Shirley v. Shirley

• Decision Date: 03 March 2000
• Docket Number: Record No. 990611.
• Citation: 525 S.E.2d 274
• Parties: Katherine Fitzgerald SHIRLEY v. Katherine Gray SHIRLEY, et al.
• Court: Virginia Supreme Court

525 S.E.2d 274

Katherine Fitzgerald SHIRLEY v. Katherine Gray SHIRLEY, et al.

Record No. 990611.

Supreme Court of Virginia.

March 3, 2000.

Richard H. Barrick (Barrick & Deinlein, on briefs), Charlottesville, for appellant.

Robert H. Blodinger, Charlottesville, for appellee Katherine Gray Shirley.

William R. Marshall, Jr. (Taylor, Hazen, Kauffman & Pinchbeck, on brief), Richmond, for appellees Western Financial Bank and Mary-Susan Payne, Trustee.

Present: CARRICO, C.J., COMPTON,¹ LACY, HASSELL, KEENAN, KOONTZ, and KINSER, JJ.

KINSER, Justice.

In this appeal, we address the common law rule that, in a deed, a reservation or exception in favor of a stranger to the instrument does not create in the stranger any right or interest in the property being conveyed. The circuit court relied on this rule to sustain demurrers to a bill of complaint seeking a declaratory judgment that a reservation in favor of a stranger to a deed created a life estate for the benefit of the stranger. Since this rule is applicable in the Commonwealth pursuant to Code § 1-10, and because we conclude that any modification of the rule falls within the province of the General Assembly, we will affirm the circuit court's judgment.

FACTS AND PROCEEDINGS

Katherine Gray Shirley (Mrs. Shirley) conveyed a certain tract of real property near Greenwood (the Greenwood property) in Albemarle County to her daughters, Martha Gray Shirley Bates and Katherine Fitzgerald Shirley (Katherine), in their capacities as "Trustees of `The Fairview Trust.'" That deed, dated May 15, 1990, contained the following provision that is the subject of this appeal: "The party of the first part [Mrs. Shirley] reserves unto herself a life estate for herself and a life estate for the benefit of Katherine Fitzgerald Shirley, in and to said real property."

Several years later, Bates, in her capacity as "Trustee of `The Fairview Trust,'" conveyed her interest in the Greenwood Property to Mrs. Shirley, in her capacity as "Trustee of The Katherine Gray Shirley Trust."² Subsequently, on May 28, 1998, Mrs. Shirley and Bates, individually and in their capacities as trustee and successor trustee, respectively, of "the Katherine Gray Shirley Trust," conveyed their interests in the subject property to Mrs. Shirley, individually. On the same day, Mrs. Shirley executed a deed of trust on the property to secure payment of a note signed by her. Mary-Susan Payne was the trustee named in the deed of trust, and Western Financial Bank (Western) was the beneficiary.

In July 1998, Katherine filed a bill of complaint against Mrs. Shirley, Western, and Payne in the circuit court, seeking a declaratory judgment that Katherine has a life estate in the property, superior to the lien of Western's deed of trust. All three defendants filed demurrers to the bill of complaint. In a memorandum in support of her demurrer, Mrs. Shirley asserted that Katherine was not a party to the May 15, 1990 deed, and that there were "no words of [g]rant" to Katherine in that deed. Western and Payne contended there was no actual controversy between them and Katherine, and that therefore a declaratory judgment action was improper.

After considering the parties' memoranda and hearing argument ore tenus, the chancellor entered an order sustaining the defendants' demurrers and dismissing the bill of complaint. In a letter opinion, the chancellor first concluded that Katherine properly brought an action for declaratory judgment. The chancellor then examined the common law rule that "in a deed neither [a] reservation nor an exception in favor of a stranger to the instrument can, by force of ordinary words of exception or reservation, create in the stranger any title, right, or interest in or respecting the land conveyed." Although Katherine admitted that Virginia incorporates the common law of England pursuant to Code § 1-10,³ she urged the chancellor to modify or abrogate this common law rule. However, the chancellor declined to do so, holding that modification of the common law rule against reservations in favor of a stranger to a deed lies within the province of the General Assembly, not the judiciary. We awarded Katherine this appeal.

ANALYSIS

On appeal, Katherine acknowledges that, under the common law, a grantor could not reserve an interest in real property for the benefit of a stranger to the deed. Nor does she dispute that the common law of England has been adopted in Virginia pursuant to Code § 1-10. However, she asks this Court to abrogate or modify this common law rule for three reasons. Katherine first asserts that the rule is at odds with the modern trend in property law to give effect to a grantor's intent, and that, in this case, the rule frustrates Mrs. Shirley's intent to grant Katherine a life estate in the subject property. Next, Katherine contends that numerous courts in other jurisdictions have rejected the rule and thus urges this Court to do so. Finally, she posits that the common law rule is inconsistent with the General Assembly's intent reflected in Code § 55-22 to protect third-party beneficiaries of written instruments.

As Katherine asserts, this Court has repeatedly held that a deed should be construed to give effect to the grantor's intent. Auerbach v. County of Hanover, 252 Va. 410, 414, 478 S.E.2d 100, 102 (1996); Allen v. Green, 229 Va. 588, 593, 331 S.E.2d 472, 475 (1985); Austin v. Dobbins, 219 Va. 930, 936, 252 S.E.2d 588, 592 (1979); Fitzgerald v. Fitzgerald, 194 Va. 925, 929, 76 S.E.2d 204, 207 (1953); Albert v. Holt, 137 Va. 5, 9, 119 S.E. 120, 122 (1923). However, the grantor's intention cannot prevail if it is "in conflict with some principle of law or rule of property." Fitzgerald, 194 Va. at 929, 76 S.E.2d at 207; accord Auerbach, 252 Va. at 414,

478 S.E.2d at 102; Albert, 137 Va. at 9, 119 S.E. at 122.

The common law rule of property at issue in this appeal provides that "a reservation, to be good, must be made to all, some, or one of the grantors, and not to a stranger to the deed." Wickham v. Hawker, 151 Eng. Rep. 679, 683 (1840).⁴ A reservation is "[t]he creation of a new right or interest ... by and for the grantor, in real property being granted to another." Black's Law Dictionary 1309 (7th ed.1999).⁵ At common law, words of "reservation" were not deemed to be words of "grant." Nelson v. Parker, 687 N.E.2d 187, 188 (Ind.1997); cf. Lim v. Choi, 256 Va. 167, 171-72, 501 S.E.2d 141, 143-44 (1998)

(discussing necessity for words of grant or conveyance in deed). Thus, a grantor's words of reservation could create a property interest in favor of the grantor but not in favor of a third person, or "stranger," to the deed.

Assuming, without deciding, that Mrs. Shirley intended to convey a life estate in the subject property to Katherine in the 1990 deed, Mrs. Shirley's method of conveyance conflicts with the common law rule and thus cannot prevail. See Fitzgerald, 194 Va. at 929,

76 S.E.2d at 207. Katherine was a "stranger" to the 1990 deed. Therefore, Mrs. Shirley's words of reservation did not convey an interest in the property to Katherine.

As the parties acknowledge, this Court has not previously addressed the "stranger rule" and its applicability in Virginia.⁶ However, pursuant to Code § 1-10, we conclude that the rule continues "in full force" in this Commonwealth and is "the rule of decision." Code § 1-10. It is not "repugnant to the principles of the Bill of Rights and the Constitution," and has not been "altered by the General Assembly." Id.

We have, however, recognized that while Code § 1-10, "aside from its express limitations, appears to adopt English common law `generally, and without a qualification,' this is not in fact the case." Weishaupt v. Commonwealth, 227 Va. 389, 399, 315 S.E.2d 847, 852 (1984) (quoting Foster v. Commonwealth, 96 Va. 306, 309, 31 S.E. 503, 504 (1898)). Accordingly, we stated the following principle with regard to the adoption of the English common law in this Commonwealth:

Such of [English common law] doctrines and principles as are repugnant to the nature and character of our political system, or which the different and varied circumstances of our country render inapplicable to us, are either not in force here, or must be so modified in their application as to adapt them to our condition.

Foster, 96 Va. at 310, 31 S.E. at 505.

Using this principle, this Court has abrogated or modified English common law in only a few instances. E.g., Weishaupt, 227 Va. at 404,

315 S.E.2d at 855 (abolishing husband's immunity from prosecution for rape of wife that occurred when husband and wife were separated but not yet divorced); Surratt, Adm'r v. Thompson, 212 Va. 191, 193-94, 183 S.E.2d 200, 202 (1971) (abolishing interspousal immunity in automobile torts); Smith v. Kauffman, Adm'r, 212 Va. 181, 186, 183 S.E.2d 190, 194 (1971) (abolishing parental immunity in automobile accident cases); Midkiff v. Midkiff, 201 Va. 829, 833, 113 S.E.2d 875, 878 (1960) (abolishing immunity in automobile accident case between two unemancipated brothers). Unlike the situations addressed in those cases in which we recognized changes in familial relationships, we find nothing in the nature, character, and circumstances of either our political system or country that vitiates the underlying reason for the common law "stranger rule." Instead, modification or abrogation of that rule by this Court would adversely impact the public policy favoring certainty of title to real property.

Therefore, "we will apply the law as it now exists, because we believe that a decision whether to abrogate such a fundamental rule as the one under consideration is the function of the legislative, not judicial, branch of government." Williamson v. The Old Brogue, Inc., 232 Va. 350, 354, 350 S.E.2d 621, 624 (1986).⁷ This is particularly so when, as here, any change in the common law rule would affect not only inchoate but also vested property rights. If, at times, application of the...