Page v. Page

THE STATE OF SOUTH CAROLINA

In The Court of Appeals

Samuel D. Page,       
Appellant,

v.

Willard G. Page, S. M. Page, Betsy Page Gilliam f/k/a Betsy Page
Flinn,
Carolyn Page Eaton, and Conway National Bank,       
Respondents.

Appeal From Horry County

J. Stanton Cross, Jr., Master-In-Equity

Unpublished Opinion No. 2004-UP-110

Heard September 9, 2003 – Filed February
24, 2004

AFFIRMED

Richard N. Weldon and Janice A. Cannan, both of Conway,
for Appellant.

James Thomas Young, of Conway, for Respondent Conway National
Bank.

STILWELL, J.:  Samuel Page filed a complaint
seeking to set aside a property transaction between S. M. Page and Willard Page. 
Samuel argued the transaction was invalid because he was not offered a right
of first refusal to the property.  The master refused to set aside the transfer. 
We affirm.

FACTS

M. K. Page and Maude Page conveyed a parcel
of real estate to S. M. Page, in fee simple absolute, reserving a life estate
unto themselves.  In the deed, M. K. and Maude placed a restriction on S. M.
Page’s right to dispose of the property.  The restriction created a right of
first refusal as follows: 

In the event S. M. Page decides to sell all or any portion
of this property, it shall first be offered to Betsy Page Flinn, Carolyn Page
Eaton, and Samuel D. Page under the same terms and conditions as the proposed
sale.  This restriction, on transfer, shall also apply to any heirs of S. M.
Page.

The reserved life estate expired upon
Maude’s death in 1993 and S. M. Page took possession of the property.  In 1995,
S. M. Page conveyed the property to Willard Page without first offering the
property to any of the persons identified in the deed from M. K. and Maude as
having a right of first refusal.  There was no mention of the right of first
refusal clause in the deed to Willard.  A little more than five years after
that conveyance, Willard encumbered the property with a $10,000 mortgage in
favor of Conway National Bank. 

Samuel, one of the individuals to whom
the right of first refusal was granted, sued Willard, S. M. Page, and Conway
National Bank seeking to set aside the conveyance, alleging he was not offered
the opportunity to purchase the property before it was conveyed to Willard. 
The matter was referred to the master in equity with finality.  The master declined
to set aside the transaction, reasoning that the right of first refusal language
contained in the deed from M. K. and Maude to S. M. Page was invalid because
it was an attempt to cut down a fee simple with subsequent language in the deed. 

LAW/ANALYSIS

Samuel argues the master erred when he refused
to set aside the conveyance from S. M. Page to Willard.  He asserts the right
of first refusal language contained in the deed was a preemptive right that
did not cut short a fee simple absolute estate.  Additionally, he contends the
master failed to consider the deed as a whole.  We disagree.

One of the first canons of construction of a deed is that
the intention of the grantor must be ascertained and effectuated if no settled
rule of law is contravened.  In arriving at such intention, the deed must be
construed as a whole, and effect given to every part, if such can be done consistently
with law. 

Southern Ry. Co. v. Smoak, 243 S.C. 331,
336, 133 S.E.2d 806, 808 (1963).  However, when a granting clause in a deed
purports to convey a fee simple absolute title, any subsequent provisions in
the deed diminishing or depriving the grantee of rights incident to owning the
property in fee simple are invalid.  Shealy v. South Carolina Elec. &
Gas Co., 278 S.C. 132, 135, 293 S.E.2d 306, 308 (1982).  Thus we must decide
whether the right of first refusal in the deed S. M. Page received diminished
any of the rights attendant to the fee simple title conveyed in the deed’s granting
clause. 

A right of first refusal is a pre-emptive right. 
Webb v. Reames, 326 S.C. 444, 446, 485 S.E.2d 384, 385 (Ct. App. 1997). 
The right of first refusal is a contingent nonvested interest because the grantee
or the grantee’s heir might never choose to sell the property.  Id. 
It is an interest predicated on an event which is not certain to occur.  Id. 
Pre-emptive rights are subject to the rule against restraint of alienation of
interest in land.  61 Am. Jur. 2d Perpetuities and Restraints on Alienation
§ 110 (2002).  Under some circumstances, a right of first refusal may not be
an unreasonable restriction on alienation.  “A right of first refusal . . .
is not a restraint on alienation, as long as both the price that the designated
person must pay, and the time allowed for the exercise of the right of first
refusal are reasonable.”  Id. 

“Whether a right of first refusal is valid depends
on the legitimacy of the purpose, the price at which the holder may purchase
the land, and the procedures for exercising the right.”  Restatement (Third)
of Prop.:  Servitude § 3.4 cmt. (f) (2000).  According to the testimony, the
purpose of the restriction in this case was primarily to retain the property
in the family, which is a legitimate purpose.  Also, the language contained
in the operative deed fixed the price that must be paid by requiring that it
be the same as contained in the offer from a potential third party purchaser. 
However, the procedures for exercising the right of first refusal are not specifically
spelled out in the grant itself, leaving unanswered the question as to how long
the right to exercise the right of first refusal must remain open and how long
thereafter the holder of the right had to consummate the transaction. 

Lengthy periods for exercise of rights of first refusal will
. . . substantially affect alienability of the property.  Potential buyers will
be deterred by the possibility that they may not know for a lengthy period of
time whether they will obtain the property or be obligated to pay the price. 
The risks of change in their needs and in financial markets will be greater
than most buyers will be willing to accept.

Id.  We are therefore constrained to conclude
that the lack of specificity in the language of the right of first refusal creates
an unreasonable restraint on the alienability of the property. 

We adopt a rule of strict construction in this
case for two basic reasons.  The first is that South Carolina has a long line
of cases strongly expressing disfavor for subsequent clauses in deeds that purport
to cut down a fee simple estate contained in the granting clause.  See
Sandford v. Sandford, 106 S.C. 304, 306, 91 S.E. 294, 295 (1917) (“It
is . . . clear (and no citation of authorities is necessary) that an attempt
to convey an estate in fee simple and deprive the purchaser of the incident
of ownership is not effective in law.”); see also Douglas v. Medical
Investors, Inc., 256 S.C. 440, 445, 182 S.E.2d 720, 722 (1971) (noting “the
well established principle that when the granting clause in a deed conveys a
fee simple title it cannot be reduced or cut down by subsequent language in
the instrument”); Stylecraft, Inc. v. Thomas, 250 S.C. 495, 498, 159
S.E.2d 46, 47 (1968) (same); Batesburg-Leesville School Dist. No. 3 v. Tarrant,
293 S.C. 442, 444, 361 S.E.2d 343, 345 (Ct. App. 1987) (same).  The second is
that any restraint on alienation in the form of a right of first refusal that
is not specific in all required elements – legitimacy of purpose, price, and
detailed procedures – runs counter to the commonly acknowledged concept in this
state that one of the attributes of fee simple ownership is the ability to freely
convey it with few if any restrictions.  Having held that the right of first
refusal in this case constitutes an unreasonable limitation upon the power of
alienation, it is therefore violative of the public policy of this state and
has no force and effect.  McCravey v. Otts, 90 S.C. 447, 452, 74 S.E.
142, 143 (1912); Wise v. Poston, 281 S.C. 574, 579, 316 S.E.2d 412, 415
(Ct. App. 1984). 

AFFIRMED.

HOWARD and KITTREDGE, JJ., concur.