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Klamath Falls v. Bell - 7 Or. App. 330, 490 P.2d 515 (1971)

Rule:

When a deed reveals an unquestionable intent to limit the interest of the first grantee to a fee simple on a special limitation, the courts of the United States do not create an indefeasible estate in the first grantee when a subsequent executory interest is void under the rule against perpetuities. Instead, the grantor retains an interest known as a possibility of reverter.

Facts:

In 1925, Daggett-Schallock Investment Company conveyed certain land to the City of Klamath Falls as a gift to be used as the site for a city library. The deed provided, among other things, that the city should hold the land "so long as" it complied with the condition of the grant with regard to its use. However, the city of Klamath Falls no longer used the property as a library. The city filed a declaratory judgment action against Constance F. Bell, Caroline Crapo, and Paul Crapo, heirs of a shareholder of the now dissolved Daggett-Schallock Investment Company to determine the parties' rights under the deed. The court determined that the title of the land was vested in the City of Klamath Falls.

Issue:

Did the lower court err in holding that the title of the land was vested in the City of Klamath Falls despite of the city’s failure to comply with the condition with regard to its use?

Answer:

Yes.

Conclusion:

The court found the grant was a fee simple determinable that terminated automatically upon breach of condition. The court further found the deed created a gift over to grant an executory interest. The court found the rule against perpetuities applied to executory interests, thus the gift over was invalid. The court determined the grantor corporation nonetheless retained a possibility of reverter. The court concluded the attempt to transfer a possibility of reverter did not destroy it. The court finally found the possibility of reverter was descendible and therefore, appellants as Daggett-Schallock Investment Company's heirs acquired all property rights when conveyed to them.

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