Texas Supreme Court Rules on Correction Deeds in a Case of First Impression

Gray Reed
Contact

Gray Reed

What if you pay good money for a mineral interest and record the deed in the official public records, thereby securing your title? What if your predecessors-in-title decide among themselves they made a material mistake in a conveyance way back in the chain of title, fix the alleged error, and record the correction deed? What if they don’t seek your approval and don’t even bother to tell you about the fix? What if that is deemed to be an acceptable way of correcting real property instruments? Here’s what: Chaos, loss of your property rights, not to mention bidding adios to the stability of record titles in Texas.

In Broadway Nat’l Bank Trustee v. Yates Energy Corp. the Supreme Court of Texas held that Section 5.029 of the Texas Property Code does not require that correction instruments be executed by a party’s heirs, successors, or assigns if all of the original parties to the recorded instrument executed the correction, even if an original grantee of the instrument has since conveyed the interest that the correction deed is correcting.

The dispute

  • 2005: Broadway Bank, Trustee, conveys mineral interests in DeWitt and Gonzales Counties to John in fee simple.
  • 2006: the Bank executes a correction mineral deed attempting to change the fee mineral interest to a life estate.
  • John does not sign this instrument.
  • 2012: John executes royalty deeds conveying his interests to Yates Energy.
  • 2013: Broadway Bank, John, and the original grantees of the 2005 deed execute a second correction deed, again attempting to change the fee interest to a life estate.
  • This correction deed is not executed by Yates or its assigns.
  • John dies. A dispute arises:  Did the royalty interests conveyed to Yates vest in the remaindermen in the 2013 correction deed or did Yates and its successors obtain a fee interest.
  • The probate court declares the 2013 correction deed valid. It conveyed a life estate to John.
  • Yates appeals, contending that the 2013 correction deed did not comply with the Material Correction Statute (Section 5.029).
  • The Court of Appeals holds that Section 5.029 requires that correction instruments be executed by a party’s heirs, successors, or assigns, rather than only the original parties, if the property interest has been conveyed by an original party.
  • The Supreme Court reverses.

The statutes

In 2011, the Texas Legislature enacted the Correction Instrument Statute (Property Code §§5.027-5.030) to enlarge the instances in which a correction instrument could be executed. Correction instruments that comply with either the Non-Material Correction Statute (§5.028) or the Material Correction Statute relate back to the date of the recorded original and effectively “replace” the original instrument.

Material corrections

It was undisputed that changing the interests conveyed in the 2005 Mineral Deed was a material correction and that the 2006 Correction Deed failed because John did not execute it. Were Yates and its assigns necessary parties to the 2013 Correction Deed?

Section 5.029(b) says a correction instrument must be executed by each party to the recorded original instrument the correction instrument is executed to correct or, if applicable, a party’s heirs, successors or assigns.

The Court reasoned that “or” is typically understood as a disjunctive term, meaning that either of the separated words or phrases may be employed without the other. In ascertaining the meaning of “if applicable,” the Court reasoned that the statutory text does not support a preference either way for the joinder of heirs, successors and assigns merely because they exist.

The statute’s plain language and the Property Code’s scheme confirm that section 5.029(1) is satisfied when all parties to the original transaction agree to correct a material mistake in the original conveyance.  Accordingly, because the 2013 correction deed was executed by all of the original parties, the court of appeals erred in declaring the correction instrument invalid.

Limitations

Broadway Bank’s lawsuit was not barred by limitations. The Property Code does not require that parties making a material correction do so within four years of the mistake.

Innocent Purchasers?

The Supreme Court remanded to the court of appeals to consider the trial court’s ruling that neither Yates nor its assigns are bona fide purchasers.

Was there a dissent?

You betcha! According to the four dissenters, the majority read the words “if applicable” out of the statute by allowing the original parties to alter a deed without even giving notice to the current owners. Aside from a grammar lesson and what is possibly the longest footnote in judicial history, their most compelling argument addresses the consequences of the decision. For instance, requiring current property owners to monitor real property records for correction instruments filed by their predecessors is especially burdensome.

TXOGA agrees. Their amicus brief warned of the perils of reversing the court of appeals.

Tired of codgers’ YouTube laments that today’s “young people” listen to garbage? The codgers, apparently impaired by that bummer acid trip in Daytona back in ‘69, aren’t paying attention.

How about Jackie Vensen

… or Rhiannon Giddens?

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Gray Reed | Attorney Advertising

Written by:

Gray Reed
Contact
more
less

Gray Reed on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.