As established in other “Watch Your Language” articles for this Blog, as a general rule, courts will typically uphold commercial document provisions unless they are contrary to public policy or statutory law, or the subject of a mutual mistake. Courts traditionally presume that commercial parties are on more of an equal playing field and are more sophisticated concerning commercial transactions, since both parties will usually have attorneys review their documents. More and more, parties to residential real estate contracts are being held to the same standard governing commercial transactions.
Because courts often defer to the specific language of commercial (and other) real estate documents, unintended results are often the norm for parties who do not seek professional advice, and for professionals who do not closely review their documents. Even the failure to follow a seemingly trivial grammar rule (the use of i.e. versus e.g.) can result in unintended consequences. In a 1995 Connecticut case, despite the tenant’s verbalized intent to the contrary, the court held that the use of “i.e.” [meaning, that is] versus “e.g.” [meaning, for example] preceding a short list of repair items in a lease, served to limit the landlord’s structural responsibility to only those items listed in the lease versus merely providing examples of the same.
There is judicial deference to “plain language” within real estate and other documents, and courts, as a general rule, will not look outside the four corners of a document to consider extrinsic evidence of intent. If the language is unambiguous, you must “watch your language, and say what you mean, precisely, or a judge will decide what you meant.”
The Ohio Supreme Court in Koprivec v. Rails-to-Trails of Wayne County recently espoused this basic tenet of Ohio law with regard to deeds – specifically, deeds creating “fee simple determinable,” or conditional estates in land.
A Deeds/Estates in Land/Fee Simple Determinable Primer
Like a certificate of title for an automobile, the deed is the document that actually transfers the title of real property from one to another. Unlike a certificate of title for an automobile, however, the deed contains a specific legal description of the property; may also contain warranties of title; reservations (e.g., right to reserve an easement over the property); and restrictive covenants (e.g., “this property may only be used for residential purposes”).
Also unique to deeds versus certificates of title (and bills of sale to transfer other personal property) is the nature of the underlying property and the varied rights transferable thereto. While both cars and land can be leased for a specific period of time, a transfer of a “life estate” in land, for example, can transfer real property for a person’s lifetime. (Note: a “fee simple” estate in land, on the other hand gives the grantee the right to own and possess real property forever.)
Ownership of real estate can be, further, uniquely limited if a “defeasible” or “conditional” estate is transferred by deed. A defeasible fee or estate in real property is a fee simple interest that can be taken away from the grantee/holder upon the occurrence or non-occurrence of a specified event. For example, when grantor transfers to grantee a parcel of land “for so long as that land is used for summer camp purposes.”
The two main types of defeasible fees are “fee simple determinable” and “fee simple subject to a condition subsequent.” The difference between the two is that a fee simple determinable interest terminates automatically upon the occurrence or non-occurrence of the event (our example above), while the fee simple subject to a condition subsequent estate is not terminated automatically. The fee simple subject can also be terminated at the will of a future interest holder upon the occurrence or non-occurrence of the specified event (the magic words for this type of defeasible fee would be “grantor transfers x to grantee, but if…, then grantor retains a right of re-entry”).
After a grantor transfers a fee simple determinable estate, said grantor is deemed to retain a “possibility of reverter,” as the property would revert to the grantor, automatically upon the occurrence or non-occurrence of the condition stated in the deed.
Are there recognized “magic words” to create a fee simple determinable estate? Dating back to English common law, many courts recognized the establishment of a fee simple determinable estate by use of the words “so long as,” “as long as,” “until,” “during” and “on condition that.”
In Ohio, however, the Supreme Court in In re Petition of Copps Chapel Methodist Episcopal Church, 120 Ohio St. 309, 166 N.E. 218 (1929) held that a deed could not create a fee simple determinable estate without “reverter language” (specific words stating the property would revert back to the grantor, if the applicable condition in the deed is satisfied).
In fact, the trial court, and the court of appeals in Koprive relied on the Copps Chapel case to deny the plaintiffs’ claim of ownership. The main issue for the court in Koprivec would be: whether or not Copps Chapel was still good law in Ohio; and, if not, what new “magic words” in Ohio would be required to create a fee simple determinable.
Background/Facts of Koprivec v. Rails-to-Trails of Wayne Cty.
As well summarized by the court in Koprivec, “[t]his case involves a dispute about ownership of an abandoned rail corridor. It pits a nonprofit organization, Rails-to-Trails of Wayne County (“Rails-to-Trails”), which seeks to develop the corridor into a bike trail, against three landowners, who claim ownership of the sections of the corridor adjacent to their properties. We have before us issues of deed construction and adverse possession.” This article only addresses the deed construction issues.
The specific facts of the case are as follows:
In 2009, Rails-to-Trails purchased an old railroad corridor with the intention of converting the land into a public, multi-purpose trail. In 2011, however, three owners of adjacent properties (the “landowners”) filed suit to establish their ownership of the sections of the corridor next to their respective properties. The landowners claimed title (ownership) based upon an 1882 deed that they claim served to revert the corridor land to them when the corridor stopped being used as a railroad and all three claimed adverse possession of those sections of the corridor.
The granting clause (“[t]he words that transfer an interest in a deed”) of the 1882 deed granted the property to the railroad company “and to its assigns forever.” The habendum clause (“the part of a… deed … that defines the extent of the interest being granted and any conditions affecting the grant”) provided that the grant was “forever for the purpose of constructing and using thereon a Rail Road.”
The plaintiffs in Koprivec construed the deed as creating a fee simple determinable. They argued that when the land stopped being used as a railroad (which was the only purpose of the transfer), the part of the property adjacent to the properties they already owned reverted back to them as the successors-in-interest of the original grantors. Rails-to-Trails sought to establish that it was the valid property owner, based upon a valid 2009 deed.
The trial court entered summary judgment in favor of Rails-to-Trails on all the landowners’ claims. It easily determined that under Copps Chapel, the 1882 deed did not create a determinable fee because it did not contain the “magic words.” That is, it did not explicitly state that the property would revert to the grantors when it ceased being used for railroad purposes. The Ohio Ninth District Court of Appeals affirmed the trial court’s judgment on the deed issue, holding that the 1882 deed created a fee simple absolute estate because the deed did not contain the magic reversionary language.
Analysis of Koprivec v. Rails-to-Trails of Wayne Cty.
It would have been easy for the Ohio Supreme Court to have affirmed the Ninth District’s decision on the basis of the Copps Chapel case – no magic reversion language, no fee simple determinable. That is why the Supreme Court of Ohio deemed the appellate court’s holding “understandable.”
Instead, recognizing lower court decisions “have taken bites out of the Copps Chapel holding” and that the Ohio Supreme Court’s later decision in Hinman v. Barnes acknowledged and applied “the modern and prevalent rule for determining estates conveyed by a deed,” the Supreme Court in Koprivec admitted that “there is no longer reason to rely on Copps Chapel, and to do so would be inappropriate.”
The Ohio Supreme Court still affirmed the Ninth Appellate District’s decision (on the issue of deed construction), but not on the basis of Copps Chapel. According to the Ohio Supreme Court in Koprivec, case law of the past seven decades dictates the need to utilize the “‘modern and prevalent rule for determining the estate conveyed by a deed,’ which rule is, ‘that if the intention of the parties is apparent from an examination of the deed ‘from its four corners,’ it will be given effect regardless of technical rules of construction.’” Citing Hinman v. Barnes, 146 Ohio St. 497, 66 N.E.2d 911 (1946). In other words, according to the court in Koprivec, “it is the plain language of the deed that matters.”
The court in Koprivec reconciled the Copps Chanel and Koprivec cases by reasoning that the words of reversion in the Copps Chapel deed were simply the plain language words of the deed that established a fee simple determinable estate.
The court in Koprivec, however, recognized that the prime example of creating a fee simple determinable estate is when a grantor conveys a property to another “for so long as it is used for X”; the magic words being conditional language, not reversion language. The court reasoned that when a grantor uses those conditional words, “she means exactly that – that she intends for the property to be held by the grantee for so long as it is used for X; [and] when the property stops being used for X, it reverts to the grantor.” Recognizing this tenet was far from new law, the Koprivec court (citing prior law review articles) admitted that “the phrase so long or as long as ha[d] been recognized as sufficient to create a determinable interest ‘since before the days of [the 16th-century legal commentator Edmund] Plowden.’”
Applying the “modern law” to the facts of the case, the court in Koprivec found no use of the words “so long as,” or similar conditional phrases. Nor was there any reversion language. Instead, classic fee simple absolute language was utilized; namely, “to grantee and to its assigns forever.” True, the deed also contained the language: “forever for the purpose of constructing and using thereon a Railroad.” However, focusing more on the purpose than the forever language of this clause, this kind of language, according to the court, “simply describes the reason for the conveyance,” and “does not condition the railroad company’s right to hold the estate on its use as a railroad.” Citing classic “black letter treatise law,” the court in Koprivec concluded that, “Unless a conditional estate is created by the express language of a deed or will, the grantor or testator will be conclusively presumed to have intended a fee simple [estate].”
What is the moral of this story? Watch your language, and say what you mean precisely, or a judge will tell you what you meant. While reversionary language is no longer necessary to establish a fee simple determinable estate in Ohio, “it couldn’t hoit.” Why not use all the magic words – the requisite conditional language (so long as, as long as…) and the reversion language? That way, there is nothing left open to interpretation. Make the plain language plain as day and you won’t need your day in court.