Replies to This Discussion

Permalink Reply by Dion Warr, CPL on September 5, 2014 at 17:03

KCM:

Is the property in LA? If yes, it is strictly a race to the courthouse. If the property is seized by the sheriff due to foreclosure subject to a mortgage in which the property is pledged and minerals are attached, the rights of the note holder prime all others, including any subsequent attempt to sell off minerals prior to sale of the property. It is as if nothing after that mortgage ever existed.

In any event, if the property is knocked off to or sold to a third party, third parties can only rely on notice provided in record title as to immovable property. If the minerals are sold and not recorded or sufficient notice of an unrecorded agreement is not provided, mineral buyer for all purposes per the order of the title bought from one that did not own interest in the property sold. In LA, third party purchaser would appear to own the property and associated mineral rights irrespective of the ineffective mineral conveyance. IANAL.

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Permalink Reply by kittycatmama on September 5, 2014 at 17:45

Thanks Dion. Yes, minerals are in LA. Weird that the mineral purchaser waited 2 yrs. to record the mineral purchase. During that time mineral owner lost the property in a foreclosure. What comes to mind is that perhaps mineral owner sold the minerals  2 yrs. after losing them and backdates mineral deed??? Why would anyone wait 2 yrs. to record a mineral purchase? I learned an important lesson from this in running a title--check 3-5 yrs. AFTER a person loses a property in foreclosure to see if they "sell" the minerals after the foreclosure. I always assume with a foreclosure that the ownership stops and then I look at new owner. That is where I made a mistake in this case

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Permalink Reply by Dion Warr, CPL on September 6, 2014 at 5:42

KCM:

Hang on - what I mean here is that if the fee property in LA was seized under foreclosure and sold prior to the mineral sale being recorded, and no minerals were reserved, all rights that the prior owner held in the property passes to the successor owner in the sale.  The mineral sale, being recorded after the transfer and regardless of its date, has no effect on the successor owner.

Also, if the property is seized as a result of a default on a mortgage in which the fee property (surface and minerals) are pledged as collateral (remember, silence as to minerals in real property in LA means mineral rights are part of the property), then the seizure is effective on both surface and minerals.  As the mortgage in this example would appear to prime the mineral sale, the mineral sale is of no effect against the holder of the note should he move to seize the property.  This principle is why as landmen, if we were to obtain a lease a property that is subject to an existing mortgage, we are usually instructed to obtain (or at least attempt to obtain) a subordination of that mortgage in favor of lessee's rights.  A foreclosure could result in the lessee losing his leasehold rights in and to the property.  Again, in LA, whomever's instrument that is filed of record first, "wins", even if the second purchaser is well aware of the existence of other agreements which convey an interest in the property.  "Not in the record" means "does not matter".

The rules are different in other states.  In TX for instance, one must interpret these events in light of a "innocent purchaser" rule, which generally states that as long as any bona fide subsequent purchaser of a right in real property is unaware of any such agreement (either actual, "knows a document exists", or constructive, "filed of record") which would serve to alienate title at the time that the real property rights are obtained, prior documents as yet unrecorded are of no effect against his interest.  TX is therefore a "notice state".  In a "race-notice" state, rights between multiple innocent purchasers are settled by first courthouse filing.

There are some decent articles on this here for TX (particularly as to why Texas is a "notice state" and not "race-notice" and a summary of these principles (and lists of states with recording acts that fall into each category).  I do less work in these other states, so I typically yield to more expert commentary as to real-life interpretation of these situations, and as always, IANAL, so if you run into a real-life title dispute based upon these principles, you want a lawyer.

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Permalink Reply by 1kw6x71km1v37 on September 6, 2014 at 7:02

"The rules are different in other states"

LOL, leave it to the Aggies to really foul things up when it comes to oil and gas.

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Permalink Reply by Dion Warr, CPL on September 6, 2014 at 8:38

cs:

Usually, it's us (LA) that are completely different.  With the exceptions of NC and DE, we're one of the few states that race to the courthouse.  Hardly a bandwagon.  TX Supreme Court opinions can make for some interesting reading, though.

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Permalink Reply by 1kw6x71km1v37 on September 6, 2014 at 9:04

Yes, a lot like reading Texas Monthly.

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Permalink Reply by Martin on September 7, 2014 at 12:15

The writing in Texas Monthly is generally of a much higher (and entertaining) quality.

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Permalink Reply by kittycatmama on September 7, 2014 at 3:33

Thanks to all for the opinions. We should hopefully close on this property in about 10 days. There is a producing well in the area, so I will start the process of leasing. This is a small parcel in north Desoto. What would one expect to get per ac. on a lease in today's world.  We have land in this section that we leased for $6000 an ac. in 2011, but I know we won't get that now.

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Permalink Reply by Skip Peel - Mineral Consultant on September 7, 2014 at 3:41

Depends on location, size and the unit operator.  The bonus paid in 2011 has no relevance as a benchmark for current lease offers.

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Permalink Reply by kittycatmama on September 7, 2014 at 10:16

Chesapeake is the operator and this little parcel we are buying is just 5 ac. It is in an area for Haynesville and Cotton Valley Liquid play though. When we close on the property I will start with contacting Chesapeake to see what they will offer.

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Permalink Reply by Skip Peel - Mineral Consultant on September 7, 2014 at 11:22

I'll be interested to learn what they offer.  Have you determined whether CHK holds the CV rights?  In north DeSoto there are a number of sections where CHK holds the Haynesville and Indigo the CV.

Permalink Reply by Lerret on September 11, 2014 at 3:30

Sounds like a quiet title issue to me

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