Monday, April 29, 2013

Symphony Space, Inc. v. Pergola Properties, Inc. case brief

Symphony Space, Inc. v. Pergola Properties, Inc. case brief
669 N.E.2d 799

CASE SYNOPSIS:
Defendant mortgagee's assignee challenged the decision of the Appellate Division of the Supreme Court in the First Judicial Department (NY).
The appellate court affirmed the lower court's order granting summary judgment to the plaintiff mortgagor and denied the summary judgment motion of the mortgagee's assignee.
The lower courts found that the commercial option was not enforceable under the Rule against Perpetuities.
Rescission was an inappropriate remedy.

FACTS:
-The Plaintiff, a non-profit devoted to the arts, entered into a transaction with Broadwest, who were the predecessors in ownership to the Defendant, Pergola Properties, Inc. when the Plaintiff bought a building for a low price and then giving Broadwest the option to repurchase the building at a later date. 
-The option contract here is in dispute because it gave Broadwest the option to purchase the property at a later time.
-When the Defendant, who purchased the option contract from Broadwest, had attempted to exercise the right to buy, the Plaintiff initiated a declaratory judgment action against the D, arguing that the option agreement was in violation of the Rule against Perpetuities.
-The trial court made the conclusion that the rule against perpetuities applied to the commercial option in the parties agreement and that the therein option had violated the rule.

HOLDING: The court held that New York's current statutory Rule against Perpetuities applied to commercial options to purchase real property.

ANALYSIS:
The court found that the option could not qualify as an option appurtenant and significantly deterred the property's development.
The court found that the plain language of the instrument had indicated that the option could potentially be exercised more than 24 years after its creation, which was more than the 21 years permitted under §9-1.1.
Another statute mandated that unless a contrary intention appeared, it should be presumed that the creator intended the estate to be valid.
Given the contrary intention manifested in the instrument itself, §9-1.3 of the statute was not applicable.
The court found that the remedy of recission could not be applied in this case because there was an irreconcilable conflict in applying a remedy which was designed to make void a transaction because it failed to carry out the parties' true intent to a transaction in which the error made by the parties was the application of the Rule against Perpetuities, the purpose being to defeat the parties' intent.

CONCLUSION: The court affirmed the lower courts' ruling that the commercial option was unenforceable under the Rule against Perpetuities and the lower court's holding which stated that rescission was inappropriate.

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