in being at the time of the grant were Sowers and the Whiteheads, and the right vested at the time of the execution of the agreement.

Firebaugh v. Whitehead, 263 Va. 398, 404-405, 559 S.E.2d 611, ___ (2002)

            The language you recited is similar to that in the Firebaugh case, in that there are "lives in being" recited in the conveyance.  Since the ultimate takers are determined upon the death of the last of the two life tenants, by reference to the statute of descent and distribution, the interest will not vest at a point in time which exceeds 21 years after the death of the lives mentioned.  The heirs at law of the grantor have a vested interest, subject to being divested by their failure to outlive the life tenants.  The common law rule against perpetuities should not be a problem.

            One minor wrinkle in the common law Rule Against Perpetuities includes an elimination of the lives in being rule when the parties are entities.  "Where the optionee is a corporate entity, however, and the parties do not contract with reference to a life or lives in being, 21 years from the date of the creation of the interest is the determinative period." The Ryland Group v. Wills, 229 Va. 459, 463, 331 S.E.2d 399, 402 (1985).

            Another wrinkle was what was called the "wait and see" rule, in which the Court would look and see if an interest vested within the period required by the rule before invalidating the interest.  Under [the `wait and see '] doctrine, the rule against perpetuities is determined to have been violated or not by taking into consideration events which occur after the period fixed by the rule has commenced. If, upon a later look, the event upon which an interest was made contingent is found to have occurred and the interest has vested or has become certain to vest within the period fixed by the rule, the rule is held not to have been violated. United Virginia Bank v. Union Oil, 214 Va. 48, 53 (1973); Lake of the Woods Assoc. v. McHugh, 238 Va. 1, 9 (1989).  The "wait and see" rule was enacted in Virginia on July 1, 1983, as subsection A of Virginia Code § 55-13.3.

In 2000, Virginia adopted the Uniform Statutory Rule Against Perpetuities which applies in many, but not all, circumstances.  (Virginia Code § 55-12.1, et seq.)  In that statute, the General Assembly made it even more difficult for an interest to violate the rule by stating:

A.    A nonvested property interest is invalid unless:

 

1. When the interest is created, it is certain to vest or terminate no later than twenty-one years after the death of an individual then alive; or

 

2. The interest either vests or terminates within ninety years after its creation.

Virginia Code Annotated § 55-12.1

 

            Hello, are you still there . . . WAKE UP!

 

                                                                                             Tute

 

 

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