Shaver v. Clanton
94 Daily Journal DAR 9469, 31 Cal.Rptr.2d 595, 26 Cal. App. 4th 568 (1994)
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Rule of Law:
Under California's Uniform Statutory Rule Against Perpetuities, commercial, nondonative transfers such as options to renew a lease are exempt from the rule. However, if the lease involves a town or city lot, it remains subject to Civil Code section 718, which limits the maximum lease term to 99 years.
Facts:
- In 1971, Robert and Helen Clanton entered into a 10-year lease for shopping center space with Martin Wagner, which included a 10-year renewal option and a percentage rent clause.
- Shortly thereafter, Emerson Stanley purchased the property, becoming the Clantons' landlord.
- Upon the first renewal in 1981, Stanley agreed to the Clantons' request to delete the 3% percentage rent provision.
- In January 1989, Stanley and the Clantons executed a final lease amendment, granting the Clantons options to extend the lease for additional five-year periods indefinitely, starting at the end of each prior lease period.
- After Emerson Stanley's death, his daughter and sole heir, Donna Shaver, inherited the property and challenged the validity of the lease amendments.
Procedural Posture:
- Donna Shaver filed a complaint against the Clantons in the trial court, seeking declaratory relief, rescission of the lease amendments, and damages.
- The trial court found that the fraud claims were baseless and that a 3% percentage rent provision had been validly deleted from the lease.
- The trial court ruled that the 1988 lease amendment was valid, but found the 1989 amendment creating perpetual renewals was void in its entirety for violating the rule against perpetuities.
- The trial court ruled there was no prevailing party and denied an award of costs or attorney fees.
- Both parties appealed the trial court's judgment to the California Court of Appeal.
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Issue:
Is a lease amendment that provides for perpetual options to renew void for violating the rule against perpetuities, or is it valid but limited by statute?
Opinions:
Majority - Sonenshine, J.
No, the lease amendment is not void, but its duration is limited. The amendment is valid because California’s Uniform Statutory Rule Against Perpetuities (USRAP) exempts commercial, nondonative transactions, such as the lease options at issue, from the common law rule against perpetuities. The court reasoned that the purpose of the common law rule was to restrict family-oriented donative transfers, not to regulate commercial agreements negotiated between parties. The transaction between Stanley and the Clantons was commercial, not donative, despite their friendship. However, while the USRAP exempts the amendment from the rule against perpetuities, it does not override other specific statutory limitations. Civil Code section 718 limits leases of town or city lots to a maximum of 99 years. Therefore, the court must read the two statutes together, giving effect to both. The result is that the perpetual renewal options are valid, but the total term of the lease is capped at 99 years from its commencement date of May 1, 1971.
Concurring - Crosby, J.
The majority reaches the correct result, but the holding is based on hornbook law. The principle that a lease violating a statutory maximum term is void only as to the excess period is well-established, as is the 99-year limit imposed by Civil Code section 718. The case presents a rare factual scenario and is not worthy of publication.
Analysis:
This case clarifies the interaction between California's modern Uniform Statutory Rule Against Perpetuities (USRAP) and older, specific statutes regulating property interests. It confirms the legislative shift away from applying the complex and often harsh common law rule to commercial transactions, providing greater certainty and freedom of contract in business dealings. The decision establishes that while USRAP exempts commercial interests from one form of invalidation, these interests are not entirely without limits. Courts will harmonize USRAP with other statutes, like the 99-year limit on city lot leases, thereby upholding specific public policies while still modernizing property law.
