sjdocs-#6315895-v1-curing title · pdf file... an affidavit from a disinterested person ... an...

Curing Title DefectsCuring Title Defects

Presented byDuncan Strickland

AndAndGiustina Persich

Inexperienced

Pompous

Lawyer Cares About Client

Two Faced

The Oil and Gas Lease is signed by only one spouse and the record indicates the covered property is the

it t f b thcommunity property of both spouses

The Title Attorney wants:The Title Attorney wants:a) A Ratification Agreement executed by thenon signing spouse which ratifies adopts andnon‐signing spouse which ratifies, adopts andconfirms the oil and gas lease signed by theother spouseother spouse.

Concern:Unleased interest.

Waive?

One or More of the Property Owners Are MarriedAre Married

The Oil and Gas Lease is signed by only one spouse and there is no i di ti f h th th t i it tindication of whether the property is community or separate

The Title Attorney wants:a) An investigation to determine whether or not any portion of theSubject Property is the Homestead of the spouses and/orSubject Property is the Homestead of the spouses and/or,b) An Affidavit from a disinterested person stating whether eitherspouse used or occupied the Subject Property as homesteadc) If the answer to either a) or b) is yes: A Ratification Agreementc) If the answer to either a) or b) is yes: A Ratification Agreementexecuted by the non‐signing spouse which ratifies, adopts andconfirms the lease.

Concerns:Unleased Interest

Waive?

One or More of the Property Owners Are MarriedAre Married

The Oil and Gas Lease is signed by both spouses, but theproperty appears to be the separate property of only onespouse.Title Attorney wants:

a) An investigation to determine whether or not anyportion of the of the Subject Property is the Homestead ofthe spouses;b)If the answer to a) is no: An Affidavit executed by thenon‐owner spouse which disclaims any Homestead rightsin and to the Subject Property.j p y

Concerns: Lease into a Stranger in Title

Waive?Waive?

Co‐Tenancy

Husband and Wife buy a piece of property along with a third party. TheG t d t if th i hi i t t i th D d All thGrantees do not specify their ownership interest in the Deed. All threeparties sign the same oil and gas lease. Do all parties own a 1/3interest each in the property? Or do the husband and wife own a ½interest together as community property and the other party owningg y p p y p y gthe remaining ½ interest in the property?Title Attorney wants

a) A Stipulation of Interest Agreement executed by all threeparties, which stipulates to their individual ownership interest inthe property

Concerns:I f l iIncorrect payment of royalties

Waive?

Prior Oil and Gas Leases

There are numerous oil and gas leases covering the Subject Property whoseprimary terms have expired due to time There are no releases of these leasesprimary terms have expired due to time. There are no releases of these leasesin the abstract.Title Attorney wants:

a) An Affidavit of Non‐Production from two or more disinterested and)credible witnesses having personal knowledge of the history of productionof oil, gas and other hydrocarbons from the Subject Property;b) Obtain information from the Railroad Commission of Texas regardingwells located on Subject Property and lands pooled therewith (if thewells located on Subject Property and lands pooled therewith (if thelease(s) provided for pooling), including the production history of suchwells, including whether or not these wells are plugged, or are activelyproducing.

Concerns:Concerns:Leasing the correct parties

Waive?

Life Estates / Open Mine Doctrine

Surviving spouse owns a life estate in the Subject Property. Her soni d i t t i th t S i iowns a remainder interest in the same property, Surviving spouse

executes an oil and gas lease covering the land, but the son does notexecute the lease nor any other lease covering the land.Title Attorney wants:Title Attorney wants:

a) A Ratification Agreement executed by the son which ratifies,adopts and confirms the oil and gas lease signed by his mother;b) A Stipulation of Interest between the two parties outlining theb) A Stipulation of Interest between the two parties outlining themanner in which the royalty payments should be disbursed.

Concern:Unleased Interest

Waive?

Tax Certificates

There are no Tax Certificates in the abstractTitle Attorney wants:

a) Obtain from all taxing authorities in the County that cover theSubject Property, Tax Certificates which show the status of thepayment of county state school and other pertinent ad valorempayment of county, state, school and other pertinent ad valoremtaxes assessed against Subject Property; for all years up to andincluding the end of the year in which the subject lease was filed ofrecordb) Should any taxes remain unpaid, ensure these taxes are paid.

Concerns:Subject Property being sold at tax sale.j p y gTaxes/liens being superior to leases

Waive?

Title cannot be traced back to a date where ownership was granted by a sovereignownership was granted by a sovereign

• Title Attorney wants:– Affidavits of Use and Possession from two or moredisinterested people (who would be available to be calledas a witness) with personal knowledge of the use,

i d l i f h l d f hpossession, occupancy, and claims of the land for the pasttwenty‐five years

– Mineral Classification Letter from the Texas GLO• Concerns

– Adverse Possession (longest SOL is 25 years in Texas)– Prior reservation of mineralsPrior reservation of minerals– Mineral classification of the land

• Waive?

Scenarios ‐ Affidavit

• Title can be traced back to 1920 and no earlierTitle can be traced back to 1920 and no earlier conveyance of the Subject Land can be found.


• Title can be traced back to 1920 and no earlierTitle can be traced back to 1920 and no earlierconveyance of the Subject Land can be found.

• Title can be traced back to 1920 and no earlier• Title can be traced back to 1920 and no earlierconveyance of the Subject Land can be foundand the minerals were reserved in aand the minerals were reserved in aconveyance dated Sept. 28, 1941.


• Title can be traced back to 1920 and no earliert e ca be t aced bac to 9 0 a d o ea econveyance of the Subject Land can be found.

• Title can be traced back to 1920 and no earlierconveyance of the Subject Land can be found andthe minerals were reserved in a conveyanced t d S t 28 1941dated Sept. 28, 1941.

• Title can be traced back to 1920 and no earlierconveyance of the Subject Land can be found andconveyance of the Subject Land can be found andthe minerals were leased on Sept. 28, 1941, and awell was drilled shortly thereafter.y


• Title can be traced back to 1920 and no earlierconveyance of the Subject Land can be found.

• Title can be traced back to 1920 and no earlierconveyance of the Subject Land can be found and theconveyance of the Subject Land can be found and theminerals were reserved in a conveyance dated Sept.28, 1941.

• Title can be traced back to 1920 and no earlier• Title can be traced back to 1920 and no earlierconveyance of the Subject Land can be found and theminerals were leased on Sept. 28, 1941, and a well wasdrilled shortly thereafterdrilled shortly thereafter.

• Title can be traced back to 1900 and no earlierconveyance of the Subject Land can be found.


• Title can be traced back to 1920 and no earlier conveyance of theS bj t L d b f dSubject Land can be found.

• Title can be traced back to 1920 and no earlier conveyance of theSubject Land can be found and the minerals were reserved in aconveyance dated Sept 28 1941conveyance dated Sept. 28, 1941.

• Title can be traced back to 1920 and no earlier conveyance of theSubject Land can be found and the minerals were leased on Sept.28, 1941, and a well was drilled shortly thereafter that produced for20 years before it was plugged.

• Title can be traced back to 1900 and no earlier conveyance of theSubject Land can be found.Ti l b d b k 1859 d li f h• Title can be traced back to 1859 and no earlier conveyance of theSubject Land can be found.

Title cannot be traced back to a date where ownership was granted by a sovereignownership was granted by a sovereign

• Title Attorney wants:– Affidavits of Use and Possession from two or moredisinterested people (who would be available to be calledas a witness) with personal knowledge of the use,

i d l i f h l d f hpossession, occupancy, and claims of the land for the pasttwenty‐five years

– Mineral Classification Letter from the Texas GLO• Concerns

– Adverse Possession (longest SOL is 25 years in Texas)– Prior reservation of mineralsPrior reservation of minerals– Mineral classification of the land

• Waive?

Scenarios – Mineral Classification

• Patent was issued prior to 9‐1‐1895.– Mineral Release Act of 1895

• Land was sold prior to 9‐1‐1895 but Patent pursuant to thesale was not issued until after 9‐1‐1895.– Witherspoon v. Green, 274 S.W. 170 (Tex. Civ. App. 1925)

• Patent was issued between 9‐1‐1895 and 6‐29‐1931.– Mining Act of 1895 ‐ “all school asylum and public lands”Mining Act of 1895 all school, asylum, and public lands– Relinquishment Act of 1919 – public lands with a mineral

classification• Patent was issued after 6‐29‐1931Patent was issued after 6 29 1931.

– Sales Act of 1931– Wintermann v. McDonald, 129 Tex. 275, 102 S.W.2d 167, reh’g

denied, 129 Tex. 286, 104 S.W.2d 4 (1937)denied, 129 Tex. 286, 104 S.W.2d 4 (1937)

Deeds of Trust, mortgage, mechanic’s liens and materialman’s liensliens, and materialman s liens

• Title Attorney wants:Title Attorney wants:– A release, or– a subordination of the lien (subordinating its– a subordination of the lien (subordinating itssecured interest in the land to the lessee’s interestin the lease))

• Concerns– Foreclosure of the lien could interfere with theForeclosure of the lien could interfere with thelease

• Waive?Waive?

Scenarios ‐Mortgages

• Lease was executed Jan 1 2010 Lien wasLease was executed Jan. 1, 2010. Lien wasexecuted in 2000 and is a 30‐ year mortgage(last payment is due 1‐1‐2030)(last payment is due 1 1 2030).


• Lease was executed Jan 1 2010 Lien wasLease was executed Jan. 1, 2010. Lien wasexecuted in 2000 and is a 30‐ year mortgage(last payment is due 1‐1‐2030)(last payment is due 1 1 2030).

• Lease was executed Jan. 1, 2010. Lien wasexecuted in 1978 and is a 30 year mortgageexecuted in 1978 and is a 30‐ year mortgage(last payment is due 12‐31‐2008).

Texas Civil Practice and Remedies CodeCode

• Section 16.035 states that an action for foreclosure of ad ’ d d f l h ’vendor’s, mortgage, deed of trust, or voluntary mechanic’s

and materialman’s lien must be instituted, or a sale madeunder a power of sale in a mortgage or deed of trust, withinfour (4) years after the cause of action accruesfour (4) years after the cause of action accrues.

• Exceptions:– Section 16.062 provides for a suspension of the statute oflimitations for 12 months after the death of either thelimitations for 12 months after the death of either thedebtor or the lender.

– Section 16.036 provides that a properly executed andrecorded extension of the real property lien will keep therecorded extension of the real property lien will keep thelien in effect for four years after the extended maturitydate of the debt


• Lease was executed Jan. 1, 2010. Lien was executed in2000 and is a 30‐ year mortgage (last payment is due 1‐1‐2030).

• Lease was executed Jan. 1, 2010. Lien was executed inLease was executed Jan. 1, 2010. Lien was executed in1978 and is a 30‐ year mortgage (last payment is due12‐31‐2008).

• Lease was executed Jan 1 2010 Lien was executed in• Lease was executed Jan. 1, 2010. Lien was executed in1980 and is a 30‐ year mortgage (last payment is due12‐31‐2010). However, a “First Amended Deed ofTrust” was executed Jan 15 2013 that replaced theTrust was executed Jan. 15, 2013 that replaced theoriginal lien of $5 million with one of $10 million andprovided for payments for the next 30 years.


• Lease was executed Jan. 1, 2010. Lien was executed in 2000 and is30 t (l t t i d 1 1 2030)a 30‐ year mortgage (last payment is due 1‐1‐2030).

• Lease was executed Jan. 1, 2010. Lien was executed in 1978 and isa 30‐ year mortgage (last payment is due 12‐31‐2008).

• Lease was executed Jan 1 2010 Lien was executed in 1980 and is• Lease was executed Jan. 1, 2010. Lien was executed in 1980 and isa 30‐ year mortgage (last payment is due 12‐31‐2010). However, a“First Amended Deed of Trust” was executed Jan. 15, 2013 thatreplaced the original lien of $5 million with one of $10 million andprovided for payments for the next 30 years.

• Lease was executed Jan. 1, 2010. Lien was executed in 1975 and isa 30‐ year mortgage (last payment is due 12‐31‐2005) and there isno recorded extension of said lien and your company is not the lienno recorded extension of said lien and your company is not the lienholder.

Heirs of a decedent cannot be determined or founddetermined or found

• Title Attorney wants:t e tto ey a ts:– Certified copies of the proper probate oradministration of the estate of decedent or

– Affidavit of Heirship and Stipulation of Interest– Receivership Lease

• Concerns– Not knowing who owns what– Not having 100% of minerals under lease

• Waive?

Scenarios – Missing Heirs

• Mr Adams died in 2000 at the age of 59 NoMr. Adams died in 2000, at the age of 59. Noprobate or administration of the estate ofdecedent can be found but an instrumentdecedent can be found, but an instrumentwas found containing a recital that he hadseveral adult children when he died Alsoseveral adult children when he died. Also,two people executed separate leases with a 3year primary term with another oil and gasyear primary term with another oil and gascompany in 2008, but the leases have sinceexpiredexpired.


• Mr. Adams died in 2000, at the age of 59. No probateor administration of the estate of decedent can befound, but an instrument was found containing arecital that he had several adult children when hedied. Also, two people executed separate leases with a3 year primary term with another oil and gas companyin 2008, but the leases have since expired.p

• If additional research doesn’t produce any results,then a receivership lease may be sought under Section64 091 of the Texas Civil Practice and Remedies Code64.091 of the Texas Civil Practice and Remedies Codeand the bonus and royalty must be paid into the clerkof the court.


• Mr. Adams died Jan. 1, 2000, at the age of 59. No probate oradministration of the estate of decedent can be found, but aninstrument contained a recital that he had several adult children whenhe died. Two people executed separate leases with a 3 year primaryterm with another oil and gas company in 2008, but the leases havesince expired.

• Additional research determined that he had four adult children, in,total, when he died, including the two who previously signed leases.


• Mr. Adams died Jan. 1, 2000, at the age of 59. No probate oradministration of the estate of decedent can be found, but aninstrument contained a recital that he had several adult children whenhe died. Two people executed separate leases with a 3 year primaryterm with another oil and gas company in 2008, but the leases havesince expired.

• Additional research determined that he had four adult children, in,total, when he died, including the two who previously signed leases.– Two options:

• Still do a receivership lease and have the bonus and royalty paid into the clerk ofthe court.

• Sign the two children you know to leases and…– treat the rest as nonleasing co‐tenants?


• Mr. Adams died Jan. 1, 2000, at the age of 59. No probate oradministration of the estate of decedent can be found, but aninstrument contained a recital that he had several adult children whenhe died. Two people executed separate leases with a 3 year primaryterm with another oil and gas company in 2008 but the leases haveterm with another oil and gas company in 2008, but the leases havesince expired.

• Additional research determined that he had four adult children, intotal, when he died, including the two who previously signed leases.total, when he died, including the two who previously signed leases.– First, sign the two children you know to leases– Second,

• get an Affidavit of Heirship from the two children you know and othersg p ywho know them all (and lease the children you didn’t know before yourecord it)

• Get a Stipulation of Interest signed by all heirs

Federal or State Estate Tax Return

• Title Attorney wants:Title Attorney wants:– Copy of Federal or State Estate Tax Return withSubject Land listed in the inventory of the estateSubject Land listed in the inventory of the estateand confirmation of payment

• ConcernsConcerns– Having foreclosure of the land void the lease

• Waive?• Waive?

Scenarios – Estate Tax Return

• Mr Adams died Jan 1 2000 at the age of 59Mr. Adams died Jan. 1, 2000, at the age of 59. The records regarding the probate proceedings of his estate do not include aproceedings of his estate do not include a federal estate tax return.


• Mr. Adams died Jan. 1, 2000, at the age of 59. The records regarding the probate proceedings of his estate do not include a federal estate tax return.– Doesn’t need to be recorded to be a perfected lien– Valid for 10 years


• Mr. Adams died Jan. 1, 2010. The records regarding the probate proceedings of his estate do not include a federal estate tax return.– Doesn’t need to be recorded to be a perfected lien– Valid for 10 years from date of death

• Mr. Adams died Jan. 1, 2000. The records regarding the probate proceedings of his estate do not include a federal estate tax return.


• Mr. Adams died Jan. 1, 2010. The records regarding the probateproceedings of his estate do not include a federal estate tax return.– Doesn’t need to be recorded to be a perfected lien– Valid for 10 years from date of death

• Mr. Adams died Jan. 1, 2000. The records regarding the probateproceedings of his estate do not include a federal estate tax return.– Can be extended by notification to the executor/administrator of the estateCan be extended by notification to the executor/administrator of the estate– This would usually be found in the probate file


• Mr. Adams died Jan. 1, 2010. The records regarding the probateproceedings of his estate do not include a federal estate tax return.– Doesn’t need to be recorded to be a perfected lien– Valid for 10 years from date of death

• Mr. Adams died Jan. 1, 2000. The records regarding the probateproceedings of his estate do not include a federal estate tax return.– Can be extended by notification to the executor/administrator of the estateCan be extended by notification to the executor/administrator of the estate– This would usually be found in the probate file

• Mr. Adams died Jan. 1, 2010. The records regarding the probateproceedings of his estate do include a federal estate tax return but theproceedings of his estate do include a federal estate tax return but theSubject Property is not listed in the inventory.


• Mr. Adams died Jan. 1, 2010. The records regarding the probatef h l f lproceedings of his estate do not include a federal estate tax return.

– Doesn’t need to be recorded to be a perfected lien– Valid for 10 years from date of death

• Mr. Adams died Jan. 1, 2000. The records regarding the probateproceedings of his estate do not include a federal estate tax return.– Can be extended by notification to the executor/administrator of the estate– This would usually be found in the probate file

• Mr. Adams died Jan. 1, 2010. The records regarding the probateproceedings of his estate do include a federal estate tax return but thep gSubject Property is not listed in the inventory.– U.S. could still go after the Subject Property because estate taxes were not paid on

it, but will they????

Duncan H. Strickland(281) 203‐5758

duncan.strickland@steptoe‐johnson.com

Giustina L. Persich(281) 203‐5766

giustina.persich@steptoe‐johnson.com

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