In The
Court of Appeals
Sixth Appellate District of Texas at Texarkana
No. 06-18-00081-CV
NATHAN CARUSO AND JENNIFER DONNER, Appellants
V.
NATHANIEL YOUNG, Appellee
On Appeal from the 200th District Court
Travis County, Texas
Trial Court No. D-1-GN-15-000993
Before Morriss, C.J., Burgess and Stevens, JJ.
Opinion by Justice Stevens
OPINION
Nathan Caruso and Jennifer Donner appeal the trial court’s entry of summary judgment
declaring void an option to purchase property within a lease agreement because it violated the rule
against perpetuities. We affirm.
I. Factual Background
Nathaniel Young owned property “known locally as 3901 Bandice Lane” in Pflugerville,
Texas (the Property). 1 In 2009, Young, as Lessor, signed a “Lease With Option to Purchase” the
Property drafted by Caruso and Donner (the Lease). The Lease stated:
3. Term of Lease. The term of this lease shall consist of one-year
leases commencing on April 19, 2009 [sic] and ending on April 18, 2010. Each
lease term is automatically renewable unless Lessee gives written notice to Lessor
to terminate or if Lessee is more than thirty (30) days in arrears on rent payments
(the lease would not be renewable and Lessee would be required to vacate[)]. Such
written notice must be given at least thirty (30) days before the expiration of any of
the one year terms.
This provision shall be binding upon and inure to the benefit of the heirs,
legal representatives, successors and assigns of the parties thereto, and this
covenant shall be construed, as a covenant running with the land and with the
leasehold.
....
19. Option to Purchase. The Lessor hereby grants to the Lessee the
option to purchase the leased property at any time during the term of this lease for
the consideration and upon the terms and conditions hereinafter set forth. As long
as Lessee is not in arrears by more than one month, and is not in violation of
performance of the terms of this lease, Lessee shall have the option to purchase the
real property described herein.
1
Originally appealed to the Third Court of Appeals, this case was transferred to this Court by the Texas Supreme Court
pursuant to its docket equalization efforts. See TEX. GOV’T CODE ANN. § 73.001 (West 2013). We follow the
precedent of the Third Court of Appeals in deciding this case. See TEX. R. APP. P. 41.3.
2
....
The price to be paid by the Lessee to the Lessor for the leased property if
the option is exercised shall be the balance of loan currently encumbering the
premises.
....
This option shall be a covenant running with the land described above, and
no conveyance, transfer, easement, or encumbrance of such land shall defeat or
adversely affect this option.
The Lessee shall have the right to assign this option subject to the Lessor’s
reasonable review and approval only to an assignee of this entire lease as provided
hereinabove and such option shall inure to the benefit of the respective heirs, legal
representatives, successors and assigns of the Lessee.
Alleging that they had attempted to exercise their option to purchase the Property, Caruso
and Donner sued Young for breach of the Lease resulting from his alleged “refus[al] to provide
the information necessary for them to [exercise the option],” including the balance of the loan
encumbering the Property. Based on their argument that they had a valid option, Caruso and
Donner also alleged that Young’s failure to tender (1) a survey or plat of the Property, (2) a tax
certificate, (3) a written statement specifying the purchase price of the Property or the interest rate
charged, and (4) an annual statement constituted violations of the Texas Property Code and Texas
Deceptive Trade Practices Act. In reply, Young filed several counterclaims arising from Caruso
and Donner’s alleged breach of the Lease and affirmative defenses.
Young filed traditional and no-evidence motions for summary judgment, which argued that
Caruso and Donner’s breach of contract claim failed because the option violated the rule against
perpetuities and other affirmative defenses and that conclusive evidence proved that Caruso and
Donner breached the lease. The trial court granted Young’s traditional motion for summary
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judgment “based on the Rule Against Perpetuities,” but denied Young’s traditional motion based
on all other grounds, as well as his no-evidence motion for summary judgment. As a result of its
ruling, the trial court dismissed Caruso and Donner’s breach of contract claim with prejudice.
To finalize the judgment for appeal, the parties filed a Rule 11 agreement nonsuiting
Young’s counterclaims. The parties’ agreement also stated that “the effect of the Court’s Summary
Judgment Order is that summary judgment has been rendered in Young’s favor on all of Plaintiffs’
claims.” Thus, after Young filed a notice of nonsuit, the trial court entered a final, take-nothing
judgment on all of Caruso and Donner’s claims. Caruso and Donner appeal.
II. The Trial Court’s Summary Judgment Was Proper
A. Standard of Review
“We review the trial court’s summary judgment de novo.” ConocoPhillips Co. v.
Koopmann, 547 S.W.3d 858, 865 (Tex. 2018) (citing Provident Life & Accidental Ins. Co. v. Knott,
128 S.W.3d 211, 215 (Tex. 2003)). “When reviewing a summary judgment, we take as true all
evidence favorable to the nonmovant, and we indulge every reasonable inference and resolve any
doubts in the nonmovant’s favor.” Id. (citing Knott, 128 S.W.3d at 215; Sw. Elec. Power Co. v.
Grant, 73 S.W.3d 211, 215 (Tex. 2002)). “Under Texas Rule of Civil Procedure 166a(c), the party
moving for summary judgment bears the burden to show that no genuine issue of material fact
exists and that it is entitled to judgment as a matter of law.” Id. (citing TEX. R. CIV. P. 166a(c)).
B. The Rule Against Perpetuities
The Texas Constitution prohibits perpetuities because they “are contrary to the genius of
free government.” Id. at 866 (quoting TEX. CONST. art. I, § 26). Thus, “no interest is valid unless
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it must vest, if at all, within twenty-one years after the death of some life or lives in being at the
time of the conveyance.” Id. at 867 (quoting BP Am. Prod. Co. v. Laddex, Ltd., 513 S.W.3d 476,
479 (Tex. 2017)). The rule against perpetuities (the Rule) “requires that a challenged conveyance
be viewed as of the date the instrument is executed, and [prohibits] the interest [as] void if by any
possible contingency the grant or devise could violate the Rule.” Id. “[T]he purpose of the Rule
[is to prevent] landowners from using remote contingencies to preclude alienability of land for
generations.” Id. at 869.
Young argues that the Lease’s option, which is an executory interest subject to the Rule,
violated the Rule because the Lease created a covenant running with the land to be honored by
both parties’ heirs and, for that reason, could be exercised by Caruso’s and Donner’s yet unborn
heirs after all lives in being had ended plus twenty-one years. See TEX. PROP. CODE ANN.
§ 5.062(a)(2) (West Supp. 2018) (option to purchase combined with a residential lease agreement
is an executory contract for conveyance of real property); Koopmann, 547 S.W.3d at 867; Peveto
v. Starkey, 645 S.W.2d 770, 772 (Tex. 1982) (executory interests are subject to the Rule). Young
argues that Caruso and Donner’s interest was void at the outset because it could potentially vest
outside the time period specified by the Rule.
“The word ‘vest’ in regards to the Rule refers to an immediate, fixed right of present or
future enjoyment of the interest.” Koopmann, 547 S.W.3d at 867 (citing Vest, BLACK’S LAW
DICTIONARY (10th ed. 2014)). “The Rule does not apply to present or future interests that vest at
their creation.” Id. (citing Laddex, 513 S.W.3d at 480). “An executory interest is a future interest,
held by a third person, that either cuts off another’s interest or begins after the natural termination
5
of a preceding estate.” Id. (citing Executory Interest, BLACK’S LAW DICTIONARY (10th ed. 2014)).
“A springing executory interest is one that operates to end an interest left in the transferor.” Id.
(citing Springing Executory Interest, BLACK’S LAW DICTIONARY (10th ed. 2014)). “This interest
does not vest at the execution of the deed, rather ‘executory interests vest an estate in the holder
of the interest upon the happening of a condition or event’” that “terminate[s] the grantor’s present
possessory interest.” Id. at 867, 868 (quoting 3 RICHARD R. POWELL, POWELL ON REAL PROPERTY
§ 20.05[2] (Michael Allan Wolf ed.)). “‘Until such happening, they are non-vested future
interests’ and are subject to the Rule.” Id. at 867 (quoting POWELL ON REAL PROPERTY § 20.05[2]).
C. The Lease’s Option Violated the Rule
As drafted, both the Lease and its option to purchase the Property ran with the land and
were binding on and benefitted both parties’ heirs, successors, and assigns. The option could be
exercised at any time during the term of the Lease, and the Lease’s term was automatically renewed
unless Caruso and Donner gave written notice to Young of their intent to terminate it. This
essentially created a perpetual lease and option to purchase (and encumbrance on Young’s fee
simple interest) for as long as Caruso and Donner, or their heirs, successors, and assigns wished to
remain on the Property.
Caruso and Donner argue that, “[w]hen the wording of the option does not compel a
construction that the parties intended that the time element should be unlimited, the court will not
construe an option contract or a will provision granting an option to run for an indefinite time and
thus destroy the validity of the option provision.” Mattern v. Herzog, 367 S.W.2d 312, 319 (Tex.
1963); see King v. Brevard, 378 S.W.2d 681, 686 (Tex. Civ. App.—Austin 1964, writ ref’d n.r.e.).
6
In this circumstance, “[i]t has been stated that the courts will go so far as to imply a reasonable
time when no time limit is expressly stated.” Mattern, 367 S.W.2d at 319. Citing Mattern, Caruso
and Donner contend that the parties did not intend for the Lease’s option to be exercised beyond
the time period in the Rule. 2
Mattern and its progeny are easily distinguishable. In Mattern, the Texas Supreme Court
found that a will devising property to the decedent’s children that also created an option for one of
their children, Chris Mattern, to purchase the property for a sum certain did not violate the Rule.
Id. at 314. The language of the will did not state that the option could be exercised by Chris’ heirs.
See id. at 318. Although there was no limit on the time in which Chris could exercise the option,
the Texas Supreme Court stated that the law implied that the option should be exercised within a
“reasonable period of time bearing some relationship with the time required to administer and
finally settle [the decedent’s] estate,” and certainly within Chris’ lifetime. Id. at 315–16, 318.
Here, while there was no limit on the time in which Caruso, Donner, or their heirs or
successors could exercise the option, the lack of a time limit was created by design. This fact
aligns this case to Garza v. Sun Oil Co., 727 S.W.2d 115 (Tex. App.—San Antonio 1986, no writ).
There, the lease term was thirty years and granted the lessees the following option to purchase:
2
Caruso and Donner’s brief states,
The “Lease” states “This provision shall be binding upon and inure to the benefit of the heirs, legal
representatives, successors and assigns of the parties thereto.” The language is limited to “the parties
thereto” not to the party who may be a successor in interest, in other words the language cuts off
multiple subsequent successors and is therefore limited to one generation.
This reasoning is misplaced since the Lease does not limit the option to Caruso’s and Donner’s currently-born heirs,
successors, or assigns.
7
At the expiration of thirty (30) years . . . , or at any time thereafter, if LESSEES,
their heirs or assigns, during the entire term of this lease have punctually and fully
complied with all of their obligations under this lease, then and in that event
LESSORS hereby give LESSEES, their heirs and assigns, the option to purchase
the above described land . . . for a consideration of One ($1.00) Dollar . . . .
Id. at 117 (alterations in original). Distinguishing Mattern because the option in Mattern did not
have a time limit for its exercise, Garza noted that the option before it expressly stated it could be
exercised at the expiration of the lease term or at any time thereafter. Id. Garza reasoned that,
since
the grantees of the option potentially included both unborn children and
grandchildren of the lessees (“heirs”) and unborn future transferees of the option
(“assigns”), it was possible that these heirs or assigns could be born after the grant
of the option, outlive all lessees then alive by over 21 years, and be eligible to
exercise the option at any time after the expiration of the surface lease.
Id. For this reason, the lease provision in Garza violated the Rule.
The reasoning in Garza applies equally here. It is true that, “[w]hen an instrument is
equally open to two constructions, the construction that renders it valid rather than void will be
accepted, assuming that the grantor intended to create a legal instrument.” Koopmann, 547 S.W.3d
at 867 (citing Laddex, 513 S.W.3d at 480). Yet, when an option “is unambiguous . . . the intent of
the parties must be determined from the four corners of the instrument.” Peveto, 645 S.W.2d at
772. As a result, where, as here, “the option by its express terms is not personal . . . but binds or
inures to the benefit of the heirs, successors and assigns of both parties[,] . . . [s]uch language
unambiguously indicates the optionor intended the option to be enforceable by individuals other
than [the named optionee].” Maupin v. Dunn, 678 S.W.2d 180, 182 (Tex. App.—Waco 1984, no
writ). Because the option does not “expir[e] with the lifetime of the optionee[,] . . . the interest
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which would arise upon exercise of the option would not necessarily vest within the time limits
contemplated by the [R]ule.” Id. (citing Mattern, 367 S.W.3d 312); see Burch v. B. N. Nabors
Excavating & Demolition, Inc., 447 S.W.2d 240, 242, 243–44 (Tex. Civ. App.—Fort Worth 1969,
writ ref’d n.r.e.) (concluding that an option violated the rule against perpetuities where it contained
no time limit and specifically stated that it “r[a]n with the land and . . . enure[d] to the benefit of
and [was to] be binding upon the parties . . . , their heirs and assigns”). 3
Because the option contained within the Lease violated the Rule, it was void at its
inception. Finding that the trial court properly granted summary judgment in Young’s favor, we
overrule Caruso and Donner’s sole argument on appeal. 4
III. Conclusion
We affirm the trial court’s judgment.
Scott E. Stevens
Justice
Date Submitted: April 29, 2019
Date Decided: May 10, 2019
3
The purchase price for the option was the unpaid balance on the mortgage. As Young notes, we are to determine
whether there is “any possible contingency” that the grant could violate the Rule. Laddex, 513 S.W.3d at 479. It is
possible that the mortgage could be continuously refinanced and never paid off. Also, the Lease does not provide for
the automatic transfer of the Property when the mortgage is paid off since compliance with the written notice
provisions would still be required.
4
Caruso and Donner urge this Court to modify the interest in accordance with Section 5.043 of the Texas Property
Code. However, that Section applies only to “an inter vivos instrument or a will” in a circumstance where there was
an actual attempt to convey the property. TEX. PROP. CODE ANN. § 5.043(d) (West 2014); see Ball v. Knox, 768
S.W.2d 829, 831 (Tex. App.—Houston [14th Dist.] 1989, no writ).
9