The Duhig Rule Explained and Distinguished

Originally published by Charles Sartain.

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.

 

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

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