Property Seller's Slick Maneuver To Jerk Around, Stiff Buyer On Oil/Gas Rights On Sale Of 138-Acre Property Fails; WV Supremes: Convey All Mineral Interests In Connection With Sale Of Premises Under Fully Consummated Land Contract

From an Opinion Summary on Justia.com US Law:

• Petitioners and Respondents executed a land contract whereby Respondents agreed to sell a piece of property to Petitioners. After the land contract had been fully consummated, Respondents refused to tender a deed to Petitioners.
  
  Petitioners filed suit, seeking a delivery of a general warranty deed for the property, including all oil and gas rights.
  
  Two months later, Respondents tendered a deed to Petitioners reserving oil and gas rights. The deed was recorded on February 17, 2010.(1)
  
  Petitioners moved for summary judgment, arguing that because the land contract did not contained any language indicating Respondents' intention to except oil and gas rights, any questions of interpretation should be resolved in favor of the grantees.
  
  The trial court granted summary judgment for Respondents, finding that when the deed was recorded, the land contract was merged in the deed and any cause of action based upon the contract was extinguished.
  
  The Supreme Court reversed, holding (1) the contract was unambiguous, and Respondents failed to establish any legally sufficient basis for varying its terms; and (2) therefore, Respondents were obligated to convey their title and interest to the property, including their vested oil and gas rights. Remanded for entry of summary judgment in favor of Petitioners.

Source: Opinion Summary - Spitznogle v. Durbin.

For the ruling, see Spitznogle v. Durbin, No. 11-1132 (W. Va. February 8, 2013).

(1) A slick maneuver the sellers attempted in this case in what ultimately turned out to be a failed effort to stiff the buyer out of the property's mineral rights on the sale of the entire fee interest of the 138-acre property was to tender the deed to the buyers while the litigation in the trial court was ongoing, specifically reserving all mineral rights from the conveyance, and then invoke the doctrine of merger to assert that, once the deed was accepted by the buyers, the existing land contract "merges" into the deed. In this way, if any terms in the land contract are in conflict with the terms in the subsequently-tendered deed, the deed will control (and thereby purportedly leaving the buyers out of luck).

In fact, the sellers (the "Durbins") initially got away with it, as the trial court ruled in their favor.

However, the screwed-over buyers (the "Spitznogles") appealed, giving the West Virginia Supreme Court an opportunity to address the merger doctrine, the lower court's erroneous ruling thereon, and its correct application under the facts and circumstances of this case:

• The Spitznogles contend that the doctrine of merger should not be applied where litigation to enforce the provisions of the underlying contract is ongoing at the time a deed is tendered and accepted. Under the facts and circumstances of this case, we agree.
  
  We begin by examining the doctrine of merger. It has been established in our jurisprudence for almost one hundred years, although it is neither well known nor well understood. It was last mentioned by this Court more than seventy years ago, where we defined it in its most basic formulation: "Where an executory contract for the sale of land is followed by a conveyance thereof, the contract is merged in the deed of conveyance, and the deed will control." Syl. Pt. 1, Wolfe v. Landers, 124 W. Va. 290, 20 S.E.2d 124 (1942); see also Syl. Pt. 3, Harman v. Dry Fork Colliery Co., 80 W. Va. 780, 94 S.E. 355 (1917) ("A contract of sale is merged in a conveyance made in pursuance of it, and, if there is any conflict between the papers, the deed controls.").
  
  In practice, however, and indeed as evidenced by our analysis in both the Wolfe and Harman cases, the doctrine of merger seldom admits of hard-and-fast application. Not all antecedent agreements between grantor and grantee are extinguished upon acceptance of a deed, because merger is not an absolute rule but rather a rebuttable presumption.
  
  The presumption of law is that the acceptance of a deed, made in pursuance of an antecedent written agreement for the sale of land, is satisfaction of all previous covenants, and, although such acceptance may in some circumstances be but partial execution of the contract, to rebut the legal presumption the intention to the contrary must be clear and convincing.
  
  Until consummated by deed, an executory contract of sale is subject to modification by agreement of the parties; and where an act is done which without fraud or mistake is tendered by one of them, and accepted as full performance by the other with knowledge of his legal rights and equities, the acceptor and those claiming under him are not competent to assert that some part of the original agreement remains to be performed.
  
   Syl. Pts. 7 & 8, James Sons Co. v. Hutchinson, 79 W. Va. 389, 90 S.E. 1047 (1916) (emphasis supplied).
  
  In rebutting the presumption of merger, a litigant must establish that the case falls within one or more recognized exceptions to the doctrine.
  
  These exceptions include fraud, mistake, ambiguity, lack of knowledge of one's legal rights and equities, and acceptance as only partial performance of an antecedent agreement. James Sons Co., 79 W. Va. at 398-401, 90 S.E. at 1051-52; Wolfe, 124 W. Va. at 293, 20 S.E.2d at 125; see also Harrodsburg Indus. Warehousing, Inc. v. MIGS, LLC, 182 S.W.3d 529, 532 (Ky.App. 2005) ("exceptions to the merger doctrine are fraud, mistake, or contractual agreement clearly not intended to be merged into the deed."); Raymond v. Holliday, 2011 WL 2462671 (Mich.App., 2011) ("where delivery of the deed represents only partial performance of the preceding contract, the unperformed portions are not merged into it[.]").
  
  When the tender and acceptance of a deed is held to extinguish rights under an antecedent contract, it is most often in cases where the plaintiff/grantee was not a party to the underlying contract whose terms are urged as the basis for reformation. That was the factual situation in Harman, James Sons Co. and Wolfe. In Wolfe, this Court explained that:
  
  [I]f this were a case between the Charlton Development Company and its grantee, a showing that the restriction inserted in the deed was placed there by mutual mistake or through fraud might justify a reformation of the deed. But that is not asked for, and probably could not be granted to the prejudice of subsequent purchasers of lots in the same subdivision, and who made purchases in reliance on the covenant appearing in the deed as executed and recorded.
  
  124 W. Va. at 293, 20 S.E.2d at 125. Additionally, our precedents make it clear that the parties' knowledge and intent are important factual elements in determining whether a merger has occurred. See James Sons Co., 79 W. Va. at 400-401, 90 S.E. at1052 (where deed conveyed fewer acres than were specified in antecedent contract, doctrine of merger applied because undisputed facts showed that original grantee was fully aware that the deed conveyed only 141 acres and that he acquiesced in the reduction of acreage until his death thirty years later).
  
  In its order granting summary judgment to the Durbins, the circuit court treated merger as a principle of law admitting of no exceptions, citing the general rule articulated in Wolfe and Harman.
  
  Under the facts and circumstances of the instant case, the circuit court erred. The antecedent land contract, the terms of which the Spitznogles sought to enforce, was their own contract with the Durbins, not a contract into which some predecessor in interest had entered.
  
  The Spitznogles had filed suit on the contract months before the Durbins tendered the deed, and there is no evidence in the record to show that the Durbins tendered the deed, or that the Spitznogles accepted it, as resolution of the lawsuit.[4]
  
  To the contrary, it is clear from the record that the Spitznogles did not accept the deed as "full performance by the [Durbins] with knowledge of [their] legal rights and equities . . .," Syl. Pt. 8, James Sons Co., but rather accepted it as partial performance of the land contract, believing that they retained their right to pursue full relief in circuit court.
  
  Indeed, in light of the Durbins' failure to tender a deed to the property for almost five months after the purchase price was paid in full — and then only after the Spitznogles were forced to retain counsel and file suit — it would be manifestly unfair to conclude that by recording the deed, the Spitznogles unwittingly extinguished their right to full relief.
  
  Finally, the Durbins claimed, in their memorandum in opposition to the Spitznogles' motion for summary judgment, that the parties' lack of mutual understanding as to the conveyance of mineral interests "is undeniably apparent," an admission that fatally undermines their argument that summary judgment was appropriate on the issue of merger.
  
  In light of the foregoing, we conclude that the circuit court erred in granting summary judgment to the Durbins, as the undisputed material facts of record demonstrate that the land contract between the parties was not merged into the deed, and that the doctrine of merger does not extinguish the Spitznogles' right to seek enforcement of the contract.