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The Duhig Rule is back, this time in Echols Minerals LLC, et al v. Green et al.

Framing the discussion, Duhig v. Peavy Moore Lumber Company and Trial v. Dragon

In Duhig the grantor in a general warranty deed warranted title and reserved half of the minerals. The deed did not mention that a third party owned half of the minerals. Duhig breached the warranty the moment he conveyed the property because he could not both retain half the minerals and convey half when the third party owned that half. Duhig was estopped from claiming ownership of the mineral interest he had reserved for himself.

There is a two-part test to determine if Duhig applies to a warranty deed that reserves an interest. First, did the grantor convey an interest greater than what he or she possessed such that there is an overconveyance and therefore a failure of title?

If the answer is yes, then under Dragon, Duhig does not apply if the grantor did not own the interests required to remedy the breach at the time of execution. Duhig is narrow in scope and confined to the specific facts in that case, say the courts.

The transactions

The court refers to several transactions. Here are the most important. By a 1952 General Warranty Deed, the Haynes grantors conveyed 278.5 acres in the north half of Section 1 to Madison, reserving a 33.25/278.5 NPRI. The deed stipulated that grantors did not own the minerals in the NW/4 of the NE/4 and the deed did not convey those minerals. There was no reference to a prior 1944 Mineral Deed conveying ½ of the minerals to Regan. In 1949 Haynes et al had stipulated that Roselyn owned 1/6th and the others owned 5/6ths.

In another 1952 deed, Haynes, guardian for the minor Roselyn, conveyed to Madison all of Roselyn’s RTI in the N/2 of Section 1, described as a 1/6th interest, “subject to all outstanding royalty or mineral conveyances.”

The suit

Echols claimed an interest through the Haynes grantors for half of the 33.25/278.5 NPRI retained in the 1952 Haynes et al deed. Defendants Green and Fortis counterclaimed as successors to Madison that the NPRI reservation by Haynes et al in the 1952 deed was ineffective under Duhig because the Haynes grantors failed to except the ½ mineral interest conveyed to Regan in 1944.

The trial court granted summary judgment in favor of Green/Fortis that the reservation was ineffective, applying Duhig. The court of appeals reversed and rendered. Duhig did not apply

The Haynes grantors in the 1952 general warranty deed conveyed more interest in the mineral estate than they owned, reserving a mineral interest, creating a “Duhig problem”. But there was no remedy available. The exact mineral interest to remedy the grantors’ failure of title would be 1/2. They conveyed a 5/6 interest to Madison while they only owned 1/3rd. The Haines grantors did not own the exact interest to remedy their failure of title.  

The court also denied Echols’ argument that the 1952 guardian deed and the 1952 NPRI deed should be read together as a single, unified transaction. The deeds had different grantors, conveyed different interests and had different terms.

A concurring opinion would read the two transactions together.

Your musical interlude

Co-author Rusty Tucker

Let’s talk the Duhig Rule and estoppel by deed in Texas. Don’t run away yet. We’ll get to the point quickly and then you can leave.

Under the doctrine of estoppel by deed:

  • “All parties to a deed are bound by the recitals therein, which operate as an estoppel, … and binding both parties and privies … ”
  • Estoppel by deed “does not bind mere strangers, or those who claim by title paramount the deed. It does not bind persons claiming by an adverse title, or persons claiming from the parties by title anterior to the date of the reciting deed.”
  • Estoppel by deed “does not bind individuals who are not a party to the reciting deed, nor does it bind those who claim title independently from the deed in question.”

Under Duhig v Peavy-Moore Lumber Co.: “If a grantor reserves an interest and breaches a general warranty at the very time of execution, then an immediate passing of title is triggered to the grantee for that property that was described in the reservation—in other words, if the grantor owns the exact interest to remedy the breach at the time of execution and equity otherwise demands it.”

So said the Supreme Court of Texas in Trial v. Dragon.

If you aren’t a title examiner or a landman, you have permission to proceed directly to the musical interlude.

The facts

Leo Trial and his six siblings each owned a 1/7th interest in property in Karnes County. In 1983 Leo gifted to his wife, Ruth, half all of his right, title and interest in the property. Thus, Ruth owned a 1/14th interest in the property as her separate property.

In 1992 Leo and his siblings purported to convey the entire property to the Dragons. Each of the seven siblings executed identical deeds with the following language: “WE, … GRANT, SELL AND CONVEY … all that certain parcel … being situated[d] in Karnes County… .” There was a 15-year mineral reservation and a general warranty clause.

Ruth was not a party to the 1992 deed, the deed did not mention her interest, and the Dragons were not otherwise aware of the 1983 deed, having obtained no title opinion. Leo died leaving his entire estate in trust for the benefit of Ruth for life, then the corpus to his two sons. Ruth died and her 1/14th interest passed to the sons.

An operator, actually paying attention to a lease status report that Ruth owned an undivided 1/14th interest, prepared a new division order and began paying the sons their respective royalties in a suspended account. The Dragons sued, claiming the property s owners.

The Dragons’ losing arguments

  • Under Duhig and its progeny, Leo breached the general warranty in the 1992 deed at the time of execution because he owned only half of what he purported to convey. The sons, as Leo’s direct heirs, are bound by the deed’s general warranty and are estopped from asserting title on any portion of the property.
  • XTO Energy, Angell, and Musick applied (see the opinion for facts and cites).
  • At the time the sons inherited the disputed interest, the after-acquired title rule was triggered and the interest vested immediately in the Dragons to make them whole under the express terms of the 1992 deed.

These arguments all failed because the facts differed significantly from those in Duhig. Leo did not own the interest required to remedy the breach at the time of the deed to the Dragons. Rather, Ruth owned the interest as her separate property. The Trial sons claimed through their mother, not their father.

Breach of warranty = damages

The Trial sons couldn’t avoid liability entirely. There was no question that Leo breached the general warranty at the time of execution. Therefore the proper remedy was monetary damages. Because the Trial sons are the direct heirs of Leo, they were bound by the general warranty to forever defend the Dragons from adverse claims to the property. The only question was whether the Trial sons are liable for damages when they failed defend against their own adverse claim to the property, and if so, what would the damages be.

The result

Because the Trial sons’ claim to the property was derived from their mother, an independent source predating the 1992 deed, estoppel by deed and Duhig did not divest the sons of their interest. The court remanded the case to the trial court to determine whether damages were appropriate.

The musical interlude

Contemporary music from New Orleans isn’t always what you’d call “New Orleans Music”. Witness John Fohl.  But then you have Renard Poche.