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Texas Mineral Owners Must Carefully Inspect Deeds Before Signing!

As the Texas Supreme Court noted recently, it is the responsibility of mineral owners to review their deeds carefully to ensure that the rights and reservations in the deed are what they intend and that there are no mistakes. Specifically, in Cosgrove v. Cade, the Court held that “Plainly obvious and material omissions in an unambiguous deed charge the parties to the deed with irrebuttable notice (of any errors) for statute of limitations purposes”. As a result, the “discovery rule” does not apply to a suit to reform the deed according to both Texas common law and the Texas recording statute.

In 2006, the Cades sold two acres of land to Barbara Cosgrove. The real estate contract provided for the reservation of all of the mineral rights to the Cades. However, the deed conveyed the land in fee simple, meaning all the land and rights incidental to ownership of the land, including mineral rights, were conveyed to the buyer. At closing of the transaction, the parties signed a document in which they agreed to correct or adjust any errors or omissions in any documents.

In 2010 the Cades realized that the deed conveyed their mineral rights to Ms. Cosgrove. The Cades filed a lawsuit to reform the deed and for breach of contract.

Discovery Rule Does Not Apply

One of the issues in the Cosgrove v. Cade case was whether the statute of limitations was tolled (i.e., extended) in this case by the discovery rule. The discovery rule allows for an extension of when the statute of limitations clock for a claim begins to run when a claimant did not know nor could not have reasonably known that they had a claim. In this case, the Cades argued that they did not learn about the mistake in the deed until 2010, and thus the statute of limitations should have been tolled until the date that they discovered there was a defect in the deed.

The Court disagreed. The Court took the position that a plainly evident omission in an unambiguous deed is not the type of injury that the discovery rule is intended to apply to. As a matter of law, parties to a deed are put on notice and are charged with knowledge of an unambiguous deed’s contents, including any material omissions or errors, when they sign the deed. Because the Cades executed the deed in 2006, and could have easily noticed the missing mineral rights reservation at that time, the statute of limitations began running from the date of execution of the deed. Both the two-year and the four-year statute of limitations had expired by the time the Cades filed this lawsuit.

Breach of Contract Claim

The Cades also claimed that the buyer had violated the agreement signed at closing in which both parties agreed they would adjust any errors or omissions in any documents. However, the Court held that if there was any violation of the contract, it occurred at closing in 2006. The statute of limitations had also expired on this claim.

The lesson here is clear. You must read documents before you sign them. If you are uncertain about the meaning of language in a document you are about to sign, have a lawyer review the document before you sign it and explain the language and the consequences of that language. If you do not, you may find that you have contracted for something that you did not intend.

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