Park Station Ltd. Partnership, LLLP v. Bosse

ELDRIDGE, Judge. This declaratory judgment action presents two questions concerning a right of first refusal in a contract which, inter alia, granted reciprocal easements in two adjoining tracts of land. The first issue is whether a gift of property to a charitable foundation constitutes a “sale” within the meaning of the right of first refusal because the donors will receive a tax benefit from the gift. The second issue is whether the right of first refusal provision in the contract violated the Rule Against Perpetuities.

The Circuit Court for Anne Arundel County (North, J.) declared that the gift was not a “sale” within the purview of the right of first refusal and that the right of first refusal provision did not violate the Rule Against Perpetuities. We agree with the Circuit Court and shall affirm. I. James and Lois Bosse own, in fee simple, a 2.53 acre rectangular parcel of land in the Severna Park area of Anne ¹²⁵ Arundel County. The Bosses’ parcel is contiguous to the Ritchie Highway and is improved by retail establishments.

Park Station Limited Partnership, LLLP, which is the successor to Crow-Park Station Limited Partnership, 1 owns, in fee simple, a 20.97 acre parcel of land which surrounds and abuts the Bosse tract on three sides. The Park Station tract is improved by a large shopping center. In 1986, the Bosses and Park Station entered into a contract whereby each of the parties granted to the other non-exclusive “reciprocal easements” in the roads, driveways, parking lots, and pedestrian walkways of both tracts, agreed not to erect fences or other barriers along the common boundary lines that would hinder vehicular or pedestrian traffic, agreed upon numbers and locations of parking spaces, agreed upon conditions and “restrictions” for future construction of improvements, agreed upon common use of loading areas and placement of trash dumpsters, agreed to cooperate with regard to utilities, and agreed upon certain “use restrictions.” The right of first refusal provision was contained in the 12th paragraph of the 1986 contract and stated as follows: “12. Right of First Refusal.

If, at any time after the date of this Agreement, BOSSE shall desire to sell the BOSSE TRACT or any part thereof, then BOSSE shall give PARK STATION written notice of the desire to sell and the price and terms of sale. PARK STATION shall have thirty (30) days to either accept or reject the offer in writing. In the event PARK STATION fails to accept the offer within said thirty (30) day period, then BOSSE shall be free to sell the BOSSE TRACT or any part thereof to others at a price and upon terms not less favorable to BOSSE than those contained in the written notice to PARK STATION for a period of six (6) months. If such sale is not so consummated, the terms of this Paragraph 12, again, shall be applicable to BOSSE.

In the event PARK STATION fails to accept ¹²⁶ the offer, PARK STATION agrees to execute and deliver to BOSSE, upon request, a certificate setting forth the fact that PARK STATION has not accepted the offer and that BOSSE is free to sell the property to others at the price and upon the terms set forth in the -written offer.” In early 2001, the Bosses created a religious foundation, named the Jehovah-Jireh Foundation, Inc. According to the Bosses, the purpose of the Foundation was to provide monetary grants to small churches. The Bosses desired to transfer the Bosse tract to the Foundation, as a gift, in order to provide funding for the Foundation. By letter dated November 15, 2001, the Internal Revenue Service determined that the Foundation was a tax exempt entity and that “Donors may deduct contributions to” the Foundation. In a July 2001 letter, the Bosses’ attorney notified Park Station that the Bosses intended “to transfer the Bosse Tract without consideration and as a gift to Jehovah-Jireh Foundation, Inc.” The letter went on to express the opinion that the right of first refusal in the 1986 contract “applies to a ‘sale’ and does not apply to a gift.” Park Station’s attorney replied by letter that the “proposed transfer by Mr. & Mrs. Bosse to Jehovah-Jireh Foundation, Inc., constitutes a ‘sale’ ... under Section 12 of the Agree-ment____” The letter explained this position by stating that “it can be inferred that Mr. and Mrs. Bosse expect to receive a tax deduction by virtue of the transfer to the Foundation.

Thus, Mr. and Mrs. Bosse would indeed be receiving consideration by virtue of the transfer.” The letter from Park Station’s attorney concluded by saying “that my client does indeed intend ... to acquire the Bosse Tract for the same amount being paid by Jehovah-Jireh Foundation.” The letter did not explain what “the same amount being paid by” the Foundation meant. After further correspondence failed to produce an agreement, the Bosses filed in the Circuit Court for Anne Arundel County a complaint for a declaratory judgment declaring, inter alia, that the proposed gift of the tract to the Founda ¹²⁷ tion is not covered by paragraph 12 of the 1986 contract and that paragraph 12 “is void and unenforceable in that it violates the Rule Against Perpetuities.” Park Station filed a counterclaim for a declaratory judgment stating, inter alia, that the proposed transfer of the Bosse tract to the Foundation “constitutes a ‘sale’ within the purview of the Right of First Refusal” and that “the provisions of the Right of First Refusal do not violate the Rule Against Perpetuities.” Thereafter, the Bosses filed a motion for summary judgment and Park Station filed a cross-motion for summary judgment. The motions were based on affidavits and other documents which showed that there were no disputes over material facts. Following a hearing, the Circuit Court filed a -written opinion and a separate written order declaring that the proposed “gift of the Bosse Tract to the charitable foundation would not constitute a ‘sale’ within the purview of the right of first refusal contained in paragraph 12 of the Agreement, and that the purported right of first refusal would not apply to such a donative transfer of the Bosse Tract.... ” The Circuit Court also held that the right of first refusal did not violate the Rule Against Perpetuities, stating: “ ‘A contract should be interpreted if feasible to avoid the conclusion that it violates the Rule Against Perpetuities ... under the doctrine that a construction should be favored which gives effect to intention rather than one which defeats it.’ Stewart v. Tuli, 82 Md.App. 726, 735-736 , 573 A.2d 109 (1990). . . . “The Rule is not violated by the terms of the Right of First Refusal in paragraph 12.

The contract states that the term Bosse refers to James F. Bosse and Lois F. Bosse. Paragraph 12 states ‘[i]f, at any time after the date of this Agreement, Bosse shall desire to sell.... ’ Although the words ‘[i]f at any time’ indicate at any time in the present or future, the words ‘Bosse shall desire to sell’ require Plaintiffs to desire to sell. It goes without saying, that Plaintiffs cannot desire to sell their property when they are dead. ¹²⁸ Therefore, they must formulate the desire to sell within their lifetimes. “Legal title is vested in Plaintiffs unless they sell or die. 1 In Ferrero [Construction Co. v. Dennis Rourke Corp., 311 Md. 560 , 536 A.2d 1137 (1988) ], the contract was between two corporations with perpetual existences. In this case, we have two lives in being____The law requires the Court to interpret this contract, if feasible, to avoid the conclusion that the Rule has been violated. [[Image here]] Park State appealed and the Bosses cross-appealed to the Court of Special Appeals.

Prior to any proceedings in the Court of Special Appeals, this Court issued a writ of certiorari. Park Station v. Bosse, 374 Md. 81 , 821 A.2d 369 (2003).

II

Park Station reiterates its argument below that, with “the Bosses receiving valuable consideration in the form of [a] tax benefit,” the proposed “conveyance to the Foundation ... is á sale within the confines of the Right of First Refusal.” (Appellant’s brief at 9). Park Station insists that a transfer of property is a “sale,” rather than a “gift,” whenever a donor “will receive recompense from the conveyance of the property ... in the form of tax benefits which are of obvious value.” (Appellant’s reply brief at 6). Park Station cites no authority, from Maryland or elsewhere, in support of this proposition. This Court has both defined the word “sale” and pointed out that it is to be given its common meaning as used by ordinary persons in every day life.

Thus, in Eastern Shore Trust Co. v. ¹²⁹ Lockerman, 148 Md. 628, 636 , 129 A. 915, 918 (1925), Judge Offutt for the Court stated: “To sell means ordinarily to transfer to another for a valuable consideration the title or the right to possess property. Certainly few words are more commonly used in commercial transactions than ‘buy’ and ‘sell,’ and it has not been supposed that they amounted to any more than a simple description of one of the commonest incidents of every day life, and if Lockerman, as he says he did, transferred the title to his pears to the brokerage company, for a stated price, and received a part of that price, the transaction was a sale, and there is no apparent reason why he should not have so described it.” A similar point was made by the Supreme Court of the United States in Commissioner of Internal Revenue v. Brown, 380 U.S. 563, 570-571 , 85 S.Ct. 1162, 1166 , 14 L.Ed.2d 75, 82 (1965): “A ‘sale,’ however, is a common event in the non-tax world; and since it is used in the Code without limiting definition and without legislative history indicating a contrary result, its common and ordinary meaning should at least be persuasive of its meaning as used in the Internal Revenue Code. ‘Generally speaking, the language in the Revenue Act, just as in any statute, is to be given its ordinary meaning, and the words “sale” and “exchange” are not to be read any differently.’ “ ‘A sale, in the ordinary sense of the word, is a transfer of property for a fixed price in money or its equivalent,’ Iowa v. McFarland, 110 U.S. 471, 478 [, 4 S.Ct. 210, 214 , 28 L.Ed. 198 ]; it is a contract ‘to pass rights of property for money, — which the buyer pays or promises to pay to the seller ...,’ Williamson v. Berry, 8 How. 495, 544 , 12 L.Ed. 1170 . Compare the definition of ‘sale’ in § 1(2) of the Uniform Sales Act and in § 2-106(1) of the Uniform Commercial Code. The transaction which occurred in this case ¹³⁰ was obviously a transfer of property for a fixed price payable in money.” This Court in Straley v. Osborne, 262 Md. 514, 526 , 278 A.2d 64, 71 (1971), invoked the commonly understood meaning of a “sale” to hold that an individual owner’s “transfer of the property without consideration to a corporation wholly-owned by him was not a ‘sale’ as contemplated by paragraph 9 of the lease.” Paragraph 9 of the lease gave the lessee of the property a right of first refusal “should the Lessor, ... his heirs, assigns or personal representatives decide to sell the property.” 262 Md. at 516 , 278 A.2d at 65 .

In holding that the transfer to the corporation was not a “sale,” the Court, 262 Md. at 526 , 278 A.2d at 71 , specifically relied on Eastern Shore Trust Co. v. Lockerman, supra, 148 Md. at 636 , 129 A. at 918 . See also Kroehnke v. Zimmerman, 171 Colo. 365 , 467 P.2d 265 (1970). Certainly the proposed transfer of the Bosse tract to the Foundation, with no consideration being paid by or on behalf of the Foundation, would be viewed as a gift, and not a sale, by ordinary persons applying the common meaning of the term “sale.” The proposed transfer is very similar to the transfer involved in Straley v. Osborne, supra. Furthermore, for the transfer of property to be regarded as a “sale,” ordinarily the consideration must be “intended by the parties to serve” as consideration for the transfer.

A collateral benefit to the transferor having an entirely different “purpose” is generally not sufficient to make the transfer a “sale.” Grinnell Corporation v. United States, 182 Ct.Cl. 702 , 390 F.2d 932, 945-947 (1968). See also, e.g., Butler v. Thomson, 92 U.S. 412, 414 , 23 L.Ed. 684, 685 (1875) (“Blackstone’s definition of sale is ‘a transmutation of property from one ... to another in consideration of some price’ ”); Cheney v. Eastern Transportation Line, 59 Md. 557, 565 (1883) (“To effect a sale it is only necessary that the parties fully agree, with respect to a thing capable of identification, that for an agreed price the title to the thing shall pass from vendor to vendee”); K.C.S., Ltd. v. East Main Street Land ¹³¹ Development Corp., 40 Md.App. 196, 199 , 388 A.2d 181, 183 , cert. denied, 283 Md. 734 (1978) (“The word sell ordinarily means to transfer title or possession of property to another in exchange for a valuable consideration”); Maryland Code (1975, 2002 RepLVol.), § 2-106(1) of the Commercial Law Article (the Uniform Commercial Code) (“A ‘sale’ consists in the passing of title from the seller to the buyer for a price”); Black’s Law Dictionary at 1337 (Sixth Edition 1991) (defining a “sale” as a “contract between two parties, called, respectively, the ‘seller’ (or vendor) and the ‘buyer’ (or purchaser), by which the former, in consideration of the payment or promise of payment of a certain price ... transfers to the latter the title and possession of property. * * * A transfer of property for a fixed price in money or its equivalent”). A gift, however, does not involve consideration by or on behalf of the donee. Rather, “[t]he requirements for a valid inter vivos gift are an intention on the part of the donor to transfer the property, a delivery by the donor and an acceptance by the donee.

Moreover, the delivery must transfer the donor’s dominion over the property.” Rogers v. Rogers, 271 Md. 603, 607 , 319 A.2d 119, 121 (1974). A “ ‘sale’ differs from [a] ‘gift’ in that the latter transaction involves no return or recompense for the thing transferred.” Black’s Law Dictionary, supra, at 1337. See Rosenberg v. State, 12 Md.App. 20, 25-26 , and n. 4, 276 A.2d 708, 711 , and n. 4 (1971) (A sale “encompasses the receipt of something in return for the [property] ... as distinguished from a gift. * * * [A] gift [is] ‘something that is bestowed voluntarily and without compensation’ ”). The proposed transfer from the Bosses to the Foundation involves no consideration from or on behalf of the Foundation.

Under the general principles set forth above, it is clearly a gift and not a sale. This Court once pointed out that “[w]here all the elements of ... a sale exist, it cannot be made anything else by calling it a different name.” Albert v. Lindau, 46 Md. 334, 347 (1877). Likewise, where all of the elements of a gift ¹³² are present, it cannot become a “sale” by Park Station calling it a sale. Finally, to the extent that the issue has arisen in other states, the courts have consistently