Chapter 9 After Acquired Titles

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Chapter 9  After Acquired Title

 

Occasionally, lessors do not have complete title to the minerals that they purport to lease to the oil company, but they acquire the interest that they did not have at some time after they grant the oil and gas lease.  This after-acquired title scenario is not commonplace, but it happens more frequently than you would expect.

The traditional Alabama rule on estoppel by deed is: “if one having no title convey[s] lands by express warranty or by the warranty which the law implies from the use of the words ‘grant, bargain, sell, and convey,’ and thereafter acquires title, ‘such title will inure and pass eo instanti to his vendee....” Turner v. Lassiter, 484 So.2d 378, 380 (Ala. 1986).   Language such as that in Turner v. Lassiter suggests that covenants of warranty, either express or implied, are necessary to vest a grantor’s after acquired title in a grantee.  The key inquiry, however, focuses on what the deed “purports” to convey:

 

A deed may have the effect of passing to the grantee a title subsequently acquired by the grantor. ‘A grantor who executes a deed purporting to convey land to which he has no title or to which he has a defective title at the time of the conveyance will not be permitted, when he afterward acquires a good title to the land, to claim in opposition to his deed as against the grantee or any person claiming title under him.’

 

Harkins & Co. v.  Lewis, 535 So.2d 104, 113-114 (Ala. 1988)(citations omitted).

 

In the Harkins case, three of four sibling co-tenants sold their interests to their uncle by warranty deed.  The fourth sibling was alive, but did not join in the deed.  The fourth sibling later died, and her interest descended to the siblings that gave the warranty deed to the uncle.  The central issue in the case was whether the after acquired title to the one-fourth interest of the fourth sibling vested in the uncle by estoppel by deed or in the three siblings.

The trial court ruled that the deed was ambiguous and looked beyond the four corners of the deed to determine the intent of the grantors.  The trial court held that the doctrine of estoppel by deed does not apply where the intention of the parties is not to convey a title subsequently acquired.  The trial court found that the intention of the parties was to convey only the three-fourths interest held by the three siblings that gave the deed to the uncle.

The Harkins case is an example where the doctrine of estoppel by deed did not apply to a warranty deed that on its face conveyed fee simple title to a forty acre tract.

The case of Garrow v. Toxey, 66 So. 443 (Ala. 1914) is an example of where the doctrine of estoppel by deed did apply to vest an after acquired title in a grantee holding under a quitclaim deed that expressed an intention to convey after acquired titles.  In the Garrow case, the grantor was Audley H. Gazzam, and the grantee was George Wragg.  The quitclaim grant was:

 

“Have remised, released and forever quitclaim, and by these presents do remise, release and forever quitclaim unto the said George Wragg in his full and actual possession now being and to his heirs and assigns forever, all the estates, right, title, interest, use, trust, property claim and demand whatsoever, at law as well as in equity, in possession as well as in expectancy of, in, to or out of all and singular those certain lots, etc.”

 

In addition to that quitclaim grant, the deed contained the following provision:

 

So that neither the said Audley H. Gazzam, his heirs or assigns, nor any other person in trust for them or in their name or names or the name, right or stead of any of them, shall or will, can or may, by any ways or means whatsoever hereafter have, claim, challenge or demand any right, title, interest or estate of, in, to or out of the said premises above described and hereby released. But that he, the said Audley H. Gazzam, his heirs and assigns, each and every one of them from all estate, right, title, interest, property claim and demand whatsoever of, in, to or out of the said premises or any part thereof, and is and shall be by these presents forever excluded and debarred.

 

The Alabama Supreme Court held that the quitclaim deed from Gazzam to Wragg vested in Wragg any future title that Gazzam acquired after the execution and delivery of the quitclaim deed.  In this regard, the court held:

 

This conveyance, by its terms, operated upon the present title and any future acquired title of Gazzam, and, when he obtained a patent to the lands from the United States government, the legal title which he thereby acquired vested in Wragg.

 

Harkins involved a full warranty deed where the doctrine of estoppel of deed did not operate to pass an after acquired title. Garrow involved a quitclaim deed where the doctrine of estoppel of deed did operate to pass an after acquired title.  These two cases demonstrate the investigation and attention that title examiners must give to after acquired title situations.

 

If an oil company agrees in the leasing negotiations to delete the warranty clause from the lease, it is fair for the oil company to ask for an after-acquired title clause. An example of an after acquired title clause is:

 

This lease includes any right, title, or interest in and to the Property that Lessor hereafter acquires from any source, except by, through, or under Lessee. Lessor, Lessor's heirs and assigns, hereby covenant and agree to execute and deliver to Lessee, Lessee’s successors or assigns, any additional leases necessary to cause any such after-acquired title to be covered by this lease.

Copyright 2011 by Edward G, Hawkins. All rights reserved.