equitable title by the mortgagor in and to the mortgaged properties to the mortgagee is an “assignment” under A’s consent provision contained in its oil and gas lease to XYZ Oil Company, thus requiring A to consent thereto. In the author’s opinion: 1. Under the legal reasoning/cases found in Select Definitions – Assignment , the term “assignment”, as it appears in A’s oil and gas lease to XYZ Oil Company, is legally equivalent to the term “grant”, “sell” or “convey”. 2. Under the lien theory of mortgages in Texas, XYZ Oil Company conveyed (assigned) to ABC Bank the equitable title in and to the oil, gas and other minerals in, on and under Blackacre. Flag-Redfern Oil Co. v. Humble Exploration Co., Inc., 744 S.W.2d 6 (Tex. - 1987) ABC Bank can only unify the legal and equitable titles in the case of default under the mortgage/deed of trust via foreclosure sale and the issuance of a trustee’s deed. Conseco Finance Servicing Corp. v. J & J Mobile Homes, Inc., 120 S.W.3d 878 (Tex.App. — 2003); That is, a purchaser at foreclosure can only obtain that title and interest the trustee has the authority to convey at the foreclosure sale. Bonilla v. Roberson, 918 S.W.2d 17 (Tex.App. — 1996) 3. For an assignment (conveyance) of the equitable title to the oil and gas in, on and under Blackacre to be in compliance with Said Lease, A’s written consent to the mortgage/deed of trust should have been obtained. 4. In the author’s opinion, until A’s written consent is obtained agreeing to the granting of the mortgage/ deed of trust by XYZ Oil Company: a. ABC Bank’s mortgage remains a valid contract between XYZ Oil Company and ABC Bank; and b. The note by and between ABC Bank and XYZ Oil Company remains a valid and enforceable note; and c. ABC Bank cannot enforce its right to foreclose and merge the legal/equitable titles to the fee simple determinable interest
in the oil, gas and other minerals mortgaged by XYZ Oil Company; and
d. ABC Bank cannot take possession of nor operate Said Lease nor sell same; and
e. ABC Bank is still entitled to possession of the oil and gas and/or the proceeds thereof, when and as produced, under the assignment of same as contained in the mortgage/deed of trust.
It is equally possible, due to on a total lack of cases on point, that the foregoing conclusion could be found by a Texas court to be incorrect. That is, a court could find that a mortgage/deed of trust is not an “assignment” of the lessee’s equitable title to its fee simple determinable interest in and to the oil and gas in the mortgaged properties requiring the lessor’s written consent before it can become an enforceable mortgage/deed of trust. However, ABC Bank’s foreclosure and resultant sale of the mortgaged properties, coupled with the merger of the legal and equitable titles in the foreclosure purchaser, raises an entirely different issue. 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? The default events which lead to the foreclosure by ABC Bank are set forth in the mortgage/deed of trust. Failure to remain current in its note payment is one of those default events which can result in a non-judicial foreclosure sale. The actual act of foreclosure is governed by a combination of contractual terms found in the mortgage/deed of trust coupled with a framework of legislatively mandated provisions ( Morlock, L.L.C. v. Bank of New York, 448 S.W.3d 514 (Tex.App. - 2014); Texas Property Code § 51.002. Sale Of Real Property Under Contract Lien). The only interest ABC Bank could sell at the foreclosure sale was the fee simple determinable interest in and to the oil and gas in, on and under Blackacre, owned by XYZ Oil Company and mortgaged to ABC Bank. ( Ford v. Emerich, 343 S.W.2d 527 (Tex.Civ.App. — 1961) That is, A’s possibility of reverter under Said Lease, including A’s right to consent/non-consent to any proposed assignment of Said Lease, remained unaffected by the foreclosure. Stated another way, the trustee under the mortgage/deed of trust could only sell to Burns Oil Company that interest
17
G r o w t h T h r o u g h E d u c a t i o n - O c t o b e r / N o v e m b e r / D e c e m b e r 2 0 2 0
Made with FlippingBook Annual report