One of my family members purchased some mineral interest in Texas a few years back. It was a small lot (under 0.25 acres) from the surface owner who owned both surface and minerals at that time. He subsequently was approached and signed an oil and gas lease covering his interest. His tract was pooled and committed to a large pooled unit. I believe their had been drilling started but no production obtained as of yet.
He just found out the original Grantor defaulted on their loan and that led to foreclosure and the property was auctioned off. He has not been contacted by anyone yet- would the new owner need to file a suit to get the mineral interest back and seek a quit claim mineral deed from my family member? Wondering if the new owner would even pursue this since it is such a small interest. Thanks in advance!
What year did he acquire the minerals? There is a law that was passed a few years ago to prevent such interests subject to a mortgage from terminating due to a foreclosure. I want to say it was 2019 or more recent but will have to look it up to be sure.
I’m taking some assumptions from your question.
The first one is that the grantor took out a loan from a bank (or somebody). Assuming that is so, then then next question is whether there was a mortgage.
If there is no mortgage, then no problem.
To go into more detail, if one gets behind on a visa card and the cardholder gets a judgment, that doesn’t automatically mean they can foreclose on a house. The creditor has to have a mortgage on the house.
The mortgage has to be recorded in the land records. A secret or unknowable mortgage is just a nice piece of paper.
Did the family member get the piece of property after the mortgage was filed of record? If it was before, they should be in the clear.
Yes, to foreclose, the creditor would have to name the family member as a defendant. If they didn’t, then a) there may not be a mortgage, b) the mortgage was taken after the family member acquired his/her interest, or c) the mortgage was never recorded.
If your family member signed a lease, at least someone had made an initial determination of their possible ownership. A title opinion may later prove otherwise.
When your family member purchased the interest, was there a deed received conveying the interest? If so, did the family member have it recorded?
Was it a warranty deed or, a mere quit claim deed?
If the grantor had a mortgage at the time of sale, then the mortgage covered all of the interests in the land the grantor had. That is why a mineral lease requires the approval by the mortgage holder.
The new owner only gets what was conveyed at the Trustee’s sale (if done on the courthouse steps) or, if the mortgage holder bid backed the property at the sale, then only what the mortgage holder conveyed to the new owner.
They bought the house in 2018, there is a Mortgage. The lease was signed in 2022 shortly after he bought the mineral rights. The house was foreclosed upon in 2024.
Looks like the minerals are subject to that mortgage as well. He hasn’t been contacted by anyone yet- I assume when an attorney renders a DOTO this will be caught. Will the new house owner have to file a suit to get the minerals back by a quit claim mineral deed or is that not necessary and they will try and get a lease signed by the new owner and pay new owner royalties from production?
In Texas if a landowner separates the mineral rights from the surface and then borrows money using the surface only property as security and defaults on the loan the minerals are not involved.
There are a lot of layers to this question. It is possible the mortgage only covered the surface.
If the seller warranted title, then the buyer could go back against the seller.
The company may (not likely) have acquired a subordination agreement from the bank, wherein the bank agreed to not foreclose against the ogl.
If the buyer loses his/her minerals, then the company would in all likelihood, attempt to acquire a new lease from the new owner.
The new house owner may not have any claim to these minerals as they were not sold in the Sheriffs Sale.
I may be wrong, but I think you are attempting to resolve problems that haven’t or may not come about.
@tim_dowd has hit the mark with timing. If this was a fee title at the time of the mortgage and there were no acceptions for a mortgage, then the later sold minerals are subject to the mortgage unless there is a subordination. The later OGL is not consequential to the situation. A company entering into the OGL may have obtained a subordination agreement with the lender in order to protect their title (common practice).