Fourth Court of Appeals: Mother's Transfer of Land to Sons Included Mineral Interests, Even if Never Discussed

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

In an opinion issued in mid-February 2015, San Antonio's Fourth Court of Appeals rejected an elderly mother's claims against her sons related to deeds she executed 12 years earlier. The deeds -- executed in 2000 -- granted to the sons, respectively, parcels of rural property, but made no mention of mineral interests. That is there was neither an express grant nor reservation of the minerals contained in the deeds. 

By the time she filed suit in 2012 (12 years after the deeds were executed), mom decided that she did not intend to convey the minerals -- or at least that she regretted doing so. Notably, the properties are located in the booming Eagle Ford shale play of south Texas by the time of suit, but no mineral activity had occurred on the property at the time that the deeds were granted.

Although the case largely turned on the timeliness of mom's suit for breach of fiduciary duty (i.e. whether the claim was barred by limitations), the Court correctly noted that the deeds' silence as to minerals resulted in all of the surface estates and the mineral interests owned by mom transferred to the sons under Texas real estate law. See Cockrell v. Tex. Gulf Sulphur Co., 157 Tex. 10,  299 S.W.2d 672, 675(1956) (“[I]t is fundamental that a warranty deed will pass all of the estate owned by the grantor at the time of the conveyance unless there are reservations or exceptions which reduce the estate conveyed.”). Thus, even though mom and her sons never discussed or considered the mineral interests at the time of the conveyance, they were conveyed under the deed because it did not expressly reserve mineral rights. 

The complete opinion, rendered in Mary Moczygemba v. Thomas and Harry Moczygemba, can be found here. 

What is a Real Estate Law Practice in Texas?

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

In Texas, Real estate law is generally divided into 3 categories: Residential real estate law, Commercial real estate law, and farm and ranch real estate law.  Although each of these areas has some qualities unto its own, there are many, many legal principles common to each real estate law area of practice. 

These areas of concentration are generally defined as follows:

• RESIDENTIAL REAL ESTATE LAW. Legal practice including advice and services in connection with the acquisition, ownership, leasing, financing, use, transfer and disposition of residential real property (single family homes, condos, apartments, etc.).

• COMMERCIAL REAL ESTATE LAW. Legal practice involving advice and services in connection with the acquisition, ownership, leasing, financing, use, transfer and disposition of real property other than residential, farm, ranch, oil, gas and mineral matters (office buildings, industrial buildings, restaurants, retail, warehouses, parking lots, staging areas, plant and factory sites, manufacturing buildings, etc.).

• FARM AND RANCH REAL ESTATE LAW. Legal practice involving advice and services in connection with the acquisition, ownership, financing, use, transfer and disposition of farm and ranch property, including a basic knowledge of mineral rights (farms, ranches, hunting operations, equine operations, animal husbandry facilities, etc.).

It is probably fair to say that most Texas lawyers whose practices emphasize real estate law (i.e. "real estate lawyers") handle -- to varying degrees -- residential, commercial and farm & ranch real estate law.  Also, many real estate lawyers limit their practices to transactional work (drafting deeds, contracts and other documents related to real property) or real estate litigation (the filing or defense of lawsuits related to real property) 

Although Oil & Gas Law and Water Law are generally characterized as separate but related areas, they are closely related to real estate law in Texas.

Title Company's Escrow Officer Owes a Fiduciary Duty to Both Buyer and Seller

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

Where real estate transactions are concerned, there are 3 "seats" at the Closing table -- the Buyer, the Seller, and the Title Company's Escrow Officer.  While the Title Company is not a "party" to the purchase or sale of real estate, the Escrow Officer factors prominently into the Real Estate Contract, and  his/her role is vital to a successful transaction.

The significance of the Title Company's role is evidenced, in part, by governmental regulation of premium rates that can be charged for policies of title insurance. In Texas, the Texas Department of Insurance (TDI) sets Texas Title Insurance Premium Rates on an annual basis. Once set, Title Companies may not charge premiums in excess of those established by the TDI, and, resultantly, premium rates are "standardized" across all title companies doing business in Texas.

Perhaps even more significant than regulating title insurance premiums, is the State's concern with regulating who may act as an Escrow Officer in Texas. Texas law prohibits any person from acting in the capacity of Escrow Officer without being licensed by the TDI, and obtaining and maintaining a surety bond.  

The Texas Title Insurance Act (located at Title 11 of the Texas Insurance Code) defines "Escrow Officer" as an attorney, or bona fide employee of either (i) an attorney licensed as an Escrow Officer, (ii) a Direct Operation, or (iii) a Title Insurance Agent, whose duties include any or all of the following:

1. countersigning title insurance forms;

2. supervising the preparation and supervising the delivery of title insurance forms;

3.  signing escrow checks; and/or

4.  closing the transaction.

This regulation is important because under Texas law, the Escrow Officer / escrow agent in a real estate closing owes a fiduciary duty to both parties, seller and buyer, to the underlying contract.Trevino v. Brookhill Capital Resources, 782 S.W.2d 279, 281 (Tex.App.—Houston [1st Dist.] 1989, writ denied); Capital Title Co. v. Donaldson, 739 S.W.2d 384, 389 (Tex.App.— Houston [1st Dist.] 1987, no writ). The three elements of this fiduciary duty are 1) a duty of loyalty; 2) a duty to make full disclosure; and 3) a duty to exercise a high degree of care to conserve the [closing/escrow] money and pay it only to those persons entitled to receive it. City of Fort Worth v. Pippen, 439 S.W.2d 660, 665 (Tex.1969).

Pursuant to this fiduciary duty, a title company's Escrow Officer is legally bound to follow the agreed terms of a Real Estate Contract/ Purchase and Sale Agreement.  This duty is an absolute one, requiring the Escrow Officer to carry out the terms of the agreement creating the escrow agency. See Albright v. Lay, 474 S.W.2d 287, 291 (Tex.Civ.App.—Corpus Christi 1971, no writ). 

When an Escrow Officer breaches one of the fiduciary duties owed to the parties -- whether by failing to properly pay those items set-forth in the Closing Statement, by mishandling or misdirecting funds, by failing and/or refusing to pay real estate commissions and/or by failing to disburse/refund earnest money as prescribed by a contract -- buyers and sellers may recover on the Escrow Officer's bond, or bring a direct action for damages.

Broker's Liability for Another's Misrepresentations (including a client's) is Limited By Statute

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

It is inevitable in real estate transactions that Buyers sometimes feel as if certain facts or circumstances surrounding property were not properly disclosed to them prior to the sale. Some non-disclosures are intentional acts of concealment rising to the level of fraud, while others much more innocuous.  

In any event, listing brokers  -- even completely innocent agents --  sometimes find themselves being accused, along with their Seller-Clients, of statutory fraud or fraudulent misrepresentation by non-disclosure.  Another Plaintiff-lawyer's favorite is an allegation of DTPA (Texas Deceptive Trade Practices Act) violations.  Enterprising Plaintiffs lawyers also recognize that brokers frequently maintain policies of professional liability ("malpractice") insurance, while Sellers usually have no coverage for negligent or intentional actions taken in connection with the sale of real estate.  Thus, brokers are sometimes dragged along solely as a "pocket" or source of recovery.

Whether recovery can be had from a broker, however, depends largely on what the broker actually knew, and on whether the Plaintiff is alleging vicarious liability (arising from the Seller-Client's misrepresentations or concealment) or direct liability based upon the broker's own concealment. 

When a plaintiff seeks to hold a real estate broker or agent liable for the misrepresentations of another, the plaintiff must prove the broker or agent (1) knew of the falsity of the misrepresentation or concealment; and (2) failed to disclose the party’s knowledge of the falsity of the misrepresentation or concealment. TEX. OCC. CODE ANN. § 1101.805(e),(f).  Thus, when seeking to assign vicarious liability, the burden falls on the Plaintiff to prove what the broker knew (and when), but failed to disclose. Even when it can be proven that a Seller intentionally concealed or misrepresented material facts, the broker cannot be held vicariously liable for such concealment in the absence of evidence of the broker's KNOWLEDGE that such fact was false.

The specific facts and circumstances of a given dispute become particularly important when, as often happens, a broker makes certain representations about a real property (in sales literature, MLS listings, internet advertising, etc.). In those instances, one of the key facts for a court to analyze in determining whether the statutory protection found in  TEX. OCC. CODE ANN. § 1101.805(e),(f) applies is whether the broker's representations were based upon information obtained from other sources (surveys, government records, the Seller, etc.) or constitute the broker's own representations. Even if the representations published by the broker were false (and based upon misinformation received from a third-party source which the broker reasonably believed to be true or accurate) unless the broker knew of that falsehood, he may be insulated from liability for misrepresentation.

While the statute goes a long way in protecting brokers from the false statements made (or silence in the face of  duty to disclose), it is not a perfect, "silver bullet" defense.  

Limitations of the Quitclaim Deed in Texas

With surprising frequency, Texans seeking to transfer title to real estate without the assistance of an experienced real estate lawyer utilize Quitclaim Deeds. Perhpas this is because of the wide availability of these forms on the internet, and in free databases. However, there are many pitfalls associated with using the Quitclaim Deed, and its limitations are plenty. For these reasons, quitclaim deeds are viewed with disfavor in Texas.

The essence of a quitclaim deed is an effort to pass any title, interest or claim of the grantor, but not professing that such title is valid, nor containing any warranty or covenants for title. See Porter v. Wilson, 389 S.W.2d 650, 655-56 (Tex.1965). A quitclaim deed is not a conveyance or a muniment of title. Adamson v. Doornbos, 587 S.W.2d 445, 447-48 (Tex.Civ.App.—Beaumont 1979, no writ).

By itself, a Quitclaim Deed does not establish any title in those holding the deed, but merely passes the interest of the grantor (if any) in the property. Stated simply, a Quitclaim Deed suffices only to give the grantee whatever title that grantor has. If the Grantor has no title to the property interest in question, then none passes.

More importantly, a subsequent purchaser is not a bona fide purchaser if the conveyance is made by quitclaim (conveyanvce without warranty). See Woodward v. Ortiz, 150 Tex. 75, 237 S.W.2d 286, 291-92 (1951) (purchaser of a quitclaim deed takes with notice of all defects in the title and equities of third persons); Kidwell v. Black, 104 S.W.3d 686, 691 (Tex.App.-Fort Worth 2003, pet. denied); Hall v. Tucker, 414 S.W.2d 766, 769 (Tex.Civ.App.-Eastland 1967, writ ref'd n.r.e.).

Although there is an appropriate application for quitclaim deeds in Texas, these circumstances are rare, and a General Warranty Deed or Special Warranty Deed is the preferential instrument for conveyance.

New Changes to TREC Contract Forms

The Texas Real Estate Commission took emergency action at the February 14, 2011 commission meeting to adopt revisions to standard contract forms including the Unimproved Property Contract, the One to Four Family Residential Contract (Resale), the New Home Contract (Incomplete Construction); the New Home Contract (Completed Construction); the Farm and Ranch Contract; and the Residential Condominium Contract. The effective date for the emergency action is March 1, 2011.

This action was taken based on a recommendation from the Broker Lawyer Committee. The Broker Lawyer Committee is a committee appointed by the Commission to draft and revise contract forms that are capable of being standardized to expedite real estate transactions and minimize controversy.

With this action the forms were amended to remove new sub-paragraph 15B, which was recently added to the contract forms to require a seller or buyer to file an action for specific performance within 45 days of the Closing Date of the contract. The Commission took emergency action to remove sub-paragraph 15B with an effective date of March 1, 2011. The updated contract forms are available for immediate use on the TREC website with a date of February 14, 2011 on the right-hand corner.

New Chair and Commissioners Appointed to Texas Real Estate Commission

Governor Rick Perry has made four appointments to the Texas Real Estate Commission: Broker member Avis Wukasch, currently serving as a broker member of the commission with a term to expire January 31, 2013, was appointed to serve as the Chair. Governor Perry also newly appointed broker member Bill L. Jones and public member Weston Martinez, and reappointed broker member Troy Alley, all three with terms to expire January 31, 2017.

Recovery of Attorney's Fees in Adverse Possession Cases

There is little doubt that adverse possession lawsuits can be costly. Litigants to these title disputes -- where the key evidence is necessarily historical and often pre-dates current ownership of a given property -- frequently incur substantial expense in surveys, document searches, depositions of prior owners, expert witnesses and title searches. Naturally, a real estate lawyer's time associated with weaving or undermining a credible claim for ownership which is contrary to "legal title" as it appears in the deed records can also translate into significant attorneys' fees. Thus, property owners with boundary disputes often inquire about the possibility of recovering their costs and attorneys' fees in the event that the prevail in an adverse possession case.

For all its criticism, the Texas Legislature has generally been sensitive to the sanctity of land ownership in Texas. For that reason, it enacted Section 16.034(a) of the Texas Civil Practice and Remedies Code to allow the Court (in its discretion) to award costs and reasonable attorneys' fees to the prevailing party in a suit for the possession of real property where one party is "claiming under record title to the property and one claiming by adverse possession." TEX. CIV. PRAC. & REM. CODE ANN. § 16.034(a). However, this grant of discretionary authority for trial courts to award fees didn't have much of an impact on the number of adverse possession suits, including those where claims of ownership by adverse possession were simply frivolous.

To address this concern, statutory revisions were made in 2009, and Section 16.034(a) now requires the trial court to award attorney’s fees “if the court finds that the person unlawfully in actual possession made a claim of adverse possession that was groundless and made in bad faith, . . . .” TEX. CIV. PRAC. & REM. CODE ANN. § 16.034(a) (Vernon Supp. 2009).

The issue of unlawful possession is still part and parcel of the availability of attorney’s fees under section 16.034(a). TEX. CIV. PRAC. & REM. CODE ANN. § 16.034(a). However, under the statutory revisions, the presence of these elements, together with a finding of bad faith, frivolity and/or groundlessness will necessarily result in the shifting of costs and attorneys' fees.

When considering whether to litigate a trespass, title dispute or adverse possession claim, a landowner shouldn't count on having the opposing party pay his or her attorneys' fees. However, given the 2009 revisions to Section 16.034(a), the frequency of such recovery in those cases involving groundless claims of adverse possession seem much better.