CHAPTER 4 BASIC MINERAL AND LEASEHOLD CONVEYANCING ISSUES
| Jurisdiction | United States |
BASIC MINERAL AND LEASEHOLD CONVEYANCING ISSUES
Long Reimer Winegar Beppler LLP
Cheyenne, WY
Tara Righetti
University of Wyoming College of Law
Laramie, WY
[Page 4-1]
KRIS C. KOSKI, Long Reimer Winegar Beppler LLP, Cheyenne, WY
TARA K. RIGHETTI is an associate professor at the University of Wyoming College of Law and the UW School of Energy Resources and is the director of the University of Wyoming's AAPL accredited academic program in Professional Land Management. She teaches classes on oil and gas law and leadership, and coaches the schools energy negotiation competition team. She has written numerous articles on legal topics related to oil and gas and carbon capture, utilization, and sequestration. Tara is a trustee-at-large for the Rocky Mountain Mineral Law Foundation. She is licensed to practice in California and Texas and is a Certified Professional Landman.
Introduction
Interpreting conveyances of mineral and leasehold interests has been called a "Sisyphean" task convoluted by inconsistently applied canons of construction that, at times, defy reason and common sense.1 A myriad of double-fractions, varying local customs of interpretation, infinite variations of language, and frequently poor drafting, can create a Gordian knot of conveyancing issues. Title examiners and courts are thus challenged to untangle the various threads of ownership and arrive at a division of interest. This paper provides a roadmap to the basic issues that arise with mineral, leasehold, and wellbore conveyances. It describes general principals and issues applicable to all conveyances of interests in real property, guidelines for drafting and interpretation, and specific rules relative to conveyances of mineral, royalty, leasehold, and wellbore interests.
A Primer on Conveyancing
Transfers of real property can be made during life (non-testamentary/inter vivos transfers) or at death (testamentary). Testamentary transfers usually occur by operation of law at death and include, but are not necessarily limited to, transfers via intestate succession, transfers via a will, transfers by right of survivorship for jointly owned property and the relatively new statutory creatures of transfer on death and beneficiary deeds. Non-testamentary transfers of interests in real property can occur by various means including, but not necessarily limited to, conveyance (such as deeds, assignments or leases), court order (such as foreclosure, tax sale, bankruptcy or quiet title), eminent domain and adverse possession. A title examiner or transactional attorney should be generally familiar with all of these various methods of real property transfer.
(i) The Requirement of a Writing
This paper focuses on transfers of real property made pursuant to conveyance. While there may be limited legal exceptions such as the doctrines of estoppel and part performance,2 all conveyances of real property must be in writing. The statute of frauds requires a written instrument "to validly convey an estate in land."3 The purpose of the statute of frauds is to "protect real estate from the uncertainty associated with oral testimony."4 In order to be an enforceable conveyance, such writing/deed must contain at a minimum: (1) an identification of the parties; (2) a description of the real property being conveyed; (3) present words of grant; and (4) a signature of the party to be bound. All states have various statutes addressing the requirements for a valid conveyance and
[Page 4-2]
many include statutory forms of conveyance.5 The party drafting conveyance instruments should review and be fully familiar with the particular state's conveyancing statutes.
(a) Identification of the Parties:
The deed or instrument of conveyance must identify the grantor and the grantee. The identified grantor of the instrument should be the party with record title ownership (i.e. the grantee of the last instrument of record in the chain of title) because "title is not marketable unless there is such a substantial identity between the name of the grantor in any particular conveyance and the record owner at the time as will create a presumption of identity of persons."6 For example, if the record title owner is Bob Smith, as Trustee of the Smith Family Trust u/a dated January 1, 2018, a subsequent deed with an identified grantor of Bob Smith, in his individual capacity, would not be sufficient to convey the interest held in trust for marketable title purposes. The limitations on the identification of the grantee(s) are few; however, generally the grantee of the deed must be in existence at the time of the execution of the deed for the conveyance to be effective.7
(b) Sufficiency of the Land Description:
The description of land in a deed or instrument of conveyance is sufficient if "the land can be identified or located on the ground."8 This may be accomplished within the conveyance itself or "the description of land in the instrument [may be] aided by reference to other documents."9 Therefore, it is quite common and typically acceptable for an instrument to simply describe the parcel of land by reference to the legal description in a prior recorded instrument. However, a common issue encountered with legal descriptions in a deed is the 'blanket description' or 'catch-all' description. These blanket descriptions may purport to convey all that a grantor may own in a particular county or state. While this is not the suggested form of legal description due to tract indexing and other notice issues that may arise, courts generally uphold such blanket conveyances as being effective at least as between the parties to the original conveyance.10 However, some courts have found that such blanket legal descriptions do not provide constructive notice to third parties.11 Often the best approach is to conduct a sufficient title search to hopefully identify all legal descriptions that should be included on the instrument of conveyance and also to include 'catch-all' language in the event that something (such as an after-acquired interest) may have been missed.
(c) Present Words of Grant:
A proper conveyance instrument must purport to presently convey an interest in real property. Many instruments facially appear to be deeds but, based on the language of the instrument, have little more legal effect than an affidavit. "At common law, a deed must contain words of grant, release, or transfer, in order to pass the legal title to the land designed to be conveyed."12 As discussed above, most states provide statutory conveyance forms which include
[Page 4-3]
effective words of grant. For certainty and avoidance of adverse interpretations, it is recommended that these statutory forms be generally followed when drafting conveyancing instruments; however, "[t]he validity of an instrument to transfer land does not require the use of exact words...rather land may be conveyed by any word which manifests an intention to transfer."13
"Most states also provide, by statute, that all the grantor's estate will be conveyed unless the conveyance indicates otherwise."14 For example and as pertaining to quitclaim deeds, Wyoming statute provides: "Every deed in substance in the form prescribed in the foregoing section (§ 34-2-104), when otherwise duly executed, shall be deemed and held a sufficient conveyance, release and quitclaim to the grantee, his heirs and assigns, in fee of all the then existing legal or equitable rights of the grantor in the premises therein described, but shall not extend to after acquired title unless words are added expressing such intention."15 Therefore, if a party desires to convey less than the entire fee, the deed or conveyance instrument should explicitly detail what interests are being conveyed and what interests are being reserved.
(d) Signature of the Party to be Bound:
An effective conveyance requires a signature by the party to be bound. At a minimum, this typically requires the signature of the grantor. While a minority of states require that the signature be acknowledged in front of a notary for an effective conveyance, generally all states require an acknowledgement for the instrument to be capable of being recorded.16
A common issue that arises is whether the proper person(s) executed the instrument. The issue is whether the person(s) had authority to execute the conveyance instrument on behalf of the particular granting entity. The authority of an agent to act on behalf of and to bind an entity to a conveyance may be actual (express or implied) or apparent.17 Express actual authority is the authority specifically delegated by the principal/entity.18 Implied actual authority exists strictly due to the agent's relationship with the principal/entity.19 "Apparent authority exists when a principal creates, by its words or conduct, the reasonable impression in a third party that the agent has the ability to perform a certain act on its behalf."20 Because a title examiner's review is often limited to record title, the party drafting the conveyance should ensure that the conveyance instrument is not only executed by a proper agent with authority but that either the instrument itself or other recorded instruments that can be located from the chain of title provide proper record notice of such agent's authority to execute the instrument.
The Texas Title Standards sum up the typical duty of investigation of a title examiner with respect to corporate entities. Standard 6.50 states: "Where a corporation is a named party to an instrument in the chain of title, an examiner may presume that the persons executing the instrument were the officers they purported to be and that such officers were authorized to execute the instrument on behalf of the corporation, if the instrument is executed and acknowledged in the proper form."21 For limited liability companies (LLCs), it is the manager of the company that has
[Page 4-4]
...
To continue reading
Request your trial