Originally published by Charles Sartain.
Posted by Charles Sartain
Co-author Alexandra Crawley
Thanks to In re Reichmann Petroleum Corp., we know one that works in Texas: A lien affidavit attaching either a plat or a plat and a Texas Railroad Commission Form W-1 provides an adequate property description for a mineral lien against an entire lease under the Texas Property Code.
Current practice – chase the wild goose
To have a valid mineral lien the claimant must file an affidavit in the Official Public Records of the county where the lease lies containing a “description of the property”.
Contractors often only identify a well name and county on their invoices. When they run to their lawyers at the last minute for a lien, the wild goose chase ensues: The lawyers navigate the user-unfriendly Railroad Commission web site and online county records (where available) seeking a “sufficient” description of the property for the affidavit. (Clients: Why do you wait so long? You’ve known for weeks the operator is a deadbeat.)
A better way
Reichmann provides much needed clarity, especially when the claimant can’t obtain the best description – from the lease – because of the pressure of time. Now, a plat or a plat and a Form W-1 will get you a lien on the entire lease, not just the portion depicted on the plat.
The court looks at what the statutory says
Reichmann was an operator of oil and gas properties and sought bankruptcy protection. Creditors claimed mineral liens on leases. Reichmann objected to several liens on the grounds that the property descriptions were inadequate, arguing that “a description of the land, leasehold interest, pipeline, or pipeline right-of-way involved” should be construed to be equivalent to the statute of frauds standard, which requires “exactness”.
In finding that Chapter 56 does not require a description as stringent as the statute of frauds, the court looked to the statutory mechanic’s lien standard, which requires a “legally sufficient” description. That is lesser than the statute of frauds standard, and the mineral lien statute requires even less, by omitting “legally “sufficient”.
Said the court: An affidavit with an RRC plat was adequate because it would “enable a party familiar with the locality to identify with reasonable certainty the premises intended.”
The objectors argued that the lien did not attach to the entire lease, but only to that part reflected in the attached plat. The court disagreed, citing Mercantile National Bank at Dallas v. McCollough Tool Co., where in 1953 the “Texas Supreme Court gave a materialman a lien on an entire lease for work done on just one well under what is now Sections 56.001 and 56.003”, and Dunigan Tool & Supply v. Burris (1968) “where a Texas Court of Appeals interpreted what is currently Chapter 56 to hold that the statutory language allows a lien to exist upon an entire leasehold interest upon which materials were delivered to or used.”
The liens applied to the entire lease “because the information provided helped to identify the nucleus of information that would identify relevant leases even without a complete lease attached.”
Musical interlude
The common element of today’s offerings is feathers: This kind and then there is this kind.
Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.
from Texas Bar Today http://ift.tt/1P2PTUm
via Abogado Aly Website
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