CHAPTER 4 BASIC CONVEYANCE PRINCIPLES

• Jurisdiction: United States

Mineral Title Examination
(Feb 2012)
CHAPTER 4
BASIC CONVEYANCE PRINCIPLES
David E. Pierce
Washburn University School of Law
Topeka, Kansas

DAVID E. PIERCE is a professor at Washburn University School of Law in Topeka, Kansas where he teaches Oil & Gas Law, Advanced Oil & Gas Law, Energy Regulation, Property, and Drafting Contracts and Conveyances. Prior to entering law teaching Professor Pierce was an in-house oil and gas attorney for Shell Oil Company in Houston, Texas and before that he engaged in the private practice of law in Neodesha, Kansas. He has also worked Of Counsel with the Tulsa-based law firm of Gable & Gotwals and with the Kansas City-based law firm of Shughart Thomson & Kilroy. Professor Pierce has a B.A. from Pittsburg State University, a J.D. from Washburn University School of Law, and a Masters of Law (LL.M.-Energy Law) from the University of Utah College of Law. Professor Pierce is the author of the Kansas Oil and Gas Handbook, a co-author of Cases and Materials on Oil and Gas Law, a revision and upkeep co-author of Kuntz on the Law of Oil and Gas, a co-author of Hemingway Oil and Gas Law and Taxation, and an editor for the Oil and Gas Reporter. Professor Pierce is a past president of the Foundation (2008-2009) and has made many presentations at Foundation short courses, annual institutes, and special institutes.

Conveyance Requirements Lifetime Transfers and Transfers at Death Encumbrances

by

David E. Pierce

Professor

Washburn University School of Law

©Copyright 2012 by David E. Pierce All Rights Reserved

I. INTRODUCTION

This article examines the range of local laws governing the conveyance of interests in real property. For animate owners, real property interests can be conveyed by grant during the grantor's lifetime, or by a will or will substitute that transfers property when the owner dies. Inanimate owners convey property through authorized agents during their corporate existence, including any statutory winding-up period. Title examiners must determine whether property has been effectively conveyed to a grantee and, if not, whether the property passed by some other transfer, often at the death of the owner.

This article also considers encumbrances that often burden real property. Title examiners must identify encumbrances that impact the ability to develop the property and to distribute revenue generated by the property. Under American property law "ownership" in real property is often fragmented among numerous owners possessing rights created by liens, leases, licenses, covenants, and easements. Public restrictions, such as zoning, also impact the ability to develop property.

II. LIFETIME TRANSFERS AND TESTAMENTARY TRANSFERS

A. Statute of Frauds vs. Statute of Wills

Before considering the statutory and common law details of conveyancing, consider the two major categories of real property transfers: testamentary and non-testamentary. Traditionally a bright line has existed between testamentary and non-testamentary transfers with a state's codified version of the Statute of Wills being the major requirement for a valid transfer of property upon the owner's death. For example, Colorado's version of the Statute of Wills requires a signed writing

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coupled with additional formalities.¹ If a conveyance is structured to take effect upon the death of the grantor, it may be deemed a testamentary act which will be effective only if it complies with the state's version of the Statute of Wills. For example, a deed executed during the grantor's lifetime, but not properly delivered prior to the grantor's death, is an invalid non-testamentary transfer. The deed will also likely fail as a testamentary transfer because in most states the requirements of the Statute of Wills are more demanding than the Statute of Frauds applicable to conveyances.

Non-testamentary conveyances of property are governed by a Statute of Frauds instead of the Statute of Wills. For example, in Kansas the Statute of Frauds requires only a writing signed by the grantor.² The Kansas version of the Statute of Wills imposes the additional requirements that the document be "attested and subscribed in the presence of such party [testator] by two or more competent witnesses, who saw the testator subscribe or heard the testator acknowledge the will."³

B. Joint Tenancy

The survivorship aspects of a joint tenancy are not subject to the Statute of Wills. The transfer of the undivided interest, together with the survivorship rights, are deemed to have been completed upon delivery and acceptance of the deed creating the interest. Most states have joint tenancy statutes that were adopted to reverse the common law presumption that a conveyance to two or more persons would create a joint tenancy with the right of survivorship.⁴

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Once a state's law is applied to determine whether a joint tenancy has been created, the next major title problem is whether an act by one of the joint tenants has caused a severance of the joint tenancy, thereby converting the relationship to a tenancy in common. The first issue receives considerable attention, the second very little. How many lawyers conduct a review of the events in the life of a joint tenancy to determine whether an act by a joint tenant, or by a third party, resulted in the conversion of the joint tenancy to a tenancy in common? This can be a real problem in states that rigidly follow the four unities of title concept. Although the four unities (time, title, interest, and possession) are used to determine whether a joint tenancy has been created, the same doctrine is applied throughout the life of the joint tenancy. Once any of the unities are "broken," the joint tenancy becomes a tenancy in common-assuming the result is not otherwise dictated by a statute.

Colorado, in 2008, amended its statute on joint tenancies to expressly preserve, subject to statutory alterations, the "doctrine of the four unities of time, title, interest, and possession ...."⁵ The amendment defines the four unities concept as "the common law doctrine that a joint tenancy is created by conveyance or devise of real property to two or more persons at the same time of the same title to the same interest with the same right of possession and included the right of survivorship."⁶ Notably, the amendment concludes stating: "Nothing in this section shall be deemed to abrogate any existing case law to the extent that such case law establishes other means of severing a joint tenancy."⁷

The Pennsylvania Supreme Court confronted the unities problem in In re Estate of Quick where two joint tenants entered into separate oil and gas leases, at different times, with the same company.⁸ The joint tenancy was created in 1957, the leases were entered into in 1979, and the issue was litigated in 1993. Although the terms of the leases were different, the court found the differences insignificant. The court then abandoned a unities analysis for an-intent analysis to resolve the severance issue. The court held the leases did not convert the joint tenancy to a tenancy in common because the parties, by entering into separate leases, did not intend to terminate the joint tenancy.⁹

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When there is evidence of record that the joint tenants executed different oil and gas leases, perhaps with differing provisions, does this trigger an obligation to make further inquiry regarding the impact this may have had on the joint tenancy? Often the record will reveal the death of a joint tenant with the title passing to the survivor. However, were they really joint tenants at that time?

III. REQUIREMENTS FOR A VALID CONVEYANCE

This section identifies the information attorneys should collect, digest, and have at hand as they work through title issues in a state. The step-by-step process is designed to allow an attorney new to title examination, or new to title examination in a particular state, to systematically gather information that will familiarize them with foundational title issues.

A. Step #1: Examine The State's Conveyancing Statutes

A conveyance is a transfer of title to property.¹⁰ All states have statutes that address, to varying degrees, what is required for a conveyance,¹¹ and of equal importance, the effect of specific language used in a conveyance.¹² Many states offer one or more statutory forms of conveyance.¹³ Therefore, when examining title to lands in a particular state, the examiner's first step should be to read the statutes in the state that address conveyances.¹⁴ The discussion that follows illustrates why

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becoming familiar with a state's conveyancing statutes is so important.

Often a state's general conveyancing statute will fill a gap in a conveyance by answering a question left open by the deed language. For example, the Colorado deed form statute instructs that when a deed conveys land using the words "sell(s) and convey(s)," or similar language, it "shall be a conveyance of the grantor's interest, if any, in any vacated street, alley, or other right-of-way that adjoins the real property unless the transfer of such interest is expressly excluded in the deed."¹⁵ Therefore, these statutes not only specify the minimum requirements for a conveyance, they also provide statutory interpretive rules that function as curative guides while establishing a default rule when deed language does not expressly address a matter.

Conveyancing statutes are often an explication and application of the state's statute of frauds. For example, the Texas conveyancing statutes begin with the Texas statute of frauds for conveyances.¹⁶

B. Step #2: Define the Type of Conveyance

Today it is important to define the type of conveyance so the correct statutory guidance can be applied. For example, most states, for decades, have had a statute defining what is required to create a joint tenancy with the right of survivorship.¹⁷ More recently, many states will...