“unrecorded instrument is binding” only “on a party to the instrument, on the party’s heirs,” and on subsequent purchasers who are not bona fide purchasers. Id. § 13.001(b). A bona fide purchaser is one who “acquire[s] property in good faith, for value, and without notice of any third-party claim or interest.” Madison v. Gordon , 39 S.W.3d 604, 606 (Tex. 2001) (per curiam). “Notice may be constructive or actual.” Id. Thus, if a correction instrument is not recorded before a bona fide purchaser obtains an affected property interest, sections 5.027 and 13.001 provide that the correction instrument has no effect on the bona fide purchaser. Once a correction instrument has the requisite signatures and is recorded, however, it is “effective as of the effective date of the recorded original instrument of conveyance.” Id. § 5.030(a)(1). That means that a properly executed correction instrument, when recorded, “replaces and is a substitute for the original instrument.” Id. § 5.030(b).[6] But consistent with section 13.001’s protections for bona fide purchasers, one notable exception to section 5.030’s retroactive effect exists: “A correction instrument is subject to the property interest of a” bona fide purchaser that was “acquired on or after the date the original instrument” was recorded “and before the correction instrument” was recorded. Id. § 5.030(c). Thus, even when a correction instrument is properly executed and recorded, a bona fide purchaser’s property interest still controls if the purchaser acquired its interest prior to the correction instrument being recorded….” Broadway National Bank et al. v. Yates Energy Corporation et al, 631 S.W.3d 16, 26 (Tex. 2021). As indicated above, Yates Energy/EOG Resources et al. may have a potential notice problem. Specifically, they may have a potential constructive notice problem. As was stated in the case of Flack v. First Nat. Bank of Dalhart, 226 S. W. 2d 628, 632 (Tex. 1950) :
ordinarily amounts in law to notice, provided inquiry has become a duty and would lead to knowledge of the facts by the exercise of ordinary diligence and understanding. In other words, one who has knowledge of such facts as would cause a prudent man to make further inquiry, is chargeable with notice of the facts which, by use of ordinary intelligence, he would have ascertained. As the rule has been more precisely stated, ‘knowledge will be imputed and may be implied from circumstances where the circumstances known to one concerning a matter in which he is interested are sufficient to require him, as an honest and prudent person, to investigate concerning the rights of others in the same matter, and diligent investigation will lead to discovery of any right conflicting with his own.”
Factually, Yates Energy/EOG Resources et al. either knew or had constructive notice that: (i) the conveyance of the 25% mineral estate in the subject lands was made by the Bank as Trustee of the Mary Frances Evers trust; (ii) that the trust agreement/ amendment was not of record and thus (iii) their royalty estate was limited by whatever limitations were placed on John’s ownership in said trust agreement/amendment. Did Yates Energy/EOG Resources et al. have a duty to obtain a copy of said trust/amendment and, after reading same, further inquire why John got a full 25% mineral fee simple interest in the subject lands instead of a life estate? It appears that the Court is holding, since Yates Energy/EOG Resources et al. obtained their royalty interest in the subject lands prior to the recordation of the 2013 Correction Deed, that they may indeed be bona fide purchasers for value. That is, there can be no constructive (as opposed to actual) notice whatsoever to Yates Energy/EOG Resources et al. of the existence of the 2013 Correction Deed since it had not been executed and filed for record prior to the time Yates Energy/EOG Resources et al. acquired their royalty interest from John. However, Yates Energy/EOG Resources may be charged with
“‘Whatever puts a person on inquiry
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N at i onal A ssociation of D i v i s i on O rder A nalys t s
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