Hensley-O'Neal v. Metropolitan National Bank
2009 WL 3720963, 297 S.W. 3d 610, 2009 Mo. App. LEXIS 1584 (2009)
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Rule of Law:
A preemptive right to purchase real estate that is binding upon the parties' heirs, successors, and assigns and contains no time limit for its exercise is void ab initio because it violates the common law rule against perpetuities.
Facts:
- On February 15, 1996, Greg Hensley granted Tanya Hensley-O’Neal a preemptive right of first purchase for a parcel of real estate in Taney County, Missouri.
- The written agreement stipulated that it was binding upon the 'executors, administrators, heirs[,] successors and assigns' of both Hensley (the seller) and Hensley-O'Neal (the purchaser).
- The agreement did not contain any provision limiting the time period during which the preemptive right could be exercised.
- On June 22, 2000, Hensley granted a Deed of Trust on the property to Metropolitan National Bank as collateral for a loan.
- After Hensley defaulted on the loan, the Bank foreclosed and purchased the property at a trustee's sale on August 21, 2002, for $87,750.
- On August 23, 2002, the Bank's trustee offered Hensley-O'Neal the right to purchase the property for $87,750, giving her 30 days to accept.
- Hensley-O'Neal responded with a counteroffer of $40,000, which the Bank rejected.
- On February 20, 2008, the Bank entered into a contract to sell the property to a third party for $79,900.
Procedural Posture:
- On April 24, 2008, Tanya Hensley-O’Neal (Appellant) sued Metropolitan National Bank (Respondent) in a Missouri trial court, seeking declaratory relief and specific performance of the preemptive right contract.
- Respondent moved for summary judgment.
- In November 2008, the trial court granted summary judgment in favor of Respondent, ruling that Appellant's preemptive right was extinguished because she failed to exercise it within a reasonable time after the 2002 foreclosure sale.
- Appellant appealed the trial court's judgment to the Missouri Court of Appeals, Southern District.
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Issue:
Does a preemptive right to purchase real estate that is binding upon the parties' heirs, successors, and assigns, and contains no time limit for its exercise, violate the rule against perpetuities?
Opinions:
Majority - Jeffrey W. Bates, Presiding Judge
Yes, a preemptive right to purchase real estate that is binding upon the parties' heirs and assigns and has no durational limit violates the rule against perpetuities. A preemptive right is an interest in property that is subject to the rule, which prohibits property interests that may not vest within a life in being plus 21 years. The contract in this case, by its explicit terms, was intended to be binding upon the heirs and assigns of both parties indefinitely. This potential for perpetual duration is a clear violation of the rule. Citing the precedent in Cole v. Peters, which involved a nearly identical 'heirs and assigns' clause, the court found that such language extends the agreement beyond the lives of the parties, making it unenforceable. Unlike in Kershner v. Hurlburt, where the right was deemed personal to the contracting parties and thus valid, this contract's language demonstrated an intent for it to continue after the parties' deaths, rendering it void from its creation.
Analysis:
This decision reaffirms the strict application of the rule against perpetuities to preemptive rights in real estate contracts in Missouri. It serves as a stark warning to contract drafters that including boilerplate 'heirs and assigns' language in a right of first refusal without a specific savings clause or a definite time limit will render the entire agreement void. The case solidifies the precedent that such rights must be personal to the parties or be carefully drafted to terminate within the perpetuities period. By affirming the summary judgment on different grounds than the trial court, the opinion also demonstrates an appellate court's power to uphold a correct result for any reason supported by the record, regardless of the lower court's reasoning.
