Texas Law - very typical - check the law in the State in which the property is located.
A situation more common than you think.
Seller places his property (suburban or rural) on the market with a Realtor. The Realtor finds a buyer and the Seller and Buyer sign an earnest money contract, which provided for the reservation of all of the minerals.
The Deed is prepared and is signed by the Seller and no mention is made of mineral rights, which in turn conveys the minerals to the buyer.
Now the shale play comes to town and even lot owners might get $10,000.00 per acre bonus for their lot.
What is the law on the sequence of events?
First, to satisfy the Statute of Frauds, all transactions in real property must be reduced to writing. That includes the Earnest Money Contract and the Conveyance Document (Deed). There is no higher measure of Agreement of the parties than what they wrote down and signed. Which brings us to step two.
Most states have a Merger Doctrine, which in a nutshell means that the Deed is defined as a merger of all previous agreements into the one document that transfers title. Now the Deed controls and the Earnest Money Contract is set aside.
And the Deed controls completely after 4 years from the delivery of the Deed and the passing of consideration (closing of the sale). That is the length of the Statute of Limitations in Texas for contracts. Therefore prior to 4 years, does the Seller have recourse?
Sure, but he better get represented by a good real estate lawyer. The title company sure wants the problem solved, because there is the potential of liability to the attorney who prepared the document inaccurately. Sometimes, things work out and the Earnest Money Contract is honored and the Deed is Corrected and Reformed. Whew. But some people's honor fails when the lure of easy, mailbox money is strong. That is when you need an attorney.
And a good one.
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Good word as always Buddy,
Am I reading it right in that there simply isn't much you can do after four years if your minerals were mistakenly conveyed?
Right, RT. That is the Statute of Limitations in Texas for items under contract.
The statute of limitations for real estate fraud is indeed 4 years however; the statute can be tolled or placed in a time out in certain instances.
In Smith vs. Little Texas 1997, a lost heir to an estate filed claim 8 years after the estate had been closed. The estate argued the 4 year statute of limitations for fraud barred any claims against the estate....not so fast. It is not always possible to determine fraud has been committed within the 4 year staute of limitations. The heir won their claim.
The statute of limitations for fraud begins to run from the time the party knew of the misrepresentation. Little v. Smith, 943 S.W.2d 414, 420 (Tex. 1997).
Here is a link for the Smith vs. Little case.
http://www.leagle.com/xmlResult.aspx?xmldoc=19971357943SW2d414_11314.xml&docbase=CSLWAR2-1986-2006
It is my understanding in cases of fraud, constructive fraud, the clock starts to run from the time you became aware of the fraud and then you have 4 years to file.
Buddy must be reading my mind because we are involved in this very same type of scenario with a title company and executors in Texas. Excellent Buddy Cotten blog as always and thanks for any further input.
Dear Farrah,
That is true. There are exceptions to the S of L, which sometimes comes down to what did they know it or when was it discoverable.
In my case, what I relayed was 100% accurate, and most importantly, get a good real estate attorney. Additionally, I was not referring to fraud as you quoted. Mutual Mistake would be more like it.
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Outstanding topic for the forum !
I spoke to a probate attorney in Texas yesterday regarding this very same subject and Buddy is right 100% on the 4 year statute.
Getting competant attorneys is paramount for discovery when litigating. The attorney said Texas courts are not inclined to invoke the discovery rule in matters of probate (in our case) however, there are exceptions (see Little vs. Smith). As the name would imply, the discovery rule centers on when the actual injury was discovered or when the injury should have reasonably been discovered. So, the role of the discovery rule is to toll the calendar date of the statute of limitations from the origination point of the civil wrong. Instead, it is moved to a point where the wrong was discovered or when it should have reasonably been discovered.
I spent an hour talking about our case which has a lot of moving parts and as such I can not give specifics but it is fascinating to hear a trial lawyers opinion.
We suspected a family member engaged in a "mutual mistake" by forgetting to reserve their mineral rights upon the sale of their unsubdivided acreage almost 9 years ago. The discovery rule will have to be invoked to prove fraud to get this family members mineral rights back and the Title Company may not be clean in the conveyance.
Buddy is 100% accurate. You better have a good lawyer prior to your four years to act legally and I would add even a better attorney when you get outside the 4 year statute of limitations.
This forum is a mineral rights education center indeed for those like myself trying to navigate these uncharted waters. Great Buddy Cotten blog as always and thanks for allowing me to contribute.
Regards
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Unfortunately, this is a common sequence of events in Colorado too. It can't be emphasized enough to put the reservation on all documents to avoid this situation: the listing agreement, the real estate contract, the deed and any other documents affecting the transaction. If you're a Seller reserving your mineral rights always look closely at that deed when signing. A few extra minutes can save years of litigation and uncertainty.
Jenna H. Keller, Esq.
DISCLAIMER: The information in this posting is for general information purposes only. This posting 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 posting.
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I had this EXACT situation happen one time in my career. I leased somebody who owned the minerals and executive rights, according to the Deed Records. Turns out the sales contract when Buyer obtained the property specified that she would receive no minerals or mineral rights, yet the Deed when she obtained the property made no reservation.
So the Seller presented a demand letter to the Title Company, Title Company paid him an amount equal to the bonus consideration that I had erroneously paid to Buyer, Title Company filed a claim with their insurance company policy covering "errors and omissions" (E and O), Title Company prepared Correction Warranty Deed, Title Company convinced Seller to consent to a reduction of her interest or get sued, and Buyer got to keep the bonus money I originally paid her because my client chose not to enforce the Warranty of Title clause against her (for only about $1,500).
Don't trust a single word that a Realtor says regarding the mineral rights to a property. Most of them (and most banks and mortgage companies too) are absolutely clueless about the whole concept and have absolutely no interest figuring out if you, the Buyer, get any minerals or not. When I bought my property, the Realtor told me that I would receive no minerals. When Operator approached me for a lease, I ran title on my own tract and determined Operator was right, I DID own my minerals. For a large tract of land, a Buyer should insist that the title policy cover the mineral estate or, if the title company refuses to do that, pay for the mineral title himself and have it done.
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In the previous post, the fifth line of the second paragraph should say "convinced BUYER to consent to a reduction...," I could not see how to edit a comment on this blog.
Buddy I think I have the same problem I wrote it on here on FORUMS SHOULD I SIGN If u would check it out and tell me what u think. all help needed THANK U JACK