Language in Deed Generally Supersedes that of Real Estate Purchase / Sale Contract

San Antonio Texas Real Estate Attorney Trey Wilson wrote:
As a San Antonio lawyer with an active real estate practice, I am frequently questioned about the legal effect of terms contained in a real estate purchase/sale agreement (earnest money contract) that do not appear in the deed. Some of examples of contractual provisions that may be omitted from deeds are:  rights of first refusal on adjacent property of the Seller,  easements or access reserved for the Seller, the right of the Buyer to cross adjacent property retained by the Seller, and the provision of a warranty on the property's condition.  The pattern is usually the same -- the parties negotiated a contract, and included certain "Special Provisions" in their written agreement, but those terms were never incorporated into the Deed recorded by the Seller after closing.

When this occurs, several legal doctrines may be implicated. This post focuses on the legal doctrine of MERGER.

It is the law in Texas that  a purchaser takes title to real property solely through a deed. See Stephens Cnty. Museum, Inc. v. Swenson, 517 S.W.2d 257, 261 (Tex. 1974). An instrument that does not operate as a present conveyance of title to real property is a contract to convey rather than a deed. See TEX. PROP. CODEANN. § 5.002; see also 30 Tex. Jur. 3d Deeds § 9 (2007). A contract to convey real property contemplates further acts leading up to the actual conveyance of title in the deed. See 30 Tex. Jur. 3d Deeds§ 9; see also Cont'l Royalty Co. v. Marshall, 239 S.W.2d 837, 840-41 (Tex. Civ. App.-Texarkana 1951, no writ). When a deed is delivered by the Seller and accepted by the Buyer as performance of a contract to convey real estate, the contract is MERGED in the deed.   

Though the terms of the  deed may vary from those contained in the contract, still the deed must be looked to alone to determine the rights of the parties. 2 DEVLIN, LAW OF DEEDS § 850a.  This principle is what Texas courts call "Merger. " See Baker v. Baker, 207 S.W.2d 244 (Tex.Civ.App. —San Antonio 1947, writ ref'd n.r.e.).

The Rule applicable in all contracts, that prior stipulations are merged in the final and formal contract executed by the parties, applies, of course, to a deed based 49upon a contract to convey. When a deed  is delivered and accepted as performance of a contract to convey, the contract is merged in the deed . Though the terms of the deed may vary from those contained in the contract, still the deed  must be looked to alone to determine the rights of the parties. No rule of law is better settled than that where a deed  has been executed and accepted as performance of an executory contract to convey real estate, the contract is functus officio and the rights of the parties rest thereafter solely in the deed .

Id. at 249-50, quoting 2 DEVLIN, LAW OF DEEDS § 850a.

Thus, when a Buyer accepts a deed as performance of an earnest money contract requiring the Seller to convey legal title top real property, it is the general rule that any collateral agreements contained in the contract are extinguished.  

This Rule, as most in the law, has exceptions.  For example, the Texas Supreme Court has held that the doctrine of merger may not be applied to defeat a cause of action under the DTPA for breach of an express warranty made in an earnest money contract and breached by deed.  See Alvarado v. Bolton, 749 S.W.2d 47, 48 (Tex.1988).  Likewise,  the doctrine of merger does not apply when a real estate contract was procured by fraud, accident or mistake in transactions leading up to the deed. ECC Parkway Joint Venture v. Baldwin, 765 S.W.2d 504, 511-12 (Tex.App.-Dallas 1989, writ denied);see also 1464-Eight, Ltd. v. Joppich, 154 S.W.3d 101, 104 n. 1 (Tex.2004) (disapproving court of appeals cursory analysis that based on merger doctrine earnest money contract was superseded by documents executed at closing).

TREC Accepting Applications for 2 Broker Slots on Broker Lawyer Committee

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

The Texas Real Estate Commission (TREC) is currently accepting letters of interest and resumes for open positions on the Broker Lawyer Committee. This volunteer committee periodically reviews and recommends revisions as necessary to the TREC promulgated contract forms. Quarterly meetings are held in person in Austin. The Broker Lawyer Committee is looking for two qualified candidates to serve as broker members for a term of six years. 

TREC is also seeking to fill available positions on the Texas Real Estate Inspector Committee and the Broker Responsibility Working Group.

To be considered for an appointment, individuals should send a cover letter and resume to Loretta DeHay, General Counsel, at the Texas Real Estate Commission, P.O. Box 12188, Austin, TX 78711-2188, by fax to 512-936-3788, or by e-mail to general.counsel@trec.texas.gov. The deadline for applying for all open positions is July 15, 2013.

Understanding the Limitations of the Quitclaim Deed in Texas

With surprising frequency, Texans seeking to transfer title to real estate without the assistance of an experienced real estate lawyer utilize Quitclaim Deeds (sometimes erroneously called "quick claim deeds"). Perhpas this is because of the wide availability of these forms on the internet, and in free databases. However, there are many pitfalls associated with using the Quitclaim Deed, and its limitations are plenty.

The essence of a quitclaim deed is an effort to pass any title, interest or claim of the grantor, but not professing that such title is valid, nor containing any warranty or covenants for title. See Porter v. Wilson, 389 S.W.2d 650, 655-56 (Tex.1965). A quitclaim deed is not a conveyance or a muniment of title. Adamson v. Doornbos, 587 S.W.2d 445, 447-48 (Tex.Civ.App.—Beaumont 1979, no writ).

By itself, a Quitclaim Deed does not establish any title in those holding the deed, but merely passes the interest of the grantor (if any) in the property.

Stated simply, a Quitclaim Deed suffices only to give the grantee whatever title that grantor has. If the Grantor has no title to the property interest in question, then none passes.

Texas Deeds Must Contain Adequate Property Descriptions

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

Texas law reporters are brimming with cases involving failed sales or transfers of land based on vague, confusing or just plain wrong descriptions the real property intended to be conveyed.  Under Texas law, inadequate property descriptions -- particularly those that don't identify the property location -- will render a deed or other conveyance document ineffectual. This is true because location is an essential element of a deed, without which the deed is void. See Wilson v. Fisher, 144 Tex. 53, 188 S.W.2d 150, 152 (1945). 

To be sufficient, a writing conveying title must provide within itself, or by reference to some other existing writing in existence at the time of the deed, the means or information by which the land being conveyed can be identified with reasonable certainty. Williams v. Ellison, 493 S.W.2d 734, 736 (Tex.1973). This has been termed the "nucleus of description" theory. 

"If enough appears in the description so that a party familiar with the locality can identify the premises with reasonable certainty, it will be sufficient." Gates v. Asher, 154 Tex. 538, 541, 280 S.W.2d 247, 248 (1955) (citations omitted).  Likewise, "if there appears in the instrument enough to enable one by pursuing an inquiry based upon the information contained in the deed to identify the particular property to the exclusion of others, the description  will be held sufficient." Templeton v. Dreiss, 961 S.W.2d 645, 658 (Tex.App.-San Antonio 1998, pet. denied). However, "a deed purporting to convey land, which describes it only by quantity and as being part of a larger tract (i.e. "25 acres out of he King Ranch"), with nothing whereby to identify what specific portion of the larger tract is intended to be conveyed, is VOID for uncertainty of description." Smith v. Sorelle, 126 Tex. 353, 358-59, 87 S.W.2d 703, 705 (1935).

San Antonio's Fourth Court of Appeals addressed the "nucleus of description" theory in a real estate case it considered in 2009. In that case, Gaut v. Daniel, 293 S.W.3d 764, 767 (Tex. App. — San Antonio 2009), the Court considered a 1990 deed conveying 28 acres in Duval County. The acreage in question was part of a larger (399.5 acre) tract, but the deed conveying the property, which purported to contain surveyor's notes, failed to identify any discernible location of the 28 acre tract.  The Court's holding:  "Because nothing identifies which 28 acres out of the 399.5 are being conveyed, the deed is void" Gaut, 293 S.W.3d at 770.

With the significant rush to obtain, break and transfer property interests, including deeds and leases, caused by the boom in the Eagle Ford shale and other oil and gas formations in Texas, sufficiency of property descriptions have become of preeminent importance. 

In an interesting case decided by the 5th Circuit appeals court in 2012, Chesapeake Exploration  unsuccessfully attempted to invalidate its agreement to purchase deep rights held by Peak Energy Corporation in certain oil and gas leases    Coe v. Chesapeake Exploration, L.L.C., 695 F.3d 311, 316 (5th Cir. 2012). When the price of natural gas plummeted several months later, Chesapeake refused to honor its commitment. When Peak filed suit, Chesapeake argued that the parties' agreement was unenforceable under the Texas statute of frauds and fatally indefinite based upon the flawed property descriptions. The district court disagreed, rendering judgment in favor of Peak and its principals and awarding them damages in the amount of more $19 million. This judgment was affirmed by the appeals court.

Thus, persons drafting deeds and other conveyance documents, as well as those contemplating the sufficiency of existing deed documents, must be mindful of the nucleus of description theory.