Be Careful With the Mineral Interests

Two recent Texas appellate cases show what can happen when an owner mistakenly conveys mineral interests and then tries to reclaim them more than four years after the closing. These cases are of interest locally where there is ongoing of leasing of mineral interests in the Fort Worth and surrounding areas. In both cases the sellers, after realizing that the mineral interests were conveyed, failed to file suit within four years after the closing of the sale. The results were different based on the facts of the case. Both cases are still pending so the circumstances may change. This is an issue to watch.

In Trahan v Mettlen, 2014 WL 1383140, Tex. App. – Texarkana 2014, no pet. h.) the plaintiff’s sold their real property intending to reserve their mineral rights. The deed was recorded in April 2006 and suit was filed in December 2010 more than four years after the sale. There was no evidence of a mutual mistake or other grounds that would toll the statute of limitations, that is, to extend the date that a suit could be filed to reform the deed. The court found that the parties were charged with the contents of the deed and that the action to reform was barred by the four-year statute of limitations under Section 16.051 of the Texas Civil Practices and Remedies Code. A decision to appeal to the Texas Supreme Court in this case has not been made.

Then jump to the case of Cade v Cosgrove, 2014 WL 1320958 (Tex. App. – Fort Worth 2014, pet. filed) where the property was sold in 2006. The contract of sale provided that the sellers would retain all mineral rights. The deed failed to include the reservation. Suit was filed in 2011, more than four years after the sale. The trial court granted summary judgment for the purchaser finding that the suit was barred by limitations.

The Second Court of Appeals reversed and held that the “discovery rule” was available because of mutual mistake. Some of the facts were that after the sale the sellers notified the oil and gas company where to send their checks and they continued to receive royalty checks and correspondence from the oil and gas company after the sale. In 2010 the sellers were assured by the title company that the deed contained the reservation of the minerals. The Second Court’s opinion involved an extensive review of case law to arrive at its holding. The purchasers contended that the omission of the reservation of the mineral rights was plainly evident. The purchasers filed a petition for review in the Texas Supreme Court. It will be interesting to see if the Texas Supreme Court takes up this case.