269 S.E.2d 608 (N.C. 1980)
In 1967, W.O. Smith, Jr., and his wife, Roberta K. Smith, placed restrictive covenants expressly running with the land on a plat of real property they owned in Caswell County.1 In addition to the usual covenants limiting development to residential dwellings of a certain size and environmental soundness, the Smiths’ duly recorded restrictive covenants included Article XIV, which provided the original parties an option to repurchase the property if any future owner desired to sell.2
In 1973, plaintiff W. Osmond Smith III succeeded to the interest in the land as heir, successor, and assignee of W.O. Smith, Jr., and Roberta K. Smith.3 On 26 September 1974, the plaintiff deeded Lot No. 16 in the plat to defendants Mitchell, and the deed was made subject to all recorded restrictive covenants, including Article XIV.4
In July 1975, defendants Mitchell deeded Lot No. 16 to defendants Barber without first offering the land to the plaintiff as required under the terms of Article XIV, despite the plaintiff’s notification that he stood ready, willing, and able to purchase the lot.5 The plaintiff thereafter sued for specific performance or, in the alternative, for damages of some $2,500.00 for breach of the restrictive covenant.6
Each of the defendant families counterclaimed for damages in excess of $5,000.00, alleging breach of certain warranties in their deeds and also alleging that the plaintiff’s lawsuit had clouded their title.7 Both sides moved for summary judgment, and the trial court granted summary judgment for the defendants on the ground that Article XIV was an unlawful restraint on the right to freely alienate property, was against public policy, and was therefore void.8
The plaintiff appealed to the Court of Appeals, which affirmed the trial court.9 The Supreme Court of North Carolina granted the plaintiff’s petition for discretionary review on 4 January 1980.10
Whether a preemptive right contained in a restrictive covenant is void per se as an invalid restraint on alienation?11
A preemptive right contained in a restrictive covenant is not void per se as an invalid restraint on alienation.12 Only absolute disabling restraints or unreasonable preemptive rights are void.13 The common law prohibition on restraints on alienation permits limited preemptive rights that impose negligible interference with alienability and serve legitimate planning purposes.14
No. The covenant in Article XIV creates only a right of first refusal that is exercisable solely upon a decision to sell the property.15 The Mitchells transferred the lot to the Barbers without offering it to the plaintiff despite his readiness to purchase. This arrangement produces only minimal interference with the alienability of the land.16 Therefore, the preemptive right is not void per se as an invalid restraint on alienation.
The preemptive right contained in the restrictive covenant is not void per se as an invalid restraint on alienation.17
Whether the specific preemptive right in Article XIV is unreasonable because of its duration or its price provisions?18
A preemptive right is reasonable, and therefore enforceable, when its duration does not exceed the period of the rule against perpetuities.19 Its price provision must link the purchase price to the fair market value of the land or to the lowest price the seller is willing to accept from any third-party purchaser.20
No. The duration of the right in Article XIV is measured by the life of W. Osmond Smith, Jr. plus twenty years.21 This falls within the life in being plus twenty-one years permitted by the rule against perpetuities.22 The specific time limit in Article XIV controls over the more general extension language.23
The price is set at no higher than the lowest price the seller is willing to accept from any other purchaser.24 These provisions satisfy the requirements for reasonableness. The trial court’s grant of summary judgment to the defendants was therefore improper, and the case must be remanded for further proceedings consistent with enforcement of a valid preemptive right.25
The specific preemptive right in Article XIV is not unreasonable because of its duration or its price provisions.26