TITLE OPINION
Bi, Terry E. Hogwood
'Curing title opinions, as the subject for a concise article, is far too broad
a topic to give each aspect of the actions taken by landmen or attorneys
✓to present oil and gas clients with a "cured" title opinion. The author chose rrr
on the underpinnings of the title curative process:
•
The Original Title Opinion Risk decisions made by the client company as
well as the examining attorney and abstractor preparatory to and during the
Ming of the original title opinion.
• The Supplemental Title Opinion - Types of curative materials that will
-sab " a title requirement as well as the risk decisions made by the client comshould one or more title requirements not be satisfied.
• Two Nonwaivable Title Requirements
Securing a copy of the patent from
the General Land Office and obtaining an affidavit of use and occupancy.
• Affidavits - Why, at the heart of curing a title requirement, affidavits do not
amount to a marketable title.
• Trespass To Try Title
_ . T.
,771 C r ZC?.U
The ultimate title curative action.
23
Landman
J. FRED HAMBRIGHT, CPL
THE ORIGINAL TITLE OPINION
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CURED TITLE OPINION
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An original title opinion is a legal
document, usually addressing fee simple
ownership (it may be limited to surface or
mineral estate depending on the wishes of
the client) of a given tract of land,
which can only be prepared by a duly
licensed attorney. An original title opinion is the first title opinion rendered for a
given tract of land. It can be written for
drilling or division order purposes. It is an
interrelated document usually consisting
of five distinct parts:
• Property description
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• Documents examined
• Certification date of abstract/opinion •
Ownership schedule
• Comments and requirements
The significant interrelationship of
an original title opinion is between the
ownership schedule and the list of comments and requirements. The ownership
schedule may not be relied on until all of
the title requirements have been deemed
satisfied by the examining attorney.
Stated differently, the examining attorney
will not (and cannot) declare that marketable title to the fee simple interest has
been achieved if even one outstanding
title requirement remains.
The author has never seen a 100
percent cured title opinion except for
offshore tracts (state and federal) and
some Indian tribal lands. Meaning? The
majority of title opinions rendered for
the oil and gas industry require that the
oil companies rely on less than marketable title for drilling and royalty payment purposes (defensible title). That a
title is not a marketable title is not in
and of itself a problem. Almost all titles
have one or more facts outside of the
record that must be relied on to support
the ownership schedule (heirship affidavit, adverse possession, etc.).
The purpose of the original title opinion is to provide assurance to the client
company that the mineral estate is properly leased and that no outstanding mineral
interests in third parties remain unleased
or leased to another company. Every time
a title requirement is waived by a client
company there is an increased risk that
title to some or all of the mineral estate
may fail.
November / December 2011
Landman
CURED TITLE
OPINION
A title opinion (either original or supplemental) rendered for a client is owned
by the client, not the rendering attorney.
The right to rely on the contents and
conclusions of the title opinion belongs
to the original client and to whomever
else the rendering attorney (with the
client's permission) will allow to utilize
same. Stated another way, possession of
a title opinion will not entitle the possessor of same to rely on its statement of
ownership (backed by the malpractice
insurance of the rendering attorney)
unless the rendering attorney has granted
his or her permission to the possessory
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Client companies face numerous
decisions that, in the end, become initial
risk decisions and form the framework
for the original title opinion. The client
company must first choose, prior to initiaring the title examination process:
(1)Between using a title abstractor
from a local title company, an
attorney or a Landman to prepare
the run sheets from which the
examining attorney will examine
the identified documents and prepare the original title opinion.
The author's preference has
always been to use Indmen for
run sheet preparation. Abstractors
typically focus only on surface
titles in their primary employment capacity at a title company.
More importantly, mineral titles
are based on many different documents never encountered in a surface ownership search. Attorneys
are not usually as familiar with
courthouses and their records as are
landmen and/or abstractors.
Landmen possess full-time knowledge both of the courthouses (and
their records location) as well as
title chain preparation.
(2) What records to use, i.e., only
abstract plant records, only courthouse records or a combination of
both. In the author's opinion, the
best run sheet preparation process
is to utilize the records of both
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25
Landman
CURED TITLE OPINION
the abstract plant and courthouse.
Practically speaking, where time
is of the essence, initially building
the chain of title in an abstract
plant and then confirming same
via the indices found in the county courthouse is the usual examination process employed by many
abstractors.
Many times documents are misindexed or not indexed at all in the courthouse. By starting the run sheet preparation process in the abstract plant, many
if not all of such instruments may be
located early on in the run sheet preparation process, thus saving considerable
time and effort later in the courthouse
portion of the examination process.
A geographically based filing system
(where each survey has all documents
associated with that survey summarized
in the abstract plant records) will usually
catch most improperly filed documents.
(Example: When searching "Branch
Springs" in the Harris County Computer
Index Records, the author found that
the creative data inputrers could spell
"Branch Springs" as one word or two
words, abbreviate "Spring" to "SP,"
abbreviate "Branch" to "BR" and thereafter combine all permutations into
numerous "spellings." The only sure way
to catch all documents is to use the
records of an abstract plant coupled with
the indices in the county records.)
From a risk standpoint, the only official records for lands located in a specific
county are those found in the county
clerk's office. If a document affecting
title to a tract of land is filed in the
office of the county clerk, there is constructive notice of its existence and the
facts exhibited therein. (Miles v. Martin,
321 S. W. 2d. 62 (Tex
1959).) This
rule of construction is limited to those
instruments in a grantee's chain of title.
(Ford v. ExxonMobil Chemical Co., 235
S. W. 3d. 615 (Tex
2007), including
all recitals, references and reservations
contained in or fairly disclosed by any
instrument forming an essential link in
the grantee's chain of title (Westland Oil
Development Corp. v. Gulf Oil Corp., 637
S. W. 2d. 903 (Tex
1982).)
What public records are to be
reviewed - i.e., only the deed/official
26
records of the pertinent county and/or
district court records and/or tax records.
The fewer records reviewed, the greater
the increased risk of missing a pertinent
document. What comprises the totality
of "public records" in a county courthouse is a subject for another paper.
Attached as Exhibit "A" is a checklist
of many of the potential public documents and indexes that may reside in a
Texas county courthouse. The abstractor
should always check with the county
clerk to be sure that he or she knows
where all indexes are so they can be
examined in the process of building the
title chain. Perhaps the most stunning
example of nonindexed documents, at
one time on file with the Harris County
clerk, is the old set of books of early
Title problems cannot be analyzed,
cured or waived without an understanding of the title standard utilized by the
examining attorney in the rendering of
the original title opinion and/or supplemental title opinion. In Texas, fee simple title opinions - and specifically the
underlying title requirements found in
such opinions
are written so that satisfaction of all title requirements will
yield a "fee simple marketable title" for
the tract of land under examination.
Marketable title has been a defined
legal term in Texas jurisprudence since
the 1920s. (Lund v. Emerson, 204 S. W.
2d. 639 (Tex. Civ. App. - 1947, no writ
hist.); Owens v. Jackson, 35 S. W. 2d.
186 (Tex. Civ. App. - 1931, writ dism'd w.o.j.); Texas Auto Co. v. Arbetter, 1
judgments affecting title to real property
S. W. 2d. 334 (Tex. Civ. App. - 1927,
in Harris County. These books (more
than 100) resided in what was once
known as the "Teapot Room" and sat
behind the counter. The author personally examined some 20 of the hooks and
found that they appeared to hold judgments rendered in Harris County (for an
indeterminate period of time) affecting
title to Harris County real property.
Those judgments did not appear to be
indexed in the Deed Records Index nor
resident in the Deed Record books. No
judgment affecting title to real property
is binding on third parties until it is
properly filed of record in the pertinent
county deed records. (Woodward v. Ortiz,
writ dism'd w.o.j.); Austin v. Carter, 296
237 S. W. 2d. 286 (Tex
1951).) More
significantly, those judgment books have
been moved to an undisclosed location.
Are the judgments still binding on third
parties even though the books cannot be
located presently or are "stored" for historical purposes' Yes, the judgments are
binding on all third parties even if they
cannot presently be located.
The disclaimer attached to any
run sheet by an abstractor or landman
must be carefully read and understood.
Many times, in addition to limiting
the amount of money (usually limited
to the cost of the run sheet), a disclaimer will virtually take away all
of the abstractor or landman's liability
for any missed document for any reason, thus transferring all risk to the
client company for any such failure
in the examination process.
S. W. 649 (Tex. Civ. App. - 1927, writ
dism'd); and Ailing v. Vander Stucken,
194 S. W. 443 (Tex. Civ. App. - 1917,
writ ref'd).) A "marketable title" is a
title based solely on instruments of conveyance properly filed of record and is
defined as that title which is reasonably
free from such doubt that a prudent
man, with knowledge of all of the salient
facts and circumstances surrounding the
title and their legal significance, would
be willing to accept. An objection (read
title requirement) to a marketable title
is based on serious and reasonable doubts
by the title examiner concerning the
title that would induce a prudent man
to hesitate in accepting a title affected
by them. (Lund v. Emerson, 204 S. W.
2d. 639 (Tex. Civ. App. - 1947, no
writ hist.); Owens v. Jackson, 35 S. W.
2d. 186 (Tex. Civ. App. - 1931, writ
dism'd w.o.j.); Texas Auto Co. v.
Arbetter, 1 S. W. 2d. 334 (Tex. Civ.
App. - 1927, writ dism'd w.o.j.); Austin
v. Carter, 296 S. W. 649 (Tex. Civ. App.
- 1927, writ dism'd); and Ailing v.
Vander Stucken, 194 S. W. 443 (Tex.
Civ. App. - 1917, writ ref'd).)"
(A Realistic Approach to Identifying and
Curing Ancient Title Problems, Terry E.
Hogwood
18th Advanced Oil, Gas
and Mineral Law Course.)
A title is not marketable if: (1) there
is a reasonable chance that a third party
could raise an issue concerning the
validity of the title to the estate against
November / December 2011
Landinan
CURED TITLE
OPINION
Exhibit "A"
INDEXES LOCATED IN THE
COUNTY CLERK'S OFFICE
If Discontinued,
Name of Index
Deed
No. Volumes
Dates in Use
Reverse Index
Records
Deed of Trust
Contracts
Map Records
Abstract of Judgment
Federal Lien
Attachment
Lis pendens
U CC
M & M Liens
Marriage
Records
Assumed Name
Oil and Gas Records
Probate Records
Powers of Attorney
Patents
Town & Subdiv. Plats
Cemetery Plats
Death
Certificates
Official Records
`.em
ber /December
2011
27
Landman
CURED TITLE OPINION
the apparent owner (for instance, a claim
of adverse possession), or (2) parol evidence is necessary to remove any doubt
as to the validity and/or sufficiency of
the owner's title (for instance, an affidavit of heirship to reflect a deceased's
owners heirs-at-law) or (3) title rests
upon a presumption of fact which, in the
event of a suit contesting title, would
probably become an issue of fact to be
decided by a jury (for instance, whether
additions to a tract of land occurred by
accretion or avulsion) or (4) the record
discloses outstanding interests in other
parties that could reasonably subject the
owner to litigation or compel such
owner to resort to parol evidence to
defend the title against the outstanding
claims (for instance, a fee simple title
with an outstanding, unreleased oil and
gas lease is not a marketable title). (Lund
v. Emerson, 204 S. W. 2d. 639 (Tex. Civ.
App.
1947, no writ hist.); Owens v.
Jackson, 35 S. W. 2d. 186 (Tex. Civ.
App. - 1931, writ dism'd w.o.j.); Texas
Auto Co. v. Arbetter, 1 S. W. 2d. 334
(Tex. Civ. App. - 1927, writ dism'd
w.o.j.); Austin v. Carter, 296 S. W. 649
(Tex. Civ. App. - 1927, writ dism'd);
and Ailing v. Vander Stucken, 194 S. W.
443 (Tex. Civ. App.
1917, writ
ref'd).) All title opinions in Texas
should be written in accordance with
this legal standard. (A Realistic
Approach to Identifying and Curing
Ancient Title Problems, Terry E.
Hopwood
18th Advanced Oil, Gas
and Mineral Law Course.)
As stated above, most onshore titles
that are approved for drilling are
approved on the basis of defensible title,
not marketable title. A defensible title
is one where the client, with advice and
consultation from the title attorney,
decides to waive the satisfaction of one
or more title requirement(s) or to accept
less than absolute proof that an outstanding title requirement has been satisfied. The client usually decides that, if
sued on the waived title issue, it can win
in a subsequent court case, i.e., a defensible title. The call of marketable title is
to point out those title defects that, in
the opinion of the title attorney, are
such that a prudent man, with knowledge of all of the salient facts and circumstances surrounding the title and
their legal significance, would not be
willing to accept.
Each title examiner, and indeed, each
client oil company, develops a risk tolerance level depending on the expertise
of the title attorney and the relative
cost of the well and value of the anticipated reserves. The author was trained to
note every title defect in the title opinion
that impacted or could impact marketable
title. If there was a title defect, it had to
he pointed out. Thereafter, management,
in consultation with the examining attorney, could decide which title requirements
it felt comfortable in waiving and which it
would attempt to cure.
Other examining attorneys make a
preliminary risk assessment of a potential
title defect and oftentimes elect to waive
same either with or without a title cornment. For instance, the typical title
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November /December 2011
Landinan
CURED TITLE OPINION
comment is as follows: "I note several
early breaks in the chain of title to
Examined Lands. Due to their early
appearance in the chain of title, there
appears to be little risk that any title
claim could be made today as a result of
said title breaks. However, in an abundance of caution, you should secure an
affidavit of adverse possession for ......... "
Often, the last sentence is omitted and
the early title defects are merely noted as
an advisory comment of their existence
with no curative action prescribed to
resolve the breaks. If an advisory comment only is made (which is much preferred by most clients), the examining
attorney has accepted all of the attendant risk should one of the early breaks
in the chain of title later assert itself
(usually if production is established)
via a claim to production as an unleased
cotenant.
Equally important is the issue of
which party is the examiner attempting
to confirm title in, i.e., the first fee simple owner immediately after the breaks
in the chain of title or the present
owner. Many of the title opinions
reviewed by the author over the last
25-plus years do not state the exact date
=tom which the affidavit of adverse possession is to track the adverse nature of
:he possession of a record title owner.
Other title opinions specifically only ask
_or confirmation of adverse possession
or the immediate past 25 years of the
_wnership of the lands under examina-on. As stated previously, no title by
adverse possession is a marketable title.
und v. Emerson, 204 S. W. 2d. 639
,Tex. Civ. App. - 1947, no writ hist.);
Owens v. Jackson, 35 S. W. 2d. 186 (Tex.
Cis-. App. - 1931, writ dism'd w.o.j.);
.etas Auto Co. v. Arbetter, 1 S. W. 2d.
34 (Tex. Civ. App.
1927, writ disn J w.o.j.); Austin v. Carter, 296 S. W.
649 (Tex. Civ. App. - 1927, writ dissd) and Ailing v. Vander Stucken, 194 S.
'L-
443 (Tex. Civ. App. - 1917, writ
wi'd).) That is, there is always the possit<- that a third party could raise a
issue concerning ownership and
ect the owner to probable litigation.
L: not that the claimant would be sucTul, which deems the title unmar-JEEable. Rather, it is the probability of
tion (to prove the facts and circum-
stances constituting adverse possession)
that causes the title to be unmarketable.
Does this mean if there is even one
break in the chain of title, no matter
where in the chain of title it occurs, and
reliance on an affidavit of adverse possession to "cure" same is required, then
the client will have to rely on defensible
title rather than marketable title? Yes.
Lately, there has arisen a middle
ground in large resource plays where
many of the same title requirements are
seen in multiple title opinions. More significantly, the client companies know
that they will not be satisfying those
redundant title requirements (old, outstanding deeds of trust, unreleased oil
and ,as leases, etc.). To reduce the length
of the title opinions, as well as costs,
client companies are allowing the examining attorney to list those title defects
that may occur in the chains of title and
to point out that the client company
deems those requirements waived.
How the ownership of the mineral
estate is set out in a title opinion is as
important as the outstanding title requirements that need to be satisfied. That is,
did the title examiner set forth the ownership schedule as it appears as of the
close of the abstract/run sheet, or was the
ownership schedule presented as if all
title requirements had been or would be
satisfied? This question is especially
important if the client company initially
attempts to verify that all of its lessors
own a mineral interest in the subject
property. If the attorney does not alert the
client that, although it appears all mineral owners are leased, the record title does
not confirm same and that only if all
title requirements are satisfied will the
ownership schedule be correct. In the
author's experience, most client companies insist that the ownership schedule
reflect all of the client company's lessors
with title requirements to confirm same.
The result is the same ultimately, but
undue confidence can be imparted to the
client company concerning whether or
not the outstanding requirements were
reviewed at the same time as the ownership schedule was reviewed. How the
ownership schedule is set forth should be
discussed with the client company or, in
the opinion of the author, if not discussed, set forth as it appears of record
subject to curative actions.
DEFINITION OF CURATIVE
Who Has the Risk?
The owner of the original title opinion has the ultimate decision whether to
accept the schedule of ownership as
written (with no satisfaction of any title
requirements), to satisfy all title requirements or to satisfy some and not others.
That decision is solely one for the client
with advice from the rendering attorney.
The rendering attorney does not waive
title requirements unless he or she wishes to accept all attendant risk associated
with such waiver (including monetary
loss if the title fails in whole or in part).
If the attorney did not expect the title
requirement to be satisfied, it should not
have been placed in the title opinion.
Once apprised of the risks of waiving the
title requirement, the client must advise
the rendering attorney of its decision to
waive a title requirement. Thereafter,
the attorney should note in a subsequent
supplemental title opinion that one or
more specific title requirements have
been waived by the client company.
Such notice thus qualifies the ownership
schedule and its accuracy and correctly
allocates the risk to the client company.
Types of Curative Actions
There are actually three different
types of curative actions a title requirement may contemplate being carried
out by the field Landman/attorney. These
are searching for documents that were
entered into and have not been found in
the initial search of the public records,
creating documents to satisfy the title
requirement or performing legal actions
such as litigation to satisfy a title
requirement.
The author has noted a significant
increase in the submission of title run
sheets that have significant breaks in the
chain of title (failure to find one or more
documents whereby a predecessor in title
conveys its interest in the subject lands)
or where the abstractor fails to read the
pertinent document and obtain and furnish a referenced document found in the
reviewed instrument.
Specifically, most landmen today
refuse to classify their abstracting duties
as title research. Many refuse to even
29
Landman
CURED TITLE OPINION
furnish a statement of ownership as
determined by them based on their initial title research. This position is curious since many times this same landman
was responsible for leasing the potential
mineral owners of the tract. How can a
statement of potential ownership not be
made for title examination purposes
when it is expected that the examining
Landman lease the correct parties? The
answer most given is in two parts: mal-
practice exposure and the fact that the
abstractor does not run title; he or she
runs names.
The misstatement of mineral ownership by an abstracting landman, where
the ownership statement is not properly
qualified, could certainly result in
potential liability if the ownership
statement is incorrect. However, since
most run sheets have lengthy and comprehensive restrictions on the reliance
and use of the run sheet as well as limitations on legal liability written into
each such run sheet, the author can
find no reason not to include the landman's best expert opinion on mineral
ownership. It is not given for reliance
purposes but to assist the examining
attorney in understanding how the run
sheet was constructed and what interpretations the landman placed on different
instruments in reaching a title conclusion. Let's be honest: The landman has
already stated who he or she believes
owns the mineral estate by leasing the
parties appearing in the oil and gas leases covering the subject tract.
Many abstractors admit to only running names. They do not even read the
instruments that they furnish the examining attorney. If they had, they would have
found contained in those instruments
additional documents identified by volume or page which would further define
the mineral ownership of the tract. The
abstractors retained by the author were
required to read each document with
a highlighter identifying the grantor,
The other significant error made in
abstracting title is the use of the reverse
index only. It has come to the author's
attention in several significant busts
that the run sheet furnished appeared
to be premised on locating the present
owners via the tax rolls and building
the chain of title back in time using
the reverse indexes. Certainly one can
obtain a chain of title with no apparent
title breaks using such a methodology.
However, between the time that the
earlier grantor conveyed the tract to
the later grantee, it could have conveyed all or part of the mineral estate
to a third party. Such a conveyance will
not be picked up in the reverse indexes.
Only if the complete chain of title is
rerun from sovereignty in the direct
indexes will all potential conveyances
be located.
In summary, the client company
should specify that all abstractors prepare a schedule of mineral ownership,
properly limited; that all instruments be
read by the abstractor; and that all actual title research be based in part on the
running of the mineral title from sovereignty using the direct indexes.
Many title requirements call for
the creation, execution and delivery
of legal documents that, in the opinion
of the examining attorney, will satisfy
the outstanding title requirement. It
is usually left up to the client company
to determine who will prepare the document. Simply stated, if it is important
enough that the examining attorney
called for the preparation of a specific
legal document to satisfy a title
requirement, it makes no sense to let
a third party prepare that document
when the examining attorney knows
exactly what information will satisfy
his or her title requirement. This is
especially true of affidavits as will be
detailed later in the article.
Can All Title Requirements
grantee, property description, exceptions
Ever be Cured?
or reservations and the date of the instrument. The highlighting of these provisions ensured that the abstractor was
aware of any mineral reservations as
well as any documents referred to in the
instrument of which the abstractor might
not have been aware.
Yes! Though rarely used today (and
discussed in greater detail in the following paragraphs), the trespass to try title
action, properly plead and with the correct attendant documentary evidence,
will cut off all potential adverse owners
of the mineral estate in a given tract of
30
land and will confirm title in the plaintiff(s) bringing the litigation. However,
prior planning and timing are required
to make the trespass to try title suit an
effective title curative option.
Liability for Not Determining the
Correct Mineral Ownership
If a mineral owner is not identified,
and not leased, what effect does that
have on the client company or lessee?
It depends on whether the lands are
pooled and/or if the missing unleased
interest in under the drillsite tract.
An unleased mineral owner under
a lease well or a pooled well (drillsite
tract only) becomes a cotenant with
the other leased mineral owners and the
lessee in that tract. (Wilson v. Superior
Oil Co., 274 S. W. 2d. 947 (Tex. Civ.
App. - writ ref'd n.r.e.) and (Wooley v.
West, 391 S. W. 2d. 157 (Tex. Civ.
App. - 1965, writ ref'd n.r.e.).) One
cotenant may lease its interest in a tract
of land without the consent of its other
cotenant(s). Any cotenant or its lessee
may commence drilling for oil and gas
on the leased premises without the consent of the other cotenant(s). (Powell v.
Johnson, 170 S. W. 2d. 273 (Tex. Civ.
App. - 1943, aff'd).) More importantly,
the entry by either cotenant onto the
tract for drilling and production purposes is not deemed trespass since each
cotenant has a co-equal right of possession (Byrom v. Pendley, 717 S. W. 2d.
602 (Tex
1986).)
The failure to identify and lease an
undivided mineral owner under a lease
well or under the drillsite tract for a
unit well will result in the payment of
monies to the unleased cotenant (after
recoupment of all drilling and producing
expenses) (Byrom v. Pendley, 717 S. W.
2d. 602 (Tex
1986)) based on its
undivided interest in the tract (in the
case of a pooled unit, the unleased
cotenant under the drillsite tract will be
entitled to its ownership interest on an
unpooled basis).
Nondrillsite tract - An unleased
mineral in a nondrillsire unit is not entitled to any share of production unless
and until:
It grants an oil and gas lease
to one of the lessees who owns
a working interest in the unit, and
November !December
201]
Land nan
CURED TITLE OPINION
the unit designation is amended to
include the additional lease covering its interest with a pooling pro-
vision. The parties to the unit can
agree that the participation of the
now leased mineral owner will be
retroactive to the date of first production. In the absence of such
agreement, the now leased mineral
owner's participation in unit pro-
duction will be from the effective
date of the pooling designation
amendment. (Union Gas Corp. v.
Gisler, 129 S. W. 3d. 145 (Tex.
Civ. App.
2003).)
It grants an oil and gas lease to an
oil and gas lessee and, if not voluntarily admitted into the unit,
has the lease force pooled into the
unit. Its right to participate is only
effective from the date of the
order of force pooling. (Railroad
Com'n of Texas v. Pend Preille Oil
& Gas Co. Inc., 817 S.W.2d..366
(Tex
1991).)
THE SUPPLEMENTAL
TITLE OPINION (CURING THE
ORIGINAL TITLE OPINION)
Definition
A supplemental title opinion is written
after an original title opinion has been
rendered and may consist of either or
both (1) a review of outstanding title
requirements in light of curative materials
submitted to the examining attorney or
(2) an update of the ownership schedule
from the last title opinion rendered based
on all records filed from the closing date
of the last title opinion. A supplemental
title opinion may also be rendered for
either drilling or division order purposes.
Only after all title requirements have
been deemed satisfied by the examining
attorney may the client company rely
fully on the ownership schedule with all
attendant risk on the examining attorney
and be assured of marketable title to the
mineral estate. Any outstanding title
requirement, or the requirement of
reliance on facts outside of the chain of
title to deem a title requirement satisfied,
will leave the title potentially defensible
but not marketable.
There are three possible actions that
can be taken by the examining attorney
with respect to an outstanding title
requirement in an original title opinion
and for which curative materials have
been submitted to the client company
(examining attorney) for review:
Waiver of title requirement Whether a client is justified in waiving
a title requirement is a function of management's evaluation of the problem and
whether it is willing to accept all attendant risks associated with the waiver.
An attorney does not waive title requirements. If a waiver was appropriate by the
examining attorney, the title require-
ment should never have been placed in
the title opinion in the first place. If a
title requirement is waived, definitionally the title cannot thereafter be deemed
marketable. At best, it would be classified as a defensible title. The examining
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Lan
Jinan
CURED TITLE OPINION
attorney can adjust the ownership schedule based on the client company's waiver
and protect himself or herself from liability with the appropriate limiting language and assumptions made based on
the waiver. For instance, if the title
requirement was to furnish the probate
materials for one of the potential mineral owners who died more than 80 years
ago, and the client believes that all
potential devisees have been located
and leased, it may elect to waive the
title requirement. The examining
attorney can then choose one of the
following:
Satisfaction of title requirement
The examining attorney, after
a review of the curative materials
submitted in connection with a
title requirement, may deem that
title requirement satisfied and, if
necessary, adjust the ownership
schedule accordingly.
Conditional satisfaction of title
requirement - The examining
attorney may have called for a
curative document involving an
affidavit such as an affidavit of
heirship. Definitionally, if an affidavit is involved in the curative
process, the quality of title is
diluted from marketable to at best
defensible.
It is up to the client company
to accept the risk that the facts
contained in the affidavit are
accurate and correct. The author
prefers to note such risk acceptance in the supplemental title
opinion. The examining attorney
may then note the appropriate
change(s) in the ownership
schedule assuming the risk decision by the client company was
an accurate one. The author has
personally made such title
requirements and was furnished
Tap Into Our Vast Reservoir
Of Oil And Gas Knowledge.
I"
affidavits of heirship. The clie-company made the decision tc
accept the facts contained in
affidavits. Unfortunately, in ms-,
than one instance, the heirshir
affidavits were wrong. Properly
identified risk decisions by th,
client company - and the
resultant incorrect assumpti,
the examining attorney based
those risk assumptions - relieves
the examining attorney from liability due to a poor management
decision to waive the title
requirement with the resultant
possibility of whole or partial
title failure.
How does the title attorney render a
supplemental title opinion (with
changes in ownership) where one or
more title requirements have been
waived? As previously discussed briefly,
with properly identified assumptions of
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32
November /
December 2011
Land in an
I
CURED TITLE
fact flowing from the waiver by the
client company, the examining attorney
can thereafter change the ownership
schedule to reflect such risk assumptions.
Risk Decisions by the Client
Company
What are the bases upon which
a client company may be justified
in waiving a title requirement? The
author has been able to classify four
distinct foundations upon which
a title requirement waiver may be
initially justified although ultimately
incorrectly made in hindsight.
Factual risk
A title requirement
can be waived where the facts are
unknown and can never be established. Example: Who were the heirs
of a party who died in 1850? No one is
alive today who can state with certainty who those heirs were. At best, the
records and family can only guess. The
risk assumed by the client company is
that the facts assumed by the client
company to be correct are ultimately
determined to be incorrect and one or
more mineral interests are unleased.
Legal risk - A title requirement
can he waived where the salient
facts surrounding a title requirement
are known, but the law on the subject matter is unclear. Example: The
application of the Duhig principle to
a factual situation, especially in
light of the numerous potential
exceptions to the rule. (See "Ding
Dong Duhig is Dead" by the author.)
Apparent risk - A title requirement can be waived where the
salient facts and/or law are known
and are against the waiver of the
title requirement. That is, if ever
discovered, title would fail. However,
the client company does not believe
that either the pertinent facts and/or
the application of the law against
it will ever take place - i.e., the
client company will never get
caught. An example is old title
problems such as heirship where
it is known that certain family
members did not participate in a
partition of the lands at issue.
OPINION
Money/Time - A title requirement
can be waived where its satisfaction
simply costs more than curing same
would yield. Closely associated with
the costs of curing is the time of
curing a title requirement. Where,
in the opinion of the client company,
the cost of curing a title requirement
exceeds the value of the loss or the
time associated with such curative
acts far exceed the yield to the
client company for curing same,
a client company may be justified
in waiving that title requirement.
Example: A small nonparticipating
royalty interest owner under a nondrillsite tract in a pooled unit cannot be found. If the costs of finding
such person far exceed what the
lessee believes will be the risk if the
owner were found and ratified the
unit, then the requirement could
reasonably be waived. The lessee's
liability would only be from the date
of ratification, not the date of first
production.
numerous other particular acts, particularly by the state of Texas, attesting that
the aforesaid line is as before stated, thus
is such line established as a matter of
law. Any other holding would impugn
the fidelity and integrity of each
Attorney General holding office in the
state of Texas, and so as to the Land
Commissioners. (Harris v. O'Connor,
185 S. W. 2d. 993 at page 1014 (Tex.
Civ. App. - 1944, no writ hist.).)
After the patent is drafted but before
it is delivered to the patentee, it must
be registered in the land office's patent
book. (Natural Resources Code §51.001
(Vernon 1985).)
If a patent is not issued according to
law and was not authorized by law nor
made under color of law, it is void and
those claiming under it acquire no title
or right. (State v. Sneed, 181 S. W. 2d.
983 (Tex. Civ. App. -1944).)
Patents are only required to be
recorded in the General Land Office.
Once recorded in the General Land
Office, their recordation is notice to
the world of the patent's existence.
Nonwaivable Requirements
(Mathews v. Caldwell, 258 S. W. 2d.
810 (Comm. Of App. - 1924).) Any
Patents
attendant documents that may assist in
the interpretation of a patent (or early
land grant) may not be filed for record
in the General Land Office unless such
deposition has been authorized by law.
(Landry v. Robinson, 219 S. W. 2d. 819
Patents, as distinguished from early
land grants, were instruments issued by
the Republic or state of Texas whereby
land was granted or conveyed by the
Republic or state to a grantee. Patents
are subject to the same rules as all written conveyances. That is, they must
comply with the Statute of Frauds and
adequately identify the grantor, grantee,
the estate being conveyed and properly
describe the lands made the basis of the
patent for them to be valid. Compliance
with the Statute of Frauds can be
deemed, even as a matter of law, where
a considerable period of time has
passed and the State and all surrounding
landowners have acquiesced in the title as
located on the ground. (Harris v.
O'Connor, 185 S. W. 2d. 993 (Tex. Civ.
App. - 1944, no writ hist).) Exactness
was difficult of attainment and should
not be insisted upon, to the destruction
of right ...... This answer is justified by
over 100 years acquiescence by the
Governments of Coahuila and Texas,
the Republic of Texas and the state of
Texas; not only by acquiescence, but by
(Tex. - 1920).)
The Fort Bend County Problem
Early one morning, the residents
owing land and homes in a survey located
in Fort Bend County, Texas, woke up to
find that they only owned two-thirds of
their surface estate and two-thirds of
their mineral estate. Since no case was
filed nor legal decision reached, the
author has only the following information furnished to him by the Fort Bend
County clerk. An oil company wanted
to drill on Blackacre. It commissioned
a fee simple title opinion for Blackacre.
One of the title requirements was to
obtain a copy of the Mexican land grant
on file with the General Land Office
despite the fact that a handwritten copy
of same was of record in the Fort Bend
County Deed Records. The copy of the
land grant obtained from the General
33
Landman
CURED TITLE OPINION
Land Office did, in fact, have noted in
the margin that one of the original
grantees had not performed his work
and residence requirements (condition
subsequent) and had in fact returned to
Tennessee. This marginal notation was
not found on the copy of the patent
found in the Fort Bend County Deed
Records. The marginal notation was evidently construed by the General Land
Office as an affirmative action, on the
part of the sovereign (Mexico), negating
the title of the noncomplying party
(undivided one-third interest).
After discovery of the marginal notation, the state of Texas, as successor-ininterest to Mexico, declared that an
undivided one-third interest in the
entire survey was and had always been
owned by the state of Texas. A constitutional amendment was passed allowing
the revesting of the title to the surface
estate. However, title today to the mineral estate (one-third) remains in the
state of Texas.
Curative Action - There is no
curative action that can be taken!
The original settler had an obligation
to remain on the land for a specific
period of time. Once he failed to perform that requirement, the sovereign
(state of Texas) had no choice but to
declare that title to the undivided onethird interest was forfeited and remained
vested in the sovereign. It cannot be
emphasized enough
adverse possession does not lie against the state of
Texas. (Harris v. O'Connor, 185 S. W.
2d. 993 (Tex. Civ. App. - 1944).)
In the author's opinion, each fee simple title opinion issued should require that
a copy of the complete patent or land
grant file in the General Land
Office be obtained and reviewed to confirm that all of the sovereign's title to the
survey in question has been properly conveyed. It must be remembered that the
copy of the patent found in the county
clerk's office, depending on its age, is
probably a handwritten copy of the
patent furnished to the patentee and is
not a copy of the patent that is filed in
the General Land Office. Since the filing
of the patent in the General Land
Office, as well as what marginal notes or
other materials are found in the patent
34
file, are notice to the world of their contents (Mathews v. Caldwell, 258 S. W. 2d.
810 (Comm. Of App. - 1924)), how
can any responsible client company elect
to waive a requirement that a copy of the
patent and any other pertinent documents found in the General Land Office
be obtained and reviewed? How can any
examining attorney fail to place such a
requirement in an original title opinion?
The author has no answers to the foregoing questions but can state that, even
where such a requirement is found in a
title opinion, it is inevitably waived.
Marketable title cannot be assured
until the requirement set out is put forth
in an original title opinion and has been
satisfied? In the author's opinion, unless
the requirement is satisfied, there
remains a possibility that there is/are one
or more facts located in the records of
the General Land Office which, as with
the survey located in Fort Bend County,
Texas, could cause the title to fail in
whole or in part. Result - the examining attorney cannot assure the client
company that marketable title exists
with the outstanding title requirement
remaining unsatisfied. Any problems
with the survey file, such as marginal
notations or other communications
found in the file, should be noted by the
title examiner. Where such title problems exist, marketable title cannot be
assured without additional acts of the
General Land Office or, in the worst
case, confirmatory litigation.
Use and Occupancy Affidavit
As a general proposition, an oil and
gas lessee is charged with notice of conditions on the ground that are readily
visible from an inspection of the surface
of the land at issue. (Madison v. Gordon,
39 S. W. 3d. 604 (Tex
2001).) For
instance, the existence of rivers, lakes,
streams, cemeteries, buildings, railroads,
roads, etc. can easily be found based on
an on-the-ground inspection. Equally
as important, parties in possession other
than the record title owner can only
be ascertained from an on-the-ground
inspection. Last, and most important,
confirmation that there are no producing oil and gas wells on the property at
issue can only be confirmed by an
inspection on the ground.
Two Examples
1. Company A decided to drill a
well in Montana. In fact, it did drill a
well and made a significant oil discovery. Later, after the well was completed,
the state of Montana called and congratulated Company A on its discovery.
It also asked Company A why it did
not get an oil and gas lease from the
state on the riverbed of the
Yellowstone River. The river had
moved avulsively (and thus titles did
not change), and the well was drilled
exactly in the middle of the abandoned
bed. A surface inspection of the drillsite tract would clearly have yielded
evidence of the former existence of a
river where the well was to be drilled.
2. Company A decided to drill a
well on Blackacre. Its geologist went
out on the wellsite when the well location was surveyed. He noted a producing well some 10 feet from the anticipated location that was separated by a
barb wire fence. He believed that the
well was on the same lease his well was
to be drilled on, and thus he said nothing to the company. The well came in
successfully. Unfortunately, the well
was on a different lease, and no Rule
37 had been obtained. The well was
shut in until appropriate damages were
paid to the adjacent operator.
This title requirement is uniformly
waived. Even if the client company
does not want to know any of the facts
identified above, it is certainly interested in keeping damages due to drilling
down to a minimum. It cannot do that
if it does not have photographic evidence of the condition of the land
before, during and after the drilling of
the well. This can only be obtained by
an actual visual and photographic
record of the drillsite tract.
Ask Company A if it wished it had
done a surface inspection. With millions of dollars in drilling costs and
even more millions in anticipated revenues, it only makes sense to eliminate
as many risks as possible. The requirement of an affidavit of use and occupancy based on an actual surface
inspection of the lands at issue should
never be waived.
Xovernber / December 2011
Landman
CURED TITLE OPINION
AFFIDAVITS
General Principles
As alluded to previously in this article,
affidavits are governed by several important principles. Failure to follow these
principles leaves the party relying on same
with the possibility that the affidavit,
although containing significant and
important information, may not be
admissible in a future court proceeding.
The single most important decision
that must be made by the examining
attorney
and company representative is
he purpose(s) for which the affidavit is
being taken. If it is never to be introduced
mto evidence for any title purpose, why
=o to the trouble to take the affidavit in
the first place? Why nor reduce the facts
to writing and submit them to the examining attorney for review with the caveat
htat the client will have to assume all risk
that the facts, as submitted, are correct?
The validity or invalidity of a particu_ r affidavit, depending on the circumstances under which the relying party is
attempting to use same (admission into
evidence; basis for summary judgment;
erliance upon for title purposes, etc.),
_ften turns on the use of "magic words,"
=e absence of which can lead to less
_an a desirable result. The following is
discussion of a sampling of Texas case
on various clauses and phrases as
_Il as the legal issues that arise from
-.e use or lack of use of certain "magic
_Js" in affidavits. The rules of evi__-Ce and admissibility of affidavits are
-serous and varied. What the author
tried to do is summarize the major
s in affidavit drafting that could lead
..rectly to the inadmissibility of any affi.iavit in a subsequent title suit. Stated
zother way, why take what will be an
=admissible affidavit when, with a little
ck and forethought, a "title curative
affidavit" can stand in futuro as an
a rissible affidavit in a litigation setting if
anLi when needed? If an affidavit is called
by the examining attorney for curapurposes, the client company is well
iced to consult with the examining
ey to confirm that the facts necesfor review have to be contained in
affidavit form. If so, why not have the
ining attorney draft the affidavit to
e that it can be used for the purposior which the attorney intends?
g is more disappointing than
b�n-e an affidavit, and its important
be deemed inadmissible in a case
ing title where the affiants are now
br / December 2011
deceased. Where to get those facts now?
With the foregoing in mind, the author
offers the most significant problems with
the admissibility of affidavits after their
execution in a brief summary format.
"Personal knowledge," "True and
correct" ("magic words") - The failure
to use the term "personally within knowledge of affiant" properly in an affidavit is,
in a trial setting, a defect in form that
must be objected to and the objection
preserved for appeal if the affidavit sought
to be admitted into evidence is objected
to by the opposing side. Failure to object
to the affidavit's admission for use of the
words "on information and belief," "verily
believes," etc. and the admission of the
affidavit into evidence without such
objection will cause the objection
to be waived. (Choctaw Properties LLC v.
Aledo ISD, 127 S.W.3d 235 (Tex.App. Waco 2003). See also Rizkallah v. Conner,
952 S.W.2d 580, 585 (Tex.App. Houston [1 Dist.] 1997).)
"The affiant must positively and
unqualifiedly represent the `facts' ... disclosed in the affidavit to be true and within his personal knowledge." (Brownlee,
665 S.W.2d at 112.[2]). Even though Tex.
R. Civ. P 145 contains specific language
to be used in affidavits, the cases cited
above have not held that those magic
words are the keystone of this review, but
instead appraise whether the affirmation is
such as to show that the statements are
based on the affiant's personal knowledge
and whether the statement is so positive as
to allow perjury to lie. (Teixeira v. Hall, 107
S.W.3d 805, 809 (Tex.App.
Texarkana 2003).)
In the context of a summary judgment affidavit, courts have uniformly
held that affidavits which are based on
the affiant's best knowledge and belief
do not meet the strict requirements of
Rule 166a - they must state facts, not
belief. Thus, such affidavits are held to
constitute no evidence. (Teixeira v. Hall,
107 S.W.3d 805, 809 (Tex.App.
Texarkana 2003).)
An affidavit which does not positively
and unqualifiedly represent the facts as
disclosed in the affidavit to be true and
within the affiant's personal knowledge
is legally insufficient. (Brownlee v.
Brownlee, 665 S.W2d 111, 112 (Tex.
1984); Burke v. Satterfield, 525 S.W2d
950, 955 (Tex. 1975).) The affidavits
before us state that the affiant's statements are based on his "own personal
knowledge and/or knowledge which he
has been able to acquire upon inquiry"
and, hence, fail to unequivocally show
that they are based on personal knowledge. Additionally, the affidavits provide
no representation whatsoever that the
facts disclosed therein are true. Because
of these defects, the affidavits are legally
invalid and cannot serve as evidence in
support of State Farm's claims of privi-
lege. (Humphreys v. Caldwell, 888 S.W2d
469, 470 (Tex. 1994).)
It is well settled law in this state that a
controverting affidavit containing such
words as "on information and belief,"
"knowledge and belief," "verily believes,"
"good reason to believe" and "believes to
be true" are fatally defective. However,
no court has ever condemned the use
of the term "to his best knowledge."
The term "within my knowledge" was
approved in Coker v. Audas Inc., 385
S.W.2d 862 (Tex.Civ.App., Texarkana,
1964, no writ). (See also Knipe v. Rector,
463 S.W2d 769 (Tex.Civ.App., Fort
Worth, 1971, no writ) and Rice v.
Tucson Credit Union, 413 S.W.2d 833
(Tex.Civ.App., Texarkana, 1967, no
writ).) It is the use of the word "believe"
which is found to be objectionable by
our appellate courts. The words "believe"
and "knowledge" or "best knowledge" do
not have the same meaning. (industrial
State Bank of Houston v. Wylie, 493
S.W2d 293, 295 (Tex.Civ.App.
Beaumont 1973).)
Apparently, for an affidavit to be
admitted into evidence, the test for its
admissibility is whether it is based on the
personal knowledge of the affiant such
that, if the facts have been deliberately
misrepresented, the affiant could be liable
for perjury.
Competency of the affiant: How the
affiant came to know the facts - It is
not enough that an affidavit shows that
the facts are within the personal knowledge of the affiant. In addition, the affiant must demonstrate how and under
what circumstances he or she obtained
knowledge of the facts and why he or
she is qualified to make such an affidavit. For instance, many affidavits of
use and occupancy reviewed by the
author for curative purposes contain a
metes and bounds description of the
property under examination and/or a
plat of same. Nowhere in the affidavit
is it stated that the affiant surveyed the
property, caused the plat to be made nor
how the affiant can state that both or
either is accurate. Only the surveyor could
37
Landman
CURED TITLE OPINION
swear or testify as to the accuracy of a
metes and bounds description or survey
plat, thus raising a substantive issue of
admissibility of the entire affidavit into
evidence. It should be noted that failure
to object to the admissibility of an affidavit due to a lack of competency on the
part of the affiant results in the waiver of
the defect.
Many affidavits reviewed by the
author contain the following statement:
"Statements of fact and conclusions
based on those facts personally within
knowledge of affiant." Almost all of the
affidavits whose admissibility was controverted and were reviewed by the
author contained an identical or similar
provision. The provision is an attempt to
establish competency of the affiant as to
the facts and conclusions recited in the
affidavit by the affiant. Such a statement, standing alone, will not establish
competency of the affiant.
An affidavit must affirmatively show
how the affiant became personally familiar
with the facts so as to testify as a witness,
and a self-serving recitation of such does
not satisfy the requirement. (Villacana v.
Campbell, 929 S.W.2d 69, 74 (Tex.App.
- Corpus Christi 1996, writ denied).
Goggin v. Grimes, 969 S.W2d 135, 138
(Tex.App. - Houston [14 Dist.] 1998).)
Who is the affiant? How did he or she
come into possession of the "facts" found
in the affidavit? If an affidavit is to be
relied on for title purposes, it simply
must be based on facts personally ascertained by the affiant. Otherwise, the affidavit will not be admitted into evidence
for the purposes for which it was taken.
Conclusive statements - "One
of the most often raised (and granted)
objections to the introduction of an
affidavit into evidence is that the affiant
stated conclusions of law or fact and
did not state or premise any such conclusions on the actual facts at issue. A
conclusory statement, either of the facts
or the law, where there are no underlying facts to support the conclusion, is
a defect of substance and may be raised
for the first time on appeal. This is to
be distinguished from a defect in form
where the objection is deemed waived
if it is not raised at the time the affidavit
is sought to be admitted into evidence."
(Churchill v. Mayo, 224 S.W3d 340, 347
(Tex.App. - Houston [1st Dist.] 2006).)
The rationale for such a rule is
premised on the theory that, if an actual trial was being held and the affiant
38
testified with conclusions only, wholly
omitting from his/her testimony any
facts upon which the conclusion(s) were
based, a court would have no choice but
to disallow such testimony. The law is
clear
conclusions are permitted by
affiants. However, they must be
premised on full and complete facts that
lead logically to the conclusion, especially if the conclusion is one of law.
The objection that a statement is
"conclusory" is an objection that is frequently made to challenge affidavits in
summary judgment cases. (Johnson v.
Bethesda Lutheran Homes & Servs., 935
S.W2d 235, 239 (Tex.App. - Houston
[1st Dist.] 1996, no writ.) (Hedges, J.,
concurring).) There is much confusion
about what this objection means. It does
not mean that logical conclusions based
on stated underlying facts are improper.
That type of conclusion is proper in
both lay and expert testimony. What is
objectionable is testimony that is nothing more than a legal conclusion.
(Anderson v. Snider, 808 S.W.2d 54, 55
(Tex.1991); Brownlee v. Brownlee, 665
S.W2d 111, 112 (Tex.1984).) To allow
such testimony is to reduce to a legal
issue a matter that should be resolved by
relying on facts. Statements of legal conclusions amount to little more than the
witness choosing sides on the outcome of
the case. (Mowbray v. State, 788
S.W.2d 658, 668 (Tex.App. - Corpus
Christi 1990, pet. ref'd). 952 S.W.2d 580
(Tex.App. - Houston [1 Dist.] 1997).)
(Rizlallah v. Conner, 952 S.W.2d 580,
587 (Tex.App. - Houston [1 Dist.]
heirs-at-law of the deceased fee si-_- mineral owner of the drillsite tract
course, after the well was drilled a-._
completed, making 2 million cubic a day, the fourth "child" came for.:
When confronted, the affiant statehe just knew his mother would ncwanted his sibling to have any in- in the "old homestead." Thus, n, -tion was made in the affidavit of _:undivided one-fourth unleased
under the drillsite tract. Ultimate
issue becomes whether the affiant
interested party in the subject mar
the affidavit. If so, a self-serving a,
is inadmissible on a trial of the ma-for which it was issued under the
rule. (Fenley v. Ogletree, 277 S.W.=_
144 (Tex.Civ.App. - Beaumont
Many corroborating affidavits a-often flawed as well in that they,-,--.
deliver conclusory statements. Thathe affidavit issued by the corrobo-:
affiant usually states that the affiar-- sonally knows the facts and conclu
made in the main affidavit to be t-.and correct. Without a full renditi_
the facts and circumstances of wh'. how the affiant knows the facts cc
tained in the main affidavit to be -the corroborating affidavit is of n�
import and will not serve to make
admissible the affidavit of the inte-_ party. More importantly, if the parr
ing the corroborating affidavit is fawith the facts such that he can co-.- the main affidavit, why shouldn't -_.
party give the main affidavit to th,
exclusion of the interested party'
1997).)
Interested Person
The first
instruction the author received from
his mentors in writing title opinions
and requesting curative documents was
to never, never allow a family member or
interested party give the affidavit in the
absence of a corroborating affidavit by a
disinterested third party. The why had a
two-part answer. First, and foremost, in
the absence of a corroborating affidavit,
the family member or affiant, especially
in heirship and family history affidavits,
is probably an interested party. As such,
the affidavit, and its contents, may very
well be inadmissible in later cases where
the heirship or family history is an issue.
Second, family members tend to see
"heirship" in a less than legal fashion.
For example, in one case, the family
member only listed three children in the
heirship affidavit as being the intestate
TRESPASS TO TRY TITLE
Making the Unmarketable Title
Marketable
If a title to a tract of land is de-unmarketable due to outstanding ,
unsatisfied title requirements, can title be made marketable via the •
cial process? Yes, a marketable tit'
be reached and reached in every ti--opinion rendered. It was not too lc- _
ago, at the beginning of the author-legal career, that all wells were drill under titles found by the examinin_
attorney to be marketable titles. H,
By the utilization of the Trespass T.-Title lawsuit (TTT Lawsuit) (Proper
Code §22.001 et seq. (Vernon 1985
Jr was, in the past, more than r: _
tine, where outstanding title requ-_
ments called for information which
November / Decembc-
Lan din an
CURED TITLE
OPINION
rendering of title opinions well in
advance of spud date (at least six
months). However, the term "business
risk" had little meaning where a judgment confirming the marketable title
to the oil and gas mineral estate in the
client company's lessor(s) was confirmed
via judicial decision.
At some point in time, oil and gas
companies dropped the TTT Lawsuit as
a method of title assurance and turned
to management title risk decisions to
speed up the title opinion process. There
is no doubt that such a decision process
allows the client company to delay title
examination until the last moment with
whatever resultant title examination
could never be completely verified,
and thus would continually expose the
client company to potential liability
(leasing the wrong party or not leasing
enough of the correct parties) to have
the law department bring a TTT Lawsuit.
Invariably, in less than 5 percent of the
cases (the author's estimate), one of
the problematic parties responded to
the litigation. Such response affirmed
the validity of the filing of the litigation as well as provided the opportunity for the client company to lease such
parties' interests via protection leases.
After the litigation was affirmatively
concluded, usually with no opposition,
the client company was assured that its
leasehold title to the oil and gas leasehold estate was good as against the
world. Is this kind of assurance expensive? No, not where the litigation was
unopposed. Where opposed, the rationale was that the litigation would have
taken place anyway but after the drilling
of a successful well.
Was the litigation time consuming?
No, not unless opposed. It did require
advance contingency planning and the
savings may occur where a title opinion
is rendered but not needed. Thus, apparently a balancing decision has been
made: sacrificing a marketable title for
a cost savings in unused title opinions.
Given that hundreds of thousands of
dollars are already committed and spent
developing an oil and gas prospect and
that up to several million dollars will be
spent in drilling and developing same, the
potential loss of 55,000 to $10,000 per
unused opinion does not, in the author's
opinion, appear to be warranted. How
much is it worth to know, with absolute
certainty, that the correct party has been
leased and that no past ancient title problems can come back, after the discovery of
oil and gas, to haunt the client company'
Be assured, ancient title problems are still
being litigated today. Problems that no
one thought could or would ever see the
light of day are, when large deposits of oil
and/or gas are found, being brought and,
at the least, subjecting the client company
to uncertainty in its title, and in some
cases, loss of lease and revenue.
All of the curative actions above
described require the obtaining of information and review of same by the examining attorney. The information
obtained is subject to being challenged
by any interested party and is not conclusive nor binding on any third party
without judicial intervention. Even with
the delivery of the called for information, the examining attorney cannot
render a final supplemental title opinion
which recites that marketable title is
vested in the parties enumerated in the
am
II
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CURED TITLE OPINION
ownership section of the title opinion.
That is, as long as the factual information remains judicially unconfirmed,
there still remains a risk of litigation
based on (1) a reasonable chance that a
third party could raise an issue concerning the validity of the title to the estate
against the apparent owner; (2) the quality of the parol evidence necessary to
remove any doubt as to the validity
and/or sufficiency of the owner's title
could be contested; (3) the presumption
of fact which, in the event of a suit contesting title, would probably become an
issue of fact to be decided by a jury would
still remain; or (4) the record discloses
outstanding interests in other parties that
could reasonably subject the owner to litigation or compel such owner to resort to
parol evidence to defend the title against
the outstanding claims. In Texas, the only
judicial method of confirming marketable
title in and to a tract of land, where there
are outstanding title problems that render
the title unmarketable, is to utilize the
trespass to try title statute (Property Code
§22.001 et seq (Vernon 1985).)
THE JUDICIAL PROCESS
The purpose of the TTT Lawsuit is to
provide the exclusive method of confirming and vesting title to real property. (Hill
v. Preston, 34 S. W. 2d. 780 (Sup. Ct.
1931).) The cause of action provides a procedure whereby all claimants to the title
may be adjudicated and possession vested
("title as against the world"). (El Paso v.
Long, 209 S. W. 2d. 950 (Tex. Civ. App. 1947, writ ref'd n.r.e.) and Slattery v.
Adams, 279 S. W 2d. 445 (Tex. Civ. App.
- 1955, no writ hist.).) Any final judgment rendered in such an action is conclusive as to the title and right of possession
against all persons claiming from, through
or under the person(s) against whom the
judgment is rendered. That is, the judgment is conclusive of all adjudicated claims
to the land or claims that could have been
set up by the losing party. (Zapeda v. Rahn,
48 S. W. 212 (Tex. Civ. App.
1898, writ
ref'd.) and Pennington v. Pennington, 145 S.
W. 2d. 688 (Tex. Civ. App.
1940, no
writ hist.).)
TTT Lawsuit is a procedure by which
rival claims to title or right of possession
may be adjudicated. (King Ranch Inc. v.
Chapman, 118 S.W.3d 742, 755 (Tex.
2003).) To recover in a TTT Lawsuit, the
plaintiff must recover upon the strength of
his own title. (Rogers v. Ricane Enter. Inc.,
884 S.W2d 763, 768 (Tex. 1994).)
The plaintiff may recover (1) by proving
40
a regular chain of conveyances from the
sovereign, (2) by proving a superior title
out of a common source, (3) by proving
title by limitations or (4) by proving prior
possession and that the possession has not
been abandoned. (Ruiz v. Stewart Mineral
Corp., 042806 TXCA12, 120500160.)
When the pleadings and evidence show
that the dispute between the parties
involves a question of title, the trespass to
try title statute governs the substantive
claims. See Martin v. Amerman, 133
S.W.3d 262, 267 (Tex. 2004); see also Ely
v. Briley, 959 S.W.2d 723, 727 (Tex. App.
- Austin 1998, no pet.) (Trespass to try
title is the exclusive remedy by which to
resolve competing title claims to property). (Ruiz v. Stewart Mineral Corp., 202 S.
W. 3d. 242 (Tex. Civ. App.
2006).)
The case of Martin v. Amerman, 133
S.W.3d 262, 267 (Tex. 2004) is one of the
definitive, modem Texas cases that outlines
the general characteristics of the TTT
Lawsuit. As a title curative tool, it is the
ultimate methodology of assuring the client
company that the title to the mineral
estate, which it leased, is vested in its lessors
and is a title that is good as against the
world. The following quotes will explain
the general tenets of the TIT Lawsuit such
that the reader can readily recognize when
the filing of same is appropriate.
In this case we must decide whether a
trespass-to-try-title action is the exclusive
means to resolve a dispute between neighbors over the proper location of a boundary line separating their properties, or
whether a declaratory judgment action is
also an appropriate way. We hold that the
Texas trespass-to-try-title statute governs
the parties' substantive rights in this
boundary dispute and that they may not
proceed under the Texas Declaratory
Judgments Act to recover attorney's fees.
(Martin v. Amerman, 133 S.W3d 262, 267
(Tex. 2004).)
The Declaratory Judgments Act provides an efficient vehicle for parties to seek
a declaration of rights under certain instruments, while trespass-to-try-title actions
involve detailed pleading and proof
requirements. (See Tex.R. Civ. P. 783809.) To prevail in a trespass-to-try-title
action, a plaintiff must usually (1) prove a
regular chain of conveyances from the sovereign, (2) establish superior title out of a
common source, (3) prove title by limitations or (4) prove title by prior possession
coupled with proof that possession was not
detailed and formal, and require a plaintiff
to prevail on the superiority of his title,
not on the weakness of a defendant's title.
(Land, 377 S.W2d at 183.) (Martin v.
Amerman, 133 S.W.3d 262, 267 (Tex.
2004).)
For the foregoing reasons, we again
decline to recognize a substantive distinction between title and boundary issues,
this time for the purpose of allowing alternative relief under the Declaratory
Judgments Act. We conclude, as did the
court of appeals, that the trespass-to-trytitle statute governs the parties' substantive claims in this case. The statute
expressly provides that it is "the method
for determining title to ... real property."
(Tex. Prop. Code 22.001(a); see Ely v.
Briley, 959 S.W.2d 723, 727 (Tex. App.
Austin 1998, no pet.); Kennesaw Life &
Accid. Ins. Co. v. Goss, 694 S.W.2d 115,
118 (Tex.App. Houston [14th Dist.] 1985,
writ ref'd n.r.e.).) Accordingly, the Martins
may not proceed alternatively under the
Declaratory Judgments Act to recover
their attorney's fees. (Martin v. Amerman,
133 S.W.3d 262, 267 (Tex. 2004).)
Title examination attorneys do not
make the risk decisions underlying curing
or waiving title requirements. However, it
is not an excuse that management cannot
plan ahead such that drillsite tract title
examination cannot be concluded with
enough time prior to lease expiration to file
a TTT Lawsuit. Severe and potentially
large title losses do not have to take place.
They can be judicially prevented via the
use of the TTT Lawsuit.
About the Author:
Terry E. Hogwood, an attorney, runs
a solo oil, gas and title-related practice in
Houston, providing legal advice for oil and
gas clients covering both onshore and offshore
legal matters. He also renders day-to-day
legal advice on lease maintenance problems,
operating agreements, farm-ins and farm-outs
and drilling agreements with heavy emphasis
on Texas title matters including the rendering
of stand-up title opinions. He is a member
of the Houston Association of Petroleum
Landmen and AAPL, receiving AAPL's
Education Award in 1993. A member of
the Texas Bar Association, he served as
founder and first chairman of the Oil, Gas
and Mineral Law Section of the Houston Bar
Association. Hogwood received his bachelor's
degree from Texas A&M and his J.D. from
Baylor Law School.
abandoned. (Plumb, 617 S.W.2d at 668
citing Land v. Turner, 377 S.W2d 181, 183
(Tex.1964).) The pleading rules are
November/December 2011