Rule in Shelley's Case

The Rule in Shelley's Case is a rule of law that may apply to certain future interests in real property and trusts created in common law jurisdictions. [Moynihan, Cornelius, "Introduction to the Law of Real Property", 3d Edition, West Group (St. Paul: 2002), p181] It was applied as early as 1366 in "The Provost of Beverly's Case" [Ibid, p182. (Y.B. 40 Ed. 3, f9, 18)] but in its present form is derived from Shelley's Case (1581), [1 Co.Rep. 93b (1581)] in which counsel stated the rule as follows:

"...when the ancestor by any gift or conveyance takes an estate of freehold, and in the same gift or conveyance an estate is limited either mediately or immediately to his heirs in fee simple or in fee tail; that always in such cases, 'the heirs' are words of limitation of the estate, not words of purchase". [Moynihan, p181.]

The Rule was reported by Lord Coke in England in the 17th century as well-settled law. In England, it was abolished by the Law of Property Act, 1925. [15 & 16 Geo. 5, c.20, s131] During the twentieth century, it was abolished in most common law jurisdictions, including many of the United States. However, in states where the abrogation has been interpreted to apply only to conveyances made after abrogation, the relevance of the Rule today varies from jurisdiction to jurisdiction and in many states remains unclear. [Moynihan, pp190-91] .

The Rule is still in operation in all Canadian common law jurisdictions (Quebec being a civil law jurisdiction) with the exception of Manitoba though it has made an appearance in case law only a few times in the last century.

History

The litigation was brought about because of a settlement made by Sir William Shelley (1480–1549), an English judge, on an estate he purchased when the Sion Monastery dissolved. The decision was rendered by Lord Chancellor Sir Thomas Bromley, who presided over an assembly of all the judges on the "King's Bench" to hear the case during Easter term 1580-1581. The rule existed in English common law long before this case was brought to the court, but Shelley's case gave the law its most famous application.

Issue

When an owner of land in fee simple died, the lord of the fee was entitled to "incidents of tenure" deriving from the descent to the heir (analogous to the modern day estate tax). [Moynihan, p182] Large landowners who desired the life tenant (who was perhaps the landowner himself, conveying through a straw party) to avoid the estate tax attempted to create a future interest in the form of a remainder in the heirs of that life tenant. It was the intention of the landowner or testator to allow the heirs of the life tenant, once ascertained at the natural expiration of his life estate, to take as purchasers by way of the original executed conveyance, and not by descent, avoiding the tax.

Thus, in a basic conveyance, "O grants Blackacre to B for life, then to B's heirs," absent the rule there was a life estate in B, and a contingent remainder in B's heirs. The Rule converted the contingent remainder in B's heirs into a vested remainder in B.

The Rule's effect ended there. After that, the "doctrine of merger" operated on the two successive freehold estates placed in the same purchaser (B's life estate and B's remainder in fee simple) and converted them into a single fee simple absolute in B.

B's heirs, necessarily ascertained only at B's death, could only take B's fee simple by descent and had to pay the tax.

Note: Living people have no heirs. B's children and B's heirs are not the same set of individuals. If B has children, they will only become B's heirs if they survive B, which is not guaranteed. It is important not to confuse "heirs presumptive" (which children probably are under most intestacy statutes) and "heirs" (which children might become provided they survive the ancestor whose property to which they are entitled, absent contrary intent expressed in a will).

Thus, a conveyance to B for life, then to B's children, where B has living children C, D, and E, does not violate the Rule because the class members are ascertained, and new ascertained members may join the class so long as B, the class member producer, lives (plus nine months if he is male).

Problems

1. O conveys Blackacre to B for life, then to B's heirs. [Moynihan, p191]

"Discussion": The conveyance purports to create the following interests: life estate in B, remainder in B's heirs. The remainder in B's heirs must be a contingent remainder because B's heirs are unascertained, the condition to be satisfied in order for the remainder to vest presumably being the death of B (see note to problem 1). The Rule in Shelley's Case "operates on this transaction to defeat the intent of the grantor and change the interests that the grantor purported to give to B and (separately) to his 'heirs"'. After application of the Rule, the state of the title is now life estate in B, vested remainder in B in fee simple absolute. Because B has been conveyed two successive freehold estates, a second and independent doctrine, the Doctrine of Merger, operates on the life estate and remainder to turn B's interest into a fee simple absolute.

The court finally reads the transaction as "O conveys Blackacre to B and his heirs." That is, B takes a fee simple absolute.

"Note to Problem 1": B is necessarily alive at the time of this conveyance; otherwise he could not take a life estate. If B were dead the transaction would be improbable; suffice to say that any contingent remainder supported by such a hypothetical life estate would be destroyed, and the fee simple would remain in O as if no transfer occurred. Assuming then the necessary inter vivos nature of this transfer, B's heirs are unascertained because living individuals have no heirs. Be sure you understand this. Only the dead have heirs. B must die in order for the world (and the court especially) to know who his heirs are. At the time of the transaction, a living person B may have an heir apparent X, but if it were the intent of the grantor O to create a future interest in B's heir apparent X, the court will not read that intent into the phrase "to B's heirs;" it will apply the Rule and place the remainder in the ancestor. At his death, his properly ascertained heirs will be forced to take his fee simple absolute by descent or devise. [See Generally Moynihan, Chapter 9, Section 12, pp181-91 for an in depth analysis]

Example

Suppose Joe has a rich parent named "Grandpa" who considers Joe a feckless wastrel, but who wishes to ensure that Joe's children are provided for. Grandpa might try to deed a house "to Joe for life, and then to Joe's heirs", thus ensuring that Joe and his family could live in the house, but Joe could not sell it to pay gambling debts. The "remaindermen" in this case are the grandchildren. The Rule in Shelley's Case states that, this language notwithstanding, Joe is the absolute owner of the property.

The Rule Generalized

Simply stated, the Rule deals with remainders in the transfer of real property by deed. A remainder is a right "carved out" of the "fee simple" (or what might be termed absolute ownership in plain English) which has some future interest (an interest of which the holder cannot yet make use at the time of the granting of the deed) so that, at some later date, the holder of the remainder (the future interest) would have ownership rights in the property and those future rights would have to be preserved. The rights could not be sold. It has been explained as an attempt to prevent the sale of property once transferred by putting such limiting words in the deed of transfer.

It is a classic example of common law legal reasoning and the logic involved in the interpretation of legal text which is why it continues to be an important teaching tool in the study of the common law. However, while it is an important interpretation tool, it should not be confused with a rule of construction (such as the Doctrine of Worthier Title) as it is a rule of law. The distinction is that a rule of law cannot be overcome by proof of the grantor's intent, while a rule of construction can be.

Analysis

Some scholars (e.g., see John V. Orth, "The Rule in Shelley's Case," The Green Bag, Autumn 2003) believe that this explanation (to promote the right to transfer the land) of the origin of the Rule is inaccurate. In their view the Rule originated as the courts' response to an estate-planning technique in the 14th century, long before the litigation in Shelley's Case. A tax known as the "relief" had to be paid to the feudal lord (the Crown) when a tenant's heir inherited the land. To avoid this estate tax, if the grant to the land were framed in term of a life estate in the grantee followed by a remainder in the grantee's heirs, then upon the grantee's death his heirs would not inherit the land, but received it as a vested remainder. As a consequence, the heir would take the land without having to pay the relief. The courts could not abide such a transparent attempt to circumvent the tax system, and the Rule was invented to deal with this problem by converting these transfers into fee simples absolute so as to allow the relief to be collected upon the grantee's death. Later, when the relief was abolished, the Rule continued to survive in the common law due to inertia ("it is the genius of the common law to add, but not to subtract"), the "promote the right to transfer the land" explanation was concocted to explain the continued existence of the Rule. Note that it is not at all uncommon for rules of common law, once their original motivation falls away, to acquire a new justification, and in the process also, sometimes, a new meaning. Many examples of such processes are given in Oliver Wendell Holmes's "The Common Law".

;As stated by Lord William Coke in his argument for the defendant in the case:::It is a rule of law, when the ancestor by any gift or conveyance takes an estate in freehold, and in the same gift or conveyance an estate is limited mediately or immediately to his heirs in fee or in tail; that always in such cases "the heirs" are words of limitation of the [ancestor's] estate and not words of purchase.

Notes

ee also

*Rule against perpetuities
*Lawrence W. Waggoner, "Estates in land and future interests in a nutshell" 2nd ed. (West Publishing: St. Paul, 1993), ch. 11