IN THE SUPREME COURT OF NORTH CAROLINA No. 378A01 FILED 1 FEBRUARY 2002 RICH, RICH & NANCE, a NC General Partnership v. CAROLINA CONSTRUCTION CORPORATION Appeal pursuant to N.C.G.S. ' 7A-30(2) from the decision of a divided panel of the Court of Appeals, 144 N.C. App. 303, 548 S.E.2d 541 (2001), reversing a judgment entered 31 August 1999 by Grant (Cy A.), J., in Superior Court, Pasquotank County, and remanding for entry of judgment in favor of defendant. Heard in the Supreme Court 15 October 2001. Trimpi, Nash & Harman, L.L.P., by John G. Trimpi, for plaintiff-appellant. The Twiford Law Firm, L.L.P., by Branch W. Vincent, III, for defendant-appellee. LAKE, Chief Justice. The sole question presented for review in this case is whether the rule against perpetuities prevents enforcement of contractual rights found in an addendum to a real estate sales contract providing for a $600 Aavailability fee@ to be paid upon the sale of each lot in a subdivision. The Court of Appeals held that such an agreement violates the rule against perpetuities and, therefore, is unenforceable. Rich, Rich & Nance v. Carolina Constr. Corp., 144 N.C. App. 303, 307, 548 S.E.2d 541, 544 (2001). For the reasons set forth below, we reverse the decision of the Court of Appeals and-2- remand the case to that court for consideration of defendant=s additional assignments of error not addressed by the Court of Appeals. Rich, Rich and Nance, a North Carolina general partnership, owned an 11.89-acre parcel of land known as AWalking Horse Subdivision@ in Elizabeth City, North Carolina. On 29 August 1994, plaintiff entered into a contract with LFM Properties to sell this parcel. Based upon their previous negotiations, plaintiff anticipated that at some date in the future LFM Properties would convey its interest in the property under the contract to defendant, which would ultimately subdivide and develop the property into thirty-seven single-family residential lots. Also, on 29 August 1994, LFM Properties and plaintiff executed an addendum to the contract which provided as follows: At the close of each of the 37 (thirty- seven) lots of Walking Horse subdivision, LFM Properties and or Carolina Construction Corporation, whomever is owner, agrees to pay to Rich, Rich and Nance the sum of $600.00 (Six Hundred Dollars) per lot as an availability fee. These fees shall survive any and all listing agreements and shall remain as a lien against the lots until they are paid. The sale or transfer of these lots from LFM Properties to Carolina Construction Corporation is exempt from the fee until such time as Carolina Construction Corporation sells the property improved or unimproved. Plaintiff thus anticipated a total payment from defendant of $97,200: $75,000 at the closing and, based on the addendum agreement, $22,200 over time as the lots in the subdivision were sold. On 28 April 1995, the sale of the proposed Walking Horse Subdivision closed, and the deed was recorded. Plaintiff sold only 9.38 acres to defendant, but the price and terms of the agreement remained the same. Apparently, plaintiff retained 2.51 acres of the original tract because of its need for an additional drainage area-3- servicing its adjacent development project. Also, at the closing, the parties added a second clause to the addendum that called for inclusion of the availability fee in future restrictive covenants. It stated: Upon the subject property being developed by LFM Properties, or its successor in interest, a Declaration of Restrictive Covenants shall be recorded with the subdivision plat. The Declaration shall refer to the above-mentioned fee agreement and provide record notice thereof. The parties jointly referred to the deferred money as an Aavailability fee.@ However, plaintiff characterized the money owed from the addendum as a deferred portion of the purchase price, an accommodation to the buyer and an interest-free loan until the lots were sold. There are no foreclosure or default terms or acceleration clauses in the addendum with regard to nonpayment. At trial, the president of defendant corporation acknowledged that the arrangement would defer a portion of the purchase price until his corporation could afford to pay it. He also stated that on the day of the closing, he signed the second part of the addendum and that, at the time, he believed the corporation was obligated to pay the $600 per lot fee. On 30 May 1997, as anticipated by the parties, defendant took title to the property upon delivery of a general warranty deed from LFM Properties, which deed was recorded. There were no exceptions to or restrictions upon this title. Defendant began to develop the property and prepared and recorded restrictive covenants. These covenants did not make reference to the availability fee. The availability fee or deferred payment arrangement mentioned in the first part of the addendum was never recorded.-4- Defendant renamed the development ACarolina Village@ and redesigned the subdivision to include thirty-eight lots, instead of the original thirty-seven. Defendant sold the first lot in Carolina Village on 22 April 1998 and did not pay the fee allegedly owed to plaintiff. Plaintiff, on 15 June 1998, brought suit for breach of contract and sought $600 in damages, alleging anticipatory repudiation and asking for the balance due of $22,200. Plaintiff also sought to require defendant to reference the availability fee in the restrictive covenants and to create a judicial lien on the remaining lots in the subdivision. At the time of trial, only twelve lots had been platted, and defendant had sold nine lots. Approximately 6.9 acres remained undivided. The trial court entered judgment for plaintiff for monetary damages in the amount of $5,400 based only on defendant=s breach of contract in failing to pay the $600 for each of the nine lots then sold. The trial court also provided in its judgment that the $16,800 balance was due in $600 increments as each of the twenty-eight possible remaining lots was sold and, if the undeveloped part of the tract was sold, the entire balance would then be due. In essence, the trial court viewed the availability fee as a deferred portion of the contract price and did not consider the rule against perpetuities applicable. The trial court did not allow plaintiff to recover on its anticipatory repudiation theory, nor did it require defendant to reference the arrangement in the
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