Haggerty v. City of Oakland

BRAY, J.

I dissent from that portion of the majority opinion which holds that there is a possibility under modern conditions and concepts of the lease existing for 21 years without either vesting (that is, its term commencing) or failing. I agree with everything said in the majority opinion concerning the rule against perpetuities, the advisability of preserving it, and that it applies where there is only a “bare possibility” of the 21-year period being exceeded. Where I differ with the majority is in their holding as a fact that there is such possibility here. In considering this lease we firstl must determine its starting date. While it contains no definite starting date, it does provide: “The Port shall and will in good faith immediately after the execution of this lease proceed with plans for the construction and construct a convention and banquet hall building upon said premises, and shall thereafter prosecute the same to completion with all due diligence.” 1 When the building is substantially completed and ready for occupancy, lessor is required to notify lessee and on the first day of the calendar month next succeeding 30 days thereafter, the term of the lease commences. The construction of the building must be started and the building completed with all due diligence. Provisions of this kind are *422 construed as requiring performance within a reasonable time. (See 17 C.J.S. p. 819; see also Imperial Water Co. v. Cameron, 67 Cal.App. 591 [ 228 P. 678 ].) No one would contend that taking 21 years to build the building required by the lease would be building it within a reasonable time. As stated in the majority opinion, section 715.2, Civil Code, applies to leases and the vesting of an interest in real property required by that section will not occur here until the building is constructed and notice of its readiness for occupancy given, (Civ. Code, §§ 694, 695.) Nevertheless there is no possibility that the vesting would be prolonged 21 years. To bring the lease within the “bare possibility” rule, it has been suggested that there might be a possibility, before the building is completed, of our country becoming engaged in a war that might last 21 years, delaying the completion that long, thereby violating the rule against remoteness of vesting. Assuming, however, that there is a “bare possibility” of the construction of the building being held up hy war for 21 years (something that never has occurred in the history of this country, and something which if it occurred would so change conditions of the country that all leases and contracts would go by the board), there is another rule applying to the vesting rule which would be applicable here. That rule is expressed in The Law of Future Interests, Simes and Smith, 2d ed., section 1231: “. . . a contingent future interest need not be certain to vest within the period of the rule in order to be valid, but merely must be certain to vest or fail within that period ...” (Emphasis added. )]A 21 year war or one extending anywhere near that length of time, or any other delay of construction for such period, would cause a complete termination of the lease and therefore there would be a failure of vesting, long before the statutory period would end. It is inconceivable and beyond a “bare possibility” that both parties in the event of such a protraction of the starting date of the lease would not be completely frustrated, thereby terminating it. It is also inconceivable that conditions or the position of the parties would be such that the lease would not fall of its own weight long before 21 years had elapsed. Obviously it is the object of both parties to this lease that its term begin within a reasonable time. A protracted postponement of that term would necessarily constitute a “frustration” in law and would bring the situation within the following quotation from Brown v. Oshiro, 68 Cal.App.2d 393, 397 [ 156 P.2d 976 ] : “Williston on Contracts (rev. ed., vol. 6, pp. 5486-5487) states the rule in *423 this language: ‘Even more clearly with respect to leases than in regard to ordinary contracts the applicability of the doctrine of frustration depends upon the total or nearly total destruction of the purpose for which, in the contemplation of both parties, the transaction was entered into. ’ (Italics added.) ” 2 There is no possible construction of the requirement of the lease that the building be completed within a reasonable time that would hold that more than 21 years is a reasonable time. The only possible construction is that the term must commence (that is, the building must be completed) Jong before the expiration of 21 years, or the lease will fail.

The situation here is different from that in cases where the question of remoteness of vesting depends upon the possibility of issue. There for various reasons including that of having a “convenient rule of practice” (see Fletcher v. Los Angeles Trust etc. Bank, 182 Cal. 177, 182 [ 187 P. 425 ]), the common law adopted the conclusive presumption that a possibility of issue is commensurate with life. This rule has been continued in America, although it is no longer rigidly enforced in England as to termination of trusts. (See Fletcher v. Los Angeles Trust etc. Bank, supra, 182 Cal. 177, 182 .) There is no presumption applicable in our ease.

To hold that under modern economic conditions there is even a bare possibility that a landlord and tenant, and particularly a landlord which is a political subdivision of the state and a tenant who is a business man, would ever wait over 21 years for their lease to take effect, is unrealistic, fantastic and even absurd. After all, there has to be some common sense in the rulings of courts^

Simes and Smith, - The Law of Future Interests, section 1228, states: “Occasionally one finds cases where vesting is, in effect, to take place ‘in a reasonable time, ’ and the court sometimes presumes that a reasonable time will necessarily be within twenty-one years.” Although the authors do not approve of this practice, their objection seems to deal primarily with interests in real property other than chattels real (leases) which they state (§ 331): . . though arising out of *424 land, are treated for most purposes as personalty, and therefore are not subject to most doctrines peculiarly applicable to freehold interests in land.” tSThile it is true that the rule against remote vesting is hoary with age and is an excellent rule, and that in some situations in the past it has been applied rather fantastically (witness the rule of possibility of issue above discussed), those facts do not require a construction of the lease in question which would be completely out of step with modern possibilities. Applicable here is the following from the Restatement, Property, section 375: “When a limitation is ambiguous and, under the rule against perpetuities, is legally more effective under one of the two or more possible constructions than it would be under any of the other possible constructions, then the legally more effective construction is adopted.” I am not seeking to change the rule against remote vesting. I am merely construing the provision in the lease which deals with the commencement of the term as meaning the term must commence or the lease fail within a reasonable time which under no circumstances could mean 21 years.

I have been unable to find any ease (and have been cited to none) in which a provision in a lease to the effect that the term is to commence within “a reasonable time,” nor any grant of a future interest to vest within “a reasonable time,” has ever been held violative of the rule against remote vesting inor the rule!against perpetuities. To so hold is legalistic formalism completely out of step with modern concepts and conditions.

I would affirm the judgment.

The construction is to he substantially in accordance with preliminary drawings, plans and specifications on file with the hoard.

For the rule of commercial frustration in the event that war causes a failure of the consideration or a practically total destruction of the expected value of the performance, see 20th Century Lites, Inc. v. Goodman, 64 Cal.App.2d Supp. 938 [ 149 P.2d 88 ] ; Autry v. Republic Productions, Inc., 30 Cal.2d 144, 148 [ 180 P.2d 888 ] ; Lloyd v. Murphy, 25 Cal.2d 48 [ 153 P.2d 47 ]; McCulloch v. Liguori, 88 Cal.App.2d 366 [ 199 P.2d 25 ]; Brown v. Oshiro, supra, 68 Cal.App.2d 393, 397 .