24May

Correction Mineral Deed Ruled Ineffective Under “Material Correction” Statute

Yates Energy Corp. v. Broadway Nat’l Bank, No. 04-17-00310-CV, 2018 Tex. App. LEXIS 10517 (App.—San Antonio Dec. 19, 2018, no pet.)

The San Antonio Court of Appeals recently analyzed the Texas Correction-Instrument Statutes in Yates v. Broadway. The court held that, if a grantor or grantee have conveyed their interests to heirs, successors, or assigns, then those heirs, successors, or assigns must sign a correction instrument in order for it to effectively correct the original instrument. For many practitioners, this was the expected outcome; however, the case provides an interesting example of complexities that can be involved when attempting to correct an instrument years after it is executed.

In 2005, Broadway Bank, acting as trustee of a trust, executed a Mineral Deed which conveyed unto John Evers an undivided 25% interest in certain mineral interests. However, in 2006, Broadway learned that it had made a mistake, intending only to convey to Evers a life estate in the minerals. Broadway Bank executed a Correction Mineral Deed, without Evers’ signature, purporting to correct the 2005 Mineral Deed to convey only a life estate to John, and added an additional provision conveying the remainder interest to several other trust beneficiaries.

In 2012, Evers executed multiple instruments in favor of Yates Energy Corporation, conveying interests in those mineral interests. Yates then conveyed several further undivided interests to EOG and numerous other assignees.

In 2013, EOG raised concerns that Evers did not sign the 2006 Correction Mineral Deed. As a result, Broadway Bank executed yet another Amended Correction Deed, but this time obtained Evers’ signature. However, a critical issue was that this 2013 Amended Correction Deed was not signed by Evers’ successors and assigns (i.e., Yates Energy Corporation and its numerous assignees).

In 2014, after Evers died, a dispute unraveled as to whether any of the correction instruments were effective to limit John’s interest to a life estate and grant interests to the remaindermen, or whether all the corrections were ineffective such that Yates and its assignees were vested with the interests in full fee simple.

The case turned on an analysis of the 2011 Correction-Instrument Statutes (Texas Property Code §§ 5.027-5.030). The signatures required under these statutes depend on whether the corrections are “nonmaterial” or “material.” A nonmaterial correction can be executed by any person with personal knowledge of the facts relevant to the correction of an original instrument. However, under §5.029(b) (1), a material correction (such as adding or removing interests) must be executed by each party to the recorded original instrument “or, if applicable, a party’s heirs, successors, or assigns.”

Broadway Bank argued that the word “or” illustrated that a correction deed can be signed either by the original parties or their heirs, successors, or assigns. However, Yates and its assignees argued that, because Evers had assigned interests, the “if applicable” language was triggered and a correction required the signature of the heirs, successors, or assigns. Yates also argued that, as a matter of policy, any contrary ruling would harm subsequent purchasers and cause title instability by divesting subsequent purchasers of property.

The San Antonio Court of Appeals agreed with Yates, holding that “a correction instrument making a material change must be executed by a party’s heirs, successors, or assigns, as opposed to the original parties of the recorded instrument, if the property interest conveyed in the original instrument has been assigned or conveyed by an original party to that party’s heirs, successors, or assigns.” Accordingly, Evers received a fee simple interest in the disputed mineral interests by way of the 2005 Mineral Deed, and subsequently conveyed full fee simple royalty interests to Yates. And, by failing to include all required signatures on the correction deeds, the correction deeds were not effective to replace the 2005 Mineral Deed.

The practical takeaway is that, while the Correction Instrument Statute provides statutory power to execute correction instruments to correct errors, parties must carefully ensure all necessary parties have executed the instrument. This is not the first Texas case analyzing whether all necessary parties have executed a correction as required under the Correction Instrument Statute, and it likely will not be the last.

Austin Brister
Austin represents oil and gas exploration and production companies and landowners in a wide variety of complex commercial litigation matters, including contract and property disputes, royalty disputes, breach of lease cases, lease termination/perpetuation disputes, and an array of other issues in the upstream oil and gas sector. Austin has prosecuted and defended claims in state courts and federal courts. Austin strives to find practical business solutions to complex issues, but if necessary, he works hard to implement effective strategies in the courthouse.
Austin Brister

© Copyright 2012-2018, McGinnis Lochridge LLP. All Rights Reserved. DISCLAIMER: The information in this article is for general information purposes only. This article should not be substituted for legal advice and should not be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or reading this article does not constitute, an attorney-client relationship. You are encouraged to contact an attorney for legal advice concerning the information provided in this article.
OR
ARE YOU KEEPING UP TO DATE?
We keep clients and subscribers updated on case law alerts and insightful articles. Join more than 2,000+ in-house attorneys and landmen who receive our occasional alerts and summaries. All for free!
Note: When choosing facebook or google, alerts will be sent to the email listed in that account.
close
OR
ARE YOU KEEPING UP TO DATE?
We keep clients and subscribers updated on case law alerts and insightful articles. Join more than 2,000+ in-house attorneys and landmen who receive our occasional alerts and summaries. All for free!
OR
ARE YOU KEEPING UP TO DATE?
We keep clients and subscribers updated on case law alerts and insightful articles. Join more than 2,000+ in-house attorneys and landmen who receive our occasional alerts and summaries. All for free!
Note: When choosing facebook or google, alerts will be sent to the email listed in that account.
ARE YOU KEEPING UP TO DATE?
We keep clients and subscribers updated on case law alerts and insightful articles. Join more than 2,000+ in-house attorneys and landmen who receive our occasional alerts and summaries. All for free!