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The Game Place, L.L.C. v. Fredericksburg 35, LLC

Supreme Court of Virginia

May 10, 2018

THE GAME PLACE, L.L.C., ET AL.
v.
FREDERICKSBURG 35, LLC

          FROM THE CIRCUIT COURT OF THE CITY OF FREDERICKSBURG Gordon F. Willis, Judge

          OPINION

          D. ARTHUR KELSEY JUSTICE

         A commercial lessor, Fredericksburg 35, LLC, sued a lessee, The Game Place, L.L.C., [1]for unpaid rent under a 15-year lease after The Game Place vacated the leasehold prior to the expiration of the 15-year term. The Game Place demurred, claiming that the lease was unenforceable under the Statute of Conveyances, Code § 55-2, because it did not have either the common-law formality of a seal or the relaxed seal substitutes available under Code § 11-3.

         Reasoning that "[t]he law looks at substance not form, " J.A. at 9, the trial court rejected The Game Place's arguments and overruled the demurrer. After a bench trial, the court entered final judgment against The Game Place and its guarantor, Robert C. Lightburn. Finding the 15-year lease unenforceable as a matter of law, we reverse and enter final judgment in favor of The Game Place and Lightburn.[2]

         I.

         In September 2000, a real-estate partnership, Amusement-Central Park Limited Partnership, leased space in a commercial shopping center to Nicol, Inc. The parties executed a 15-year lease requiring monthly payments. A year later, Amusement-Central Park Limited Partnership conveyed property which included the leasehold space to Carl D. Silver. See id. at 194. That same year Silver re-conveyed the property to the Carl D. Silver Company. See id. at 235-37. After selling the property, Amusement-Central Park Limited Partnership dissolved itself in 2001 and filed a certificate of cancellation with the State Corporation Commission in January 2002. See id. at 239.

         In November 2002, the lessee, Nichol, Inc., assigned its rights and obligations under the lease to The Game Place.[3] See id. at 224-25. The lease required the written consent of the landlord to any such assignment. Though Amusement-Central Park Limited Partnership had ceased to legally exist, it executed the assignment as "LANDLORD" with the signature line stating "By: Silver GP, Inc., General Partner." Id. at 225 (altering capitalization).[4] The narrative becomes more tangled when, in December 2002, the Silver Company conveyed the property to Fredericksburg 35. See id. at 193-96.

         The lessor-lessee relationship nonetheless continued without contest until years later when The Game Place found itself unable to keep up with the rent payments. In May 2014, The Game Place vacated the premises and terminated what it characterized as "its month-month periodic tenancy." R. at 688. The Game Place was current on its rent at that time. Rejecting The Game Place's characterization of the lease as month-to-month, Fredericksburg 35 responded with a suit seeking unpaid rent that had accrued since The Game Place had vacated the leasehold space. The Game Place demurred, arguing that the lease was unenforceable under the Statute of Conveyances because it did not contain a seal as required by the common law for a deed or one of the substitutes for a seal available under Code § 11-3. The trial court overruled the demurrer. Following a bench trial, the court entered final judgment against The Game Place and Lightburn, jointly and severally, ordering them to pay $68, 610.44 in unpaid rent and $17, 152.61 in attorney fees pursuant to a lease provision allowing the landlord to recover 25% of the claim as attorney fees. See J.A. at 211, 253.

         II.

         On appeal, The Game Place contends that the trial court erred as a matter of law when it enforced the 15-year lease and, instead, should have recognized that the lessor-lessee relationship could only be enforced as a month-to-month tenancy.[5] We agree.

         A. The Statute of Conveyances

         The Statute of Conveyances states in pertinent part that "[n]o estate of inheritance or freehold or for a term of more than five years in lands shall be conveyed unless by deed or will." Code § 55-2; see Humble Oil & Ref. Co. v. Cox, 207 Va. 197, 201, 148 S.E.2d 756, 760 (1966) ("The Lease purported to demise property for a term of more than five years, and Virginia law requires that such a demise be made in the form of a deed."). That provision's "statutory antecedents date back to 1705" and it appears to be "based in part upon section three of the English Statute of Frauds, 29 [Car. II] c.3 (1677)." Burdette v. Brush Mt. Estates, LLC, 278 Va. 286, 293, 682 S.E.2d 549, 553 (2009) (quoting Burns v. Equitable Assocs., 220 Va. 1020, 1031, 265 S.E.2d 737, 744 (1980)); see 3 William Waller Hening, The Statutes at Large 318-19 (1812) (reprinting 1705 Act).

         When applicable to an inter vivos conveyance, the Statute of Conveyances specifically requires a "deed" to effect the transfer. Code § 55-2. When a statute employs a common-law term of art, the General Assembly "is presumed to have known and to have had the common law in mind in the enactment of a statute" and we must "giv[e] effect to both 'unless it clearly appears from express language or by necessary implication that the purpose of the statute was to change the common law.'" Jenkins v. Mehra, 281 Va. 37, 44, 704 S.E.2d 577, 581 (2011) (citation omitted); see also Tvardek v. Powhatan Vill. Homeowners Ass'n, Inc., 291 Va. 269, 276 n.4, 784 S.E.2d 280, 283 n.4 (2016) ("A statute touching on matters of common law must 'be read along with the provisions of the common law, and the latter will be read into the statute unless it clearly appears from express language or by necessary implication that the purpose of the statute was to change the common law.'" (citation omitted)).

         B. The English Common Law of Sealed Deeds

         It is "almost impossible to trace the history of seals back to the time when they were first employed." 1 Robert T. Devlin, The Law of Real Property and Deeds § 242, at 345 (3d ed. 1911). Chancellor Kent found the common-law custom of sealing documents to be "corroborated by the usages and records of all antiquity, sacred and profane." 4 James Kent, Commentaries on American Law 444-45 (1830); see also 1 Devlin, supra, § 242, at 345-46 (describing the ancient origins of sealing); 2 John B. Minor, Institutes of Common and Statute Law 727-28 (4th rev. ed. 1892) (same).

         For our purposes, the historical analysis focuses on English common law at the time of the Founding.[6] At that time, a deed had certain defined characteristics. One of them was that it had to be a "sealed" writing. See 2 William Blackstone, Commentaries *295.[7] The seal was "deemed essential" and was "requisite" to the conveyance of land by deed. 4 Kent, supra, at 443-44. We have never taken issue with this view. "One of the essential requisites of a deed, " we have emphasized, "is that it shall have a seal affixed thereto." Smith v. Plaster, 151 Va. 252, 258, 144 S.E. 417, 419 (1928).[8] The historic justification for the seal requirement in deeds of conveyance was two-fold, with both explanations stemming from the goal of orderly conveyance of real property that has always been integral to the Anglo-American legal tradition.

         First, "affixing a seal to a signature to a deed gives solemnity" to this uniquely important transaction. Bank of Chatham v. Arendall, 178 Va. 183, 192, 16 S.E.2d 352, 355 (1941). We inherited this view from the Normans, whom Blackstone described as "a brave but illiterate nation" responsible for bringing the tradition of seals to England after the 1066 invasion by William the Conqueror. See 2 Blackstone, supra, at 305-06.[9] The Normans "used the practice of sealing only, without writing their names: which custom continued, when learning made its way among them, though the reason for doing it had ceased." Id. "[S]ealing alone, " Blackstone reports, "was sufficient to authenticate a deed" even if the deed was unsigned. Id. at 306. Seals acquired this importance in part because "they obviously made the evidence of the [instrument] better, in so far as the seal was more difficult to forge than a stroke of the pen." Oliver Wendell Holmes, Jr., The Common Law 272 (1923). The seal thus provided the highest form of certitude for one of the most important legal transactions.[10]

         Second, "[a]t common law a sealed instrument imposed peculiar liabilities." Preston v. Hull, 64 Va. (23 Gratt.) 600, 604 (1873). One of these liabilities, though somewhat unclear in its origins, [11] was the enforcement of sealed instruments even in the absence of bilateral consideration. "In a contract under seal, a valuable consideration is presumed from the solemnity of the instrument, as a matter of public policy and for the sake of peace, and presumed conclusively . . . ." Norris v. Barbour, 188 Va. 723, 736, 51 S.E.2d 334, 339 (1949) (emphases in original).[12] With a sealed instrument, therefore, "it d[id] not matter how the obligation arose, or whether there was any consideration for it or not." Holmes, supra, at 270.[13] An instrument "under seal was no longer a promise well proved; it was a promise of a distinct nature, for which a distinct form of action came to be provided." Id. at 272-73; see 9 W.S. Holdsworth, A History of English Law 155-59 (1926) (describing the origins of the doctrine of estoppel by deed in the common-law seal requirement).

         Thus, "the seal furnished a convenient means by which an intentional promise, voluntarily made (i.e., without consideration) could be binding." 1 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 2:16, at 175 (4th ed. 2007). Though the seal requirement, when unsatisfied, "occasionally defeated the intent of the parties, the seal served its purpose of permitting obligors to bind themselves without consideration." Id. at 176-77. Professor Williston recognized the need for and the ongoing development of legislative reforms to the seal requirement, but he argued "that the seal has served and continues to serve a valid function, that being to make binding promises without consideration, and to suggest that some device for performing that function is not only appropriate, but in some cases necessary." Id. at 177.[14]

         C. The Statutory Reforms to the Seal Requirement

         Almost immediately upon the reception of English common law in the United States, state legislatures began to make a host of statutory changes to the common-law seal requirement.[15] In 1788, the General Assembly of Virginia enacted a statute to permit the use of a "scroll[16] by way of seal" as an alternative to the traditional wax-imprinted seal. See 1788 Acts ch. 67, at 35 (codified as amended at Code § 11-3) (altering archaic spelling). An instrument bearing such a scroll would be treated in law "as if it were actually sealed." Id. (altering archaic spelling). The current version of the statute provides in pertinent part:

Any writing to which a natural person . . . making it affixes a scroll by way of a seal, shall be of the same force as if it were actually sealed. The impression or stamping of a corporate or an official seal on paper or parchment alone shall be as valid as if made on wax or other adhesive substance. And any writing to which a natural person . . . making it affixes his signature . . . and which writing in its body says "this deed, " or "this indenture, " or other words importing a sealed instrument, or recognizes a seal, shall be of the same force as if it were actually sealed by such person . . .; and any writing signed by a natural person . . . and regularly acknowledged before an officer authorized to take acknowledgments of deeds to be recorded in this Commonwealth, in the body of which writing it clearly appears that the person so signing and acknowledging the same intends to and does grant or convey . . . certain real estate therein described, . . . shall pass the title to such real estate as effectually as if it were written and executed in strict accordance with the provisions of [Code] § 55-48 [providing a permissible form for a deed] . . . .

Code § 11-3.

         This statute does not abolish the seal requirement. Instead, it relaxes the seal requirement by offering a limited list of specific substitutes for a seal. These substitutes include (1) "a scroll by way of a seal"; (2) an imprint or stamp "of a corporate or an official seal on paper or parchment"; (3) the use in the "body of [such] writing" of the words "'this deed, ' or 'this indenture, ' or other words importing a sealed instrument" or recognizing a seal; or, finally, (4) a proper acknowledgement of a document clearly demonstrating an intent to convey real estate "before an officer authorized to take acknowledgments of deeds." Id. The statute does not identify when a seal is necessary ...


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