The Supreme Court of Virginia and the Merger Doctrine: Abi-Najm v. Concord Condominium

In Abi-Najm v. Concord Condominium, LLC (September 16, 2010), the Supreme Court of Virginia tackled the doctrine of merger. In particular, the Court built-on a line of prior decisions that limit the extent to which warranties, covenants, and other agreements are merged (and thereby extinguished) in the deed of conveyance.

You can read Justice Lemons's opinion in Abi-Najm, here.

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The doctrine of merger holds that the provisions in an "instrument of higher dignity" supersede conflicting provisions in a prior instrument.  Merger most often applies to scenarios in which a real estate deed contains provisions that are arguably in-conflict with the language of the underlying purchase contract.

Ever since the Supreme Court's decision in Woodson v. Smith (1920), the extent to which merger applies to a given deed (and the antecedent contract) has actually been relatively circumscribed.

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In Woodson, the Court held that "distinct and unperformed stipulations in a contract for sale will not be merged in or discharged by deed where that instrument is silent upon the subject of such stipulations" (emphasis added). In subsequent decisions, a key issue in determining whether merger applies has been whether the deed explicitly addresses the warranties/covenants/etc. which are alleged to have been merged.

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For instance, in Beck v. Smith (2000), a property-seller argued that the seller's warranty that utility easements would not materially affect the purchaser's use of the property was not merged into the deed -- even though the purchase contract contained the language that the seller's warranties "SHALL BE DEEMED MERGED INTO THE DEED AT SETTLEMENT AND SHALL NOT SURVIVE SETTLEMENT."  From the Court's perspective, the deed failed to accomplish the merger because it only contained standard language about transfer of title to the property; language that the warranties were extinguished was not included in the deed. The seller had the proper language in its contract but not in its deed, and therefore the purchaser was entitled to the benefit of the warranty.

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In Abi-Najm, the purchasers of certain condominiums in Arlington County had included, in their purchase contracts, a provision for certain high-end hardwood flooring.  When they discovered after settlement that the condos actually contained run-of-the-mill hardwood floors, they sued the seller for (among other things) breach of contract.

The Circuit Court granted the seller/defendant's demurrer on the breach of contract claim, holding that the provision for alternative hardwood flooring had been merged into the deed that the purchasers accepted at closing.  In other words, by proceeding to closing without objection, the purchasers had waived their opportunity to object to the floor.

The Supreme Court of Virginia reversed, holding that merger does not apply because the issue of the flooring was not addressed in the deed; therefore, the language of the contract still applied:

"The flooring agreement is a distinct agreement, does not affect the validity or nature of the title conveyed, is not addressed in the deed, and does not conflict with the terms of the deed [citing Beck v. Smith]. Accordingly, we hold that the representations [about the flooring] are collateral to the transfer of title, they are not merged into the deed, and therefore they survive delivery of the deed."

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Abi-Najm should serve as a cautionary tale to both purchasers and sellers: do not assume that contract provisions will be merged into the deed, even if the contract specifically provides for a merger.  Instead, ensure that the deed itself addresses the critical provisions and is clear as to whether or not they survive the transfer of title.

Holographic Wills in Virginia: Schilling v. Schilling

Wills (or, more broadly, testamentary instruments) are special: they are governed by a different set of rules than other legal documents. This reality was highlighted in Schilling v. Schilling (June 10, 2010), in which the Supreme Court of Virginia (a) examined the General Assembly's amended statute regarding holographic wills and (b) reiterated the rule that a will "speaks" (or takes legal effect) on the date of the testator's death, not the date of the will's execution. Most legal documents, on the other hand, become effective upon the date of their execution by the party or parties.

You can read Justice Mims's opinion in Schilling, here.

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First, some background on holographic wills:
 
Generally, Virginia law requires that for a will to be valid, it must be signed in the presence of two competent witnesses, who also must sign the will in the presence of the testator (the requirement of witnesses is in addition to other requirements including those governing the age and competence of the testator).
 
There is an exception for a will that is entirely in the testator's own handwriting.  Such a will is known as a holographic will and is valid even without any witnesses (though there is a requirement that two witnesses who are familiar with the testator's handwriting testify that the alleged will is authentic).
 
Until 2007, the Virginia statute governing holographic wills, Code of Virginia Section 64.1-49 (you can read the text here), mandated that a holographic will be "wholly" in the testator's handwriting.  If the testator's relative or friend had added certain words or sentences to the document, those "extra" words or sentences were not deemed to be part of the will -- they were excluded by Section 64.1-49.
 
In 2007, however, Section 64.1-49.1 (the text is here) modified the rule slightly, so that additions by others are now permitted (and read as part of the will), if a proponent of the will can establish by clear and convincing evidence that the testator intended the document - including the extra words - to constitute his or her will.

 

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The question arose in Schilling of how to interpret a holographic will that was signed prior to the 2007 law but not probated (because the testator did not die) until after enactment of the 2007 law. 
 
In particular, Ms. Schilling's son had added certain important words to the will that was otherwise entirely in her handwriting (and which left her entire estate to the same son!), and certain of her other heirs argued that those portions of the will should be invalidated, since it was signed prior to the 2007 law.

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The Supreme Court of Virginia reversed the Circuit Court for the City of Hampton (which had granted the protesting heirs' demurrer), holding that Ms. Schilling's will did not take legal effect until her death on September 23, 2008.

The Supreme Court's decision in Schilling illustrates the rule that makes wills special among legal documents:  whereas most documents are governed by the laws in effect at the time they are signed, wills are governed by the laws that are effective as of the date of death.

A Birthday Celebration at Richmond & Fishburne

Yesterday at the office we had a super fun "Birthday and Best Senior Partner in the World" celebration for Rick. 

Marcelle put together an absolutely fantastic party.  She and Ken prepared homemade barbecue, fresh-caught catfish dip, and tasty cucumbers a la Jinx.  She also baked the cruise-ship cake shown above, to celebrate Rick's passion for traveling the Seven Seas.

And in an unprecedented surprise, the office's waiting area became home to an inflatable bouncy-house in which the grandkids (and even an unnamed Senior Partner!) were thrilled to jump and play.

Happy Birthday Rick and thank you Marcelle for such a FUN event!

Electronic Recording of Deeds

Virginia Lawyers Weekly recently reported (here) that the Rockingham County Circuit Court has implemented a system for electronic recording of deeds and other land records. 

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I was vaguely aware of electronic recording, but I had not previously heard of any local jurisdictions adopting it. 

After reading the news about Rockingham County, I did a little research.

CSC's website has this diagram of the electronic recording process.

I gather that there are several companies that offer electronic recording services.  The larger firms include Simplifile (here), eDocs Solutions (here), and Ingeo (here). 

Interestingly, Corporation Service Company (the leading provider of registered agent and corporate maintenance services) recently purchased Ingeo, so I assume that CSC has identified electronic recording as a growth industry.

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The e-recording companies provide software that enables law firms and settlement companies to electronically transmit deeds, deeds of trust, etc., to the Clerk's Office.  The original document remains in the transmitter's possession. 

Upon receipt, the staff at the Clerk's Office reviews the electronic copy prior to uploading it to the land records system. My understanding is that there are a number of safeguards against fraud or the recording of invalid documents.

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In Virginia, at least ten jurisdictions have adopted e-recording systems, including the aforementioned Rockingham County as well as Loudoun County, Prince William County, and the cities of Virginia Beach and Norfolk. 

I haven't spoken with any attorneys who use electronic recording, so I do not know whether the reception in Rockingham and other places has been positive. 

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I certainly can imagine the benefits of electronic recording: convenience, efficiency, and cost-savings, to name a few.

On the other hand, if Charlottesville and/or Albemarle were to adopt electronic recording, I worry about the human interaction that would probably be lost -- gone the way of the phone conversations and face-to-face meetings that have largely been replaced by e-mails.

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One of my favorite parts about practicing law in a small town has been walking over to the Courthouses to review or record documents.  It gives me the chance to get away from my computer screen and to catch my breath.

I enjoy seeing Bruce Maxa and Phillip from Blue Ridge, hard at work in the records room, and it is fun to chat with Margaret when I record in Albemarle.  I look forward to the changing arrangements of the flower beds in Jackson Park.

Sometimes when I cross the Park, I imagine my grandfather and Juni Fishburne taking a similar stroll in the 1950's; or when I look through the deed books I picture my dad and Rick Carter, circa 1977, running into each other at the Clerk's Office and talking about the latest Redskins game.

Technology can be a good thing, and I am probably sentimentalizing a process that can often be stressful or mundane.  But I do worry about what will be left if we reduce everything to an image on a computer screen.

Some days I even like the musty smell of the Deed Books...

Favorite Tree in Charlottesville

It blossomed later than last year, but the cherry tree in Lee Park (across the street from our office) looks as beautiful as ever right now.  I love the way that the happy pink petals frame the stern grey statue.