If A borrows money from Bank then sells minerals to C, then defaults on the loan and Bank forecloses, does C still own the minerals it purchased?

I have read the mortgage documents, but I don't see any mention of minerals or servitudes.

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Thanks Steve P.

What Dion said is effectively correct. The mortgage is a lien on the minerals whether the mortgagor (borrower) continues to own them or not. If there is a foreclosure, C would lose his title in the minerals. Companies who buy or lease the mineral rights normally seek a contract called Conventional Subordination from the bank that releases the lien on the mineral rights to avoid this.

PG,

The reason the bank should care, and has legal rights to protect itself, is that the property is the bank's security. The bank's ability to foreclose on the property to recover their funds in the event of default is a critical element of the mortgage contract. If the lender did not have a form of security (i.e. the right to foreclose) on the property itself, it would be left holding the bag if a borrower defaulted and already sold all of his property.

So you are technically correct that the bank does not own the property, and their mortgage contract may not even give them the right to stop the owner from selling the property (although virtually every mortgage does). However, the mortgage does protect their right to foreclose on the property as it was at the time of the contract, not whatever the borrower has left of it.

"I would attribute this more to the widespread marketing and securitization of mortgages versus the prior traditional local and regional lending and servicing of mortgages."

I couldn't agree with this hypothesis any more. Anyone who has ever tried to get a subordination from a megabank like Capital One or Chase knows how futile such an effort can be. Unless you know someone there, it is impossible to communicate with a human being/non-call center operator. You'll never get far enough through the red tape to even get a "no thanks" from the bank.

It seems to me that the minerals fall under Prescription, and until that period runs out, C owns the minerals as they were sold before the bankruptcy.  However, I'd consult an landman or attorney to be sure.

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