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The Rule Against Perpetuities in North Carolina, 57 N.C

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The Rule Against Perpetuities in North Carolina, 57 N.C NORTH CAROLINA LAW REVIEW Volume 57 | Number 5 Article 2 6-1-1979 The Rule ga ainst Perpetuities in North Carolina Ronald C. Link Follow this and additional works at: http://scholarship.law.unc.edu/nclr Part of the Law Commons Recommended Citation Ronald C. Link, The Rule against Perpetuities in North Carolina, 57 N.C. L. Rev. 727 (1979). Available at: http://scholarship.law.unc.edu/nclr/vol57/iss5/2 This Article is brought to you for free and open access by Carolina Law Scholarship Repository. It has been accepted for inclusion in North Carolina Law Review by an authorized administrator of Carolina Law Scholarship Repository. For more information, please contact [email protected]. THE RULE AGAINST PERPETUITIES IN NORTH CAROLINA RONALD C. LINKt TABLE OF CONTENTS I. EVOLUTION OF THE RULE ............................... 731 A. Evolution of the Rule in England .................... 731 B. Evolution of the Rule in North Carolina ............. 736 II. ELEMENTS OF THE RULE ................................ 751 A. Statement of the Rule in North Carolina............. 751 B. Elements of the Rule in North Carolina.............. 753 III. CLASS GIFTS ............................................ 770 IV. POWERS OF APPOINTMENT .............................. 782 V. THE DURATION OF TRUSTS ............................. 793 VI. COMMERCIAL INTERESTS ................................ 804 VII. DRAFTING ............................................... 817 VIII. REFORM ................................................. 818 The world of estates and future interests in North Carolina is a fascinating one (at least to collectors of incunabula). Here is found al- most the full panoply of common law freehold estates: the fee simple absolute; the defeasible fees including the fee simple determinable, the fee simple subject to condition subsequent, and the fee simple subject to executory limitation;I and the life estate. Although our statutes con- vert the fee tail into a fee simple,2 one must understand the feudal nice- ties of the fee tail in order to know when the statutes will operate. Fortunately, North Carolina has never recognized the fee simple condi- tional,3 a medieval estate eliminated in England in 1285;1 the distinc- t Associate Professor of Law, University of North Carolina. B.A. 1961, University of Illi- nois; M.A. 1962, University of California at Berkeley; J.D. 1965, University of Illinois. 1. See McCall, Estates on Condition and on Special Limitation in North Carolina, 19 N.C.L. REv. 334 (1941). 2. N.C. GEN. STAT. § 41-1 (1976): "Every person seized of an estate in tail shall be deemed to be seized of the same in fee simple." 3. Prior to 1285 a conveyance "to .4 and the heirs of his body" created in .4 a fee simple conditional upon the birth of issue. If, after the birth of issue, A failed to convey the estate, it passed on his death to his issue in fee simple conditional, with the same consequences. J. CRIB- BET, PRINCIPLES OF THE LAW OF PROPERTY 46 (2d ed. 1975). 4. Statute De Donis Conditionalibus, 13 Edw. 1, c. 1 (1285). 728 NORTH CAROLINA L4W REVIEW [Vol. 57 tion of sanctioning that estate is reserved for our sister state to the south.5 The feudal conveyancer would also find his full armamentarium of future interests: reversions, possibilities of reverter and powers of termination (rights of entry) for the grantor; remainders (indefeasibly vested, vested subject to total divestiture, vested subject to partial di- vestiture and contingent); and executory interests (springing and shift- ing) for the grantee. Were Lord Coke to emerge, H.G. Wells-like, from a time machine into a twentieth-century Tar Heel deeds vault, he would not be unfamiliar with many of the doctrines and issues associ- ated with our future interests. Worthier Title may have been abol- ished,6 but Destructibility of Contingent Remainders lurks in the cases.7 The Rule in Shelley's Case is alive and well and living in Raleigh,8 and the Rule in Wild's Case, dating from 1599, is still with us. 9 Various restrictive common law rules have led to meliorating North Carolina statutes furthering the transferability of future inter- 5. 1 L. SiMEs & A. SMITH, THE LAW OF FUTURE INTERESTS § 62 n.8 (2d ed. 1956); Note, The Fee Simple Conditionalin South Carolina, 18 S.C.L. REV. 476 (1966). 6. See N.C. GEN. STAT. § 28A-1-2 (1976). Compareid with Link, The Rule in Wld's Case in North Carolina,55 N.C.L. REv. 751, 824 n.369 (1977). One question not addressed in this article is whether the abolition applies to instruments other than wills (chapter 28A deals with decedents' estates) and, if so, whether it applies retroactively. The statutory presumption that "heirs" means "children" tends to limit the operation of the doctrine. See N.C. GEN. STAT. § 41-6 (1976); c N.C. GEN. STAT. § 41-6.1 (1976) ("next of kin" presumed to mean "those persons who would take under the law of intestate succession"). On Worthier Title generally, see 41 N.C.L. REv. 317 (1963); 14 N.C.L. REv. 90 (1935). 7. Dictum in Blanchard v. Ward, 244 N.C. 142, 148-49, 92 S.E.2d 776, 781 (1956), suggests that destructibility may still arise in North Carolina via the doctrine of merger. See Fourth 4nnual Survey of North CarolinaCase Law, 35 N.C.L. REV. 177, 237 (1957). See generally McCall, The Destructibility of ContingentRemainders in North Carolina, 16 N.C.L. REv. 87 (1937). There is a kind of statutory destructibility in North Carolina. The grantor of a deed or settlor of a trust creating a contingent future interest in some person not in esse or not determined until the happening of some future event may revoke the grant of the interest at any time prior to the happening of the contingency vesting the future interest. N.C. GEN. STAT. §§ 39-6, -6.1 (1976); f. id §§ 41-11, -11.1, -12 (generally allowing sale or mortgage of property subject to contingent remainders, with proceeds of sale to be held for ascertainment of ultimate remaindermen). 8. E.g., Starnes v. Hill, 112 N.C. 1, 16 S.E. 1011 (1893); N.C. GEN. STAT. § 39-1.1 (1976). The statute provides that in construing conveyances the court shall give effect to the intention of the parties, but has an express proviso that the section shall not prevent the application of the Rule in Shelley's Case. The Rule in Shelley's Case has even been extended to personal property. Riegel v. Lyerly, 265 N.C. 204, 143 S.E.2d 65 (1965), noted in 68 W. VA. L. REV. 104 (1965). On Shelley's Case generally, see Block, The Rule in Shelley's Case in North Carolina, 20 N.C.L. REV. 49 (1941); Webster, 4 Relic North CarolinaCan Do Without-The Rule in Shelley's Case, 45 N.C.L. REV. 3 (1966). 9. Link, supra note 6, at 819-21. 19791 RULE A GAINST PERPETUITIES ests,'° sanctioning the creation of future interests in personalty by inter vivos instrument," and establishing a constructional preference for definite failure of issue."z The Statute of Uses, in a form recognizable by Henry VIII, lies entombed in the General Statutes.' 3 Many of the rules, doctrines and issues just listed are of somewhat limited current significance. Destructibility of Contingent Remainders, for example, customarily is restricted to legal (not equitable) remain- ders (not executory interests) in real property (not personalty); its po- tential scope is therefore limited. Even those old rules, such as the Rules in Shelley's Case' 4 and Wild's Case,' 5 which are now applied to equitable interests as well as legal ones and to personalty as well as realty, apply only if the creator uses certain fatal language not ordina- rily found in modem instruments. (At least one hopes that lawyers avoid such pregnant language as "to A and his children" (invoking the Rule in Wild's Case) or such notorious phrases as "to A for life, re- mainder to his heirs" (invoking the Rule in Shelley's Case). Laymen may blunder into such usages, but there are limits to the preventive scope of the law.16) On the other hand, the Rule Against Perpetuities, while derived from centuries-old principles, remains a vital concept. It applies to le- gal and equitable interests, to real property and personal property, to family dispositions and, perhaps unexpectedly, to some commercial transactions (for example, options, leases and condominiums). Fur- ther, the kinds of gratuitous dispositions to which the Rule Against Per- petuities applies include two of the most common dispositive tools in modem estate planning: class gifts and powers of appointment. For various reasons, it is often advisable for the draftsman of a will or trust disposing of a modest or large estate to create class gifts' 7 and powers 10. N.C. GEN. STAT. §§ 29-2 (inheritability), 31-40 (devisability), 39-6.3 (alienability) (1976). 11. Id § 39-6.2 (overturning rule of Speight v. Speight, 208 N.C. 132, 179 S.E. 461 (1935), noted in 14 N.C.L. REv. 196 (1935), which held that future interests in personal property, which may be created by will, could not also be created by deed). 12. Id § 41-4. 13. Id § 41-7. 14. For the Rule in Shelley's Case to apply to equitable interests, both the preceding freehold estate to the ancestor (e.g., the life estate to A) and the remainder to the ancestor's heirs or bodily heirs must be equitable. If one is legal and the other equitable, the Rule does not apply. If both are legal, of course, the Rule applies. See Webster, supra note 8, at 14-15. 15. See Link, supra note 6, at 783-85.
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