CHAPTER 6 WORKSHEETS, CHAINING, AND PREPARATION OF FEE, STATE, FEDERAL AND SECURITY TITLE OPINIONS
| Jurisdiction | United States |
(Apr 1982)
WORKSHEETS, CHAINING, AND PREPARATION OF FEE, STATE, FEDERAL AND SECURITY TITLE OPINIONS
Hinkle, Cax, Eaton, Coffield & Hensley
Roswell, New Mexico
TABLE OF CONTENTS
I. INTRODUCTION
II. PRELIMINARY EXAMINATION MATTERS
A. Worksheet
B. Chaining
C. Review Sheet
III. PREPARATION OF TITLE OPINIONS ON FEE, STATE AND FEDERAL TRACTS
A. Lease Acquisition
B. Supplemental Opinion
C. Drilling
D. Division Order
E. Security
IV. CONCLUSION
APPENDICES
1. Worksheets
2. Ownership Charts
3. Review Sheets
4. Lease Acquisition Opinions
5. Supplemental Opinion
6. Drilling Opinion
7. Division Order Opinion
8. Security Title Opinion
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I. INTRODUCTION.
The papers presented just prior to this paper at this Institute have discussed in detail the source materials (including abstracts and other submitted or examined materials pertinent to the title of the land under examination) upon which an attorney must rely in order to prepare a complete title opinion which is satisfactory for the client's purposes. The purpose of this paper is not to restate the matters discussed in the previous papers, but to provide a practical and consistent approach to preparation of title opinions covering fee, state and federal lands, including lease acquisition, drilling, division order and security title opinions, based upon the examination of the source materials described by the prior papers. To properly illustrate the steps taken by an examining attorney in the preparation of the particular type of title opinion required by his client, I have necessarily shown the attorney's notes on pertinent matters contained in the examined source materials ("worksheets"), the chart based upon the worksheets which reflects all pertinent ownership transfers affecting the land under examination ("chaining" or "ownership chart"), and the outline based upon the worksheets and ownership chart from which the opinion will be prepared by the attorney ("Review Sheet"). These are attached as appendices to this paper. To the extent possible, this paper will not discuss the necessity of examining any particular source material in connection with a title opinion nor the various title problems an examining attorney can expect to encounter (which will be covered by one or more papers to be presented later at this Institute). The primary focus of this paper will be an examination of (a) the basic form of title opinion used for fee, state, and federal lands, including standard items of opinion content, and how the same basic form utilized for each type of opinion will vary depending on the type of opinion being written (i.e. lease acquisition, drilling or division order) and (b) the basic form and content of the security title opinion which is often prepared from an existing title opinion, particularly a division order title opinion.
In preparing this paper, I have necessarily relied upon the law of the state where I practice (New Mexico) and upon the methods for title examination and forms of opinions used by my law firm. The latter is not to say that other methods of title examination are not just as reliable or other forms of title opinions not just as appropriate.1 The form of title opinions used as examples in this paper has been developed by my firm over the many years it has represented companies and individuals in the oil business and we have found them quite satisfactory for most clients. However, when a client specifically requests a different form of opinion, we are happy to oblige.
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As a final introductory remark before getting to the "nuts and bolts" of this paper, I would like to emphasize the fact brought out by the previous speakers that an attorney engaged in title examination must be well rounded and versed in all areas of the civil (and sometimes criminal) law which may affect land titles and able to make sound, reasoned decisions based upon the facts presented by the source materials. He is also required to be able to accurately draft the many contracts and instruments which are necessitated by title requirements as well as by the needs of the active client in the oil business. To a new attorney facing the prospect of engaging in title work, the designation "title lawyer" may seem to be a sentence rather than a reward, but I can assure you, as can all other attorneys who have engaged in title examination, that it provides entry to a practice that is rarely dull and stultifying. Many successful attorneys engaging in oil and gas litigation or a regulatory practice got their start through title examination because it is probably the best preparation for a lawyer who intends to pursue these legal careers. It has also been my experience and that of my firm that the oil company or individual in the oil business who is having you do its title work will normally expect you to do its oil and gas contract work, litigation and regulatory work as well. There are few areas of the law practice where so much responsibility is visited upon an attorney. He is required to prepare, on a daily basis, title opinions on oil and gas properties where the client is prepared and willing to spend hundreds of thousands of dollars, or more, for acquisition of leases or other oil and gas interests, or for the drilling of a well, based solely upon the attorney's opinion. Finally, I do not need to tell the majority of you how exciting it gets when you return to your office to find a large abstract on your desk together with a phone message advising that the client has a rig on the road to a location (or is prepared to spud) and simply needs title clearance by you before he starts making hole!
II. PRELIMINARY EXAMINATION MATTERS
This part of this paper deals with examination of the source materials and preparation of the worksheets, the ownership chart and review sheet, which must be done prior to preparation of the title opinion. Broadly viewed, the approach utilized by the attorney in these preliminary examination matters determines the accuracy and clarity of the title opinion he prepares. The approach discussed herein stresses double checking the attorney's work at every possible point in the examination process to assure the accuracy of the matters contained in the attorney's title opinion and to minimize the risk of embarrassment and even malpractice liability to the careless attorney. It has been the experience of my firm that while an examining attorney may save time by shortcutting or even leaving out one of the steps in the preliminary examination process, he often has to spend unbillable time correcting errors that become apparent at a later date.
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This is especially true with new attorneys having limited experience in preparation of title opinions and it is to these attorneys that this paper is especially addressed.
A. Worksheet. When examining a source material (and I will use the abstract for example purposes), the attorney will make notes on pertinent matters affecting the land under examination. Collectively attached hereto as Appendix 1 are worksheets prepared in connection with typical fee, state and federal title opinions. The form of printed worksheet used is particularly functional in that its caption provides spaces for information relative to the lands and interests under examination (such as acreage, lease number, an actual description of the land and a plat on which to locate the same), the number of the abstract being examined and the client. The body of this printed worksheet form contains columns for page numbers of the abstract being examined, the type of instrument examined, attorney's notes and notation of defective entries. This form of worksheet is not "magic" and there are many other forms which are just as useful and perhaps more detailed. However, this form of worksheet has been used in our office since the early days of the oil industry in New Mexico and has proved its usefulness in connection with preparation of title opinions on fee, state and federal lands. Where more than one base abstract is being examined, as is the case with the examination of the fee tract discussed herein, it is useful to sort out the abstracts and arrange them chronologically, or in such other fashion as seems mandated by the way in which the base abstracts have been prepared by the abstracter, and then to number the abstracts in the order to be examined. In preparing the worksheets on each abstract, the abstract and page number of the entry is placed in the column under the word "page". This method allows the examining attorney ready access to the abstract being examined in the event he needs to refer back to the actual instrument during the preparation of the title opinion. The worksheets attached hereto as Appendix 1 reflect the way in which the attorney's notes on examined instruments are placed on the worksheet and I will not discuss this in any detail. However, special emphasis should be given to the fact that any entries which are defective, merit comment in the opinion, or are briefed by the abstracter (such as judicial proceedings or lengthy instruments) should be clearly marked in the "defective entries" column with a color of ink clearly calculated to bring the matter to the attention of the examining attorney when he is preparing his review sheet. In our office, we typically use a red asterisk to mark such entries and as my senior partner, Lewis Cox, will tell you, if he had used this "red flag" more carefully in his youthful days as a title examiner, he would never have been embarrassed because of the current mortgage he failed to mention in a title opinion.2 I will not go into any detail about the
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important matters I missed and which should have been mentioned in the title opinion because of failure to adhere strictly to this method of highlighting such matters, but I can assure you...
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