Mortgage
At no time in the foregoing process was written consent to the mortgage/deed of trust nor the trustee’s deed ever obtained from A. A had, at no time, any actual knowledge of XYZ’s mortgage/deed of trust.
“ Texas follows the lien theory of mortgages. Under this theory the mortgagee is not the owner of the property and is not entitled to its possession, rentals or profits. Thus, it has become a common practice to include in the deed of trust, or in a separate instrument, terms assigning to the mortgagee the mortgagor’s interest in all rents falling due after the date of the mortgage as additional security for payment of the mortgage debt.” Taylor v. Brennan, 621 S.W.2d 592, 594 (Tex. - 1981) (emphasis added) Under the lien theory of mortgages, the legal and equitable titles to the mortgaged properties are severed. Williams v. Nationstar Mortg., LLC, 349 S.W.3d 90 (Tex.App. - 2011); Flag-Redfern Oil Co. v. Humble Exploration Co. , 744 S.W.2d 6, 8 (Tex. - 1987) The mortgagor continues to own the legal title to the mortgaged properties (in the instant fact situation, oil and gas leases) but the equitable title in and to the mortgaged properties is vested in the mortgagee. Williams v. Nationstar Mortg., LLC, 349 S.W.3d 90 (Tex.App. - 2011) Conversely, upon the happening of a valid foreclosure and trustee’s deed issued to a purchaser at a foreclosure sale, the legal and equitable titles are merged into the purchaser. Conseco Finance Servicing Corp. v. J & J Mobile Homes, Inc., 120 S.W.3d 878 (Tex.App. — 2003) A purchaser at a foreclosure sale can only obtain that title and interest the trustee has authority to convey. Bonilla v. Roberson, 918 S.W.2d 17 (Tex.App. — 1996) More significantly, the act of foreclosure does not terminate those interests in the mortgaged properties which are senior to the mortgage being foreclosed. Williams v. Nationstar Mortg., LLC, 349 S.W.3d 90 (Tex.App. - 2011); Conversion Properties v Kessler, 994 S.W.2d 810 (Tex.App. — 1999)
II. Definition of the Issues
Issue No. 1 – Was the written consent of A, under Texas law, required so that XYZ Oil Company could validly enter into its mortgage/deed of trust (assignment) with ABC Bank? Issue No. 2 – Was the written consent of A, under Texas law, required in order for the Trustee’s deed (assignment) to Burns Oil Company to be a valid assignment of Said Lease?
III.
Select Definitions
Assignment
For purposes of this paper, express written consent by A, the lessor, is only required if XYZ Oil Company assigns Said Lease to a third party. Case law in Texas early on held that: “…The word ‘assign’ is defined: ‘To make or set over to another; to transfer; as to assign property or some interest therein.’ 2 Bl. Comm. 326; Black, Law Dict. 97. The word ‘assignment’ means ‘the act by which one person transfers to another, or causes to vest’ in another, his property, or an interest therein; the transfer or making over the estate, right, or title which one has in lands and tenements.” Harlowe v. Hudgins , 19 S.W. 364, 365 (Tex. 1892) Subsequent case law has followed this early legal definition and very clearly appears to hold today that the word “assign” is the equivalent of the word “grant”. Neeley v. Intercity Management Corp., 623 S.W.2d 942 (Tex. App. —- 1981) See also Luecke v. Wallace, 951 S.W.2d 267 (Tex.App. — 1997) Under the above rules of law and factual setting, if XYZ Oil Company wants to assign (grant or convey) Said Lease to a third party, it must first obtain the written consent from A to have a valid assignment of Said Lease.
Equitable Title
The term “equitable title” was referred to above under the definition of Mortgage . Equitable title is to be distinguished from legal title. Equitable title is the present right to the legal title. City of Houston v. Guthrie, 332 S.W.3d 578 (Tex.App. - 2009) Equitable title indicates a beneficial ownership in the lands at issue and entitles the owner of the equitable title to the formal legal title.
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