Court Opinion

ID: 4110978
Source: CourtListenerOpinion
Date Created: 2016-12-26 08:14:57.687928+00
Date Added: 2024-06-11T14:35:32.823865
License: Public Domain

Dissenting Opinion issued December 22, 2016

                                       In The

                               Court of Appeals
                                      For The

                           First District of Texas
                            ————————————
                               NO. 01-15-00044-CV
                            ———————————
   TANYA L. MCCABE TRUST, MCCABE FAMILY TRUST, AND THE
             ROCHFORD LIVING TRUST, Appellants
                                         V.
                       RANGER ENERGY LLC, Appellee

                    On Appeal from the 356th District Court
                           Hardin County, Texas
                         Trial Court Case No. 54138

                             DISSENTING OPINION

      This is an important suit that affects the development of Texas law governing

the enforceability of correction deeds against oil and gas overriding royalty interest
owners. I strongly disagree with the majority’s holding that a correction deed of

trust was invalid and that the royalty owners’ interests in the property survive

foreclosure. Accordingly, I respectfully dissent.

      This is a suit brought by appellee, Ranger Energy LLC (“Ranger”), against

appellants, Tanya L. McCabe Trust, McCabe Family Trust, and Rochford Living

Trust (collectively, “the Trusts”), to quiet title to overriding royalty interests in two

oil-and-gas leases, the “McShane Fee and Brice Leases,” located in Hardin County,

Texas, that Ranger acquired at a foreclosure auction. The question before the trial

court on cross motions for summary judgment was whether a corrected mortgage

and deed of trust complied with provisions in the Texas Property Code relating to

correction instruments. See TEX. PROP. CODE ANN. §§ 5.027–.031 (West 2014). The

Trusts contend that the correction instruments at issue in this case failed to comply

with the statutory requirements for making a material correction to an instrument

and are therefore invalid as a matter of law. The majority agrees with the Trusts,

stating, “The correction instruments were ineffective because they purported to

make material changes, yet they were not correctly executed as specified by the

Texas Property Code.” Slip Op. at 3. I strongly disagree.

      The leases at issue here—the McShane Fee and Brice Leases—were part of a

package of eight oil and gas leases referred to as the “Saratoga Leases,” sold by

Tomco Energy, PLC (“Tomco”) to Mark III Energy Holdings, LLC (“Mark III”) in

                                           2
August 2008. But these two particular leases were inadvertently omitted from the

legal description of the Saratoga Leases set out in Exhibit A to the 2008 Original

Assignment, Mortgage, and Deed of Trust.

      The Trusts purchased their overriding royalty interests in the Saratoga Leases

in 2011 and 2012. In 2011, Exhibit A was corrected with respect to the original

assignment and the assignments of overriding royalty interests to each of the Trusts,

and the corrected instruments were filed in the public records of Hardin County. All

but the first overriding royalty interest purchased by the Trusts had the correct

Exhibit A attached, and the one purchased with an incorrect Exhibit A was corrected

effective one month later. In other words, the Trusts knew from the time they

purchased their overriding royalty interests in the Saratoga Leases in 2011 and 2012

that they had purchased property interests in all eight of the Saratoga Leases.

      Subsequently, in December 2012, the Original Mortgage and Deed of Trust

were renewed with the original incorrect Exhibit A attached that omitted the

McShane Fee and Brice Leases from the legal description of the Saratoga Leases.

The mistake was promptly discovered, however, and, in January 2013, correction

instruments were filed in the Hardin County public records. These instruments

amended the Renewal Mortgage and Deed of Trust to reflect that the McShane Fee

and Brice Leases were part of the Saratoga Leases, as shown in the 2011 Corrected

                                          3
Original Assignment and the assignments to the Trusts already on file in the Hardin

County public records.

      Under these circumstances, I cannot agree with the majority that the 2013

correction of Exhibit A to the renewal mortgage and deed of trust was a material

change made at that time to the original conveyance instruments. I would hold,

instead, that it was a valid nonmaterial change made to correct the legal description

of the Saratoga Leases in Exhibit A to the Renewal Mortgage and Deed of Trust so

that they conformed to the previously Corrected Original Assignment on file in the

Hardin County public records since 2011.          I would conclude that Ranger’s

predecessor in title complied with the statutory provisions for making nonmaterial

changes to correction instruments.

      Property Code section 5.030 provides that a correction instrument is subject

only to the property interests of a creditor or bona fide purchaser without notice of

an error in the original instrument. Under the circumstances of this case, I would

conclude that the Trusts could not and did not establish that they were bona fide

purchasers of the overriding royalty interests in the McShane Fee and Brice Leases

without notice at the time they acquired their interests in 2011 that their overriding

royalty interests extended to all eight of the Saratoga Leases burdened with the

Original Mortgage and Deed of Trust. As a result, I would hold that the trial court

correctly determined that the foreclosure sale of the Saratoga Leases to Ranger

                                          4
extinguished the Trusts’ interests in the McShane Fee and Brice Leases together with

their interests in the remaining six Saratoga Leases. I would affirm the judgment of

the trial court granting summary judgment in favor of Ranger.

                                          Facts

      In August 2008, Tomco sold eight oil-and-gas leases, “the Saratoga Leases,”

in Hardin County, Texas, to Mark III. The Saratoga Leases were described in

Exhibit A to the assignment and bill of sale (“the 2008 Tomco Original

Assignment”). However, two of the eight Saratoga Leases—the McShane Fee and

Brice Leases—were inadvertently omitted from Exhibit A. The 2008 Tomco

Original Assignment was recorded in the official public records of Hardin County.

      On October 21, 2008, in preparation for closing the $4 million Security

Agreement between Mark III and Peoples Bank, attorney Keith C. Thompson issued

an opinion letter (the “2008 Opinion Letter”). It stated, inter alia, that Thompson

had “[p]repared and obtained signatures for the Assignment of the Saratoga Lease

from Tomco Energy, PLC to Mark III Energy Holdings, LLC,” along with other

leases, and that he had recorded all of the described documents in the appropriate

counties. Thompson gave his opinion that the transactions were completed using

regularly accepted standards in the Texas oil and gas industry and that they were

“such that People’s Bank, Kansas has a valid and legally enforceable security

interest in the [Saratoga Leases].”

                                         5
      On November 3, 2008, Mark III obtained a $4 million mortgage from Peoples

Bank (the “Original Mortgage”) and executed a deed of trust securing the mortgage

(the “Original Deed of Trust”).1 The Original Mortgage and Deed of Trust granted

to Peoples Bank a lien against Mark III’s undivided working interests in the Saratoga

Leases. The Original Mortgage and Original Deed of Trust were recorded in the

official public records of Hardin County on November 10, 2008. But, like the 2008

Tomco Original Assignment, the Original Deed of Trust identified the subject leases

in an Exhibit A that included only six of the eight Saratoga Leases, again

inadvertently omitting the McShane Fee and Brice Leases. Neither Mark III nor

Peoples Bank discovered the error at this time.

      On May 3, 2011, Mark III executed an assignment, effective July 1, 2011, of

a 10% undivided overriding royalty interest in “the oil, gas and mineral leases in

Hardin County, Texas described on Exhibit ‘A’” to the Tanya L. McCabe Trust

(“Tanya L. McCabe Assignment No. 1”). Exhibit A to this assignment omitted the

McShane Fee and Brice Leases, as had the 2008 Tomco Original Assignment and

the Original Mortgage and Deed of Trust. The Tanya L. McCabe Assignment No.

1 was filed on May 26, 2011, in the official public records of Hardin County.

1
      The transactions between Peoples Bank and Mark III also involved other oil-
      and-gas leases in Hardin and Liberty Counties that are not at issue in this
      appeal.

                                         6
      On July 25, 2011, Mark III executed an assignment of a 5% undivided

overriding royalty interest in “the oil, gas and mineral leases in Hardin County,

Texas described on Exhibit ‘A’” to the Tanya L. McCabe Trust (the “Tanya L.

McCabe Assignment No. 2”). The assignment had an effective date of August 1,

2011. The correct Exhibit A, including the McShane Fee and Brice Leases, was

attached to the Tanya L. McCabe Assignment No. 2.

      At some point, Mark III discovered the omission of the McShane Fee and

Brice Leases. Although the Tanya L. McCabe Assignment No. 2 had the correct

Exhibit A, Mark III nevertheless executed a “Corrected Tanya L. McCabe

Assignment No. 2” on November 1, 2011, to be effective August 1, 2011. The

Exhibit A attached to this document again included the McShane Fee and Brice

Leases. Mark III also corrected the first assignment to the Tanya L. McCabe Trust

by executing a “Corrected Assignment of Overriding Royalty Interest” that

“supersede[d] the Assignment of Overriding Royalty Interests recorded in

Instrument No. 2011-20342” in the Hardin County Public Records (the “Corrected

Tanya L. McCabe Assignment No. 1”) on November 30, 2011, to be effective

August 1, 2011. The Corrected Tanya L. McCabe Assignment No. 1 attached the

corrected Exhibit A that included the McShane Fee and Brice Leases. Both of these

corrected assignments were filed in the Hardin County Public Records on December

22, 2011.

                                       7
      On November 1, 2011, Mark III executed an assignment of a 15% undivided

overriding royalty interest in “the oil, gas and mineral leases in Hardin County,

Texas described on Exhibit ‘A’” to the Tanya L. McCabe Trust (the “Tanya L.

McCabe Assignment No. 3”). The Exhibit A attached to this document included the

McShane Fee and Brice Leases. The Tanya L. McCabe Assignment No. 3 was also

filed in the Hardin County Public Records on December 22, 2011.

      On or about December 13, 2011, Tomco executed and filed a Corrected

Assignment and Bill of Sale (the “2011 Corrected Tomco Original Assignment”)

which added the two omitted McShane Fee and Brice Leases to the August 2008

Tomco Original Assignment, clarifying that the August 2008 transaction transferred

all eight Saratoga Leases from Tomco to Mark III. Mark III and Peoples Bank did

not execute a corrected mortgage or deed of trust at this time.

      The parties do not dispute the validity of the 2011 Corrected Tomco Original

Assignment conveying the Saratoga Leases to Mark III. Nor do they dispute the

validity of the 2011 Corrected Tanya L. McCabe Trust Assignments, all of which

were filed by Mark III in the Hardin County Public Records by December 2011.

      On April 1, 2012, Mark III executed an assignment of a 2.5% undivided

overriding royalty interest in “the oil, gas and mineral leases in Hardin County,

Texas described on Exhibit ‘A’” to the McCabe Family Trust (the “McCabe Family

Trust Assignment”). The Exhibit A attached to this document again included the

                                          8
McShane Fee and Brice Leases. The McCabe Family Trust Assignment was filed

in the Hardin County Public Records on May 18, 2012.

      Likewise on April 1, 2012, Mark III executed an assignment of a 2.5%

undivided overriding royalty interest in “the oil, gas and mineral leases in Hardin

County, Texas described on Exhibit ‘A’” to the Rochford Living Trust (the

“Rochford Living Trust Assignment”). The Exhibit A attached to this document

included the McShane Fee and Brice Leases.             The Rochford Living Trust

Assignment was also filed in the Hardin County Public Records on May 18, 2012.

      Mark III fell behind in its mortgage payments, and, in 2012, Peoples Bank

filed a lawsuit to collect the debt. At that time, however, Steward Energy Fund LLC

also claimed a lien on some of the leases that secured the loans to Mark III from

Peoples Bank. On December 6, 2012, Peoples Bank, Mark III, and other parties,

including Steward, entered into a settlement agreement (the “2012 Settlement

Agreement”). That agreement provided that Steward would release its lien and, in

lieu of foreclosure, Mark III would deed its interest in the Saratoga Leases to Peoples

Bank and pay it $750,000. The exhibit identifying the Saratoga Leases omitted the

McShane Fee and Brice Leases.

      In connection with the 2012 Settlement Agreement, Peoples Bank and Mark

III executed a new mortgage on December 6, 2012 (the “Hardin Renewal

Mortgage”), which extended the bank’s security interest in the Saratoga Leases.

                                          9
Despite having the correct description of the eight leases comprising the Saratoga

Leases on file with the Hardin County Public Records in the 2011 Corrected Tomco

Original Assignment and each of the five assignments of overriding royalty interests

to the Trusts, the Hardin Renewal Mortgage, like the uncorrected Original Mortgage,

identified the leases in an attachment, Exhibit A, that omitted the McShane Fee and

Brice Leases.

      Also as part of the 2012 Settlement Agreement, the same parties executed a

“Renewal Deed of Trust.” In the Renewal Deed of Trust, Mark III represented that

it was renewing and extending the $4 million note it had executed on August 12,

2008, in favor of Peoples Bank. Like the Hardin Renewal Mortgage, the addendum

to the Renewal Deed of Trust that identified the leases subject to the mortgage to

Peoples Bank, Exhibit A, omitted the McShane Fee and Brice Leases. The Renewal

Deed of Trust was recorded in the official public records of Hardin County on

December 7, 2012.

      About a month after Mark III and Peoples Bank executed the Hardin Renewal

Mortgage and the Renewal Deed of Trust, Peoples Bank discovered the mistake: the

McShane Fee and Brice Leases had been omitted from Exhibit A to both the Hardin

Renewal Mortgage and the Renewal Deed of Trust executed in connection with the

2012 Settlement Agreement. On January 14, 2013, Peoples Bank filed a “Corrected

Deed of Trust” in the public records of Hardin County. This document contained a

                                        10
revised first page and the original remaining pages of the Renewal Deed of Trust,

including the original signature page signed by Mark III and Peoples Bank that had

previously been filed as the signature page of the Renewal Deed of Trust in the

official public records of Hardin County on December 7, 2012. This document also

contained a correct Exhibit A that listed all eight Saratoga Leases, including the

McShane Fee and Brice Leases. The revised first page of the Corrected Deed of

Trust listed the same parties as the Renewal Deed of Trust: Mark III and Peoples

Bank. It added a paragraph to the bottom of the first page explaining that the

document had been refiled to correct the original Exhibit A that listed the properties

used as collateral. Peoples Bank notified Mark III of the filing of the Corrected Deed

of Trust on January 15, 2013.

      On January 23, 2013, after recording the Corrected Deed of Trust, Peoples

Bank filed a “Corrected Mortgage” in the official public records of Hardin County.

The Corrected Mortgage was corrected in the same manner as the Corrected Deed

of Trust. As with the Corrected Deed of Trust, the Corrected Mortgage included a

revised first page that identified Mark III as the mortgagor and Peoples Bank as the

mortgagee, plus the original remaining pages of the Original Mortgage, including

the original signature page executed by Mark III and Peoples Bank for the Original

Mortgage, and a corrected Exhibit A that listed all eight of the Saratoga Leases,

including the McShane Fee and Brice Leases. As with the Corrected Deed of Trust,

                                         11
the revised first page of the Corrected Mortgage stated that the Original Mortgage

was being refiled to correct the Exhibit A that listed the property used as collateral,

and the corrected Exhibit A showed all eight Saratoga Leases. On January 23, 2013,

Peoples Bank notified Mark III of the filing of the Corrected Mortgage.

      Two months later, on March 4, 2013, Peoples Bank and Mark III entered into

a second written settlement agreement (the “Second Settlement Agreement”), which

provided that Peoples Bank had the right to foreclose on the lien created by the

Corrected Mortgage and renewed by the Corrected Deed of Trust against all eight of

the Saratoga Leases, including the McShane Fee and Brice Leases. In return,

Peoples Bank agreed to pay a third-party lienholder $150,000 to obtain release of

the third-party’s lien against the McShane Fee and Brice Leases.

      On March 5, 2013, Peoples Bank foreclosed on the lien created by the

Corrected Mortgage, and it sold the Saratoga Leases to Ranger.

      In May 2013, Ranger filed this declaratory judgment action and suit to quiet

title against the Trusts. Ranger asserted that because it had obtained the leases by

foreclosure sale, the Trusts’ overriding royalty interests had been extinguished. The

Trusts disagreed. They argued that the Corrected Mortgage and the Corrected Deed

of Trust were invalid, and therefore the foreclosure affected only the six leases listed

in the original, uncorrected Hardin Renewal Mortgage, excluding the McShane Fee

                                          12
and Brice Leases. The Trusts argued that they retained their overriding royalty

interests in the McShane Fee and Brice Leases free and clear of any mortgage.

      On May 8, 2014, Ranger and the Trusts executed a Rule 11 and Stipulation of

Facts Agreement (“the Rule 11 Agreement”). The parties stipulated that the 2008

Tomco Original Assignment inadvertently omitted the McShane Fee and Brice

Leases from the Saratoga Leases that Tomco conveyed to Mark III. The parties also

stipulated that the McShane Fee and Brice Leases were inadvertently omitted from

the Original Mortgage and the Renewal Deed of Trust as well. The Rule 11

Agreement also contained stipulations relating to the filing of the Corrected

Mortgage and Corrected Deed of Trust by Peoples Bank. The parties stipulated that

the Corrected Mortgage and Corrected Deed of Trust included the inadvertently

omitted McShane Fee and Brice Leases and that Peoples Bank prepared the

correction instruments by revising the first page of the instruments to acknowledge

the correction being made, using the remaining pages from the original instruments,

and revising Exhibit A describing the Saratoga Leases. Attorneys for both Ranger

and the Trusts signed the Rule 11 Agreement on May 8, 2014, and the parties filed

the Rule 11 Agreement with the trial court on May 12, 2014.

      Both parties subsequently moved for summary judgment.          As summary

judgment evidence, Ranger filed the affidavit of Mark Watts, an officer of both

Ranger and Peoples Bank, explaining the history of all relevant transactions. The

                                        13
affidavit attached the 2008 Opinion Letter, which stated that the entire “Saratoga

Lease” was subject to the Security Agreement between Mark III and Peoples Bank.

The affidavit also stated that in December 2011, Mark III “had corrected the mistake

concerning the McShane Fee and Brice Leases with regard to every transaction

except as to the Hardin mortgages it had executed in 2008 in favor of Peoples.”

Ranger’s summary judgment evidence also included the deposition of Stanley

McCabe, the trustee of the McCabe Family Trust. McCabe testified that he did not

perform any due diligence prior to purchasing the overriding royalty interests in the

Saratoga Leases. He did not check the property records, and Mark III did not inform

him that Peoples Bank had a lien on the Saratoga Leases. Ranger also attached the

deposition of Lloyd Rochford, a trustee of the Rochford Living Trust, and Rochford

also testified that he did not perform a title examination or inquire about whether

there were any outstanding liens on the Saratoga Leases before purchasing an

overriding royalty interest.

      On October 26, 2014, the trial court denied the Trusts’ motion for summary

judgment, granted summary judgment in favor of Ranger, and issued a final

declaratory judgment that the Trusts’ overriding royalty interests were void and

extinguished. The Trusts appealed. The majority reverses, enters judgment in favor

of the Trusts, and remands the case. I would affirm.

                                         14
                       Validity of Correction Instruments

      A. Applicable Statutes

      The Texas Property Code provides for the correction of recorded instruments

that transfer real property or an interest in real property. See TEX. PROP. CODE ANN.

§ 5.027(a) (West 2014). Section 5.027(a) provides, in relevant part:

      A correction instrument that complies with Section 5.028 or 5.029 may
      correct an ambiguity or error in a recorded original instrument of
      conveyance to transfer real property or an interest in real property,
      including an ambiguity or error that relates to the description of or
      extent of the interest conveyed.

Id. The Property Code permits parties to make both nonmaterial and material

changes to instruments of conveyance.

      Section 5.028 governs nonmaterial corrections to instruments of conveyance

and provides:

      (a)    A person who has personal knowledge of facts relevant to the
             correction of a recorded original instrument of conveyance may
             prepare or execute a correction instrument to make a nonmaterial
             change that results from a clerical error . . . .
      ....
      (a-1) A person who has personal knowledge of facts relevant to the
            correction of a recorded original instrument of conveyance may
            prepare or execute a correction instrument to make a nonmaterial
            change that results from an inadvertent error, including the
            addition, correction, or clarification of:
             (1)    a legal description prepared in connection with the
                    preparation of the original instrument but
                    inadvertently omitted from the original instrument;
             ....

                                         15
      (b)    A person who executes a correction instrument under this section
             may execute a correction instrument that provides an
             acknowledgement or authentication that is required and was not
             included in the recorded original instrument of conveyance.
      (c)    A person who executes a correction instrument under this section
             shall disclose in the instrument the basis for the person’s personal
             knowledge of the facts relevant to the correction of the recorded
             original instrument of conveyance.
      (d)    A person who executes a correction instrument under this section
             shall:
             (1)    record the instrument and evidence of notice as
                    provided by Subdivision (2), if applicable, in each
                    county in which the original instrument of
                    conveyance being corrected is recorded; and
             (2)    if the correction instrument is not signed by each
                    party to the recorded original instrument, send a
                    copy of the correction instrument and notice by first
                    class mail, e-mail, or other reasonable means to
                    each party to the original instrument of conveyance
                    and, if applicable, a party’s heirs, successors, or
                    assigns.

Id. § 5.028 (West 2014) (emphasis added).

      Section 5.029, governing material changes to instruments of conveyance,

provides, in relevant part:

      (a)    In addition to nonmaterial corrections, including the corrections
             described by Section 5.028, the parties to the original transaction
             or the parties’ heirs, successors, or assigns, as applicable may
             execute a correction instrument to make a material correction to
             the recorded original instrument of conveyance, including a
             correction to:
             (1)    add:

                                          16
             (A)    a buyer’s disclaimer of an interest in the real
                    property that is the subject of the original instrument
                    of conveyance;
             (B)    a mortgagee’s consent or subordination to a
                    recorded document executed by the mortgagee or an
                    heir, successor, or assign of the mortgagee; or
             (C)    land to a conveyance that correctly conveys other
                    land[.]
             ....
      (b)    A correction instrument under this section must be:
             (1)    executed by each party to the recorded original
                    instrument of conveyance the correction instrument
                    is executed to correct or, if applicable, a party’s
                    heirs, successors, or assigns; and
             (2)    recorded in each county in which the original
                    instrument of conveyance that is being corrected is
                    recorded.

Id. § 5.029 (West 2014) (emphasis added).

      Finally, section 5.030, which governs the effect of a correction instrument

against a challenge by another party claiming an interest in the property, provides:

      (a)    A correction instrument that complies with Section 5.028 or
             5.029 is:
             (1)    effective as of the effective date of the recorded
                    original instrument of conveyance;
             (2)    prima facie evidence of the facts stated in the
                    correction instrument;
             (3)    presumed to be true;
             (4)    subject to rebuttal; and

                                           17
             (5)   notice to a subsequent buyer of the facts stated in
                   the correction instrument.
      (b)    A correction instrument replaces and is a substitute for the
             original instrument. Except as provided by Subsection (c), a
             bona fide purchaser of property that is subject to a correction
             instrument may rely on the instrument against any person making
             an adverse or inconsistent claim.
      (c)    A correction instrument is subject to the property interest of a
             creditor or a subsequent purchaser for valuable consideration
             without notice acquired on or after the date the original
             instrument was acknowledged, sworn to, or proved and filed for
             record as required by law and before the correction instrument
             has been acknowledged, sworn to, or proved and filed for record
             as required by law.

Id. § 5.030 (West 2014) (emphasis added).

      B. Whether the Corrected Mortgage and Deed of Trust Complied with
         Statutory Requirements

      The Trusts contend that the corrected instruments of conveyance did not

comply with the Texas correction statutes; therefore, they “could not serve to correct

the original instruments of conveyance which omitted all mention of two oil and gas

leases, and thereby prevented [Ranger] from extinguishing by foreclosure [the

Trusts’] right in such omitted leases.” The Trusts acknowledge that “due to an

inadvertent error, two of the Saratoga Leases intended to be included in the Tomco

Original Assignment were inadvertently omitted from Exhibit A thereto, which

listed only six of the eight Saratoga leases intended to be subject to the Tomco

Assignment,” specifically the McShane Fee Lease and the Brice Lease on which

they base their claims. In the trial court and on appeal, Ranger responds that “[t]he

                                         18
corrected instruments are valid under sections 5.027 through 5.031 of the Texas

Property Code (the “Correction Statutes”).” And it further argues that the Trusts

“are not bona fide purchasers for the purposes of Section 5.030(c) of the Correction

Statutes.”

      1. Inadvertent error in a legal description under section 5.028

      In my view, section 5.028(a-1), governing nonmaterial changes to

conveyance instruments, which is relied upon by Ranger, governs this case. The

majority instead incorrectly determines that section 5.029, governing material

changes to conveyance instruments, applies. The difference is decisive.

      Section 5.028(a-1) provides that “[a] person who has personal knowledge of

facts relevant to the correction of a recorded original instrument of conveyance may

prepare or execute a correction instrument to make a nonmaterial change that results

from an inadvertent error, including . . . a legal description prepared in connection

with the preparation of the original instrument but inadvertently omitted from the

original instrument.” Id. § 5.028(a-1). For a nonmaterial change, the person who

executes the correction instrument must disclose in the instrument the basis for the

person’s knowledge of the facts relevant to the correction. Id. § 5.028(c).

      Unlike a correction instrument that makes a material correction to an

instrument of conveyance, a correction instrument that makes a nonmaterial change

need not be executed by each party to the recorded original instrument of

                                         19
conveyance. Compare id. § 5.029(b) (governing material corrections to instruments

of conveyance), with id. § 5.028(d) (governing nonmaterial changes). Specifically,

section 5.028 provides that “if the correction instrument is not signed by each party

to the recorded original instrument,” the parties making the correction must “send a

copy of the correction instrument and notice by first class mail, e-mail, or other

reasonable means to each party to the original instrument of conveyance and, if

applicable, a party’s heirs, successors, or assigns.” Id. § 5.028(d)(2). It must record

the instrument and evidence of reasonable notice given as provided in the statute to

each party to the original instrument and, if applicable, a party’s assigns. Id.

      The majority notes that the Corrected Mortgage and Deed of Trust added the

McShane Fee and Brice Leases to Exhibit A, which described the Saratoga Leases,

and it states that “the revisions purported to add property interests in two leases that

previously were not listed.” Slip Op. at 24. The majority concludes that the

correction instruments “added two leases to a conveyance that correctly conveyed

interests in other specifically identified leases,” which constitutes a material

correction pursuant to section 5.029. Slip Op. at 26. But to say that the two leases

were not listed in the legal description of the land conveyed is not to say that they

were not conveyed, and the evidence is undisputed that all eight Saratoga Leases

were, in fact, conveyed by Tomco to Mark III in 2008. I disagree, therefore, that the

revisions in the Corrected Mortgage and Deed of Trust “add[ed] . . . land to a

                                          20
conveyance that correctly convey[ed] other land.” See TEX. PROP. CODE ANN.

§ 5.029(a)(1)(C). Instead, I agree with Ranger that the revisions in the correction

instruments added the McShane Fee and Brice Leases to the legal description of the

Saratoga Leases, the property interest conveyed by Tomco to Mark III in 2008 and

mortgaged by Mark III to Peoples Bank in 2008. The “addition, correction, or

clarification of . . . a legal description prepared in connection with the preparation of

the original instrument but inadvertently omitted from the original instrument” is a

nonmaterial correction pursuant to section 5.028(a-1). See id. § 5.028(a-1).

      The evidence in this case shows that all of the requirements of section 5.028

were met. The Corrected Deed of Trust stated, “This document was originally filed

under County Clerk Instrument No. 2-12-33676, Official Public Records of Hardin

County, Texas and is being refiled to correct the Exhibit A attached at the time of

the original filing.” That same Exhibit A had already been corrected with respect to

both the 2008 Tomco Original Assignment of the Saratoga Leases to Mark III and

the assignments of undivided overriding royalty interests in the Saratoga Leases to

the Trusts and filed in the Hardin County public records in 2011. Moreover, both

parties stipulated in their Rule 11 Agreement filed in this litigation, “Due to an

inadvertent error, two of the Saratoga Leases were omitted from the Exhibit A

attached to the Original Tomco Assignment.” That same Rule 11 Agreement stated

that Tomco executed the 2011 Corrected Tomco Original Assignment, recorded

                                           21
under number 2011-25176 of the official public records of Hardin County, that

“corrected the Original Tomco Assignment by adding the two Omitted Saratoga

Leases as part of the property being conveyed by this instrument.” The parties also

agreed in the Rule 11 Agreement that Peoples Bank sent notice of the Corrected

Mortgage and Deed of Trust to Mark III shortly after it filed the corrected

instruments.

      I would hold that all of the requirements of section 5.028 for making a

nonmaterial correction to a legal description in a conveyance instrument were

satisfied with respect to the Corrected Mortgage and the Corrected Deed of Trust.

Therefore, I would hold that the Corrected Mortgage and Corrected Deed of Trust

are valid.

      2. Bona fide purchasers without notice under section 5.030

      I would also hold that, at the time the Corrected Mortgage and Corrected Deed

of Trust were filed, the Trusts were not bona fide purchasers for value of their

overriding royalty interests in the McShane Fee and Brice Leases. The Trusts were

not without notice that these Leases were two of the eight Saratoga Leases to which

their undivided overriding royalty interests applied and which were mortgaged by

Mark III to Peoples Bank. Therefore, these correction instruments replaced the

uncorrected instruments as to the Trusts and barred their claims in this litigation.

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      Property Code section 5.030, governing the enforceability of correction

instruments against adverse claimants, provides:

      (b)    A correction instrument replaces and is a substitute for the
             original instrument. Except as provided by Subsection (c), a
             bona fide purchaser of property that is subject to a correction
             instrument may rely on the instrument against any person making
             an adverse or inconsistent claim.

      (c)    A correction instrument is subject to the property interest of a
             creditor or a subsequent purchaser for valuable consideration
             without notice acquired on or after the date the original
             instrument was acknowledged, sworn to, or proved and filed for
             record as required by law and before the correction instrument
             has been acknowledged, sworn to, or proved and filed for record
             as required by law.

Id. § 5.030(b)–(c). Thus, under section 5.030, a correction instrument replaces the

original instrument and is subject only to the property interests of creditors or bona

fide purchasers for value without notice of the error in the original instrument and

who acquired their interest on or after the date the original instrument was executed

and filed in the public records and before the correction instrument was executed

and filed in the public records. See id.

      The Trusts assert that their property interests in the McShane Fee and Brice

Leases were not subject to the lien placed on the Saratoga Leases by Peoples Bank,

so that their interests were not conveyed to Ranger at the March 5, 2013 foreclosure

sale. To prove this, the Trusts had to show that they were bona fide purchasers of

their undivided overriding royalty interests in the McShane Fee and Brice Leases

                                           23
“for valuable consideration without notice acquired on or after the date the original

instrument was acknowledged, sworn to, or proved and filed for record as required

by law and before the correction instrument ha[d] been acknowledged, sworn to or

proved and filed for record as required by law.” Id. § 5.030(c). The Trusts thus had

to prove that they had no notice that their undivided overriding royalty interests in

the McShane Fee and Brice Leases were included in the undivided interests in all

eight Saratoga Leases acquired by Mark III from Tomco in the 2008 Tomco Original

Assignment and Bill of Sale and made subject to Peoples Bank’s 2008 Original

Mortgage and Deed of Trust. See id.

      I would hold that the Trusts did not and cannot show that they were bona fide

purchasers for value of their undivided overriding royalty interests in the McShane

Fee and Brice Leases without notice before the Corrected Mortgage and Corrected

Deed of Trust were executed and filed that their undivided property interests in those

two leases were a portion of their undivided property interests in all eight Saratoga

Leases conveyed by the 2008 Tomco Original Assignment to Mark III. Nor did the

Trusts acquire their interests without knowledge that the working interests in the

Saratoga Leases acquired by Mark III in 2008—from which they purchased their

interests in 2011 and 2012—were all subject to the 2008 Original Mortgage and

Deed of Trust and the Hardin Renewal Mortgage and Renewal Deed of Trust before

the Corrected Mortgage and Corrected Deed of Trust were executed and filed.

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Therefore, the Corrected Mortgage and the Corrected Deed of Trust were both

enforceable against the Trusts’ interests. See id. § 5.030(a)–(c).

      Because the Trusts failed to show that the foreclosure sale under the Corrected

Mortgage and Deed of Trust foreclosed upon and sold property they owned that was

not subject to the Corrected Mortgage and Corrected Deed of Trust—namely that

portion of the undivided overriding royalty interests in the Saratoga Leases

attributable to the McShane Fee and Brice Leases—I would hold that their interests

were extinguished by the foreclosure sale.

                                     Conclusion

      I would affirm the trial court’s judgment denying the Trusts’ motion for

summary judgment and granting summary judgment in favor of Ranger.

                                               Evelyn V. Keyes
                                               Justice

Panel consists of Justices Keyes, Massengale, and Lloyd.

Justice Keyes, dissenting.

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