City of Klamath Falls v. Bell

Oregon Court of Appeals · 1971 · Property

Propertyfuture interestsfee simple determinablepossibility of reverterrule against perpetuitiesschool landfee simple determinablespecial limitation

Facts

In 1925, Daggett-Schallock Investment Company conveyed land to the City of Klamath Falls as a gift for use as a city library, with the deed stating the city would hold the land "so long as" it complied with that use and that if it ceased using the land for library purposes, title would pass to Fred Schallock and Floy B. Daggett, their heirs and assigns. The city built and used a library on the land from 1926 until July 1, 1969, when library operations were moved elsewhere and the building became vacant. The corporation dissolved in 1927, all creditors were paid, and all remaining corporate assets were distributed to its sole shareholders, Schallock and Daggett. Their heirs were joined in this action, and the other defendants later conveyed their interests to Marijane Flitcraft.

Issue

When a deed gives land to a city "so long as" it is used for library purposes and then purports to pass title to named individuals and their heirs if that use ceases, does cessation of the library use leave title in the city because the gift over is void under the rule against perpetuities, or does title pass by way of a retained possibility of reverter? Also, did the corporation's attempted transfer of that future interest, or its later dissolution, extinguish the possibility of reverter?

Rule

Language such as "so long as," coupled with automatic termination upon a stated event, creates a fee simple determinable. A gift over that follows such a fee simple is an executory interest and is void ab initio if it might vest beyond the period allowed by the rule against perpetuities. When the instrument clearly shows the first grantee's estate is to end automatically upon the stated event, invalidity of the executory interest does not enlarge the first grantee's estate into a fee simple absolute; instead, the grantor retains a possibility of reverter. In Oregon, although a possibility of reverter is inalienable, an attempted transfer of it does not destroy it, and the interest is descendable.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In 1930, Pine Crest Development Co. conveyed a parcel in Salem, Oregon, to the City of Salem "so long as" the land is used as a public playground, and the deed stated that the city's estate would end automatically if playground use ceased. Decades later, the city converted the parcel into a maintenance yard.

What estate did the city originally receive under the deed?

Explanation. The majority treated language such as "so long as," coupled with automatic termination upon the stated event, as creating a fee simple on special limitation, i.e., a fee simple determinable. The key is not merely a use restriction, but words of duration and automatic ending of the estate. That is the governing rule applied here.