78 N.Y.2d 383 (1991)
Whether a clause in a deed is a covenant running with the land or a future interest on a condition subsequent depends on the parties’ intent, as gleaned from the deed’s language and the omission of a right of reentry effecting forfeiture.
Summary
Suffolk Business Center (SBC) sold land to Applied Digital Data Systems (Applied) with a clause requiring Applied to build improvements within a year, or SBC could repurchase the land at the original price. Applied built part of the improvements but failed to complete the rest. SBC sought specific performance of the repurchase option. The court had to determine if the clause was a covenant, enforceable by specific performance, or a future interest, subject to RPAPL 1953. The Court of Appeals held that the clause was a covenant running with the land, based on the parties’ intent as shown in the deed, because it used the term “covenant” and lacked a right of reentry. This allows SBC to seek specific performance.
Facts
Suffolk Business Center (SBC) sought to develop an industrial park and sold a parcel to Applied Digital Data Systems (Applied).
The contract required Applied to start construction on improvements within one year and diligently continue until completion.
If Applied failed, SBC had the option to repurchase the parcel at the original price.
The deed, which was recorded, contained the construction/repurchase provision.
Applied began but did not complete all required construction due to economic conditions.
SBC tried to exercise its repurchase option, but Applied refused.
Procedural History
SBC sued Applied for specific performance in Supreme Court, Suffolk County.
The Supreme Court granted Applied’s cross-motion for summary judgment and dismissed the complaint, suggesting SBC bring an action under RPAPL 1953.
The Appellate Division affirmed the Supreme Court’s decision.
The Court of Appeals granted SBC’s motion for leave to appeal.
Issue(s)
Whether the construction/repurchase provision in the deed constituted a covenant running with the land, enforceable by specific performance, or a future interest on a condition subsequent, enforceable only under RPAPL 1953.
Holding
No, because the parties intended to create a covenant running with the land enforceable in equity, as evidenced by the use of the term “covenants” in the deed and the omission of any right of reentry effecting a forfeiture.
Court’s Reasoning
The Court’s reasoning hinged on determining the parties’ intent from the deed’s language. The Court emphasized that the deed specifically used the term “covenants running with the land” in relation to the construction/repurchase provision. “[T]he deed to be delivered by the Seller under this Agreement shall contain such provisions as are necessary to implement the [construction/repurchase] provisions * * * so that such provisions shall constitute covenants running with the land“. This explicit language indicated the parties intended to create a covenant.
Further, the absence of a right of reentry, which is typical of future interests on a condition subsequent, suggested that the parties did not intend a forfeiture. The Court noted that “a covenant is intended and preferred where, as here, the deed is tellingly silent as to any reentry authorization”.
The Court distinguished covenants from future interests, noting that future interests often involve a forfeiture if the condition is not met, whereas the repurchase provision in this case required SBC to pay Applied the original purchase price, thus avoiding forfeiture in the traditional sense. The court emphasized that “the provision does not effect a forfeiture, which is usually an essential component of a future interest on a condition subsequent”.
The Court also considered the legislative history of RPAPL 1953, which was designed to limit the enforceability of forfeiture provisions. Since the provision in question did not effect a forfeiture, the statute was deemed inapplicable.
The dissenting opinion argued that the provision created a condition subsequent, as the right to repurchase was personal to the grantor (SBC). The dissent also contended that requiring Applied to reconvey the property for the original purchase price, when its value had significantly increased, constituted a forfeiture. However, the majority rejected this argument, focusing on the explicit language in the deed and the lack of a right of reentry.
The court considered the distinction between a covenant and a condition subsequent, noting that a covenant is a promise concerning real property, while a condition subsequent involves a right of reacquisition triggered by a specific event. The characterization depends on the intent of the parties at the time of the transaction.
Ultimately, the Court’s decision turned on the importance of interpreting the deed according to the parties’ intent, as evidenced by the specific language used and the absence of terms traditionally associated with future interests. The Court prioritized the specific use of the word “covenants” over the boilerplate language of the contract. This approach emphasizes the importance of clear and precise language in real estate transactions.