Symphony Space, Inc. v. Pergola Properties, Inc.

Facts

In 1978, Broadwest Realty Corporation owned a two-story building on Manhattan's Upper West Side that held a theater and commercial space. Broadwest could not find a permanent theater tenant and was running its properties at a net loss. Symphony Space, a not-for-profit arts group, had rented the theater for several one-night engagements. To let Symphony seek a property tax exemption for the whole building, the parties set up a sale and leaseback. Broadwest sold the building to Symphony for the below-market price of $10,010 and leased back the commercial space, excluding the theater, for $1 per year. As a condition of the sale, Symphony also gave Broadwest, for $10, an option to repurchase the entire building. The option could be exercised during several "Exercise Periods," including any time after July 1, 1979 if the closing fell in 1987, 1993, 1998 or 2003. The price rose from $15,000 to $28,000 depending on the closing date. The agreement said the right to exercise it was unconditional, apart from paying any unpaid rent, and that the option ran with the land. In 1981, Broadwest sold its interests to defendants' nominee for $4.8 million. Property values later rose. An appraisal valued the blockfront at $27 million if the option was enforceable. In 1985, defendants gave notice that they were exercising the option, but Symphony did not appear at the closings.

Issues

1. Are options to purchase commercial property exempt from the statutory prohibition against remote vesting in New York's Rule against Perpetuities (EPTL 9-1.1 [b])?
2. Can the option here be saved by the saving statute (EPTL 9-1.3), which presumes the parties intended a valid interest, or by the "wait and see" approach?
3. If the option fails, may the sale be rescinded for the parties' mutual mistake about the Rule against Perpetuities?

Holding

The option to repurchase the building could be exercised after the 21-year period, so it violated EPTL 9-1.1 (b) and was unenforceable. The Court declined to exempt all commercial options from the statute, refused to save the option or to "wait and see," and denied rescission.