Conveying Future Interests: What You Don’t Say Is As Important As What You Do Say

May 14, 2021 In Parker v. Jordan,[1] the El Paso Court of Appeals interpreted a 1998 warranty deed to determine the extent of the interests conveyed by the deed.  The deed, which claimed to convey all right, title and interest, was silent on whether it also conveyed a remainder interest that was owned by the grantor.  Ultimately, the Court held that because the remainder interest was a vested future interest and not a present interest, the remainder interest could not be conveyed without clear and express language in the deed.  Thus, because the deed was silent as to the remainder interest, the Court held that the deed did not convey the remainder interest.

The action was between a mother, Kathy Parker (“Kathy”), and her daughter Elise Jordan (“Elise”).  In 1998, Loyd Parker, III (“Loyd III”) (Kathy’s husband and Elise’s father), executed a warranty deed which conveyed to Elise and Allison, his second daughter, “all of [his] right, title and interest in and to”[2] the described tracts of land.  It is undisputed that, prior to signing the warranty deed, Loyd III owned a 1/8 mineral interest in addition to a 1/8 remainder interest pursuant to a life estate that was still in effect at the time the warranty deed was executed.

The 1998 deed did not make express reference to either the 1/8 mineral interest or the 1/8 remainder interest; rather, the deed appeared to convey to Loyd III’s daughters all of Loyd III’s right, title and interest.  After the conveyance, however, Loyd III filed a gift tax return which indicated that “[t]he property given to the two donees represents one sixteenth of the entire land in the tract for each of the donees.”[3]  The gift tax return made no mention of the remainder interest.  Further, in 1999, all three parties executed leases and division orders recognizing Loyd III as remainderman of the life estate and indicating that the two daughters each owned a 1/16 mineral interest.  For almost ten years following the 1998 warranty deed, Loyd III and his two daughters continued as though each daughter owned a 1/16 mineral interest, and as though Loyd III retained his remainder interest.

In 2006, the life estate related to Loyd III’s remainder interest was extinguished and Loyd III inherited his remainder interest.  Again, for nearly ten years, Loyd III and both daughters continued as they had before, with both daughters acknowledging their individual 1/16 mineral interests, and with Loyd III acknowledging the interest he acquired as remainderman.  In 2013, however, a new entity took over the existing leases and issued a division order crediting Elise with ownership of a 1/8 interest instead of a 1/16 interest, thus appearing to credit Elise with a portion of Loyd III’s remainder interest.  Elise clarified that she only owned a 1/16 interest, Loyd III confirmed his ownership pursuant to the remainder interest, and all three parties signed a new option division agreement acknowledging their respective ownerships.

The dispute arose after Loyd III’s death in 2014, at which point Kathy, Loyd III’s wife, inherited all of his property including the remainder interest.  Until 2015, Elise continued to acknowledge her 1/16 interest and Kathy’s inherited interest, and Elise continued to accept payments accordingly.  In 2016, however, there was another new lessee and another round of division orders.  As in 2013, the division order credited Elise with ownership of the remainder interest.  Although Elise again attempted to correct the division order, the lessee responded that all three parties must stipulate as to the correct division of interests.  Instead, Elise signed the division order indicating that she owned a higher percentage of the interests.  One month later, Kathy filed suit.

After determining that Kathy’s suit was not barred by the statute of limitations,[4] the Court recognized that in Texas, deeds typically will be construed to confer the greatest possible estate that the instrument will allow.  Thus, usually, a deed will convey whatever interest the grantor has, unless there is language in the deed indicating an intent by the grantor to limit the estate. However, the Court then explained that, when interpreting a deed, it is necessary to distinguish between present and future interests.  The distinction between present and future interests is important because, when it comes to future interests in property, “an instrument is not given effect as an assignment of an expectancy or future interest unless it clearly manifests the intention of the prospective heir to sell, assign or convey his expectancy or future interest.”[5]  Present interests, on the other hand, do not require any special language in order to be transferred.

The Court then considered whether the remainder interest owned by Loyd III was a present or future interest.  The Court reasoned that “a present interest in property means an owner can currently exercise his ownership rights to possess and enjoy the property, while a future interest recognizes that ‘[t]he owner’s right to possession or enjoyment is postponed until sometime in the future[.]’”[6]  The Court then clarified that a ‘vested’ interest, though transferable, is still a future interest and is one “where the future event is certain to occur, such as the death of a testator.”[7]  Ultimately, the Court determined that because the life estate had not yet expired when Loyd III signed the warranty deed, his remainder interest was still a future ownership interest.  Further, because the future interest depended on the death of the life estate owner, an event that was certain to occur eventually, the Court reasoned that Loyd III’s remainder interest was a vested future interest.  It was not until the death of the life estate owner (in 2006, eight years after the warranty deed was executed), that Loyd’s remainder interest ripened into a present ownership.

After determining that Loyd III’s remainder interest was a vested future interest at the time he executed the warranty deed, the Court then considered what is required to transfer a vested future interest.  According to the Court, “[w]hen an instrument purports to transfer a vested remainder interest under these circumstances, it must contain clear and express language demonstrating the grantor’s intent to do so.”[8]  Thus, because the 1998 warranty deed was silent as to whether it conveyed the remainder interest, the Court determined that the deed only operated to transfer his present ownership at the time – a 1/8 interest, or 1/16 for each daughter.  The Court emphasized that while it is possible for a remainderman to transfer his future interest, the deed must clearly indicate the grantor’s intent to do so.  Additionally, the Court noted that this interpretation is “supported by circumstances surrounding the instrument’s execution, which make clear Loyd III did not [intend] to convey to his daughters his remainder interest via the 1998 gift deed.”[9]

Ultimately, the Court determined that while Loyd III “possessed a right to transfer his future ownership interest if he so desired,”[10] he did not actually do so.  This case emphasizes the notion that parties should be clear and unambiguous when drafting mineral deeds.  Often, Texas courts will default to language contained within the deed itself.  Here, however, the Court made clear that sometimes what you don’t say is as important as what you do say.

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[1] Parker v. Jordan, No. 08-19-00121-CV, 2021 Tex. App. LEXIS 458 (Tex. App.—El Paso Jan. 21, 2021).

[2] Id. at *5.

[3] Id.

[4] The Court determined that the case was not barred by the four-year statute of limitations because “Kathy did not or could not have discovered the alleged mistake until Elise claimed an interest to the remainder in 2016.”  Further, “it is undisputed Kathy could not have acquired the remainder interest until Loyd III’s death in 2014, and Elise did not manifest her belief she acquired the remainder interest via the gift deed until 2016.”  Id. at *17-*18.

[5] Id. at *12, quoting Clark v. Gauntt, 161 S.W.2d 270, 273 (Tex. 1942).

[6] Id. at *19.

[7] Id.

[8] Id. at *25.

[9] Id. at *26.

[10] Id. at *25.


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