Brief Fact Summary. A municipality, Ocean City, owned many undeveloped lots in a swampy condition, which were advertised for sale. The sale of the lots to Defendant Stoeco Homes was subject to a condition that they fill and grade the undeveloped lots within one year or, according to the original deed, the lands would automatically revert back to the municipality.
Synopsis of Rule of Law. When determining the nature of a defeasible interest in land, which in this case is between a fee simple determinable with right of reverter or a fee simple subject to a condition precedent, created by deed the court will seek to read the whole deed to determine the intent of the parties.
That if the grantees, their heirs or assigns, should at any time wholly cease to use the said rail or tramway for the purpose of transportation or conveyance, or suffer the same to go entirely out of repair and to become unfit for use, or cease to use the same for transportation or conveyance, for the space of five whole years, that then, or in either of said cases, or on failure of any or either of said conditions, the deed and the estate thereby granted should cease, determine, and become utterly void, and the said premises should revert to the grantors, their heirs and assigns, and re-vest in them in as full and ample a manner as if this deed had not been made.View Full Point of Law
Issue. Did the deed from the city to the Defendant create an estate in fee simple subject to a condition subsequent or a fee simple determinable?
Held. The estate was a fee simple subject to a condition subsequent. Affirmed.
The difference between an estate in fee simple determinable and fee simple subject to a condition subsequent is that in the fee simple determinable, upon the happening of a stated event the title to the property automatically reverts to the grantor, and that in a fee simple subject to a condition subsequent, the happening of the prescribed event gives the grantor only the power of termination. Thus, if the estate is characterized as a fee simple subject to a condition subsequent, the city, upon a failure of the Defendant to perform the condition, may take further action to regain possession, such as a lawsuit.
That the difference in the form of the estate between a fee simple determinable and a fee simple subject to a condition precedent is also noticeable in the form of defenses available. In the fee simple determinable the automatic vesting in the grantor precludes any defense. In the fee simple subject to a condition subsequent the defenses of waiver and estoppel are available.
The Court, in considering the language of the deed, will be guided by the intent of the parties rather than by the appearance of formulaic words. In this case the words “automatically cause title to revert” are held to not create a fee simple determinable, but rather, to create a fee simple subject to a condition subsequent. The Court considers the language of “conditions” found in the deed to create a fee simple subject to condition subsequent. Also, that two conditions were imposed, first, to fill and grade, and second, to do so within one year. The second condition having been modified by the city, the Court found that the parties did not intend for time to be of the essence such that if the Defendant was one day late the city would own the land.
The intent of the parties and the need for flexibility in determining the terms of deeds are important considerations. The Court will try to rule in such a way as to effect the parties’ intent. Here the Court found that the clear intent of the parties was to create an estate in fee simple subject to a condition subsequent.
Discussion. Consider the effect of the Court’s decision. The Defendant is afforded protection against the taxpayer suit. The city, if it desires to regain the property, must file its own suit, to which the Defendant would have certain defenses available (waiver and estoppel). This case is based on a distinction between the way in which the remedy for a happening of an event in a deed is to be recovered. On the one hand the remedy is automatic and inflexible and on the other hand the remedy is subject to legal action and provides rights to the Defendant.