Levan v. Eidson

WELLS, Judge. The sole issue in this appeal is whether the trial court erred in granting summary judgment for defendant. So-called “rights of first refusal” or “preemptive rights” in real property contracts have been the subject of a number of decisions of our appellate courts. In the leading case of Smith v. Mitchell, 301 N.C. 58, 269 S.E. 2d 608 (1980), our Supreme Court analogized such contracts to options to purchase and discussed at length the principles of law pertaining to and controlling such contracts. The Court initially noted that “[cjertain such restrictions on alienability, if defined as preemptive rights and if carefully limited in duration and price, are not void per se and will be enforced if reasonable.” Relying on Hardy v. Galloway, 111 N.C. 519, 15 S.E. 890 (1892), the seminal case in this aspect of real property law, the court in Smith stated that two primary considerations dictate the reasonableness or unreasonableness of such preemptive rights: “the duration of the right and the provisions it makes for determining the price of exercising the right.” The court then adopted the following generally applicable rules: We believe the better rule is to limit the duration of the right to a period within the rule against perpetuities and thus avoid lengthy litigation over what is or is not a reasonable time within the facts of any given case. We further agree with the authorities that a reasonable price provision in a preemptive right is one which somehow links the price to the fair market value of the land, or to the price the seller is willing to accept from third parties. We first note that the contract at issue in this case meets the first requirement as it purports to bind only the grantors. It is *103 clear, however, that the contract does not meet the second requirement, as it neither links the preemptive right (right of first refusal) to the fair market value of the land nor to the price the grantors would be willing to accept from third parties. The forecast of evidence before the trial court showed that there was no genuine issue as to any material fact and that defendant was entitled to judgment as a matter of law. See G.S. § 1A-1, Rule 56(c) of the Rules of Civil Procedure. For the reasons stated, the judgment of the trial court is Affirmed. Judges Arnold and ORR concur.