Langman v. Alumni Association Of The University Of Virginia

Facts

Ps (Stowe and Langman) purchased commercial real property as tenants in common from Empire Management & Development Company, Inc. (Empire). The contract included a provision by which Empire guaranteed a specified monthly income from the property until the actual income equaled or exceeded the guaranteed amount for three consecutive months. Empire's rental guarantee would survive the closing of the transaction. The deed stated a consideration of $780,000. An appraiser for the mortgagee had valued the property, as of March 19, 1986, at $775,000. Ps executed a note payable to Dominion Federal Savings and Loan Association (Dominion Federal) in the amount of $600,000, secured by a first deed of trust on the real property and its improvements, fixtures, rents, and income. Later in 1986, Ps determined that they would make separate gifts to the University of Virginia. Stowe wished to honor a pledge of $100,000, and Langman wished to establish an endowed chair in the university's medical school. These gifts were to be accomplished by the transfer of the Ferdinand's Arcade property to the university. The Office of University Development suggested to Stowe that the property be conveyed to D. Part of Langman's initial contribution to funding of the endowed chair was to derive from Langman's 'equity interest' in the property, which was valued at approximately $86,000. The deed of conveyance states that P, as grantors, convey to D, as grantee, the property in fee simple. The consideration recited is 'the love and respect which the Grantors have for the University of Virginia.' The deed states that the property is subject to the lien of the deed of trust securing the $600,000 debt to Dominion Federal. The next sentence reads, 'The Grantee does hereby assume payment of such obligation and agrees to hold the Grantors harmless from further liability on such obligation.' The deed was not signed by D. There was no space provided for the grantee's signature. The director of D wrote to Ps and acknowledged the gift. The deed was recorded. The audited balance sheets and financial statements of the Alumni Association for the fiscal years ended June 30, 1987, and June 30, 1988, identified the Dominion Federal mortgage as a liability, and the footnotes to financial statements stated that the Alumni Association had 'assumed the mortgage on property donated during the year ended June 30, 1987.' There was an oral agreement between Stowe and D whereby Stowe undertook to 'follow through, manage [the] property, collect the rents, and get it sold.' When the income was insufficient to meet these expenses, Stowe paid the shortfall from his own funds. For the fiscal years ending in 1987 and 1988, both Stowe and D originally recorded the shortfall amount as a debt owed to Stowe. Stowe forgave the debt. From 1987 through early 1989, several lease documents and a liquor license application were signed relating to business tenants which show D as the 'lessor' and 'owner of premises' and bear Sullivan's signature as D's agent. Eventually, the note went into default. Trustbank, the successor in interest to Dominion Federal, notified P and called upon her to cure the default. P demanded that D make the required payments, but D disclaimed any responsibility for payment of the mortgage debt. P paid the amounts demanded under a reservation of rights and commenced this litigation. The court held that D 'did not knowingly accept the gift with contractual conditions,' that the assumption clause was mistakenly placed in the deed by an unknown draftsman, and that D had 'sufficiently rejected the gift to require a finding by the court that the conveyance is ineffective.' The court then found that the assumption clause was unenforceable and the attempted conveyance a nullity. D had no liability to the mortgagee or Ps with regard to the amounts paid or the remaining debt. P appealed.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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