Oldfield v. Stoeco Homes, Inc

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.

Facts. In 1951 Ocean City held title to a large number of undeveloped lots situated in a swamp, and divisible into two segments one being the eastern side of Bay Avenue and the other being the western side of Bay Avenue. In 1951 both of the tracts of land were advertised for public sale to the highest bidder, except for 226 lots of which the city wished to remain owners, and that certain terms and conditions incident to the sale were set forth. The only bidder was Defendant Stoeco Homes, and the winning bids were $10,525 for the eastern lots and $100,000 for the western lots. The sales were confirmed by municipal resolution on February 16, 1951, and the final settlement was made on June 29, 1951. The deed contained provisions that are in dispute herein. Specifically, the deed called for all the lots, inclusive of those retained by the city, to be graded and filled to the existing levels established for the city and that such filling was to be done within one year of the deed. The cit
y reserved the right to “change or modify any restriction, condition or other requirement” in the deed, and that a failure to comply with the “covenants and conditions” regarding the filling and grading within one year may cause the title of the lands or lots in violation of the provisions to revert back to the city. By June 29, 1953, one year later, Defendant had still not completed a substantial portion of the filling. In February of 1953, the city, wishing to have the land developed rather than take back possession as is, passed a resolution extending the time for performance on certain lots until December 31, 1954, and then in subsequent resolutions, other lots were subject to extensions until January 1, 1958, and January 1, 1960, respectively. Certain residents and taxpayers of Ocean City instituted suit against Defendant Stoeco Homes, Inc., desiring to have the resolutions of the city extending time for performance of the filling declared invalid and seeking to have the lands ow
ned by the Defendants pursuant to the 1951 sale forfeited and returned to the city. At the lower court the Defendants prevailed. Plaintiffs appealed.

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.