The City of Klamath Falls v. Bell
490 P.2d 515 (1971)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
When a conveyance creates a fee simple determinable followed by an executory interest that is void under the Rule Against Perpetuities, the grantor retains a possibility of reverter. An attempt to alienate this possibility of reverter in the same instrument does not destroy it, and upon the dissolution of a corporate grantor, this interest passes to its shareholders.
Facts:
- In 1925, Daggett-Schallock Investment Company, a corporation, conveyed land as a gift to the City of Klamath Falls.
- The deed specified that the city would hold the land "so long as" it was used for a city library.
- The deed further stated that if the city ceased using the land for a library, title would pass to Fred Schallock and Floy K. Daggett, their heirs, and assigns.
- In 1926, the City of Klamath Falls built and began operating a library on the site.
- In 1927, the Daggett-Schallock Investment Company was voluntarily dissolved, and all its assets were distributed to its sole shareholders, Schallock and Daggett.
- On July 1, 1969, the city terminated the use of the building as a library, moved the books to a county facility, and left the building vacant.
- After the library closure, the heirs of Schallock and Daggett conveyed their respective interests in the property to defendant Marijane Flitcraft.
Procedural Posture:
- The City of Klamath Falls filed a complaint for declaratory judgment in an Oregon trial court against the heirs of Fred Schallock and Floy K. Daggett.
- The trial court found that title to the property was vested in the City of Klamath Falls.
- The trial court reasoned that the gift over to Schallock and Daggett was void under the rule against perpetuities, which converted the city's interest into a fee simple absolute.
- The defendants, heirs of the original shareholders, appealed the trial court's decision to the Court of Appeals of Oregon.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
When a deed grants a fee simple determinable followed by an executory interest that is void under the Rule Against Perpetuities, does the grantor retain a possibility of reverter that passes to its successors upon termination of the fee?
Opinions:
Majority - Schwab, C.J.
Yes. When a deed grants a fee simple determinable with an executory interest that is void under the Rule Against Perpetuities, the grantor retains a possibility of reverter that passes to its successors. The deed's language 'so long as' created a fee simple determinable in the City, an estate that terminates automatically upon the breach of the condition. The subsequent gift over to Schallock and Daggett was an executory interest that was void ab initio under the Rule Against Perpetuities because it was not certain to vest within the permitted time. However, the invalidity of this executory interest does not convert the City's determinable fee into a fee simple absolute; instead, a possibility of reverter remains with the grantor. The court rejects the harsh rule that an attempt to alienate this inalienable possibility of reverter destroys it. Upon the corporate grantor's dissolution, this possibility of reverter passed as an asset to its shareholders, Schallock and Daggett, and was subsequently descendable to their heirs. Therefore, when the city breached the condition in 1969, its estate automatically terminated, and title vested in the shareholders' successors.
Analysis:
This decision clarifies several key aspects of Oregon property law regarding future interests. It establishes that an attempt to alienate an inalienable possibility of reverter does not destroy it, choosing a modern, less harsh rule over older common law precedent. The case also affirms that upon corporate dissolution, a possibility of reverter is treated as a corporate asset that passes to shareholders rather than being extinguished. This holding reinforces the grantor's original intent in creating a defeasible fee and prevents the first grantee from obtaining a windfall (a fee simple absolute) due to a subsequent, unrelated invalidity under the Rule Against Perpetuities.
Unlock the full brief for The City of Klamath Falls v. Bell