Brief Fact Summary.
Mr. Hansen and Stroecker (Plaintiff) signed an agreement under which Plaintiff paid Mr. Hansen to hold an indefinite option to purchase land. After Mr. Hansen died, Plaintiff exercised the option but Mrs. Hansen (Defendant) refused to deliver the deed, claiming that the option violated the rule against perpetuities.
Synopsis of Rule of Law.
In analyzing whether an interest in land would violate the rule against perpetuities, the applicable periods shall be measured by actual, not possible events.
Mr. Hansen and Plaintiff signed an “Option to Purchase” agreement. Plaintiff paid Mr. Hansen $1500 for the option to purchase seven parcels of Mr. Hansen’s land. The agreement did not set a deadline for the exercise of the option or determine who would pay to survey the land to determine the square footage and total purchase price. After Mr. Hansen died, Plaintiff paid to have the land surveyed and then sent a check to Defendant for the remainder of the purchase price. Defendant refused to deliver the deed. Plaintiff filed suit seeking specific performance of the option agreement. The trial court found for Plaintiff, concluding that the agreement was not an option, but a real estate contract which conveyed a vested interest to Plaintiff. Both parties appealed. Defendant argued that the indefinite option period violated the rule against perpetuities and was therefore void.
When determining whether an interest in land violates the rule against perpetuities, shoud the applicable periods be measured by actual, vice possible, events?
(Matthews, J.) Yes. In analyzing whether an interest in land would violate the rule against perpetuities, the applicable periods shall be measured by actual, not possible events. The rule against perpetuities provides that an interest is void unless it must vest, if at all, within 21 years after a life in being at the time of the interest’s creation. Under the plain meaning of this rule, an indefinite option to purchase land would violate the rule because it could occur more than 21 years after a life in being at the time of the option’s creation. However, Alaska had never adopted the traditional rule against perpetuities and can instead adopt the competing wait-and-see approach. Under this approach, the court judges the validity of the interest based upon what actually occurs, not what possibly can. The Alaska legislature has adopted the wait-and-see approach, although that law is not applicable in this case because it was adopted after the interest at issue was created. The court now adopts the wait-and-see approach as Alaska common law as well and applies it in this case. Because Plaintiff did actually exercise the option within 21 years of a life in being at the time of the option’s creation, the interest is valid. Affirmed.
The wait-and-see approach is endorsed by the authors of the Restatement (Second) of Property, but is not the approach taken by the majority of jurisdictions. The wait-and-see approach is favored because it allows reasonable limitations that would in fact vest within the period of perpetuities that would be voided under the traditional application. The traditional rule unfairly punishes the ignorant or unskilled drafter while the wait-and-see approach treats all nonvested interests equally, no matter the skill of the drafter.