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St. Regis Paper Co. v. Brown

Court of Appeals of Georgia
272 S.E.2d 544, 155 Ga. App. 679 (1980)
ELI5:

Rule of Law:

An option to purchase real estate that is not tied to a measuring life in being and can be exercised more than 21 years after its creation violates the Rule Against Perpetuities and is void.


Facts:

  • The predecessors in title to the current landowners entered into two 60-year timber lease agreements with St. Regis Paper Company.
  • Lease A was executed on September 1, 1958, and Lease B was executed on April 1, 1959.
  • Both leases granted St. Regis an irrevocable option to purchase the property at a fixed price of $65 per acre.
  • The purchase option in Lease A became exercisable on September 1, 1970.
  • The purchase option in Lease B became exercisable on April 1, 1971.
  • The leases did not specify an expiration date for the options, making them exercisable for the remainder of the 60-year lease terms, which was approximately 49 years for Lease A and 48 years for Lease B.

Procedural Posture:

  • The property owners (Plaintiffs) filed a lawsuit against St. Regis Paper Company (Defendant) in a Georgia trial court.
  • The plaintiffs sought a declaratory judgment to declare the purchase options in two lease agreements null and void.
  • The plaintiffs moved for summary judgment on the declaratory judgment count, and the defendant filed a cross-motion for summary judgment.
  • The trial court granted the plaintiffs' motion for summary judgment, ruling the options were void, and denied the defendant's motion.
  • St. Regis Paper Company (Appellant) appealed the trial court's order to the Court of Appeals of Georgia.

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Issue:

Does a purchase option contained within a 60-year commercial lease, which becomes exercisable after 12 years and remains exercisable for the remaining 48 years of the lease term, violate Georgia's Rule Against Perpetuities?


Opinions:

Majority - Shulman, Judge

Yes, the purchase options violate the Rule Against Perpetuities. A purchase option creates a future interest in property that must vest within the period allowed by the rule. Where no life in being is used to measure the period, the interest must vest within 21 years. The court rejected the argument that purchase options in leases should be treated like perpetual renewal options, which are exempt from the rule, because a purchase option restrains the alienability of the fee and contemplates the remote vesting of title, the very issue the rule is designed to prevent. Because these options could be exercised for nearly 50 years, well beyond the 21-year limit, they are void. Citing precedent from Turner v. Peacock and Brown v. Mathis, the court affirmed that Georgia law applies the rule to such options, and it is the court's duty to follow that precedent.



Analysis:

This decision solidifies Georgia's strict application of the common law Rule Against Perpetuities to commercial purchase options within long-term leases, a position not universally shared by other jurisdictions. It draws a critical distinction between an option to purchase, which creates a future interest subject to the rule, and an option to renew a lease, which extends a present vested estate and is not. The case serves as a strong precedent in Georgia, reminding drafters of long-term real estate contracts that options to purchase must be structured to be exercised within the 21-year perpetuity period to be valid.

G

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