Langman v. Alumni Association of the University of Virginia

Supreme Court of Virginia
442 S.E.2d 669 (1994)

ELI5:

Rule of Law:

A grantee who accepts a deed, even without signing it, is contractually bound by an unambiguous mortgage assumption clause contained within it. Acceptance is implied by the grantee's conduct, such as recording the deed, exercising rights of ownership, and failing to repudiate the conveyance in a timely manner.

Facts:

On June 3, 1986, Margaretha W. Langman and Caleb N. Stowe purchased a commercial property known as 'Ferdinand's Arcade,' financing it with a $600,000 note secured by a deed of trust.
Later in 1986, Langman and Stowe decided to donate the property to the University of Virginia by conveying it to the Alumni Association of the University of Virginia.
On December 30, 1986, a deed was executed conveying the property to the Alumni Association, which contained a clause stating, 'The Grantee does hereby assume payment of such obligation and agrees to hold the Grantors harmless from further liability on such obligation.'
The Alumni Association did not sign the deed, but its agents received the deed in early 1987 and had it recorded.
For approximately two and a half years, the Alumni Association treated the property as its own, listing the mortgage as a liability on its financial statements, signing lease documents as the owner, and accepting Stowe's payments of mortgage shortfalls as charitable contributions.
In the summer of 1989, Stowe could no longer cover the property's expenses, and the mortgage went into default.
The lender notified Langman of the default, and after she cured it, she demanded reimbursement from the Alumni Association.
The Alumni Association refused to reimburse Langman, disclaiming any responsibility for the mortgage debt.

Procedural Posture:

Dr. Margaretha W. Langman filed a bill of complaint in a state trial court against the Alumni Association, seeking a declaration of rights under a deed.
The Alumni Association asserted the affirmative defenses of fraud, mutual mistake, and the statute of frauds.
The trial court, after a three-day hearing, found in favor of the Alumni Association.
The trial court held that the conveyance was ineffective, the mortgage assumption clause was unenforceable, and the Alumni Association had no liability for the debt.
Langman, as appellant, appealed the trial court's decision to the Supreme Court of Virginia.

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Issue:

Does a grantee, by accepting a deed and exercising rights of ownership over the property for more than two years, become contractually bound by an unambiguous mortgage assumption clause contained within that deed, even though the grantee did not sign the instrument?

Opinions:

Majority - Justice Keenan

Yes. A grantee who accepts a deed and enjoys the benefits of ownership becomes contractually bound by its unambiguous provisions, including a mortgage assumption clause, regardless of whether the grantee signed the deed. The court reasoned that the parol evidence rule barred the admission of evidence to contradict the deed's clear and unambiguous terms, which explicitly stated that the Alumni Association assumed the mortgage. The court found no ambiguity in a deed of gift also containing consideration for the grantor. Furthermore, the Alumni Association's acceptance of the deed was established by its conduct over more than two years, including recording the deed, listing the property and its associated debt on financial statements, and executing leases as the owner. Such actions are inconsistent with a renunciation of the deed; having accepted the conveyance, the Alumni Association is bound by all its terms. The court also held that the statute of frauds did not apply because a mortgage assumption is an 'original undertaking' for the grantee's own benefit, not a 'collateral' promise to answer for the debt of another.

Analysis:

This case strongly reaffirms the principle that acceptance of a deed can be demonstrated through conduct, and such acceptance binds the grantee to all covenants within the deed, even burdensome ones like mortgage assumption. The decision reinforces the strict application of the parol evidence rule, preventing parties from using extrinsic evidence of prior negotiations to escape clear, written obligations in a deed. It also clarifies that a mortgage assumption clause in an accepted, but unsigned, deed is an 'original undertaking' that falls outside the statute of frauds. This holding provides certainty in real estate transactions by emphasizing the primacy of the written instrument once it has been accepted by the grantee's actions.

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