Client Alert: Canova Land and Investment Company v. Carolyn Lynn

This morning, the Supreme Court of Virginia interpreted a restriction contained within a 146-year-old deed as not being an unreasonable restraint on alienation. In Canova Land and Investment Company v. Carolyn Lynn, the Supreme Court analyzed whether ancient deed restrictions, undiscovered by a subsequent lender, vitiate the security for its loan.

In 1875, Edna and Levi Lynn granted a deed to the unincorporated Woodbine Baptist Church to hold the property “for the use and benefit of the Baptist Church,” “to use it for the worship of God in accordance with the customs and regulations of said Church” and that “said property to revert to the grantors or their heirs if it ceases it be used for the purposes expressed in the deed.” In 2006, the Woodbine Baptist Church gifted their interest to the Woodbine Worship Center, a Virginia corporation, which continued to use the property for worship. In 2007, the Woodbine Worship Center received a loan for $1,373,000. The title search preceding the loan went back to only 1900 and, as such, did not discover the deed restriction. The Woodbine Worship Center defaulted on the loan in 2011 and the property was sold at foreclosure. The foreclosure purchaser did not take possession of the property but filed a quiet title action seeking an interpretation of the reversionary provisions.

On appeal, the Supreme Court began its analysis by noting that an owner may convey its property under whatever conditions agreed upon and that the courts must give full effect to the parties’ intent unless the result is unlawful. One such unlawful condition, which would be void, is the total prohibition of alienation on a vested fee simple estate. However, the Court noted that the 1875 deed was not a fee simple absolute transfer but was more correctly a fee simple determinable subject to the possibility of reverter. As the Lynn family intended to create a limited estate, the Court held that it was “less inclined to find the condition imposed on the grant to be unreasonable.”

After first classifying the type of grant at issue, the Court then held that the deed language did not create a restraint on alienation but was merely a restraint on the use of the property. The Court held that the deed limited usage to a “congregation that generally follows the tenets of Baptist churches,” though the Court expressly declined “to opine regarding what those tenets may be.” The Court concluded by upholding the 1875 deed as valid and held that the property would revert to the Lynn family in the event that it ceased being used for the religious purposes set forth in the deed.

Jackson & Campbell, P.C. represents title insurers and insureds in Maryland, Virginia, and Washington, D.C. and we strive to keep our clients and other title professionals up to date on various developments in the law. Additionally, we present no cost in-house updates of the nation’s most noteworthy cases and national trends following the spring and fall American Land Title Association’s Title Counsel meetings.

If you have any questions about this case or laws impacting real estate in and around the Washington, D.C. region, feel free to contact us. Our Real Estate Litigation and Transactions Practice Group is ready to assist.