Klein v. McCullough

Citation858 S.E.2d 909
Decision Date04 June 2021
Docket NumberNo. 19-0888,19-0888
Parties Lanna KLEIN, Plaintiff Below, Petitioner v. Darlene MCCULLOUGH, Defendant Below, Respondent
CourtSupreme Court of West Virginia
Concurring Opinion of Justice Armstead and Wooton June 7, 2021

Edmund L. Wagoner, Esq., David E. Goddard, Esq., Goddard & Wagoner PLLC, Morgantown, West Virginia, Counsel for the Petitioner.

David L. Delk, Jr., Esq., Grove, Holmstrand & Delk, PLLC, Wheeling, West Virginia, Counsel for the Respondent.

HUTCHISON, Justice:

In this appeal from the Circuit Court of Tyler County we examine the "stranger to the deed" rule. The deed in question conveyed land from the grantor to the grantee, but contained a clause requiring the grantee to give a third party – a "stranger" – the right of first refusal to any future conveyance of the land. The "stranger to the deed" rule is an ancient one that identifies someone who is neither a grantor nor a grantee to a conveyance as a "stranger." The rule also posits that any property interest in favor of that stranger, and which is contained in a reservation or an exception, is void.

In the order on appeal, the circuit court applied the rule and concluded that the right of first refusal clause in the deed favored a stranger and was, accordingly, void and unenforceable. As we discuss below, we hold that a right of first refusal clause in a deed is neither a reservation nor an exception, and such a clause is therefore outside the boundaries of the "stranger to the deed" rule. Consequently, we reverse the circuit court's order.

I. Factual and Procedural Background

In 1995, Julia McCullough owned a parcel of land, including the oil and gas rights thereunder, in Tyler County. By a deed dated June 24, 1995, Julia conveyed the parcel to her son, Benjamin F. McCullough. However, there was a "right of first refusal" clause in the deed: "This conveyance is made subject to the provision that upon the subsequent conveyance, sale or devise of the said property, the said Benjamin F. McCullough, his heirs or assigns, shall offer a first right of refusal to ... Lanna L. Klein[.]" Lanna L. Klein was Benjamin's sister, and she is the plaintiff in this case.

Benjamin McCullough died in 2010, and his will left his entire estate, including the Tyler County parcel, to his wife, defendant Darlene McCullough. A short time later, the defendant conveyed the parcel to two other individuals (neither of whom was the plaintiff), and those individuals subsequently leased the oil and gas. The parties agree that the defendant never offered to let the plaintiff purchase the parcel.

Plaintiff Lanna Klein filed a complaint against her sister-in-law, defendant Darlene McCullough, seeking to enforce the "right of first refusal" clause in the 1995 deed.1 The defendant responded with a motion to dismiss the complaint asserting that the plaintiff had failed to state a claim upon which relief could be granted.2 Specifically, the defendant noted that the plaintiff was a "stranger" to the 1995 deed because the plaintiff was neither the grantor nor the grantee. Further, the defendant argued that the plaintiff's claimed interest in a right of first refusal was contained within a reservation or exception. At common law, the "stranger to the deed" rule is that a "reservation or an exception in favor of a stranger to a conveyance does not serve to recognize or confirm a right." Syl. pt. 3, Erwin v. Bethlehem Steel Corp. , 134 W. Va. 900, 62 S.E.2d 337 (1950). Stated simply, "[a] reservation to a stranger to the instrument is void for all purposes."

Beckley Nat'l Exch. Bank v. Lilly , 116 W. Va. 608, 182 S.E. 767, 773 (1935). The defendant argued that, because the plaintiff was a stranger to the 1995 deed, she received no legally enforceable right of first refusal in the conveyance between Julia McCullough and Benjamin McCullough.

Plaintiff Klein admitted that she was a stranger to the deed. Accordingly, in an order entered September 18, 2019, the circuit court concluded that "the right of first refusal in favor of Lanna Klein in the deed is void, inoperative and cannot be enforced by the plaintiff." The circuit court then granted the defendant's motion to dismiss the complaint.3 The plaintiff now appeals the circuit court's order.

II. Standard of Review

"Appellate review of a circuit court's order granting a motion to dismiss a complaint is de novo. " Syl. pt. 2, State ex rel. McGraw v. Scott Runyan Pontiac-Buick, Inc. , 194 W. Va. 770, 461 S.E.2d 516 (1995).

III. Discussion

The plaintiff contends that the circuit court erred in applying the "stranger to the deed" rule to the right of first refusal in the 1995 deed. Before exploring the plaintiff's arguments, we first examine the rule.

The "stranger to the deed" rule derives from feudal interpretations of deeds. The rule presumes that deeds conveying land are between a grantor and a grantee, and views with distrust any attempt to use the deed to create a property interest in any other party – that is, a "stranger." "Strangers to the deed are those who are not parties to it." Conway v. Miller , 356 Mont. 231, 232 P.3d 390, 397 (2010). The long-established rule in many jurisdictions is that, in a deed, a reservation in favor of a stranger to the instrument creates in that stranger no new right or interest in the property. "The early rule, still strongly adhered to in most jurisdictions, is that in an instrument of conveyance a mere reservation in favor of a stranger to the deed is inoperative to create in him any right or interest in the property conveyed." Annotation, Reservation or exception in deed in favor of stranger , 88 A.L.R.2d 1199 (1963). "A reservation of interest in real property, to be good, must be made to all, some, or one of the grantors, and not to a stranger to the deed." 23 AM. JUR. 2 D Deeds § 68 (2021).

West Virginia observes the "stranger to the deed" rule. In 1935, this Court recognized deeds cannot contain language in an exception or a reservation that "operate[s] actually to vest rights in the property ... in persons who are strangers to the instrument." Syl. pt. 3, in part, Beckley Nat'l Exch. Bank v. Lilly , 116 W. Va. at 608, 182 S.E. at 767. We later clarified that "[p]ersons not named in the premises or granting clause of a deed of conveyance are strangers thereto." Syl. pt. 2, Collins v. Stalnaker , 131 W. Va. 543, 48 S.E.2d 430 (1948).

In the 1950 case of Erwin v. Bethlehem Steel Corporation , 134 W. Va. at 909, 62 S.E.2d at 343, this Court expounded upon the rule, noting that at the time it was "elementary law, stated in every text book on the subject, that a reservation or exception in favor of a stranger to a conveyance is void or inoperative." Our review of the law led us to conclude that

it is evident that an exception or a reservation in favor of a stranger to a conveyance is void or inoperative to the extent that it may undertake to create or vest a new right or interest in his favor, or to enlarge or extend his then existing right or interest, and that it can operate only to recognize, confirm, or preserve an existing right or interest held or owned by him at the time such conveyance is made.

134 W. Va. at 910, 62 S.E.2d at 343. We therefore adopted the following rule in Syllabus Point 3 of Erwin : "A reservation or an exception in favor of a stranger to a conveyance does not serve to recognize or confirm a right which does not exist in his favor when the conveyance which contains such reservation or exception is made."

The parties in this case agree that the 1995 deed was solely between Julia McCullough, as the grantor, and Benjamin McCullough, as the grantee. To the extent that the plaintiff's name appears in the deed, the parties agree she is neither a grantor nor a grantee and that she meets the technical definition of a "stranger to the deed." Nevertheless, the plaintiff contends that the circuit court erred in applying the rule in this case, and she offers two arguments in support. First, before the circuit court and in her brief to this Court, the plaintiff asserted that a reservation or exception in a deed refers to an interest that touches the land, while a right of first refusal exists separate from the land and is simply a contractual right to receive an offer. Hence, the plaintiff argued that the "stranger to the deed" rule should not be interpreted to apply to rights of first refusal and that the rule is limited to reservations and exceptions.

An "exception" in a deed is a clause withdrawing some part of the property conveyed from the grant, usually a property interest that is already in existence, while a "reservation" creates or reserves some new interest in the grantor(s):

An exception withdraws from the operation of the conveyance some part of the thing granted, which, but for the exception, would have passed to the grantee under the general description; while the reservation is the creation in behalf of the grantor of some new right issuing out of the thing granted,—that is to say, something which did not exist as an independent right.

Erwin , 134 W. Va. at 915, 62 S.E.2d at 346. See also , Tate v. United Fuel Gas Co. , 137 W. Va. 272, 280, 71 S.E.2d 65, 70 (1952) (in "a deed of conveyance," an exception allows the grantor to "withdraw[ ] from the operation of the conveyance that which is in existence, and included under the terms of the grant," while a reservation is "something arising out of the thing granted, not then in esse , or some new thing created or reserved, issuing or coming out of the thing granted, and not a part of the thing itself[.]"); Howard H. Harris, Reservations in Favor of Strangers to the Title , 6 Okla.L.Rev. 127, 128 (1953) ("Technically, an exception is a provision in a deed which excludes from the operation of the grant an existent thing or estate which would otherwise pass to the grantee under the general terms of the grant. A reservation is a provision in a deed creating some new right or interest...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT