recordingelectronictlta2005 11 22 05€¦ · nebraska section 23-1517.02; north dakota century code...

by

James L. Gosdin Stewart Title Guaranty Company

800-729-1902 [email protected]

for

TLTA Institute

San Antonio, TX December 1 to 2, 2005

TLTA Institute -ii- December 1, 2005 San Antonio, TX

STEWART TITLE GUARANTY COMPANY 1980 Post Oak Boulevard, Suite 710

Houston, Texas 77056

JAMES L. GOSDIN BIOGRAPHIC INFORMATION

James L. Gosdin is Senior Vice-President and Senior Underwriting Counsel for Stewart Title Guaranty Company. Jim received his Bachelor's Degree from the University of Texas and his Juris Doctorate with honors from the University of Texas School of Law.

A Stewart associate since 1976, Jim underwrites title insurance transactions throughout the United States, reinsurance transactions, and international title insurance transactions for the company. Jim is Board Certified by the Texas Board of Legal Specialization in farm and ranch, commercial, and residential real estate. Jim is a member of the American Land Title Association Forms Committee, he is chair of the ALTA Liaison Committee with the National Association of Insurance Commissioners, and he is a member of the ALTA Reinsurance Committee. He also serves on the Bylaws and the State Legislative and Regulatory Action Committee. Jim is a member of the American Bar Association, the Texas Bar Association and the Houston Bar Association. He is also a member of the Texas Title Standards Joint Editorial Board and the Electronic Recording Advisory Committee to the Texas State Library and Archives Commission. Jim was named the 1998-1999 Title Person of the Year by TLTA.

In 1995, Jim wrote the ABA publication, Title Insurance: A Comprehensive Overview. Jim’s 2000 revision of Title Insurance: A Comprehensive Overview, Second Edition is available through ABA Book Publishing:

American Bar Association Publications Planning & Marketing 750 North Lake Shore Drive Chicago, Illinois 60611 Fax: (312) 988-6030 Web: www.abanet.org/abapubs Title Insurance: A Comprehensive Overview, Second Edition ISBN #1-57073-830-0

[email protected]

Virtual Underwriter: www.virtualunderwriter.com

TLTA Institute -iii- December 1, 2005 San Antonio, TX

TABLE OF CONTENTS

Recording Laws And Electronic Transactions ....................................................................................................... i

J. L. Gosdin Bio ......................................................................................................................................................ii

Table Of Contents ..................................................................................................................................................iii

1.0 Background Of Title Recording ................................................................................................................1

2.0 Structure Of Established Recording System.............................................................................................4

3.0 The Electronic Recording Laws................................................................................................................9

4.0 Recording Laws .......................................................................................................................................24

5.0 Instruments Not Required To Be Recorded In Real Property Records.................................................38

6.0 UCC..........................................................................................................................................................39

7.0 Federal Recording Statutes ......................................................................................................................39

8.0 Types Of Notice .......................................................................................................................................42

9.0 Protected Parties By Recording Laws Or Equity ...................................................................................49

10.0 Curative Recording Laws ........................................................................................................................58

Exhibit 1: Electronic Recording Memorandum Of Understanding With Tarrant County ............................65

Exhibit 2: Electronic Recording Memorandum Of Understanding With Fort Bend County........................74

Exhibit 3: Electronic Recording Memorandum Of Understanding With Brazoria County ..........................88

Exhibit 4: Press Release Of May 31, 2005 ................................................................................................. 97

Exhibit 5: Press Release of Jan. 24, 2005 For Brazoria County ................................................................ 99

Exhibit 6: PeirsonPatterson Website Discussion Of eRecording............................................................. 101

Exhibit 7: Hart Intercivic Press Release .................................................................................................. 105

By James L. Gosdin, Copyright reserved RECORDING AND ELECTRONIC TRANSACTIONS

TLTA Institute -1- December 1, 2005 San Antonio, TX

RECORDING LAWS AND ELECTRONIC TRANSACTIONS

1.0 BACKGROUND OF TITLE RECORDING

1.1 COLONIES AND EARLY STATES

The public registry system was designed to evidence ownership and to inform purchaser of the status of title. Our recording system descends from the colonial practice in Plymouth Colony from 1636 and Massachusetts in 1640. In 1639 Virginia enacted the requirement of recordation if the grantee did not take possession of the land. In 1639 Connecticut adopted a law stating that all mortgages and sales were not valid until recorded.1 The Act of October 7, 1640 adopted by Massachusetts Bay Colony was a recording statute that did not except subsequent purchasers with notice from the protection of those who recorded first. English equity courts construing similar laws impressed a constructive trust on such purchasers with notice. Massachusetts rendered a similar decision; subsequently the law was expressly engrafted with this significant limit. Many American recording laws similarly exclude from their protection those who are not "innocent," "bona fide," acting in "good faith," or who are not "without notice."2 A number of earlier laws also contained "grace" provisions, which required only a prompt recording within the context of the time. Such delay sanctioned by law sometimes exceeded six months. Those acquiring in the interim were not protected if recording of the first transaction ensued. This feature was the product of a rustic environment where community knowledge was real. Grace provisions are now largely historic in the real property context.

1.2 GENERAL FEATURES OF UNITED STATES RECORDING SYSTEMS

The public records generally consist of a number of books and indices for deeds, mortgages, judgments, mineral leases, judgments, tax liens, and similar matters. Other records that must be reviewed include probate, court, and tax records. Typically the records are indexed by names (grantor/grantee; grantee/grantor). However, a few states authorize or require tract indexing that posts or indexes instruments by the land parcels that they affect. In theory, this type of index is superior, but experience has varied on the quality of indexing.3

The Torrens system was adopted in approximately 20 states as an optional system for registration of land titles; however, its use was not that widespread and is now available in only a few jurisdictions. The system was most frequently used in Cook County, Cape Cod, Boston, Minneapolis and St. Paul. Criticism of this form of title transfer usually has centered on the cost of registration, lack of conclusiveness of effect in some jurisdictions, and the exceptions to the effect of registration.4

There are three basic types of recording systems in the United States: race, race-notice, and notice. The race system provides that the first person to record (or file) prevails, regardless of whether that person has knowledge of other unrecorded interests. The notice system protects a subsequent purchaser or lender who acquires an interest without notice of a prior unrecorded conveyance or lien. Under the notice system the subsequent purchaser is not required to record in order to protect an interest against a prior grantee or lienholder, but is required to record in order to protect against a subsequent grantee or lienholder. In the race-notice system, the subsequent grantee or lienholder must acquire an interest without notice of the prior unrecorded interest and must record before recordation of that prior unrecorded interest. This is the most common system. In a few states, the initial grantee or lienholder has a grace period to record in order to protect its interest against intervening purchasers or lienholders who acquire without notice of its rights. Texas has a notice system of recording as its basic recording structure. Below is a table of the recording laws of the different states.

1 Patton and Palomar, Land Titles Section 4 2 Patton and Palomar, Land Titles, Section 6 3 Michigan Compiled Laws Sections 53.142, 53.151; Minnesota Statutes Sections 386.05-386.06; Revised Statutes of

Nebraska Section 23-1517.02; North Dakota Century Code Section 11-18-07; Ohio Revised Code Annotated Section 5309.33; 19 Okla. St. Section 291; Wisconsin Statutes Section 706.08

4 Basye, Clearing Land Titles Section 1



1.3 LIST OF STATE LAWS (FOUND UNDER 1.2)

State Recording Acts:

N = Notice R = Race R-N = Race-Notice G = Grace State Type Statute ALABAMA N ALA. CODE §35-4-90 (UNLESS) (RECORDED) ALASKA R-N ALASKA STAT. §40.17.080 (RECORDED) (RECORDED OPTION

NOTICE FOR 30 DAYS AFTER EXPIRATION) ARIZONA N ARIZ. REV. STAT. ANN. §§33-411, -412 (NOTE §33-411.01 PROVIDES

60 DAY REQUIREMENT FOR RECORDING TRANSFER) (RECORDED).

ARKANSAS R ARK. CODE. ANN §18-40-102 MORTGAGES (FILING) N ARK. CODE. ANN §14-15-404 OTHER THAN MORTGAGE (FILED) CALIFORNIA R-N CAL. CIV. CODE §1214 (RECORDED) COLORADO R-N COLO. REV. STAT. ANN. §38-35-109 (FILING) CONNECTICUT N(G) CONN. GEN. STAT. ANN. §47-10 (RECORDED; ORIGINAL

DOCUMENT MAY BE CONVERTED TO ELECTRONIC FORM) GRACE OF REASONABLE TIME TO RECORD: Farmers and Mechanics, Savings Bank, v. Garofalo, 219 Conn. 810, 595 A. 2d 341 (1991).

DELAWARE R DEL. CODE ANN. TIT. 25, §153 (RECORDED) Cravero v. Holleger, 566 A. 2d 8 (Ct. Chancery De. 1989)

DIST. OF N D.C. CODE ANN. §§42-401, 42-801 COLUMBIA (DELIVERY) FLORIDA N FLA. STAT. ANN. §695.01 (RECORDED) (BFP by quit claim) GEORGIA R-N GA. CODE ANN. §44-2-1 (RECORDED) quitclaim enough for recording –

Archer v. Kelly, 21 S.E.2d 51 HAWAII R-N HAW. REV. STAT. §502-83 (RECORDED) IDAHO R-N IDAHO CODE §55-812 (RECORDED) ILLINOIS N 765 ILCS 5/30 (FILING) INDIANA R-N IND. CODE ANN. §§32-21-4-1 (FILING) IOWA N IOWA CODE ANN. §558.41 (FILED AND RECORDED) KANSAS N KAN. STAT. ANN. §§58-2222, - 2223 (DEPOSITED AND FILING)

(Note: case law suggests loosely R-N – Farmers & Merchants State Bank of Cawker City v. Higgins, 149 Kan. 783, 89 P.2d 916 (Kan. 1939)

KENTUCKY N KY. REV. STAT. ANN. §382.270 (LODGED FOR RECORD) LOUISIANA R LA. REV. STAT. ANN. §9:2721; LA. CIVIL CODE §3338, 3347 (FILING)

(PRIORITY MAY INCLUDE OPTION TO PURCHASE) MAINE R-N ME. REV. STAT. ANN. TIT 33, §201 (RECORDED) (QUIT CLAIM

SUFFICIENT) MARYLAND R-N MD. CODE ANN., REAL PROP. §§3-101, -203 (RECORDED) MASSACHUSETTS N MA. GEN. LAWS ANN. CH. 183, §4 (RECORDED) MICHIGAN R-N MICH. COMP. LAWS ANN. §565.29 (RECORDED) (BFP by quit claim) MINNESOTA R-N MINN. STAT. ANN. §507.34 (RECORDED) (BFP by quit claim) MISSISSIPPI R-N MISS. CODE ANN. §89-5-5 (FILED) MISSOURI N MO. ANN. STAT. §§442.390, 442.400 (FILING) (DEPOSITED) MONTANA R-N MONT. CODE ANN. §70-21-304 (RECORDED) NEBRASKA R-N NEB. REV. STAT. §76-238 (DELIVERED FOR RECORDING) NEVADA R-N NEV. REV. STAT. ANN. §§111.320, 111.325 (FILING) NEW HAMPSHIRE N N.H. REV. STAT. ANN. §477:3-a (RECORDED), §477-7 (N.H. is race-

notice per case law: Amoskeog Bank v. Chagnon, 133 N.H. 11, 572 A. 2d 1153 (1990))

NEW JERSEY R-N N.J. STAT. ANN. §46:22-1 (LODGED)



NEW MEXICO N N.M. STAT. ANN. §14-9-3 (RECORDED) (BFP by quit claim per case law: Mabie-Lowrey Hardware Co. v. Ross, 26 N.M. 51, 189 P. 42 (1920))

NEW YORK R-N N.Y CLS REAL PROP. LAW §291 (RECORDED) NORTH CAROLINA R N.C. GEN. STAT. §47-18, 47-20 (REGISTRATION) (OPTIONS MAY BE

RECORDED) NORTH DAKOTA R-N N.D. CENT. CODE §47-19-41 (DEPOSITED) (BFP by quit claim) OHIO N OHIO REV. CODE ANN. §§5301.25 (FILED) (OTHER THAN

MORTGAGES) R OHIO REV. CODE ANN. §§5301.23 (PRESENTATION) (MORTGAGES) OKLAHOMA N OKLA STAT. ANN. TIT. 16 §§15,16 (FILED) OREGON R-N OR. REV. STAT. §93.640 (RECORDED) PENNSYLVANIA R-N PA. STAT. ANN. TIT. 21 §351 EXCEPT MORTGAGES (RECORDED) R/G PA. STAT. ANN. TIT. 21 §622 MORTGAGES (left for record but purchase

money lien has 30-day grace period) RHODE ISLAND N R.I. GEN. LAWS §34-11-1 (RECORDED) SOUTH CAROLINA R-N S.C. CODE ANN. §30-7-10 (FILING) SOUTH DAKOTA R-N S.D. CODIFIED LAWS ANN. §43-28-17 (RECORDED) TENNESSEE N TENN. CODE. ANN. §66-5-106 (REGISTERED) TEXAS N TEX. PROP. CODE. ANN. §13.001 (FILED) UTAH R-N UTAH CODE ANN. §57-3-103 (RECORDED) VERMONT N VT STAT. ANN. TIT. 27, §341,342 (RECORDED) (HEMINGWAY V.

SHATNEY, 152 VT. 600, 568 A.2D 394 (1989) VIRGINIA N VA. CODE ANN. §55-96 (admitted to record) (BFP by quit claim) WASHINGTON R-N WASH. REV. CODE ANN. §65.08.070 (FILED) WEST VIRGINIA N W.VA. CODE ANN. §40-1-9 (admitted to record) WISCONSIN R-N WIS. STAT. ANN. §706.08 (accepted for record) (conveyance of mineral

interest void if not recorded within 30 days.) WYOMING R-N WYO. STAT. §§34-1-120, 34-1-121 (DELIVERY)

1.4 TEXAS CATEGORY

The Texas recording system is primarily based on Tex. Prop. Code §13.001, which creates a notice system of recording. Consequently, if the junior instrument is executed before the senior instrument is filed for record and the junior purchaser or lienholder pays value and has no notice of the prior instrument, then it is immaterial whether the junior instrument is filed before the senior instrument.5 The grantee under the junior instrument will have superior rights. However, some other states with seemingly similar notice recording laws have concluded that the law creates a race-notice recording system.6

In Texas, an instrument such as a deed or mortgage is considered recorded from the time filed.7 In other jurisdictions, the requirements vary: (1) some states, like Texas, provide that most instruments impart constructive notice from the time of filing; (2) some states require that instruments be properly recorded (transcribed or copied) in order to act as constructive notice, but do not require proper indexing8; and (3) some states dictate that an instrument must not only be filed, but also must be properly indexed, and the person filing bears the responsibility to confirm that the instrument was indexed. 9

5 Penny v. Adams, 420 S.W. 2d 820 (Tex. Civ. App.–Tyler 1967, writ ref'd); Matthews v. Houston Oil Co., 299 S.W. 450

(Tex. Civ. App.–Beaumont 1927, no writ); Houston Oil Co. v. Kimball, 103 Tex. 94, 122 S.W. 533 (1910); Watkins v. Edwards, 23 Tex. 443 (1859); White v. McGregor, 92 Tex. 556, 50 S.W. 564 (1899); Raposa v. Johnson, 693 S.W.2d 403 (Tex. App.—Ft. Worth 1985, writ ref’d n.r.e.)

6 See Amoskeog Bank v. Chagnon, 133 N.H.11, 572 A.2d 1153 (1990) ] 7 Tex. Local Gov't Code Section 191.003 8 Seat v. Louisville and Jefferson County Land Co., 293 S.W. 986 (Ct. App. Ky. 1927); see Boyer v. Pahvant Mercantile &

Investment Co., 287 P. 188 (Utah 1930) (citing different decisions and concluding that this was the majority view in the U.S.) 9 Hanson v. Zoller, 187 N.W.2d 47 (N. D. 1971) (state system includes a tract index; instrument is constructive notice from filing if

recordation and indexing are properly done); Cuthrell v. Camden County, 118 S.E.2d 601 (S.C. 1961); Compiano v. Jones, 269 N.W.2d 459 (Iowa 1978)



2.0 STRUCTURE OF ESTABLISHED RECORDING SYSTEM

2.1 COUNTY CLERK’S RECORDS

The county clerk must record instruments in a well bound book, microfilm records or other medium (such as optical imaging).10 The county clerk must, within a reasonable time after delivery, record any instrument authorized or required to be recorded in that clerk's office that is proved, acknowledged, or sworn to according to law. The county clerk must record instruments in the order the instruments are filed. The county clerk who violates these requirements and the clerk’s sureties are liable for damages and, on motion in district court and after three days' notice to the clerk, for a civil penalty of not more than $500, half of which is payable to the county and half to the person who files the motion.11

The instrument is considered recorded from the time filed.12

If made as provided by law, a certified copy has the same effect as the original.13

The records in the clerk's office are open to the public at reasonable times. A member of the public may make a copy of the records.14 Pursuant to Texas Government Code Section 552.262, the attorney general shall adopt rules for use by governmental bodies in determining charges for copies of public information in paper, electronic or other forms not specifically set by law. The governmental body, other than the state, may set the charge at no more than 25 per cent variance from the rules established unless the governmental body requests an exemption.

Legal papers must be no wider than 8-1/2 inches and no longer than 14 inches. The instrument must have a clearly identifying heading at the top of first page. Names must be legibly typed or printed immediately below each signature. Printing, typing, and handwriting must be clearly legible. Photostats and copies must have black print, type or handwriting on a white background. Riders and attachments must comply with size requirements. The filing fee is doubled for each page that fails to meet these requirements. Failure to meet the print size requirement of eight-point type does not result in a higher fee. If a page has larger riders or more riders than one, the fee is doubled for each rider. This section does not authorize a refusal to record a paper. A county clerk may not impose additional requirements for filing or recording, or charge an extra fee if the document meets statutory requirements. Failure to comply does not alter or invalidate any document and upon recordation, the instrument is deemed as full complying with the provisions of the law dealing with recordation of documents of every type and character.15

The commissioners court may provide for a computerized electronic information system by which it provides on a contractual basis, subject to a fee, direct access to information relating to county records that is public information and is stored. The commissioners may make the records available online only if the custodian agrees to allow public access to the records.16

The clerk must note at the foot of the record the date and time that the instrument was filed for recording. The clerk must make a record of the names of the parties to the instrument in alphabetical order, the date of the instrument, the nature of the instrument, and the time the instrument was filed. After recording the instrument, the clerk shall deliver the instrument to the person entitled to it.17

A clerk who does not maintain microfilm may divide the instruments into seven classes including "Official Public Records of Real Property" and may consolidate the records into a single class known as "Official Public Records." The clerk must so divide the records if maintaining records on microfilm.18

The clerk must maintain a well-bound alphabetical index to all recorded deeds, powers of attorney, mortgages, and other instruments relating to real property and a separate index to suits. The index must be a cross index that contains the names of the grantors and grantees in alphabetical order. If the instruments by a representative (executor,

10 Tex. Local Gov't Code Section 191.002 11 Tex. Prop. Code Section 11.004 12 Tex. Local Gov't Code Section 191.003 13 Tex. Local Gov't Code Section 191.005 14 Tex. Local Gov't Code Section 191.006 15 Tex. Local Gov't Code Section 191.007 16 Tex. Local Gov't Code Section 191.008 17 Tex. Local Gov't Code Section 193.001 18 Tex. Local Gov't Code Sections 193.002, 193.008



administrator, guardian, agent or trustee), both that person and the principal’s name must be indexed. These provisions do not apply to records maintained and indexed as required for microfilming.19

Records maintained on microfilm must be indexed and cross indexed in the indexes under the names of the parties in the instrument. The index must give the names of the parties, a brief description of the instrument, the date of filing, a brief description of the property, if any, and the location of the microfilm image by roll or group number and by image number or other suitable method.20

The indexes must be periodically revised during the year to obtain a complete alphabetical index for each calendar year.21

Local records may be stored electronically such as on computer disks, optical disks, or other machine-readable medium.22 Optical imagining was first adopted by Nueces County and is being used or considered by a number of other counties.

An index for an official public record may be stored or maintained by computer, provided that a backup copy is stored separately.23

Hardcopy records (source documents) from which a microfilm, optical image record, or other electronically stored record is made may be discarded if the microfilm, optical image, or other electronically stored record meets required standards.24

A reference to a volume and page, code number or file number of the "real property records" (or similar words) is effective as reference to the instrument.25

The statutory recording fee for an instrument is $5 for the first page and $4 for succeeding pages pursuant to Section 118.011, Local Government Code. The Records Management and Preservation Fee may not exceed $5 for each instrument pursuant to Section 118.0216, Local Government Code. The security fee of $1 per instrument may be charged pursuant to Section 291.008, Local Government Code. The clerk charges double the statutory recording fee if the names are not printed or typed below the signatures pursuant to Section 191.007, Local Government Code. The requirements for filing specifications, such as size, type of paper, size of type, and what can be included on a page, are uniform specifications and a county clerk may not prescribe additional requirements for filing or recording, or make an additional charge for such requirements.26

If more than 5 names must be indexed the clerk charges 25 cents for each additional name pursuant to section 118.011, Local Government Code. If the grantee's address is not shown the clerk charges the greater of $25 or twice the statutory recording fee pursuant to Section 11.003, Property Code.

Section 118.011(f), Local Government Code, allows the commissioners court of a county to adopt a Record Archives Fee of not more than $5. Section 118.025 provides that the Record Archives Fee is “for the preservation and restoration services performed by the county clerk in connection with maintaining a county clerk’s records archive.” The fee must be paid at the time a person, excluding a state agency, presents a public document to the county clerk for recording or filing. A public document is any instrument, document, paper, or other record that the county clerk is authorized to accept for filing or maintaining. Records archive means public documents designated by the county clerk. Preservation of such documents includes providing public access to the public documents in a manner that reduces the risk of deterioration, “excluding providing public access to public documents indexed geographically.” Subsection 118.025 (f) states that “The funds may not be used to purchase, lease, or develop computer software to geographically index public records, excluding indexing public records by lot and block description as provided by Section 193.009(b) (4).” Existing Section 193.009(b) (4) (which has not been amended) provides that, in indexing of records on microfilm, the index entry must give “a brief description of the property, if any.” The fee may not be collected after the county records archive preservation and restoration is complete. Section

19 Tex. Local Gov't Code Sections 193.003, 193.004 20 Tex. Local Gov't Code Section 193.009 21 Tex. Local Gov't Code Section 193.010 22 Tex. Local Gov't Code secs. 205.001, et seq. 23 Tex. Local Gov't Code Section 193.013 24 Tex. Local Gov't Code Section 205.008 25 Tex. Prop. Code Section 11.007 26 Tex. Local Gov’t Code Section 191.007(a)



118.025(h) provides that if a county charges the Record Archives Fee, a notice must be posted in a conspicuous place in the county clerk’s office and the notice must state the amount of the fee.

Under prior law, a county or district clerk could charge a fee of $1 per page for copies of public records maintained in a paper format or reproduced in a paper format. The law did not establish a clear fee for non-paper copies of records maintained in non-paper format, such as microfilm or an electronic format, since these documents may or may not consist of a number of pages. Many county and district clerks store or record public records in non-paper formats and are asked to produce copies of these records in various forms. For these reasons fees for copies of public records varied throughout the state. The law now standardizes the fees charged for copies of public records produced in paper or other format. Section 552.265, Government Code “requires the charge for providing a paper copy made by a district or county clerk's office (regardless of the source of the record, whether microfilm, CD, or otherwise, if the copy is paper to be the charge provided by Chapter 51 (Clerks) of this code, Chapter 118 (Fees Charged by County Officers), Local Government Code, or other applicable law. Section 118.011[(e)], Local Government Code, requires a county clerk who provides a copy in a format other than paper of a record maintained by the clerk to provide the copy and charge a fee in accordance with Sections 552.231 (Responding to Requests for Information That Require Programming or Manipulation of Data) and 552.262 (Rules of …[Attorney General]), Government Code so that the copy will not be the charge made for paper copies, but generally will be the cost of producing a CD or other copy format.” The $1 fee per page for hard copies applies if the request for 50 or fewer copies of public information is in one non-remote building and is not located in two or more separate, unconnected buildings or in a remote storage facility, and no additional charges may be made.27 Under both amended Section 118.011, Local Government Code, and prior Attorney General Opinion OR-2371 (June 21,2000), copies of records provided on CD must be provided for the costs of production under Chapter 552, Government Code, and not the $1 for each document page. If a third party maintains the recording information in electronic format for the county, the county clerk as custodian of the records must make the information available for inspection and copying. The third party may not refuse to provide the data under any circumstances.28 The public record information is not copyrightable by any third party providing services to the county and the county retains ownership of the information for all purposes.29 The agreement with the third party cannot provide otherwise.30 If the digital information exists in an electronic medium and the requestor has requested copies of that medium, then the clerk must provide such copies.31

Section 2054.111 (e), Government Code, provides that a state agency or local government (including a county), which uses the TexasOnline Project (a common electronic infrastructure through which state agencies and local governments, including licensing entities may operate), may charge a fee if

“(1) the fee is necessary to recover the actual costs directly and reasonably incurred by the agency or local government because of the project for: (A) the use of electronic payment methods; or (B) interfacing with other information technology systems; (2) the fee does not include an amount to recover state agency or local government employee costs; (3) the state agency or local government approves the amount of the fee using the state agency's or local government's standard approval process for fee increases; (4) the chief financial officer for the state agency or local government certifies that the amount of the fee is necessary to recover the actual costs incurred because of the project; and (5) the department approves the amount of the fee.”

Section 2054.111(f) also provides that “A local government (such as a county) may not charge a fee under Subsection (e) that is otherwise prohibited under Section 195.006 (which provides that the fee for electronic filing of documents such as real property records is the same as hardcopy filing) or 195.007 (which provides that the cost of electronic copies of electronically filed documents is subject to the limits of Section 552.262, Government Code – substantially the cost of reproduction), Local Government Code.”

27 A.G. Opinion No. JC-0292 (Oct. 11, 2000); Tex. Gov’t Code Section 552.261; Tex. Local Gov’t Code Section 118.011 28 OR20003-7855, 2003 Tex AG LEXIS 9118 (Oct. 31, 2003) 29 OR2003-4604, 2003 Tex AG LEXIS 5826 (July 3, 2003). 30 OR2002-5672, 2002 Tex. AG LEXIS 4745 (Oct. 8, 2002) 31 OR2003-1410, 2003 Tex. AG LEXIS 2108)



Section 2054.2591, Government Code, provides that the Texas Department of Information Resources (the “department”) shall set fees that a state agency or local government may charge for a transaction that uses the project. A fee set by the department for using the project is in addition to any other statutory fees. Section 2054.2591, Government Code provides that “(d) No fee may be charged to a person authorized to file electronically under Section 195.003, Local Government Code, for filing, recording, access to, or electronic copies of a real property record subject to the provisions of Chapter 195, Local Government Code, except as provided in Section 195.006 or 195.007, Local Government Code.”

Section 2054.274, Government Code, provides that a person that pays a fee for using the project may recover the fees in the ordinary course of business. Amended Section 195.003(b), Local Government Code, provides that a fee may not be charged to a person authorized to file under the section (e.g., attorneys, certain financial institutions, agencies of the state, government-sponsored entities, title insurance companies and title insurance agents), except as provided by §195.006 (filing fees) or §195.007 (actual costs for electronic copies).

2.2 REDACTION OF PUBLIC RECORDS

Section 552.117, Government Code “prohibits state and local governmental agencies, such as a tax appraisal district, from releasing information that relates to the home address, home telephone number, or social security number of a current or former official or employee of a governmental body, a peace officer or commissioned security officer, a current or former employee of the Texas Department of Criminal Justice, a peace officer, reserve law enforcement officer, commissioned deputy game warden, or a corrections officer who was killed in the line of duty.” All documents filed with a county clerk and all documents filed with a district clerk are exempt from these requirements.

Section 552.1175, Government Code, provides that a governmental body that receives a confidentiality request in writing from certain individuals (those who are peace officers, county jailers, Texas Department of Criminal Justice or prosecutor’s office employees, and commissioned security officers) “may not release … record information to the public that contains the individual's name, home address, home telephone number, social security number, or whether that officer has family members.” All documents filed with a county clerk and all documents filed with a district clerk are exempt from these requirements.

The law authorizes a confidentiality request for tax appraisal records by peace officers, county jailers, employees of the Texas Department of Criminal Justice, commissioned security officers and victims of family violence under Section 25.025, Tax Code, but provides that it does not prevent public disclosure of the information identifying the property by address if the information does not identify an individual who has made the election of confidentiality.

Section 35.58, Business & Commerce Code protects confidentiality of social security numbers, but provides that the section does not apply to “documents that are recorded or required to be open to the public under Chapter 552, Government Code.”

Military discharge records recorded on or after September 1, 2003 are confidential for 75 years.32

A social security number of a living person is excepted from disclosure under the public information law, and a governmental body may redact the social security number of a living person from any public disclosure without the necessity of requesting a decision by the attorney general. There is some concern that this law is mandatory and may force redaction of applicable or all instruments.33

Amended Section 11.008, Property Code, and Section 191.007, Local Government Code, recognize that if a notice is placed on the deed or deed of trust pursuant to §11.008, then the notice is placed above the heading of the instrument, which otherwise appears at the top of the instrument. Amended Section 11.008(b), Property Code, provides that an instrument disclosing an individual’s social security number or driver’s license number must include substantially the following (modified) notice in 12-point boldfaced type or 12-point uppercase letters:

NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE

32 Tex. Gov’t Code Section 552.140 33 Tex. Gov’t Code Section 552.147



IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER'S LICENSE NUMBER.

The notice is not required on a deed or deed of trust that contains neither the social security number or driver’s license number. The county clerk may not reject an instrument that fails to contain this required notice. The validity of an instrument is not affected by the failure to contain the notice. All instruments described in Section 11.008, Property Code are subject to inspection by the public. Subsection (g) states that “Unless this section is cited in a law enacted after September 1, 2003, this section is the exclusive law governing the confidentiality of personal information contained in the real property or official public records or the equivalent of the real property or official public records of a county.” Amended Section 191.007, Local Government Code, provides that the failure to have the legal heading at the top of the first page does not result in a increase in filing fees, if the instrument complies with §11.008, Property Code.

Common Law" liens (and other fraudulent liens and claims) have included "common law judgments" against public officials, "common law liens" against land (including the claimant's former land), 21 silver dollar bids at foreclosures, and claims of "allodial title." Section 51.901 of the Texas Government Code provides that a county clerk who believes in good faith that a document filed with the county clerk to created a lien is fraudulent may (1) request the assistance of the county or district attorney to determine if the document is fraudulent before filing; (2) request the prospective filer to provide additional documentation to support the existence of the lien, such as a document that has the alleged debtor’s signature; and (3) forward any additional documentation to the county or district attorney.34 A person may secure an ex parte (without notice) district court order extinguishing a fraudulent judgment lien (common law judgment).35 A person may secure an ex parte district court order extinguishing a fraudulent lien or claim; then an expedited appeal may occur and the claimant shall be given notice by mail.36 Chapter 12, Civil Practice and Remedies Code, creates a cause of action for fraudulent court records or fraudulent liens or claims.37

2.3 GEOGRAPHIC RECORDS

A title insurance agent must own or lease and control an abstract plant or be a participant in a bona fide joint abstract plant operation.38 “An Abstract plant as further defined in Rule P-12 and as further provided for in the Insurance Code [Sections 2501.003, 2501.004] and [2502.054], must include an abstract plant for each county in which a title insurance agent or direct operation maintains an office.” 39 An abstract plant must be geographically arranged, and maintained to current date, showing all instruments affecting lands within the county for at least 25 years prior to date of search. The index must be arranged in geographic order. Alphabetical indices must be maintained. The alphabetical index will include some suits, probates, divorces, abstracts of judgment, and tax liens. The records in the plant must include map records, deeds, deeds of trust, mortgages, lis pendens, abstracts of judgment, federal tax liens, mechanic's liens, attachment liens, divorces, probate records, and fixture filings.40 Acreage tracts broken out of patents or surveys are assigned arb (arbitrary) numbers for separate identification of parcels in the survey. Some believe that a computerized plant with geographic indexing based upon file specific searches complies with the requirements for an abstract plant.

As of November 1, 2005, 622 licensed title insurance agencies, 4 domestic title insurers and 27 foreign title insurers conduct business in the state. According to one survey, a majority of the plants (including back plants) were sovereignty plants. A substantial number of agents have a portion of their plants on computer (often a PC) and many of the major metropolitan counties (having included counties such as Harris, Travis, Bexar, Dallas, Amarillo [Randall, Potter], Williamson, Hayes, Comal, Guadalupe, Median, Kendall, Collin, Hidalgo, Nueces and El Paso) have or have had joint computerized plants (for varying periods of time). A joint plant will commonly entail back plant ownership by the participant (for the period prior to the joint operation; the back plant may or may not be shared), microfilm or other copies of the documents, maps, base files (files of subdivision or other larger tracts including an examination, copies of relevant instruments, and a chain or run sheet of the title), and guaranty files (separately or jointly used by the

34 Tex. Gov’t Code Section 51.901 35 Tex. Gov’t Code Section 51.902 36 Tex. Gov’t Code Section 51.903 37 Tex. Civ. Prac. & Rem. Code Sections 12.001-12.007 38 Tex. Ins. Code Section 2503 (13) 39 Procedural Rule P-1.i 40 Procedural Rule P-12



participants). A back plant (and some current plants) may consist of geographic posting of cards, geographic posting of instruments, and/or ledger or book posting. As can be imagined, the quality of plants varies. With the advent of new technology, title companies are able to receive daily tapes or CDs of county clerk indexes and images. In some locations (in Florida) third parties (i.e. other than title companies) can fully access the title plant and secure search information from a remote location. Some recorders in the United States now provide real estate filings on the internet. Regardless of the length of time covered by plants, such time is not necessarily indicative of the length of search undertaken by the title company or of the scope of coverage of the title policy. The policy does not contain a time limit or time of coverage. For example, the policy is not limited to coverage of matters arising within the last 25 years simply because of the plant requirements or because of the actual time of a possible examination. The periods covered by examination of title vary: it is not uncommon for a title company to rely upon a starter (such as a prior owner policy issued to the seller by another company).

Access to county records is well recognized. “A county commissioners court may provide space in the county courthouse to a title company to examine, inspect, and copy public records, but the commissioners court may not charge the title company for the space. Whether a commissioners court may lease vacant space in the courthouse to a title company to perform functions other than examining, inspecting, and copying public records and whether a commissioners court may permit the private attorney who owns the title company to conduct his or her private practice in the leased space depend upon two determination. First, the commissioners court must determine whether the use of the rental space will interfere with proper use of the courthouse. Second, the commissioners court must determine whether locating these businesses within the courthouse is necessary to the convenience of those transacting business in the courthouse.”41

In some states Bar Standards address the period of search. In other jurisdictions the decision is affected by Marketable Record Title Acts. Although Texas does not have either of these guidelines, the Texas Title Examination Standards should be helpful in other respects (such as guidelines for certain minimum practices).

In addition to furnishing title insurance and escrow services, title companies often perform various search services in the nature of abstract information, if perhaps more limited in scope, particularly in urban areas. These may consist of nothing further searches, deed searches (e.g., for CERCLA due diligence or to detect flips), last deed searches, or subdivision searches.

3.0 THE ELECTRONIC RECORDING LAWS

3.1 FEDERAL E-SIGN

The Electronic Signatures in Global and National Commerce Act (“E-SIGN”) 42 was passed by Congress on June 16, 2000, and signed by President Clinton on June 30, 2000. Title I, which relates to electronic records and signatures, generally became effective October 1, 2000. Title II, which relates to transferable records (promissory notes secured by real property), became effective September 28, 2000.

Key provisions of FEDERAL E-SIGN:

a. It applies to “any transaction in or affecting interstate or foreign commerce.” 43 UETA Commentary states that “The term (transaction) includes all interactions between people for business, commercial, including specifically consumer, or governmental purposes. However, the term does not include unilateral or non-transactional actions.”

b. A “signature, contract or other record… may not be denied legal effect, validity or enforceability because it is in electronic form.” 44

c. A “contract… may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation.” 45

41 A. G. Letter Opinion No. 98-091 (Oct. 6, 1998) 42 S.761. References to sections of E-SIGN are hereafter made by reference to “Section __, E-SIGN” 43 Section 101(a), E-SIGN; 15 U.S.C. Section 7001(a) 44 Section 101(a)(1), E-SIGN; 15 U.S.C. Section 7001(a)(1) 45 Section 101(a)(2), E-SIGN; 15 U.S.C. Section 7001(a)(2)



d. E-SIGN does not “limit, alter, or otherwise affect any requirement imposed by a statute, regulation, or rule of law relating to the rights and obligations of persons, under such statute, regulation, or rule of law….” 46 E-SIGN does not affect substantive rights or other substantive law.

e. Consumer disclosures required by law or regulation may be made by an electronic record if (1) the consumer affirmatively consents to use and has not withdrawn consent; (2) the consumer is given a prior clear and conspicuous statement of any right to a paper record or right to withdraw consent, whether the consent applies only to the particular transaction or to other categories of records, the procedures to withdraw consent, and how to obtain a paper record and any fee for the paper record, if the consumer withdraws consent; (3) the consumer has been provided with a statement of hardware and software requirements for access and retention of the electronic records and consents electronically in a manner that reasonably demonstrates the consumer can access the electronic information; (4) after the consent, if hardware or software requirements change, the consumer is provided with the requirements for access to the electronic records and the right to withdraw without fees and the consumer consents electronically. 47 This provision of E-SIGN is viewed as more pro-consumer than the provisions of UETA, and has been incorporated in some state enactments of UETA.

f. Failure of the consumer to provide consent electronically to the consumer disclosure in a manner that demonstrates that the consumer can access information in the electronic form that will be used to provide the information does not affect the validity, effectiveness or enforceability of any contract executed by the consumer. 48

g. An oral communication or a recording of an oral communication does not qualify as an electronic record. 49

h. Statutory, regulatory, or other legal requirements for retention of contracts or records can be satisfied by electronic records that accurately reflect the information and remain accessible for the period required by statute or regulation in a form capable of being accurately reproduced. 50 If statute, regulation, or other rule of law requires that a contract or record be provided, available or retained in its original form, the statute or regulation is satisfied by the electronic record. 51

i. If statute, regulation or other rule of law requires that a contract or other record be in writing, the legal effect, validity and enforceability of an electronic record may be denied if the electronic record is not capable of being retained and accurately reproduced for later reference by all parties who are entitled to retain the contract or other record. 52

j. If a statute, regulation, or other rule of law requires a signature or record to be notarized, acknowledged or verified under oath, the requirement is satisfied if the electronic signature of the person authorized to perform those acts, together with other information required to be included by other law is attached to or logically associated with the signature or record. 53

k. A contract or other record may not be denied legal effect solely because its creation involved the action of electronic agents, if the action of the electronic agent is legally attributable to the person who is to be bound. 54 An electronic agent is a computer program or electronic or automated means used independently to initiate an action, or respond to electronic records or performances without review or action by an individual at the time of the action or response.55 The provisions of Section 14 of UETA suggest more explicit and binding effect of electronic agents, despite lack of knowledge of the electronic agent or action.

46 Section 101(b)(1), E-SIGN; 15 U.S.C. Section 7001(b)(1) 47 Section 101(c )(1), E-SIGN; 15 U.S.C. Section 7001(c )(1) 48 Section 101(c )(3), E-SIGN; 15 U.S.C. Section 7001(c )(3) 49 Section 101(c )(6), E-SIGN; 15 U.S.C. Section 7001(c )(6) 50 Section 101(d)(1), E-SIGN; 15 U.S.C. Section 7001(d)(1) 51 Section 101(d)(3), E-SIGN; 15 U.S.C. Section 7001(d)(3) 52 Section 101(e), E-SIGN; 15 U.S.C. Section 7001(e) 53 Section 101(g), E-SIGN; 15 U.S.C. Section 7001(g) 54 Section 101(h), E-SIGN; 15 U.S.C. Section 7001(h) 55 Section 106(3), E-SIGN; 15 U.S.C. Section 7006(3)



l. This law (E-SIGN) applies to the business of insurance. 56

m. An insurance agent or broker acting under direction of a party that enters a contract by electronic record or signature is not liable for any deficiency in the electronic procedures if the agent or broker did not engage in negligent, reckless, or intentional tortious conduct, the agent or broker was not involved in development or establishment of the electronic procedures, and the agent or broker did not deviate from the procedures.57

n. A state statute, regulation, or other rule of law may modify, limit or supersede Section 101 of E-SIGN (15 U.S.C. Section 7001) only if one of the two following requirements is met: (1) The state law is the Uniform Electronic Transactions Act (“UETA”) as approved and recommended by the National Conference of Commissioners on Uniform State Laws (“NCCUSL”) in 1999.58 Any exception to the scope of UETA adopted by the state shall be preempted to the extent the exception is inconsistent with E-SIGN or accords greater legal status or legal effect to specific technology or technical specifications for electronic records or electronic signatures.59 (2) The state statute, regulation, or rule of law specifies alternative procedures or requirements for use or acceptance (or both) of electronic records or electronic signatures to establish the legal effect, validity and enforceability of the contracts or records and (a) the alternative procedures and requirements are consistent with E-SIGN; and (b) the alternative procedures or requirements do not require or accord greater legal status or effect to specific technology or technical specifications for creating, storing, generating, receiving, communicating, or authenticating electronic records or electronic signatures; and (c) if enacted or adopted after June 30, 2000, makes specific reference to E-SIGN.60 State statutes, regulations, or other rules of law on procurement by a state, agency or instrumentality may apply special rules for specific technologies.61 Generally, state laws, such as digital signature laws in Utah giving special recognition to particular technologies, are preempted.

o. Exceptions to the application of E-SIGN are statutes, regulations, or other rules of law relating to: (1) creation and execution of wills, codicils and testamentary trusts; (2) adoption, divorce or other matters of family law; (3) the UCC other than Sections 1-107 (waiver or renunciation of a claim or right after breach) and 1-206 (statute of frauds for kinds of personal property not otherwise covered), and Articles 2 (sales) and 2A (leases); (4) court orders or notices or official court documents; (5) notices of cancellation of utility services; (6) notices of default, acceleration, repossession, foreclosure or eviction, or right to cure under an agreement secured by or rental agreement for a primary residence of an individual; (7) cancellation of health insurance or life insurance (excluding annuities); (8) recall of a product or material failure of a product that risks endangering health or safety; or (9) documents required to accompany or relating to handling of hazardous materials, pesticides or other toxic or dangerous materials.62 The exceptions to application of E-SIGN are more extensive than the exceptions in UETA; consequently, some states have incorporated some or all of these federal exceptions in order to provide more favorable consumer protections.

p. E-SIGN does not limit or supersede requirements of Federal or State regulatory agencies that records be filed with the agency or organization in accordance with specified standards and formats.63 “State regulatory agency” is not defined by E-SIGN, but it appears that this term is intended to include county clerks, county recorders, and similar officials. Most have concluded that this provision of E-SIGN means that state filing and recording requirements for real property instruments have not been preempted. The American Land Title Association received an opinion from Goodwin, Procter & Hoar LLP dated Sept. 14, 2000, which concluded that “The E-Sign Act does not require recorders to accept electronic filings. The Act allows ‘State regulatory agencies’ to specify the standards or formats for the filings of records, including standards prescribing non-electronic filings. Although the E-Sign Act does not explicitly define ‘State regulatory agency,’ legislative history and the Act itself indicate that recorders are included in the Act’s definition of ‘State regulatory agency.’ There is no indication in the legislative history that Congress

56 Section 101(i ), E-SIGN; 15 U.S.C. Section 7001(i ) 57 Section 101(j), E-SIGN; 15 U.S.C. Section 7001(j) 58 See NCCUSL Site at http://www.nccusl.org/ 59 Section 102(a)(1), E-SIGN; 15 U.S.C. Section 7002(a)(1) 60 Section 102(a)(2), E-SIGN; 15 U.S.C. Section 7002(a)(2) 61 Section 102(b); 15 U.S.C. Section 7002(b) 62 Section 103(a), (b), E-SIGN; 15 U.S.C. Section 7003(a), (b) 63 Section 104(a), E-SIGN; 15 U.S.C. Section 7004(a)



intended to mandate that recorders accept electronic filings. Moreover, to interpret the Act to require recorders to accept electronic filings would have the anomalous effect of mandating acceptance of electronic filings only during the term between passage of the E-Sign Act and State adoption of UETA. The stealth imposition of what could be a billion-dollar mandate on States and localities is clearly beyond the contemplation of Congress when it enacted the E-Sign Act, and would be inconsistent with the spirit of Unfunded Mandates Reform Act of 1995. Although the Act does not require recorders to accept electronic filings, it provides recorders with the flexibility to choose to convert to an electronic recording system.” The Texas Attorney General concluded that “the E-Sign Act does not require a county clerk to accept real estate filings that contain printed images of signatures rather than original pen and ink signatures” and that “Nothing in the E-Sign Act, 15 United States Code chapter 96 or in the Uniform Electronic Transactions Act (the “UETA”), chapter 43 of the Texas Business and Commerce Code, requires a county clerk to accept real estate filings that contain copies of electronic signatures.”64

q. Federal and State regulatory agencies may not adopt new regulations, orders or guidances unless the regulation, order or guidance is consistent with Section 101 of E-SIGN, and the methods required to carry out the regulation, order or guidance are substantially equivalent to the requirements for records that are not electronic records, and will not impose unreasonable costs on the acceptance and use of electronic records.65 However, Federal and State regulatory agencies may specify performance standards to assure accuracy, record integrity, and accessibility of records that are required to be retained. 66

r. A Federal or State regulatory agency may not impose or reimpose a requirement that a record be in a tangible printed or paper form.67 However, a Federal or State regulator agency may require retention of a record in a tangible printed or paper form if (1) there is a compelling governmental interest relating to law enforcement of national security, and (2) imposing the requirement is essential to attaining such interest. 68

s. Under E-SIGN, a “consumer” is an individual, or the individual’s legal representative, who obtains through a transaction, products or services used primarily for personal, family or household purposes.69

t. Under E-SIGN, an “electronic record” is a contract or other record created, generated, sent, communicated, received, or stored by electronic means. 70

u. Under E-SIGN, an “electronic signature” is an electronic sound, symbol or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record. 71

v. Under E-SIGN, a “transaction” is an action relating to conduct of business, consumer, or commercial affairs between two or more persons, including the sale, lease, exchange, or other disposition of any interest in real or personal property. 72

w. E-SIGN was effective October 1, 2000 except (1) record retention requirements were effective March 1, 2001; (2) if the federal or state regulatory agency had initiated but not completed rulemaking relating to performance standards on March 1, 2001, then the requirements of this law were effective June 1, 2001; and (3) the provisions relating to transferable records (Title II of E-SIGN) were effective September 28, 2000.73

x. A “transferable record” under E-SIGN is an electronic record that (1) would be a note under Article 3 of the UCC if it were in writing; (2) the issuer of the electronic record has agreed is a transferable

64 Texas Attorney General Opinion GA-0028 (August 5, 2004) 65 Section 104(b)(2), E-SIGN; 15 U.S.C. Section 7004(b)(2) 66 Section 104(b)(3)(A), E-SIGN; 15 U.S.C. Section 7004(b)(3)(A) 67 Section 104(c )(1), E-SIGN; 15 U.S.C. Section 7004(c )(1) 68 Section 104(b)(3)(B), E-SIGN; 15 U.S.C. Section 7004(b)(3)(B) 69 Section 106(1), E-SIGN; 15 U.S.C. Section 7006(1) 70 Section 106(4), E-SIGN; 15 U.S.C. Section 7006(4) 71 Section 106(5), E-SIGN; 15 U.S.C. Section 7006(5) 72 Section 106(13), E-SIGN; 15 U.S.C. Section 7006(13) 73 Sections 107, 202, E-SIGN



record; and (3) that relates to a loan secured by real property. A transferable record may be executed by using an electronic signature. 74

y. A person has control of a transferable record if a system employed for evidencing the transfer of interests in the transferable record reliably establishes that person as the person to which the transferable record was issued or transferred. 75

z. A person is deemed to have control of a transferable record if (1) the record is created, stored, and assigned in such a manner that a single authoritative copy of the transferable record exists which is unique, identifiable and unalterable (except as hereafter provided); (2) the authoritative copy must identify the person asserting control as the person to which the transferable record was issued, or if the authoritative copy indicates that the transferable record has been transferred, and the person to which the transferable record was most recently transferred; (3) the authoritative copy must be communicated to and maintained by the person asserting control or its designated custodian; (4) copies or revisions that add or change an identifiable assignee of the authoritative copy can be made only with the consent of the person asserting control; (5) each copy of an authoritative copy and any copy of a copy must be readily identifiable as a copy that is not an authoritative copy; and (6) any version of an authoritative copy must be readily identifiable as authorized or unauthorized. 76

aa. A person having control of a transferable record is a holder, as defined in section 1-201(20) of the UCC, of the transferable record, and, if applicable statutory requirements are met, has the rights and defenses of a holder in due course. 77

Section 6 of UETA (SB 393) (consistent with the exceptions in E-SIGN) passed in 2001 provides that UETA does not supersede the provisions of 15 USC 7001(c ) (relating to affirmative consumer consent to consumer disclosures in electronic means) or 15 USC 7003(b) (which includes exemptions for wills, court orders and notices), and does not authorize electronic delivery of (1) any notice of cancellation or termination of utility services, (2) any notice of default, acceleration, repossession, foreclosure or eviction, or right to cure under a credit or rental agreement for a primary residence of an individual, (3) any notice of cancellation of health insurance or life insurance (excluding annuities), (4) any notice of recall of a product, or material failure of a product, that risks endangering health or safety, or (5) any document required to accompany transportation or handling of hazardous, toxic or dangerous materials. Section 6 of the bill states that if a federal regulatory agency exempts a specified category or type of record from the requirements relating to consent under 15 USC 7001(c ), or removes an exception from the type of document from the application of 15 USC 7001, then the applicable regulatory agency of this state may exempt the specified category or type of record.78

3.2 THE INITIAL TEXAS ELECTRONIC RECORDING LAW

Pre-existing Texas law, enacted effective September 1, 1999, allows electronic filing of instruments with the county clerk.

• A county clerk may accept instruments by electronic filing and record the instruments electronically if the filing and recording comply with rules adopted by the Texas State Library and Archives Commission.79 An instrument includes an electronic record as defined by Section 43.002, Business & Commerce Code (as added by UETA). Pursuant to the adoption of the Uniform Real Property Electronic Recording Act (URPERA), the clerk may accept electronic documents, as defined by Section 15.002, Property Code. “An electronic document or other instrument that is filed electronically in compliance with the rules adopted under Chapter 195 (Local Government Code) is considered to have been filed in compliance with any law relating to the filing of instruments with a county clerk.”80

74 Section 201(a), E-SIGN; 15 U.S.C. Section 7021(a) 75 Section 201(b), E-SIGN; 15 U.S.C. Section 7021(b) 76 Section 201(c ), E-SIGN; 15 U.S.C. Section 7021(c ) 77 Section 201(d), E-SIGN; 15 U.S.C. Section 7021(d) 78 Tex. Bus. & Com. Code Section 1.108 79 Tex. Local Gov’t Code Section 191.009(a) 80 Tex. Local Gov’t Code Section 191.009(b)



• The Texas State Library and Archives Commission shall adopt rules by which a county clerk may accept electronic filing and record instruments electronically.81

• Persons authorized to file documents electronically if the county clerk chooses to accept electronic filings are: (1) Texas attorneys, (2) a bank, savings and loan association, savings bank or credit union, (3) a federally chartered lending institution, federal government-sponsored entity, an instrumentality of the United States, or a person approved as a mortgagee by the United States to make federally insured loans; (4) a person licensed to make regulated loans in Texas, (5) a title insurance company or title insurance agent licensed in Texas, or (6) an agency of Texas.82

• A county clerk shall confirm or reject an electronic filing no later than the first business day after the date the instrument is filed. If the county clerk fails to provide such notice of rejection, the instrument is considered accepted for filing.83

• An instrument recorded electronically is considered in compliance with the law as of the day filed. An instrument filed electronically must be recorded as timely as instruments filed by other means.84

• The fee for filing or recording an electronic instrument is the same as the fee for filing a recording by other means.85

• An instrument recorded electronically must be available for public inspection in the same manner and same time as an instrument filed or recorded by other means.86

• The Electronic Recording Advisory Committee recommends rules for adoption by the Texas State Library and Archives Commission.87

Amended Section 195.002, Local Government Code, provides that a county clerk may accept any filed electronic record and may electronically record that record if the filing and recording comply with the rules adopted by the Texas State Library and Archives Commission. This amendment authorizes electronic records, such as electronically created deeds and mortgages, to be filed and recorded.

Section 195.009, Local Government Code, provides that an instrument is filed with the county clerk when it is received by the county clerk, unless the county clerk rejects the filing within the time and manner provided by rules adopted for electronic filings (which provide for rejection within one business day).

3.3 UNIFORM ELECTRONIC TRANSACTIONS ACT (UETA)

UETA was adopted in 1999 by the National Conference of Commissioners on Uniform State Laws. UETA has now been adopted in 47 jurisdictions, including Texas; however, the enacted version in several states has included modifications. Those states, which have enacted UETA (in some form), are:

Alabama Louisiana Ohio Alaska Maine Oklahoma Arizona Maryland Oregon Arkansas Massachusetts Pennsylvania California Michigan Rhode Island Colorado Minnesota South Carolina Connecticut Mississippi South Dakota Delaware Missouri Tennessee District of Columbia Montana Texas Florida Nebraska Utah Hawaii Nevada Vermont Idaho New Hampshire Virginia Indiana New Jersey West Virginia Iowa New Mexico Wisconsin Kansas North Carolina Wyoming Kentucky North Dakota

81 Tex. Local Gov’t Code Section 195.002. 82 Tex. Local Gov’t Code Section 195.003. 83 Tex. Local Gov’t Code Section 195.004 84 Tex. Local Gov’t Code Section 195.005. 85 Tex. Local Gov’t Code Section 195.006. 86 Tex. Local Gov’t Code Section 195.007. 87 Tex. Local Gov’t Code Section 195.008.



The optional provisions of UETA authorize governmental agencies, including county recorders, to accept electronic filings of electronic documents. Those provisions were revised in a number of the bills, and some states did not include provisions authorizing such electronic filings with county recorders.

Senate Bill 393 was adopted in Texas, effective January 1, 2002. This legislation included the substantive provisions of UETA, but also contained several non-substantive changes in wording of UETA, and additionally included:

a. A modified optional UETA provision,88 which allows each state agency to determine whether, and the extent to which, the agency will send, accept, create, generate, communicate, store, process, use, and rely upon electronic records and electronic signatures. The Department of Information Resources and Texas State Library and Archives Commission may specify the manner and format of the electronic records, and the type of electronic signatures, the manner and format of electronic signatures, control processes and procedures, and other required attributes. A state agency is not synonymous with government agency; a state agency is more restrictive and should not include political subdivisions such as counties.89

b. An optional UETA provision,90 which provides that the Department of Information Resources may encourage and promote consistency and interoperability with similar requirements adopted by other governmental agencies of Texas, other states, the federal government, and nongovernmental persons interacting with governmental agencies of Texas.

c. A provision required by E-SIGN91 if the state law is not UETA, as approved and recommended by the NCCUSL in 1999. The provision states that the Texas legislation modifies, limits, or supersedes E-SIGN as authorized by Section 102 of E-SIGN.92

d. Section 2 of S.B. 393 amends Section 191.009(a), Local Government Code, to provide that an instrument electronically filed with and recorded by the County Clerk is an electronic record, as defined by Section 43.002(7), Business & Commerce Code.

e. Section 3 of S.B. 393 amended Section 195.002, Local Government Code, to authorize a county clerk to accept an electronic record, as defined in Section 43.002(5), Business and Commerce Code, if the filing and recording comply with the rules adopted by the State Library and Archives Commission.

f. Section 4 of S.B. 393 adopted Section 195.009, Local Government Code. This section states that an instrument is deemed filed (and generally constitutes constructive notice) when it is received by the county clerk, unless rejected by the next business day.

g. Section 5 of S.B. 393 repeals Sections 2.108 and 2A.110, Business and Commerce Code, which relate to digital signatures.

h. Section 6 of S.B. 393 (Tex. Bus. & Com. Code Section 1.108), which recognized continued applicability of Sections 101(c) and 103(b) of E-SIGN. Section 101(c) concerns consumer disclosures and requires affirmative consent by the consumer to providing or making available any required information by electronic means. The consumer also must receive a required clear and conspicuous statement before consenting and must receive a notice of any change of hardware or software requirements to access or retain the electronic records. Section 103(b) provides that Section 101 of E-SIGN (authorizing use of electronic records and electronic signatures) does not apply to (a) court orders, notices, or official court documents, (b) any notice of cancellation or termination of utility services (including water, heat, and power), (c) notice of default, acceleration, repossession, foreclosure, or eviction, or right to cure, under a credit agreement secured by, or a verbal agreement for, a primary residence of an individual, (d) cancellation or termination of health insurance or life insurance benefits (excluding annuities), (e) recall of a product or material failure of a product that risks endangering health or safety, or (f) any document

88 Tex. Bus. & Com. Code Section 43.017. 89 See Tex. Bus. & Com. Code Section 43.002(9); compare Tex Gov’t Code Section 572.002 (defining state agency). 90 Tex. Bus. & Com. Code Section 43.018. 91 Section 102(a)(2), E-SIGN; 15 U.S.C. Section 7002(a)(2) 92 Tex. Bus. & Com. Code Section 43.019.



required to accompany transportation or handling of hazardous materials, pesticides or other toxic or hazardous materials.

A regulatory agency of Texas may, with respect to matters within its jurisdiction, exempt a specific category or type of record from the requirements relating to consumer consent under Section 101(c), E-SIGN, if a Federal regulatory agency exempts the category or type of record from the requirements or exceptions.

An amendment to the bill added Section 43.019, Business and Commerce code, to provide that the Chapter does not authorize any activity prohibited by the Penal Code.

i. Section 7 of S.B. 393 provided that it does not modify, limit or supersede Chapter 15, Civil Practice and Remedies Code (venue) or Section 35.531, Business and Commerce Code (law applicable to contracts made over the internet).

Key provisions of Texas Uniform Electronic Transactions Act (“UETA”):

a. A contract, record or signature may not be denied legal effect solely because it is in electronic form and a contract may not be denied legal effect because an electronic record was used in its formation. 93

b. An “electronic record” is a record created, generated, sent, communicated, received or stored by electronic means. 94

c. An “electronic signature” is an electronic sound, symbol or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record. 95 UETA Commentary states that “Whether any particular record is ‘signed’ is a question of fact…. No specific technology need be used in order to create a valid signature. One’s voice on an answering machine may suffice if the requisite intention is present. Similarly, including one’s name as part of an electronic mail communication also may suffice, as may the firm name on a facsimile. It also may be shown that the requisite intent was not present and accordingly the symbol, sound or process did not amount to a signature. One may use a digital signature with the requisite intention, or one may use the private key solely as an access device with no intention to sign, or otherwise accomplish a legally binding act. In any case the critical element is the intention to execute or adopt the sound or symbol or process for the purpose of signing the related record…. The term ‘authentication,’ used in other laws, often has a narrower meaning and purpose than an electronic signature as used in this Act. However, an authentication under any of those other laws constitutes an electronic signature under this Act…. This definition includes as an electronic signature the standard webpage click through process…. A digital signature using public key encryption technology would qualify as an electronic signature, as would the mere inclusion of one’s name as a part of an e-mail message – so long as in each case the signer executed or adopted the symbol with the intent to sign." This should be a ripe area for risk assumption in transactions.

d. A “security procedure” is a procedure used to verify that an electronic signature, record or performance is that of a specific person, or to detect changes or errors in the information. It may include a procedure that requires use of algorithms or other codes, identifying words or numbers or encryption, callback or other acknowledgment procedures. 96 A security procedure may be applied to verify (1) an electronic signature, (2) identity of the sender, and (3) informational integrity of the electronic record. These matters reflect some of the risks associated with electronic transactions.

e. Texas UETA does not apply to (1) a law relating to wills, codicils, or testamentary trusts; (2) UCC except sales or leases, waivers or renunciations under a breach of contract, or statute of frauds applicable to personal property. 97 A number of provisions of the UCC already address electronic transactions. UETA Commentary states that “Additional exclusions under subparagraph (b)(4) should be limited to laws which govern electronic records and signatures which may be used in transactions as defined in Section 2(16). Records used unilaterally, or which do not relate to business, commercial (including consumer), or governmental affairs are not governed by this Act in any event, and exclusion of laws relating to such

93 Tex. Bus. & Com. Code Section 43.007 94 Tex. Bus. & Com. Code Section 43.002(7) 95 Tex. Bus. & Com. Code Section 43.002(8) 96 Tex. Bus. & Com. Code Section 43.002(13) 97 Tex. Bus. & Com. Code Section 43.003(b)



records may create unintended inferences about whether other records and signatures are governed by this Act.” The Drafting Committee of UETA determined that exclusion of trusts (other than testamentary trusts), powers of attorney, real estate transactions (as to which recording may still need to be done by paper), and consumer protection statutes was unwarranted. E-SIGN allows non-uniform state law to pre-empt E-SIGN only if they are consistent with the provisions of Title I and Title II of E-SIGN. Presumably, inclusion of inconsistent provisions would not affect the validity of the remainder of the state law, although a general or specific severability provision in state law should assure validity of the remainder of law.

f. The act applies only to transactions if the parties agree to conduct a transaction by electronic means, as determined by the context and surrounding circumstances, including the parties’ conduct. 98 UETA Commentary stated as examples where parties may have agreed to conduct transactions electronically: “Auto maker and supplier enter into a Trading Partner Agreement setting forth the terms, conditions and methods for the conduct between them electronically…. Joe gives out his business card with his business e-mail address. It may be reasonable, under the circumstances, for a recipient of the card to infer that Joe has agreed to communicate electronically for business purposes. However, in the absence of additional facts, it would not necessarily be reasonable to infer Joe’s agreement to communicate electronically for purposes outside the scope of the business indicated by use of the business card…. Sally may have several e-mail addresses – home, main office, office of a non-profit organization on whose board Sally sits. In each case, it may be reasonable to infer that Sally is willing to communicate electronically with respect to business related to the business/purpose associated with the respective e-mail addresses. However, depending on the circumstances, it may not be reasonable to communicate with Sally for purposes other than those related to the purpose for which she maintained a particular e-mail account.” UETA Commentary states that an agreement in the fine print of a written contract consenting to receive all notices electronically may not evidence intent to use electronic means. “Buyer executes a standard form contract in which an agreement to receive all notices electronically is set forth on page 3 in the midst of other fine print. Buyer has never communicated with Seller electronically, and has not provided any other information in the contract to suggest a willingness to deal electronically. Not only is it unlikely that any but the most formalistic of agreements may be found, but nothing in this Act prevents courts from policing such form contracts under common law doctrines relating to contract formation, unconscionability and the like.” A person who agrees to conduct a transaction by electronic means may refuse to conduct other transactions by electronic means. This right may not be waived by agreement. 99 Cautious parties will include a conspicuous provision associated with the signature expressly evidencing the parties’ intent to enter a legally binding agreement by an electronic signature to the electronic instrument.

g. The essential section of this bill provides that “a record or signature may not be denied legal effect or enforceability solely because it is in electronic form…. A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation…. If a law requires a record to be in writing, an electronic record satisfies the law… If a law requires a signature, an electronic signature satisfies the law.”100

h. If a law requires written notice of information and the parties have agreed to conduct the transaction by electronic means, the requirement is satisfied if the information is in an electronic record capable of retention by recipient at the time of receipt. An electronic record is not capable of retention if the sender or its system inhibits the ability of the recipient to print or store the electronic record. In such case the electronic record is not enforceable against the recipient. 101

i. If a record must be posted displayed or formatted in a certain manner, or sent communicated or transmitted by a specific method, then those requirements must be met. However a requirement to send a record by first-class mail may be varied by agreement to the extent permitted by other law. 102

j. The record or signature is attributable to a person if it is the act of the person . An act of a person may be shown in any manner, including efficacy of any security procedure applied to determine the person to whom the electronic signature is attributable. The effect of an electronic record or electronic signature

98 Tex. Bus. & Com. Code Section 43.005(b) 99 Tex. Bus. & Com. Code Section 43.005(c) 100 Tex. Bus. & Com. Code Section 43.007 101 Tex. Bus. & Com. Code Section 43.008(a) 102 Tex. Bus. & Com. Code Section 43.008(b),(d)



must be determined by the context and surrounding circumstances. 103 UETA Commentary states that “In the context of attribution of records, normally the content of the record will provide the necessary information for a finding of attribution. It is also possible that an established course of dealing between the parties may result in a finding of attribution. Just as with a paper record, evidence of forgery or counterfeiting may be introduced to rebut the evidence of attribution…. In certain processes, a technical or technological security procedure may be the best way to convince a trier of fact that a particular electronic record or signature was that of a particular person. In certain circumstances, the use of a security procedure to establish that the record and related signature came from the person’s business might be necessary to overcome a claim that a hacker intervened.”

k. If a change or error occurs in an electronic record in a transmission between the parties to a transaction, (1) if the parties agreed to use a security procedure to detect changes or errors and one party conformed to the procedure and the other did not, and (2) if the nonconforming party would have detected the change or error had that party also conformed, then the conforming party may avoid the effect of the changed or erroneous electronic record. 104

l. In an automated transaction, an individual may avoid the effect of an error by the individual if the electronic agent did not provide an opportunity to prevent the correction and the individual takes specified prompt action. 105

m. In other cases, a change or error has the effect provided by other law, including the law of mistake, and the parties’ contract, if any. 106

n. Texas UETA allows an electronic acknowledgment or verification if the electronic signature of the notary, and all other required information, is attached or logically associated with the signature or records.107

o. In any proceeding, evidence of a record or signature may not be excluded solely because it is in electronic form. 108

p. Texas UETA sanctions electronic storage. “If a law requires that a record be retained, the requirement is satisfied by retaining an electronic record of the information in the record which… accurately reflects the information set forth in the record after it was first generated…and … remains accessible for later reference…. This section does not preclude a governmental agency of this state from specifying additional requirements for the retention of a record subject to the agency’s jurisdiction (note that this provision should authorize a governmental agency to make additional requirements for records filed with the governmental agency, not private records of a business regulated by the agency; the business should be able to avail itself of the cost savings of record retention in electronic means if it complies with this section).”109

q. Unless otherwise agreed, an electronic record is sent if it enters an information processing system outside the control of the sender and is in a form capable of being processed by the recipient’s system; the electronic record is received when it enters an information processing system that the recipient has designated and is in a form capable of being processed by that system.110

r. Texas UETA has requirements similar to those in E-SIGN for transferable records. Under Texas UETA transferable records include a note under negotiable instruments law, whether or not secured by real property, or a document under the Documents of Title Law. The issuer must expressly agree that the electronic record is a transferable record.111 The borrower may accomplish this by specifically agreeing in the electronic record that it will qualify as a transferable record. UETA Commentary states that “However, conversion of a paper note issued as such would not be possible because the issuer would not be the issuer,

103 Tex. Bus. & Com. Code Section 43.009 104 Tex. Bus. & Com. Code Section 43.010(b) 105 Tex. Bus. & Com. Code Section 43.010(c) 106 Tex. Bus. & Com. Code Section 43.010(d) 107 Tex. Bus. & Com. Code Section 43.011 108 Tex. Bus. & Com. Code Section 43.013 109 Tex. Bus. & Com. Code Section 43.012 110 Tex. Bus. & Com. Code Section 43.015 111 Tex. Bus. & Com. Code Section 43.016



in such case, of an electronic record. The purpose of such a restriction is to assure that transferable records can only be created at the time of the issuance by the obligor. The possibility that a paper note might be converted to an electronic record and then intentionally destroyed, and the effect of such action, was not intended to be covered by Section 16 [of UETA].” The control requirements may be satisfied by use of a trusted third party. UETA Commentary says, “For example, a borrower signs an electronic record which would be a promissory note or document if it were paper. The borrower specifically agrees in the electronic record that it will qualify as a transferable record under this section. The lender implements a newly developed technological system, which dates, encrypts, and stores all the electronic information in the transferable record in a manner which lender can demonstrate reliably establishes lender as the person to which the transferable record was issued. In the alternative, the lender may contract with a third party to act as a registry for all such transferable records, retaining records establishing the party to whom the record was issued and all subsequent transfers of the record.”

s. UETA Commentary states that Sections 17-19 of UETA (relating to governmental records) are optional provisions for each state. UETA provides a baseline. Of paramount importance is that whatever systems and rules are adopted be compatible with the systems of other governmental agencies and with common systems in the private sector. The authority in Section 19 of UETA to send and receive electronic records and signatures in dealing with non-governmental persons is permissive and not obligatory.

t. Each state agency (which does not include local governments) shall determine whether it will send and accept electronic records. If a state agency does use electronic records and electronic signatures, the Department of Information Resources (DIR) and Texas State Library and Archives Commission may, pursuant to rulemaking the requirements and attributes for electronic records.112

u. DIR may encourage and promote consistency and interoperability with similar requirements of governmental agencies of Texas and other states and the federal government and nongovernmental persons.113

3.4 UNIFORM REAL PROPERTY ELECTRONIC RECORDING ACT (URPERA)

On August 5, 2004, the Texas Attorney General rendered an opinion, which primarily recognized that the county clerk was not required to accept for record real estate filings that contained copies of electronic signatures or electronically transmitted notary public seals, such as photocopied or faxed instruments. The Attorney General concluded that “Nothing in the E-Sign Act, 15 United States Code chapter 96, or the Uniform Electronic Transactions Act (the “UETA”), chapter 43 of the Texas Business and Commerce Code, requires a county clerk to accept real estate filings that contain copies of electronic signatures. Similarly, nothing in the UETA, nor in Section 406.013 of the Government Code, requires a county clerk to accept real estate filings containing a copy of the electronically transmitted notary public seal. Neither the UETA nor section 406.013 requires a county clerk to accept faxed real estate filings.” However, the Attorney General then rendered electronic filings doubtful and appeared to ignore Section 3 of Senate Bill 393 (passed in 2001) , even though acknowledging regulations of the Texas State Library and Archives Commission that relate to optional electronic filings, by concluding that “Furthermore, current statutory requirements in the Property Code appear to prohibit a county clerk’s recording of an electronically generated record or a copy of such a record, including an electronically generated signature or notary public seal or a faxed document.”114 Section 3 of Senate Bill 393 had amended Section 195.002, Local Government Code, to authorize a county clerk to accept an electronic record, as defined in Section 43.002(5), Business and Commerce Code, if the filing and recording comply with the rules adopted by the State Library and Archives Commission.

Subsequently, Texas has adopted the Uniform Real Property Electronic Recording Act (URPERA), effective September 1, 2005, which also has been adopted in Arizona, Delaware, and North Carolina (in Virginia, it must be reenacted in 2006). URPERA is Chapter 15, Property Code and is substantially the same as the NCCUSL Model Act.

112 Tex. Bus. & Com. Code Section 43.017 113 Tex. Bus. & Com. Code Section 43.018 114 Texas Attorney General Opinion GA-0028 (August 5, 2004)



Electronic document is defined as a document that is received by a county clerk in an electronic form; it is not required to be an “original.”115

Electronic signature is defined as an electronic sound, symbol, or process attached to or logically associated with a document and executed or adopted by a person with the intent to sign the document.116

URPERA authorizes the filing of electronically generated documents and scanned (originally paper) documents: “If a law requires, as a condition for recording, that a document be an original, be on paper or another tangible medium, or be in writing, the requirement is satisfied by an electronic document that complies with the requirements of this chapter.”117

Any requirement of an acknowledgment is satisfied if the electronic signature of the person authorized to perform that act, and all other information required to be included, is attached to or logically associated with the document or signature. A physical image of a stamp or seal need not accompany an electronic signature.118

A county clerk who implements any of the functions shall act in compliance with the rules adopted by the Texas State Library and Archives Commission under Chapter 195, Local Government Code.119 Authorized filers of electronic documents include certain institutional lenders, governmental agencies, government-sponsored entities, attorneys, title insurance companies, and title insurance agents.120 The filing fees for electronic documents may not vary from the costs for paper documents.121 The county clerk may, but is not required to, accept electronic documents or records.122 An authorized filer and a participating county clerk must enter an agreement of understanding containing the terms of participation in the county clerk’s electronic filing and recording program.123 The county clerk must confirm or reject the electronic filing no later than the first business day after the date the electronic document or other instrument is filed.124

The NCCUSL Commentary on URPERL (available at http://www.nccusl.org/Update/) states that “Even though documents resulting from electronic transactions are valid and enforceable between the parties, there is uncertainty and confusion about whether those electronic documents may be recorded in the various local land records offices in the several states. Legacy laws and regulations in many states purport to limit recordable documents to ones that are in writing or on paper or require that they be originals. Other laws and regulations require signatures to be in writing and acknowledgements to be signed. Being electronic and not written on paper, being an electronic version of an original paper document, or having an electronic signature and acknowledgement instead of handwritten ones, an electronic document might not be recordable under the laws of these states. The continuing application of these legacy laws and regulations remain uncertain (see Op. Cal. Atty. Gen. No. 02-112 (Sept. 4, 2002)).

“Despite these uncertainties, recorders in approximately 40 counties in several states began recording electronic documents. These efforts depend, however, on the initiatives of individual recorders and the opportunities available under the laws of those states. They are piecemeal and offer only limited interoperability among the recording venues and across state lines. They do not provide a uniform legal structure for the acceptance and processing of electronic documents.

“In response, a few states have convened study committees or task forces to consider the question of recording electronic documents (see Report of Iowa State Bar Ass’n, Real Estate Modernization Comm., draft of Ch. 558B – Iowa Electronic Recording Act (2001); Conn. Law Revision Comm., An Act Establishing the Connecticut Real Property Electronic Recording System (Conn. Gen Assembly, Judiciary Comm., Raised Bill No. 5664, 2004)). In 2002, a drafting committee was established by the NCCUSL Executive Committee to draft a Uniform Real Property Electronic Recording Act. The Committee’s decision followed a recommendation of the

115 Tex. Prop. Code Section 15.002 (3) 116 Tex. Prop. Code Section 15.002 (4) 117 Tex. Prop. Code Section 15.004(a) 118 Tex. Prop. Code Section 15.004 (c) 119 Tex. Prop. Code Section 15.005 (a) 120 Tex. Local Gov’t Code Section 195.003 121 Tex. Local Gov’t Code Section 195.006 122 Tex. Local Gov’t Code Section 195.002 123 Tex. Adm. Code Ch. 13, Section 7.142 124 Tex. Local Gov’t Code Section 195.004



NCCUSL Committee on Scope and Program. Their actions were in recognition of a strong recommendation from the Joint Editorial Board on Uniform Real Property Acts that a uniform act be drafted.

“The Uniform Real Property Electronic Recording Act was drafted to remove any doubt about the authority of the recorder to receive and record documents and information in electronic form. Its fundamental principle is that any requirements of state law describing or requiring that a document be an original, on paper, or in writing are satisfied by a document in electronic form. Furthermore, any requirement that the document contain a signature or acknowledgment is satisfied by an electronic signature or acknowledgement. The act specifically authorizes a recorder, at the recorder’s option, to accept electronic documents for recording and to index and store those documents….

“This subsection (Subsection 3(a) of the Act) [Tex. Prop. Code Section 15.004 (3)] also provides that any stipulation of state law requiring that a document be an original document is satisfied by an electronic document meeting the requirements of this act. For example, this section acknowledges that one form of electronic document is created by making an electronic duplicate of an original paper document. The duplicate is an electronic “picture” of the original document with all of its signatures and verifications. Under some existing state laws, the electronic duplicate may be considered to be a copy of the original paper document and not the original itself. The laws of the state may also provide that a copy of a document may not be recorded. This act corrects that circumstance and allows the electronic document containing the “picture” of the original document to be recorded. Of course, in order to be valid, the original paper document must be executed in accordance with law, including a signature and verification.”

3.5 NOTARIZATION

Section 121.004 (d), Civil Practice and Remedies Code, relating to the requirements of an acknowledgment, provides that “The application of an embossed seal (for a notary acknowledgment) is not required on an electronically transmitted certificate of an acknowledgment.” Section 406.013, Government Code, requires that a notary public’s seal be affixed by a seal press or stamp that embosses or prints a seal that reproduces the elements of the seal under photographic methods. This requirement does not apply to an electronically transmitted authenticated document, except that an electronically transmitted authenticated document must legibly reproduce the required elements of the seal.

Section 43.011, Business & Commerce Code, provides that an acknowledgment or notarization may be satisfied if the electronic signature of the notary, together with the other information required to be included for the notary acknowledgment is “attached to or logically associated with the signature or record.” A seal is not required, but any required information on the seal should be shown.

New §15.004(c), Property Code provides that a requirement of an acknowledgment is satisfied if the electronic signature of the person authorized to perform that act, and all other information required to be included, is attached to or logically associated with the document or signature. A physical image of a stamp or seal need not accompany an electronic signature.

E-SIGN provides that if a statute, regulation, or other rule of law requires a signature or record to be notarized, acknowledged or verified under oath, the requirement is satisfied if the electronic signature of the person authorized to perform those acts, together with other information required to be included by other law is attached to or logically associated with the signature or record. 125

3.6 RULES OF TEXAS STATE LIBRARY AND ARCHIVES COMMISSION

The Texas State Library and Archives Commission adopted regulations relating to electronic filing of real property instruments effective December 6, 2000, at Texas Administrative Code, Chapter 13, Sections 7,141, et seq. Those regulations provide:

• A participating county clerk is a county clerk who chooses to accept real property instruments by electronic filing.126

• An authorized filer and a participating county clerk must enter an agreement of understanding relating to the terms of participation in the county clerk’s electronic filing and recording program.127

125 Section 101(g), E-SIGN; 15 U.S.C. Section 7001(g) 126 Tex. Adm. Code Ch. 13, Section 7.141. 127 Tex. Adm. Code Ch. 13, Section 7.142.



• Instruments filed electronically must provide fidelity to the original appearance and retain the original content. Delivery mechanisms may include network connections, direct electronic connection with the county clerk, and physical delivery of media.128

• The agreement of understanding shall address acknowledgement of receipt, notice of confirmation (which shall include the recording information), and notice of rejection. The authorized filer must return the original instrument and the recording information to the party entitled to it.129

• Security procedures shall be implemented to ensure authenticity and integrity of the electronically filed instrument, including the ability to verify the identity of the filer and the ability to verify the instrument was not altered since it was transmitted or filed.130

3.7 BRANCHES

County clerks may maintain branch offices for filing of instruments, “If the recording of instruments or documents in the county’s official records is permitted at a branch office by the county clerk, the recording must be by electronic means and the electronically recorded instruments or documents must be available without delay to members of the public in the county clerk’s office at the county seat. For purposes of this subsection, an instrument or document is available if it is capable of being: (1) electronically examined by a member of the public in the county clerk’s office at the county seat; and (2) placed into a format and medium that a member of the public can electronically process using technology that is generally available and nonproprietary.” On a daily basis, a deputy at a branch office shall file all original records made at that office during the previous day not later than the start of the next business day.131

3.8 CURRENT RECORDINGS

Counties where real property documents can be electronically recorded (according to Stewart Title and PeirsonPatterson LLP) include:

Arizona: Maricopa California: San Bernardino, Orange Colorado: El Paso Florida: Broward, Orange Illinois: Cook, Winnebago Massachusetts: Middlesex N Michigan: Macomb, Ottowa Nevada: Washoe North Carolina: New Hanover Oklahoma: Tulsa Pennsylvania: Lancaster Texas: Bexar, Brazoria, Fort Bend, Tarrant, Williamson, Denton, (Dallas and Parker were projected to start in early 2006) Utah: Salt Lake Washington: King, Snohomish Wisconsin: Milwaukee

Some counties have made real property records available on the internet. Examples include Bexar County, Texas (records on-line from 1960 at http://www.countyclerk.bexar.landata.com/), Tarrant County, Texas (at http://ccanthem.co.tarrant.tx.us/search.aspx?cabinet=opr), and Broward County, Florida (from 1978 at http://www.broward.org/records/cri03300.htm).

Tarrant County has placed on its website general instructions relating to electronic filing of real property records. The instructions are located at < http://www.tarrantcounty.com/ecountyclerk/cwp/view.asp?A=735&Q=437048>.

“The first step toward becoming an approved submitter is to have a Memorandum Of Understanding (MOU) approved by the Tarrant County Commissioner's Court and signed by all parties. The MOU defines the

128 Tex. Adm. Code Ch. 13, Section 7.143. 129 Tex. Adm. Code Ch. 13, Section 7.144. 130 Tex. Adm. Code Ch. 13, Section 7.145. 131 Tex. Local Gov’t Code Section 292.006



technical, procedural and financial requirements necessary to submit documents electronically. An example of an MOU is linked to this document. The example MOU references certain PRIA standards. PRIA is the Property Records Industry Association. Their web site is www.pria.us.

“Once the MOU is completed, the prospective submitter will be put in contact with Hart InterCivic in order to test the submitter's electronically filing software. Hart InterCivic is the County vendor for the eRecording software.

“After completion of testing with Hart, the submitter must complete all financial arrangements with the County Clerk Accounting department to ensure prompt payment of all filing fees. The submitter will then be given an eRecording user id and password.

“Generally, we have the submitter file a single document as a test and repeat that process until a successful submission is received and recorded properly. Once that is complete, the submitter may submit as often as they like.

“One caveat to the filing process is that the County Clerk reserves the right to accept only certain types of documents via eRecording. A list of those documents may be found below.

Document Type Description A Agreements, subordinations AFF Affidavit APP Substitution of Trustee CTF Death Certificate D Deeds DIV Divorce Decree(already filed with the court)DT Deed of Trust DTU UCC Financing Statement FTL Federal Tax Lien J Judgment L Liens LP LIS Pendens ML Mechanics Lien N Notice of Settlement POA Power of Attorney R Releases, reconvenyance REST Declaration of Restrictive Covenents RFTL Release of Federal Tax Lien RJ Release of Judgment Lien RL Release RSTL Release of State Tax Lien STL State Tax Lien T Quit Claim Deed Owner to Trust U Assignment WD Warranty Deeds

The MOU has generally been standardized, and examples can be seen as Exhibits to this paper. The MOU may include three parties: the county, the authorized filer (such as a title company or law firm), and an electronic recording provider (such as Hart InterCivic, Inc.). The authorized filer may, directly or through a trusted third party provider, electronically file documents. The electronic recording provider must provide and maintain electronic and internal recording software for the county, and is compensated by the county. Any trusted third party provider is compensated by the authorized filer.



4.0 RECORDING LAWS

4.1 THE TEXAS SYSTEM

4.1.1 NOTICE SYSTEM

The notice system generally provides that a subsequent purchaser, lender or lien creditor who acquires his or her interest when the prior rights are not reflected of record, will attain priority over the prior rights. It does not matter that the instrument reflecting the prior rights is recorded before that instrument of the subsequent purchaser or lienholder; therefore, under this system, one cannot assume that an interest has priority simply because it was recorded first. Texas generally reflects that notice system132. The types of notice preventing a subsequent purchaser, lender or creditor from attaining priority are possession, actual notice and constructive (record) notice.

4.1.2 EFFECTIVENESS OF UNRECORDED INSTRUMENTS

Instruments such as Deeds which are not filed of record, or which, though filed, are not properly acknowledged, are still binding on the parties to the transaction and their heirs. Such unrecorded instruments are also binding upon lien creditors with notice, and upon subsequent purchasers or lenders who have notice, who do not furnish current consideration, or who do not acquire their interest in good faith133.

4.2 RECORDING LAWS

4.2.1 “MAY” RECORDING STATUTE

There are numerous recording statutes which expressly or impliedly require that instruments be recorded in order to be effective against innocent purchasers and, under certain circumstances, lien creditors.

Tex. Prop. Code Ann. Section 12.001 (the "may" record statute) provides that any instrument concerning real property may be recorded if it has been acknowledged, sworn to with a proper jurat, or proved according to law. Tex. Prop. Code Section 11.001 also provides that, to be effectively recorded, an instrument relating to real property must be eligible for recording and must be recorded in the county in which a part of the land is located.

4.2.2 “MUST” RECORDING STATUTE

Tex. Prop. Code Ann. Section 13.001 (the "must" record statute) provides that conveyances of real estate and mortgages will be void as to creditors and as to subsequent purchasers for valuable consideration without notice unless acknowledged, sworn to, or proved according to law and filed for record.

4.2.3 EXAMPLES OF INSTRUMENTS SUBJECT TO RECORDING REQUIREMENTS

There are numerous instruments, including deeds and mortgages, that must be filed for record in order to be effective against subsequent purchases, lenders or lien creditors. Other instruments that must be filed for record, in order to be effective against such subsequent parties, include:

Easement Appurtenant;134 Contract of Sale;135 Sheriff's Deed;136 Timber Deed or an Extension of a Timber Deed;137 Decree of Condemnation;138

132 (a)A conveyance of real property or an interest in real property or a mortgage or deed of trust is void as to a creditor or to a

subsequent purchaser for a valuable consideration without notice unless the instrument has been acknowledged, sworn to, or proved and filed for record as required by law.

(b)The unrecorded instrument is binding on a party to the instrument, on the party's heirs, and on a subsequent purchaser who does not pay a valuable consideration or who has notice of the instrument.

(c)This section does not apply to a financing statement, a security agreement filed as a financing statement, or a continuation statement filed for record under the Business & Commerce Code. Tex. Prop. Code Section 13.001

133 Tex. Prop. Code Section 13.001; Watkins v. Edwards, 23 Tex. 443 (1859); Drake v. McGalin, 626 S.W. 2d 786 (Tex. App. 1981, no writ)

134 Pokorny v. Yudin, 188 S.W. 2d 185 (Tex. Civ. App.–El Paso 1945, no writ) 135 Linn v. LeCompte, 47 Tex. 440 (1877) 136 Griggs v. Montgomery, 22 S.W. 24 688 (Tex. Civ. App.–Beaumont 1929, no writ) 137 Grogan-Cochran Lumber Co. v. McComb, 192 S.W. 2d 313 (Tex. Civ. App.–Beaumont 1945, writ ref'd) 138 Parker v. Fort Worth & D.C. Ry. Co., 84 Tex. 333, 19 S.W. 518 (1892)



Judgment Awarding Title (in either a federal or state court);139 Divorce Decree Awarding Title to a Spouse;140 Assignment of a Mortgage;141 Collateral Assignment of a Mortgage;142 Release of a Mortgage;143 Federal Tax Lien Notice;144 Notice of Federal Claim for Hazardous Waste Remedial or Removal Action;145 Fixture Filings;146 State Tax Liens;147 State Lien for Hazardous Waste Clean-up;148 Notice of Bankruptcy;149 Written Extension of a Mortgage;150 Plat and a Dedicated Easement shown thereon;151 Ordinance Relocating an Alley;152.

4.2.4 STATE LIS PENDENS STATUTES

Tex. Civ. Prop. Code Ann. Section 12.007 provides that the party seeking affirmative relief may file a notice of a pending action in an eminent domain proceeding or during pendency of a suit affecting real estate.

Tex. Prop. Code Ann. Section 13.004 provides that a transfer or encumbrance made to a third party who has paid valuable consideration and who does not have actual or constructive notice of the suit is effective unless a lis pendens has been recorded in the county clerk's office. The recorded lis pendens is constructive notice of its contents, and is effective from the time it is filed for record, even if service has not been made on the parties to the suit.

A lis pendens notice is effective from the filing thereof. Proper indexing is not required before the lis pendens is effective. Service on the other parties is not required by the statutory lis pendens law, unlike the common law lis pendens.153 The effect of the statutory lis pendens notice is to put those interested in a tract of land on a duty of inquiry as to issues involved in the suit at time of acquisition. It does not give constructive notice of matters not appearing on the face of the pleadings as that time, although it is effective as to papers which were lost by the clerk.154 If one purchases during the pendency of the suit after a notice of lis pendens is filed, then one is not a necessary party to the suit and is bound by the results of a litigation and also by judicially approved settlement reached by the parties in the

139 Ball v. Norton, 238 S.W. 889 (Tex. Comm'n App. 1922, judgm't adopted) 140 Prewitt v. United States, 792 F. 2d 1353 (5th Cir. 1986); Benn v Security Realty & Dev. Co., 54 S.W. 2d 146 (Tex. Civ.

App.–Beaumont 1932, writ ref'd); Myers v. Crenshaw, 116 S.W. 2d 1125 (Tex. Civ. App.–Texarkana 1938), aff'd, 134 Tex. 500, 137 S.W. 2d 7 (Tex. Comm'n App. 1940, opinion adopted); See also Stafford v. Lunsford, 53 S.W. 3d 906 (Tex. App. - - Houston [1st Dist.] 2001, pet. denied) (an attorney who fails to advise the client to record the divorce decree may be guilty of malpractice)

141 Woods v. Sparks, 59 S.W. 2d 361 (Tex. Comm'n App. 1933, judgm't adopted); Fannin Inv. & Dev. Co. v. Neuhaus, 427 S.W. 2d 82 (Tex. Civ. App.–Houston [14th Dist.] 1968, no writ)

142 Southern Bldg. & Loan Ass'n v. Brackett, 91 Tex. 44, 40 S.W. 719 (1897) 143 Biswell v. Gladney, 213 S.W. 256 (Tex. Comm'n App. 1919, judgm't adopted); Steele v. Orts, 390 S.W. 2d 343 (Tex. Civ.

App.–Texarkana 1965, writ ref'd n.r.e) 144 26 U.S.C.A. Section 6323; Tex. Prop. Code Section 14.001, et seq. 145 42 U.S.C.A. Section 9607 ; Tex. Prop. Code Section 11.001, 14.001, et seq. 146 Tex. Bus. & Com. Code Section 9.334 147 Tex. Tax Code Section 113.101; Tex. Lab. Code Section 213.058 148 Tex. Health & Safety Code Section 361.194 149 11 U.S.C.A. Section 549 150 Tex. Civ. Prac. & Rem. Code Section 16.036 151 City of Richland Hills v. Bertelsen, 724 S.W. 2d 428 (Tex. App.–Fort Worth 1987, no writ); Popplewell v. City of Mission,

342 S.W. 2d 52 (Tex. Civ. App.–San Antonio 1960, writ ref'd n.r.e.) 152 Lesley v. City of Rule, 255 S.W. 2d 312 (Tex. Civ. App.–Eastland 1953, writ ref'd n.r.e.) 153 Tex. Prop. Code 13.004; Pope v. Beauchamp, 110 Tex. 271, 206 S.W. 928 (Tex. Comm'n App. 1918, judgm't adopted);

Humphrey v. Beaumont Irrigating Co., 41 Tex. Civ. App. 308, 93 S.W. 180 (1906, writ ref'd) 154 Kropp v. Prather, 526 S.W. 2d 283 (Tex. Civ. App.–Tyler 1975, writ ref'd n.r.e.); Latta v. Wiley, 92 S.W. 433 (Tex. Civ.

App. 1905, writ ref'd)



pending suit.155 The lis pendens will continue, not only until the judgment, but until a court-ordered sale (provided same is secured within a reasonable time), during appeal and for the period the writ of error is sued out.156 The doctrine of lis pendens will cease when the case is dismissed.157 If a purchaser bought by Deed dated before the lis pendens was filed, he or she is not charged by or bound by the suit or notice of lis pendens even though his or her Deed is not recorded until after the notice of lis penden is filed.158 The notice of lis pendens may be extinguished: (a) where there is only a claim for monetary damages and an attempt to establish a lien pursuant to the judgment by abstract, or (b) under statute by depositing money in the amount of the judgment sought to be recovered, plus costs and interest likely to accrue during the pendency of the action, or by requiring a bond for a sum double the amount of the requested judgment, plus interest and costs..159 A court must cancel a notice of lis pendens if the suit simply seeks imposition of a constructive trust on land based on allegations that the defendant converted property and used proceeds to buy the land. A claim of a constructive trust is no more than a collateral interest in the property.160 However, a lis pendens is appropriate if the suit also seeks a resulting trust or rescission and restitution.161 A plaintiff may not file a lis pendens to reflect a claim of a constructive trust only to satisfy a judgment sought.162 A lis pendens also is appropriate if the plaintiff seeks the land itself as the product of unjust encroachment.163 Although there is no fixed statutory time limit for lis pendens or commencement of a trial, it is not uncommon to waive a lis pendens, pursuant to which no judgment has been recorded, after an extended time since its filing.

Tex. Prop. Code Ann. Section 12.005 provides that the court order partitioning or allowing recovery of title must be recorded in the clerk's office in which that land is located in order to be admissible in evidence. The clerk of the court may provide a summary form abstracting the pertinent aspects of the order, including the identity of the case, date of the case, names of parties, description of land and the name of the party to whom the land is awarded.

The attorney representing the state, not later than the third day after the date proceedings for forfeiture are commenced, shall file a lis pendens notice describing the land with the county clerk of each county in which the land is located.164 A final judgment of forfeiture perfects the title of the state to the land forfeited as of the date a notice of lis pendens is filed on the land.165 An owner or interest holder's interest in land may not be forfeited if the owner or interest holder proves by a preponderance of the evidence that the owner or interest holder acquired an ownership interest, security interest, or lien interest before a lis pendens notice was filed and did not know or should not reasonably have known of the act or omission giving rise to the forfeiture or that it was likely to occur at or before the time of acquiring the ownership interest, security interest, or lien interest.166

4.2.5 FEDERAL LIEN REGISTRATION ACT ADOPTED BY TEXAS

Tex. Prop. Code Ann. Section 14.001, et seq. is the Uniform Federal Lien Registration Act. This Act provides that notice of a lien or claim in favor of the United States or a release of same may be recorded in the county clerks' office. Certificates of notices of liens by the secretary of the treasury or her delegate, or any official of the U.S. responsible for filing or certifying of notices entitles them to be filed, and no acknowledgment or attestation is necessary.167

155 Hammon v. Southwestern Gas Pipeline, Inc., 821 F.2d 299 (5th Cir.), aff'd in part and vacated in part on rehearing, 832 F.2d

55 (5th Cir. 1987); Black v. Burd, 255 S.W. 2d 553 (Tex. Civ. App.–Fort Worth 1953, writ ref'd n.r.e.) 156 Hartel v. Dishman, 135 Tex. 600, 145 S.W. 2d 865 (1940); Bryson & Hartgrove v. Boyce, 41 Tex. Civ. App. 415, 92 S.W.

820 (1906, writ ref'd) 157 Vehle v. Wagner, 201 S.W. 2d 636 (Tex. Civ. App.–El Paso 1946, writ ref'd n.r.e.) 158 Martin v. Marquardt, 111 S.W. 2d 285 (Tex. Civ. App.–San Antonio 1937, writ dism'd w.o.j.) 159 Tex. Prop. Code 12.008; Ransopher v. Deer Trails, Ltd., 647 S.W. 2d 106 (Tex. App.-Houston [1st Dist.] 1983, no writ);

Hughes v. Houston Northwest Medical Center, 647 S.W. 2d 5 (Tex. App.–Houston [1st Dist.] 1982, writ dism'd); Lane v. Fritz, 404 S.W. 2d 110 (Tex. Civ. App.–Corpus Christi 1966, no writ)

160 Flores v. Haberman, 915 S.W. 2d 477, 1995 Tex. LEXIS 136, 38 Tex. Sup. Ct. J. 1166 (Tex. 1995); reh’g of cause overruled March 7, 1996

161 First National Petroleum Corp. v. Lloyd, 908 S.W. 2d 23 (Tex. App.–Houston [1st Dist.] 1995, no writ) (mandamus is appropriate remedy on issues of lis pendens)

162 Flores v. Haberman, 915 S.W. 2d 477 (Tex. 1995) 163 First National Petroleum Corp. v. Lloyd, 908 S.W. 2d 23 (Tex. App.–Houston [1st Dist] 1995, no writ) 164 Tex. Code Crim. Proc. art. 59.04 165 Tex. Code Crim. Proc. art. 59.06 166 Tex. Code Crim. Proc. art. 59.02 167 Tex. Prop. Code §14.003



4.2.6 UTILITY SECURITY INSTRUMENTS

Tex. Bus. & Com. Code Ann. Sections 35.01-35.09 authorize a notice of a utility security instrument to be filed in the county records. The "utility" (such as a person engaged in generating electric power, transportation of gas, etc.) may then file mortgages (with appropriate provisions) in the Secretary of State's office.168)

4.2.7 TIMBER DEEDS

A bill of sale for timber or trees may be filed of record in the real property records, and it shall contain the name of the owner of the land, description of the land, description of the trees or timber, and representations and a warranty of the seller that the seller is the owner.169

4.2.8 LIEN RECORDING STATUTES

Tax Lien Foreclosure. A lien held by a property owner’s association or condominium unit owner’s association that secures a regular or special maintenance assessment, fee, dues, interest, fines, costs, attorney’s fees or other monetary charges against the land is subordinate to the tax lien. The association is not a necessary party to the tax lien foreclosure unless at the time the action was commenced, a notice of the association lien in a liquidated amount is evidenced by a sworn statement recorded with the county clerk. The foreclosure extinguishes the association lien for all amounts accrued before the date of sale if the association is joined by virtue of a notice of recorded lien, or if the notice of lien is not recorded and the association is not joined. The tax lien is otherwise subordinate to restrictive covenants and easements recorded before January 1 of the year the tax lien arose.170

Assignment of Tax Lien. A person may authorize another person to pay delinquent taxes on the person’s land. The tax lien transferred must be recorded in the deed records with the sworn statement and affidavit attesting to the tax lien transfer in order to be enforceable. A foreclosure of the transferred tax lien may not be instituted within one year after the date on which the lien is recorded, unless the contract between the owner and the transferee provides otherwise. After one year from the date the tax lien is transferred, the transferee may foreclose unless the contract provides otherwise. Beginning on the date the foreclosure deed is recorded, the landowner or mortgage servicer of a prior recorded lien may redeem the land from the purchaser at the foreclosure by paying the buyer or successor 125% of the purchaser price in the first year and 150% of the purchase price in the second year of the redemption period. The redemption may be exercised on or before two years after the purchaser’s foreclosure deed is filed of record if the land is the residence homestead of the owner, or was designated for agricultural use, or was a mineral interest. Other land may be redeemed no later than 180 days after the date the foreclosure deed is filed of record. 171 An affidavit of the transferee executed after foreclosure of a tax lien that recites compliance with the terms of §32.06 and §32.065, Tax Code, and is recorded in the county in which the land is located (1) is prima facie evidence of compliance, and (2) may be relied on conclusively by a bona fide purchaser for value without notice of any failure to comply.172

Foreclosure Sale Location. The commissioners court shall designate the area at the courthouse where foreclosure sales are to take place and shall record the designation in the real property records of the county. New §51.002(h) provides that The commissioners court of a county may designate an area other than the area of the courthouse where foreclosure sales will take place. The designated location must be a public place within reasonable proximity of the county courthouse and in a location as accessible to the public as the courthouse door.173

Governmental Lien Requirements. A lien on real property in favor of a governmental entity must be recorded in the real property records and must contain a legal description of the property, unless the lien is for ad valorem taxes (and penalties and interest), or unless the law establishing the lien expressly states that recordation is not required. This provision does not apply to (1) a lien created under Section 89.093, Natural Resources Code (relating to costs of plugging wells), a state tax lien created under Chapter 113, Tax Code (which requires a notice of general lien to be recorded in the real property records, but does not provide 168 See also Tex. Prop. Code §11.001 169 Tex. Nat. Res. Code Section 151.002 170 Tex. Tax Code Section 32.05 171 Tex. Tax Code Section 32.06 172 Tex. Tax Code Section 32.065 173 Tex. Prop. Code Section 51.002



for a legal description), or a lien under Chapter 61 or 213, Labor Code (Section 61.082 and 61.083 provide that the lien for wages and penalties paid by the Texas Employment Commission is perfected pursuant to Chapter 113, Tax Code; Section 213.057 provides that the lien for unemployment compensation taxes may be recorded pursuant to Section 113.004, Tax Code).174

Abstract of Judgment. An abstract of judgment becomes a lien on nonexempt real property when it is recorded and indexed in the real property records by the county clerk in the county in which the land is located.175 A transfer of a judgment may be filed in the papers of the suit if acknowledged or sworn to as required by law for deeds. A filed transfer is notice to and is binding on a person subsequently dealing with the judgment.176 An abstract of judgment is not a lien if security is posted by the defendant (unless excused by law) and a certified copy of court findings that the lien would not substantially increase the degree to which the judgment creditor’s security would be secured when balanced against the costs to the defendant is recorded in the real property records. The lien exists on filing of a certified copy of an order of withdrawal of the findings of the court in the real property records.177

Mechanic’s Lien Affidavit. A person claiming a lien arising from a residential construction project must file an affidavit with the county clerk of the county in which the property is located not later than the 15th day of the third calendar month after the day on which the indebtedness accrues. Otherwise, a person claiming the lien must file an affidavit with the county clerk of the county in which the property is located not later than the 15th day of the fourth calendar month after the day on which the indebtedness accrues. . Failure of the county clerk to properly record or index a filed affidavit does not invalidate the lien.178

Affidavit of Commencement of Construction. An owner and original contractor may jointly file an affidavit of commencement with the county clerk of the county in which the land is located not later than the 30th day after the date of actual commencement of construction of the improvements or delivery of materials to the land.179

Inception and Recording of Mechanic’s Lien Affidavit. The time of inception of a lien that is created under Section 53.021(c), (d), or (e) (architect, engineer, surveyor, landscaping, or demolition) is the date of recording of an affidavit of lien. The priority of such a lien with respect to other mechanic's liens is determined by the date of recording. A lien created under Section 53.021(c), (d), or (e) is not valid or enforceable against a grantee or purchaser who acquires an interest in the real property before the time of inception of the lien. Otherwise, the inception of a mechanic’s lien claim is the commencement of construction of improvements or delivery of materials.180

Discharge of mechanic’s lien. A mechanic’s lien may be discharged of record by filing the bond and notice under Section 53.171,et seq. (bond to indemnify against specific lien or liens), by filing the bond in compliance with Section 53.201, et seq. (statutory payment bond on project), or by recording a certified copy of the order removing the lien under Section 53.160 (summary motion to remove invalid or unenforceable mechanic’s lien) and a certificate from the clerk of the court that states that no bond or deposit as described by Section 53.161 was filed by the claimant within 30 days after the date the order was entered.181 A purchaser, insurer of title, or lender may rely on and is absolutely protected by the record of the bond and notice (to indemnify against specific lien or liens) to the same extent as if a release had been filed.182 A purchaser, lender or other person acquiring an interest in the land or an insurer of title is entitled to rely on the record of the bond and contract (statutory bond on project) as constituting payment for all liens incurred by the original contractor as if the purchaser, lender, or other person acquiring an interest in the land or the insurer of title where the owner and as if the claimants other than the original contractor had filed a complete release of record.183

174 Tex. Prop. Code sec. 51.008 175 Tex. Prop. Code Sections 52.001, 52.004 176 Tex. Prop. Code §12.014 177 Tex. Prop. Code Section 52.0011 178 Tex. Prop. Code Section 53.052 179 Tex. Prop. Code Section 53.124 180 Tex. Prop. Code Section 53.124 181 Tex. Prop. Code Section 53.157 182 Tex. Prop. Code Section 53.174 183 Tex. Prop. Code Section 53.204



Mechanic’s Lien Contract on Homestead. To fix a lien on homestead, the person furnishing labor or matrial and the owner must execute a written contract before the material is furnished and labor is performed, and the contract must be filed with the county clerk of the county in which the homestead is located.184

Mineral Contractor’s Lien. Not later than six months after the day the indebtedness accrues, a person claiming a lien for labor or services related to mineral activities must file an affidavit with the county clerk of the county in which the property is located.185

Broker and Appraiser’s Lien on Commercial Real Estate. A broker or appraiser claiming a lien on commercial real estate must file a notice of lien with the county clerk of the county in which the commercial real estate is located.186 A broker's lien attaches to the commercial real estate interest owned by the person obligated to pay the commission on the date the notice of lien is recorded. The lien does not relate back to the date of the commission agreement.187 A recorded lien, mortgage, or other encumbrance on commercial real estate, including a recorded lien securing revolving credit and future advances for a loan, recorded before the date a broker's lien is recorded has priority over the broker's lien. A broker's lien on the commercial real estate interest of a person obligated to pay a commission is not valid or enforceable against a grantee, buyer, lessee, or transferee of the interest of the person obligated to pay the commission if the deed, lease, or instrument transferring the interest is recorded before the notice of the broker's lien is recorded. A purchase-money mortgage lien executed by the buyer of the commercial real estate interest has priority over a broker's lien claimed for the commission owed by the buyer against the commercial real estate interest purchased by the buyer. A mechanic's lien that is recorded after a broker's lien and that relates back to a date before the date the broker's lien is recorded has priority over the broker's lien.188 If a lien is fixed or is attempted to be fixed by a recorded instrument under this chapter, any person may file a bond to indemnify against the lien with the county clerk of the county in which the commercial real estate is located.189 In acquiring an interest in or insuring title to the commercial real estate, a buyer, insurer of title, or lender may rely on and is absolutely protected by the record of the bond and the notice to the same extent as if the lien claimant had filed a release of lien in the real property records.190

Buildings. A municipality may remove or repair a substandard building. The lien for its costs arises and attaches at the time the notice of lien is recorded and indexed in the county records.191 The lien is a privileged lien subordinate only to tax liens. A municipality has authority to secure substandard buildings subject to the same lien provisions as set forth in Section 214.001.192The additional authority to impose a lien on substandard housing of 10 or fewer units provides that the notice of lien must be promptly recorded after imposition and that the lien is subordinate to mortgages filed before the civil penalty was assessed or the repair was begun.193

Child Support Liens. A child support lien for arrearage is perfected by recording of an abstract of judgment or child support lien notice. The lien filed before September 1, 1997 is effective for 10 years from recording. The lien may be extended for an additional 10 year period by recording a child support lien notice within the last year of the 10 year period following the date of the original recording of the notice. The lien filed on or after September 1, 1997 is effective until all child support arrears owed are paid.194 The lien does not have priority over a lien or conveyance recorded before the lien notice is recorded. The lien does have priority over a lien or conveyance recorded after the lien notice is recorded. The child support lien

184 Tex. Prop. Code Section 53.254 185 Tex. Prop. Code Section 56.021 186 Tex. Prop. Code Section 62.024 187 Tex. Prop. Code Section 62.027 188 Tex. Prop. Code Section 62.028 189 Tex. Prop. Code Section 62.121 190 Tex. Prop. Code Section 62.124 191 Tex. Local Gov't Code sec. 214.001 192 Tex. Local Gov't Code sec. 214.0011 193 Tex. Local Gov't Code sec. 214.0015 194 Tex. Fam. Code sec. 157.318



is subordinate to a vendor’s lien retained in the deed to the obligor .195 The lien attaches to real property on or after the date the lien notice or abstract of judgment is filed with the county clerk.196

Continuing Care Contracts: To secure obligations of a provider under continuing care contracts, a lien attaches on the date a resident first occupies the facility. The lien attaches to the land at the facility. The provider must file a notice of the facility in the real property records of the county on or before the execution of the first continuing care contract. The commissioner of insurance may remove the lien so that the provider may secure secondary financing or refinancing if the facility is financially sound and removal will not adversely affect residents. The lien is subordinate to liens used to construct, acquire, replace or improve the facility or to refinance such a loan. The lien is effective for 10 years.197

Corporation Lien: The state has a lien on all property of a filing or foreign entity (domestic or foreign corporation, limited partnership, limited liability company, professional association, cooperative or real estate investment trust) from the date suit is filed by the attorney general or a district or county attorney to forfeit the charter or permit or for the fines and penalties. The filing of the suit is notice of the lien.198

Cotton Pests: If the Department of Agriculture destroys host plants contaminated by boll weevils and pink bollworms, the Department may perfect a lien by filing a sworn statement of debt.199

Litter Near Highway: If the county removes litter from a person's land within 50 feet of a public highway and the person assessed the costs does not pay within 60 days after assessment, the county shall file a record of the lien in the county clerk's office.200

Mental Health Lien: The Department of Human Services has a lien to secure reimbursement for support of a patient with mental illness or mental retardation. The lien attaches to land owned or later acquired by the patient, client, or person legally responsible for the patient or client. The notice must be filed with the county clerk to secure the lien.201

Mining Reclamation: The Railroad Commission shall file a statement in the county clerk's office within six months after completion of reclamation to control adverse effects of past mining practices on privately owned land. The statement constitutes a lien on the land second only to a lien for property taxes. to secure the lien.202

Nuisance Lien (Municipal): A municipality may assess the cost of removing weeds, rubbish, or other unsanitary matter as a lien. To obtain a lien, a lien statement must be filed with the county clerk. The lien attaches upon the filing of the statement. The lien is inferior only to tax liens and liens for street improvements.203 Section 342.008 of the Health and Safety Code provides for an additional lien for abatement of dangerous weeds, subject to the lien provisions of Section 342.007.

Nuisance Lien (County): If a county abates a nuisance, it may obtain a lien for an assessment of costs by filing a notice of lien with the county clerk. The lien attaches when the notice is filed and is inferior to a previously recorded bona fide mortgages if the mortgage was filed before the notice is filed.204

State Restitution Lien: Chapter 42 of the Code of Criminal Procedure provides for a restitution lien for a victim of a criminal offense and for the state. The lien attaches to land of the defendant

195 Tex. Fam. Code sec. 157.320 196 Tex. Family Code sec. 157.317 197 Tex. Health & Safety Code sec. 246.111 198 Tex. Bus. Org. Code secs. 1.002, 12.201 (effective Jan. 1, 2006) 199 Tex. Agric. Code sec. 74.004 200 Tex. Health & Safety Code sec. 365.034 201 Tex. Health & Safety Code sec. 533.004 202 Tex. Nat. Res. Code sec. 134.150 203 Tex. Health & Safety Code sec. 342.007 204 Tex. Health & Safety Code sec. 343.023



and is perfected when the affidavit is filed with the county clerk. The lien expires 10 years after it is filed. The lien may be refiled before it expires; in that event, the lien expires 10 years after refiling. The lien is subordinate to a person who acquires a valid lien perfected before the perfection of the restitution lien or a vendor's lien and is subordinate to the rights of a bona fide purchaser who acquires and files for record an interest in the land before the perfection of the restitution lien.205

Shoreline Protection (County Adjacent to County Over 2.5 Million): Section 233.001 of the Local Government Code provides that a county bordering the Gulf and adjacent to a county of over 2.5 million may repair or remove a shoreline structure and assess the expenses against the land. The county must file for record a notice of lien. The lien arises and attaches at the time the notice is recorded and indexed in the office of the county clerk. The notice is inferior to previously recorded bona fide mortgage liens that were filed for record before the notice is recorded and indexed.

Solid Waste Disposal Lien (State): The state has a lien on land subject to or affected by a remedial action. The lien arises and attaches at the time an affidavit is recorded and indexed in the county. The lien is not enforceable if the land or mortgage is acquired before the affidavit is recorded unless the person acquiring the interest had or reasonably should have had actual notice or knowledge that the land is subject to or affected by the action or that the state has incurred the costs. A purchaser or lender may rely upon a bond (as provided in the law) to take free of the lien.206

State Land Encroachments: The commissioner may remove a structure on state land that is not subject to a proper easement or lease from the state or that is a threat to the public welfare. The commissioner may record a lien for the penalties, cost, and expenses against the adjacent littoral property. The lien arises and attaches at the time the notice of lien is recorded and indexed in the real property records. The lien is subordinate to the rights of prior bona fide purchasers or lienholders on the adjacent littoral property.207

State Tax Liens: A lien attaches for contribution, penalty, and interest when overdue. The Texas Employment Commission has a lien against the employer for the amount owed from the date the order is final. This lien is superior to any other lien on the land, with the exception of a lien for ad valorem taxes. This lien is subject to the requirements of Chapter 113 of the Tax Code.208 The comptroller may conduct a public auction to sell property seized for payment of taxes and provide a deed to the purchaser.209 All nonexempt property of the taxpayer is subject to a lien in favor of the state for taxes, fines, interest and penalties owed.210 The provisions apply to all taxes collected by the comptroller.211 The filing and recording of the tax lien notice with the county clerk constitutes notice and covers all taxes previously accrued or that subsequently accrue.212 With approval of the attorney general the comptroller may release specific property upon payment of reasonable cash fair market value.213 The lien is not effective against a bona fide purchaser, mortgagee, judgment creditor or other person who acquires a lien, title, or right for bona fide consideration before the lien is filed, recorded and indexed.214

A lien on real property in favor of a governmental entity must be recorded in the real property records and must contain a legal description of the property, unless the lien is for ad valorem taxes (and penalties and interest), or unless the law establishing the lien expressly states that recordation is not required. This Section does not apply to (1) a lien created under Section 89.093, Natural Resources Code (relating to costs of plugging wells), a state tax lien created under Chapter 113, Tax Code (which requires a

205 Tex. Code Crim. Proc. art. 42.22 206 Tex. Health & Safety Code sec. 361.194 207 Tex. Nat. Res. Code sec. 51.3021 208 Tex. Lab. Code secs. 61.081-61.085, 213.057-213.058 209 Tex. Tax Code sec. 111.019 210 Tex. Tax Code sec. 113.001 211 Tex. Tax Code sec. 113.0021 212 Tex. Tax Code sec. 113.006 213 Tex. Tax Code sec. 113.008 214 Tex. Tax Code sec. 113.101



notice of general lien to be recorded in the real property records, but does not provide for a legal description), or a lien under Chapter 61 or 213, Labor Code (Section 61.082 and 61.083 provide that the lien for wages and penalties paid by the Texas Employment Commission is perfected pursuant to Chapter 113, Tax Code; Section 213.057 provides that the lien for unemployment compensation taxes may be recorded pursuant to Section 113.004, Tax Code).215

Paving Liens: Notice of assessment for street improvements shall describe, or describe by reference, each abutting parcel and shall be filed in the clerk's office. 216 The paving lien notice must give the name of “the subdivision and affected blocks if the street abuts a subdivision for which a plat has been recorded in the county clerk’s office” in addition to containing preexisting requirement of the street and the two cross streets or other approximate lengthwise limits of improvements.217 The lien takes effect from the date the municipality orders the improvement.218 The lien is superior to all other liens, except ad valorem tax liens.219

Subdivisions in Economically Distressed Areas: Section 2306.0985 of the Government Code requires a political entity to assess or place a lien on a subdivider's land in unincorporated areas of affected countries if the land benefits from state or federal funds for water, wastewater or drainage improvements. The lien expires 10 years after improvements are completed. The section requires adoption of regulations to administer the section. A distressed areas water financing fee may be imposed on undeveloped property. The lien or fee is not effective until the governing body files for record in the county a notice of imposition of the distressed areas water financing fee and the notice is recorded and indexed. On January 1 of each year the lien attaches. It is treated as if it were a tax lien and has the same priority.220

Swimming Pool Enclosures: A municipality that incurs expenses for repair or remedy of swimming pool fences and enclosures may assess the expenses against the land. The lien arises and attaches at the time the notice is recorded in the county clerk's office. The lien is a privileged lien subordinate only to tax liens and previously recorded bona fide mortgages.221

Utility Service Lien: A municipality may by ordinance impose a lien against an owner's property for delinquent bills for municipal utility service to the property. The lien is perfected by recording in the real property records of the county. The lien is subordinate to a bona fide mortgage lien that is recorded before the recording of the municipality's lien and is superior to all other liens, including previously recorded judgment liens and any liens recorded after the municipality’s lien.222 4.2.9 PROBATE MATTERS

A certified copy of a marital survivorship agreement and order adjudicating the agreement may be recorded.223 If a person purchases real property for value from a person claiming from a decedent more than six months after the decedent's death without notice of the agreement, the purchaser has title to the interest which the person (seller) would have had in the absence of the agreement. If a person purchases real property for value from the personal representative of the decedent without notice of the agreement, the purchaser has title to the interest which the personal representative would have had the power to convey in the absence of the agreement. If a person buys real estate from the decedent’s surviving spouse more than six months after the date of the decedent’s death for value and (i) the purchaser received an original or certified copy of the survivorship agreement or the agreement is

215 Tex. Prop. Code sec. 51.008 216 Tex. Transp. Code sec. 313.044 217 Tex. Transp. Code sec. 314.043 218 Tex. Transp. Code sec. 313.054 219 Tex. Transp. Code sec. 313.042 220 Tex. Water Code sec. 16.348 221 Tex. Local Gov't Code sec. 214.101 222 Tex. Local Gov't Code sec. 402.0025 223 Tex. Prob. Code sec. 457



recorded in the county and (ii) the purchaser has no notice that the agreement was revoked, the purchaser shall have good title to the interest the survivor would have had in the absence of a revocation.224

A statement of facts concerning heirship of a decedent is prima facie evidence of the facts stated if the statement is contained in an affidavit or other instrument executed and acknowledged or sworn to and if of record for five years or more in the deed records in the county in which the land is located or where the decedent had his or her domicile or residence at death.225

A bona fide purchaser may rely upon the small estate affidavit. A bona fide purchaser may rely on a recorded small estate affidavit, which is approved by the probate court. The bona fide purchaser without actual or constructive notice of an heir who is not disclosed in the recorded affidavit acquires title free of the interests of the undisclosed heir, but subject to any claim of a creditor of the decedent. A purchaser has constructive notice of an omitted heir if an affidavit, judgment or heirship or title transaction in the chain of title identified the heir as an heir of the decedent.226

If the foreign will purports to convey or dispose of Texas property, a copy of the will and its probate, together with the attestation by the clerk or other person acting in such capacity in the foreign jurisdiction, seal of the foreign court affixed, and certificate from the judge that the attestation is in due form, may be filed and recorded in the deed records in any county in which land of the decedent is located.227 Original signatures are not required for recordation in the deed records. The copy of the will with its probate attached, together with the proper attestation, seal, and certificate, is prima facie evidence that the will was admitted to probate in the other jurisdiction.228 The recordation of the will makes it valid and effective as a conveyance of all property in this state covered by the will and the record of the will is notice as the existence of the instrument and of the title conferred under the will.229 If a foreign will is recorded in the deed records of any county of this state and the will gives the executor or trustee the power to sell real estate in this state, the executor or trustee may sell and convey in accordance with the will without order of a court in this state.230

Certified copies of an order admitting will to probate together with the will and the record in the cause may be recorded in other counties.231

A certified copy of the judgment determining heirship may be filed in any county where land of the decedent is located and is constructive notice from the date of filing.232

One claiming to be a child (but not legally presumed such) may apply to the probate court for a finding on the right to inheritance. A bona fide purchaser, relying on an affidavit of heirship, prior to a judgment recognizing the child’s rights, takes free of such inheritance rights.233 4.2.10 CONDOMINIUMS AND TIMESHARES

Creation of Condominium. An owner or developer of an existing or a planned building establishes a condominium regime by recording a master deed, master lease, or declaration in each county in which any portion of the condominium is located. If the declaration is not properly executed, the defect may be cured by subsequent execution; the declaration is then retroactively effective on the date it was first recorded234.

224 Tex. Prob. Code sec. 460 225 Tex. Prob. Code sec. 52 226 Tex. Prob. Code sec. 137 227 Tex. Prob. Code sec. 96 228 Tex. Prob. Code sec. 97 229 Tex. Prob. Code sec. 98 - 99 230 Tex. Prob. Code sec. 107 231 Tex. Prob. Code sec. 89 232 Tex. Prob. Code sec. 56 233 Tex. Prob. Code sec. 42(b) 234 Tex. Prop. Code Section 81.101, Section 83.051



Termination of Condominium. To be effective, a termination agreement and all ratifications of the agreement must be recorded in each county in which a portion of the condominium is located. [Tex. Prop. Code Section 82.068 ] Foreclosure or enforcement of a lien against the entire condominium does not of itself terminate the condominium, and foreclosure or enforcement of a lien against a portion of the condominium does not withdraw that portion from the condominium, unless the portion is withdrawable or unless the mortgage being foreclosed was recorded before the date the declaration was recorded and the mortgagee did not consent in writing to the declaration.235

Transfer of Special Declarant Rights in Condominium.) Special declarant rights created or reserved under this chapter may not be transferred except by an instrument evidencing the transfer recorded in each county in which any portion of the condominium is located.236

Condominium Assessment Lien. The association's lien for assessments is created by recordation of the declaration, which constitutes record notice and perfection of the lien. Unless the declaration provides otherwise, no other recordation of a lien or notice of lien is required.237

Condominium Foreclosure. The owner of a unit used for residential purposes and purchased by an association at a foreclosure sale of the association's lien for assessments may redeem the unit not later than the 90th day after the date of the foreclosure sale. The exercise of the right of redemption by the owner of a unit used for residential purposes and purchased by the association at the foreclosure sale for the association’s lien for assessments is not effective against a subsequent purchaser or lender for value without notice of the redemption after the redemption period expires unless the redeeming unit owner records the deed from the association or an affidavit stating that the owner has exercised the right of redemption.238

The developer, sole owner, or the co-owner may declare through recordation of a master deed, master lease or declaration the property to be a timeshare regime. 239 Any title or interest in a timeshare interest may be recorded.240

4.2.11 WATER RIGHTS

“A written instrument conveying a permanent water right may be recorded in the same manner as any other instrument relating to a conveyance of land.”241

“The commission shall transmit the (surface water) permit by registered mail to the county clerk of the county in which the appropriation is to be made…. When the county clerk receives the permit and is paid the recording fee (as prescribed by Subchapter B, Chapter 118, Local Government Code, he shall file and record the permit in a well-bound book kept for that purpose. He shall index the permit alphabetically in the name of the applicant and of the stream or source of water supply. After he has recorded the permit, the county clerk shall deliver the permit, on demand, to the applicant…..When the permit is filed in the office of the county clerk, it is constructive notice of: (1) the filing of the application; (2) the issuance of the permit; and (3) all the rights arising under the filing of the application and the issuance of the permit.”242

“The commission shall transmit the certificate of adjudication (of surface water rights) or a true copy to the county clerk of each county in which the appropriation is made….On receipt of the recording fee from the holder of the certificate, the county clerk shall file and record the certificate in a well-bound book provided and kept for that purpose only. The clerk shall index the certificate alphabetically under the name of the holder of the certificate of adjudication and under the name of the stream or source of water supply. …When a certificate of adjudication is filed and recorded as provided in this section, the county clerk shall deliver the certificate on demand to the holder.”243

235 Tex. Prop. Code Section 82.068 236 Tex. Prop. Code Section 82.104 237 Tex. Prop. Code Section 82.113 238 Tex. Prop. Code Section 82.113 239 Tex. Prop. Code Section 221.011 240 Tex. Prop. Code Section 221.012 241 Tex. Water Code Section 11.040(b) 242 Tex. Water Code Section 11.136 243 Tex. Water Code Section 11.324



Within 30 days of issuance of a new or amended (groundwater) permit to a transferee or issuance of a final order or letter approving an application for transfer, the transferee must file the permit in the deed records of the counties in which the point of withdrawal and place of use are identified in the permit, and the counties to which point of withdrawal and place of use are transferred as identified in the new or amended permit.244

Subsection 11.3271(j), Water Code, provides: that the watermaster shall maintain a central repository which shall be made available to the public that includes certified copies of all instruments, including deeds, deeds of trust, and liens, that the commission requires to be filed in connection with water rights relating to water in the lower, middle, or upper basin of the Rio Grande and that are subject to a permit, certified filing, or certificate of adjudication. On or after September 1, 2003, a lien against a water right shall not be effective against third parties unless a certified copy of the instrument is filed with the watermaster and all requirements under other law are met. The validity of any liens or filings made prior to September 1, 2003, is not affected by this section. This section does not affect the validity of a lien as between the holder of the water right and the holder of the lien or the requirements or validity of any other law governing the perfection and recordation of these instruments. The executive director may charge a fee for the filing of certified copies of instruments. A fee collected under this section shall be deposited to the credit of the watermaster fund. This section does not apply to the Rio Grande above the Fort Quitman Dam.245

4.2.12 MANUFACTURED HOMES

If an owner elects to treat a manufactured home as real property, the Texas Department of Housing and Community Affairs (Department) shall issue a certified copy of the Statement of Ownership and Location (SOL) reflecting such election by the owner. No later than the 60th day after the date the Department issues the certified copy of the SOL, the owner must (1) file the certified copy in the real property records of the county in which the home is located, and (2) notify the Department and the tax assessor-collector that the certified copy has been filed. The manufactured home is not considered to be real property until the certified copy of the SOL has been filed and the department and the tax assessor-collector have been notified of the filing.246 Thereafter, no further SOLs must be recorded when the land and manufactured home are sold as a unity.

4.2.13 CONTRACTS FOR DEED

Tex. Prop. Code Section 5.076 requires the seller under an executory contract to record the executory contract and disclosure statement on or before the 30th day after the contract is executed. If the executory contract is terminated for any reason, the seller must record the instrument terminating the contract. An executory contract is a contract for the purchase of land for the buyer’s residence or residence of a person related to the buyer within the second degree of consanguinity or affinity; an executory contract is not a contract requiring a deed within 180 days after final execution.247 The seller must convey recorded, legal title no later than 30 days after receiving the final payment under the executory contract.248

4.2.14 POWER OF ATTORNEY

A power of attorney may be recorded in the real property records.249

“A durable power of attorney for a real property transaction requiring the execution and delivery of an instrument that is to be recorded, including a release, assignment, satisfaction, mortgage, security agreement, deed of trust, encumbrance, deed of conveyance, oil, gas, or other mineral lease, memorandum of a lease, lien, or other claim or right to real property, shall be recorded in the office of the county clerk of the county in which the property is located.”250

4.2.15 MARITAL RIGHTS

Section 3.308 of the Family Code provides that “An order authorized by this subchapter (for an order authorizing management, control and disposition of community property by the remaining spouse if the other

244 Section 711.356, Edwards Aquifer Authority Rules 245 Tex. Water Code Section 11.3271(j) 246 Tex. Occupations Code Sections 1201.222, 1201.2055 247 Tex. Prop. Code §5.062 248 Tex. Prop. Code §5.079 249 Tex. Prop. Code §12.016 250 Tex. Prob. Code sec. 489



spouse is missing, abandoned the remaining spouse, separated or is missing in public service or a prisoner of war) affecting real property is not constructive notice to a good faith purchaser for value or to a creditor without actual notice unless the order is recorded in the deed records of the county in which the real property is located.”

A partition or exchange agreement may be recorded in the deed records in the county where a party resides and in the county in which affected real property is located. The agreement is constructive notice to a good faith purchaser and creditor if acknowledged and recorded in the county in which the land is located.251

An agreement converting separate property to community property may be recorded in the deed records in the county in which a spouse resides and in a county in which any real property is located. The conversion is constructive notice to a good faith purchaser for value or a creditor without notice only if the agreement is acknowledged and recorded in the deed records in the county in which the real property is located.252 4.2.16 ROAD MAPS

Chapter 258, Transportation Code authorizes the commissioners court of a county (until September 1, 2009) to adopt a proposed county road map and include in the map all roads in which the county claims a public interest. Section 258.003, Transportation Code, provides that the adopted county road map is conclusive evidence of the public’s right of access over a road included in the map, except as provided in Section 258.004.

4.2.17 PARTITION OR RECOVERY OF TITLE

Tex. Prop. Code Ann. Section 12.005 provides that the court order partitioning or allowing recovery of title must be recorded in the clerk's office where that land is located in order to be admissible in evidence. The clerk may provide a summary form abstracting the pertinent aspects of the order, including the identity of the case, date of the case, names of parties, description of land and the name of the party to whom the land is awarded.

4.2.18 MASTER FORM DEED OF TRUST OR MORTGAGE

A master form of a mortgage or deed of trust may be recorded in any county without acknowledgement. The master form must include on its face: "Master form recorded by (name of person causing the recording)." The parties to a mortgage or deed of trust may incorporate by reference a provision of a recorded master form. The reference must state that the master form is recorded in the county in which the instrument is filed, the numbers of the book or volume and first page of the records in which the master form is recorded, and a definite identification of each provision being incorporated. If a mortgage or deed of trust incorporates by reference a master form, the mortgagee shall give the mortgagor a copy of the master form at the time the instrument is executed. A statement in the mortgage or deed of trust or in a separate instrument signed by the mortgagor that the mortgagor received a copy of the master form is conclusive evidence that the mortgagor received it.253

4.2.19 REDEMPTION BY U.S.

A certificate of redemption by the U.S. from a foreclosure may be recorded in the county clerk’s office.254

4.2.20 WRIT OF ATTACHMENT

A writ of attachment may be recorded in the county clerk’s office.255

4.2.21 DESIGNATION OF HOMESTEAD

To designate property as a homestead, a person must make the designation in an instrument that is signed and acknowledged or proved, and file the designation with the county clerk of the county in which all or part of the property is located.256

251 Tex. Fam. Code sec. 4.106 252 Tex. Fam. Code sec. 4.206 253 Tex. Prop. Code Section 12.009 254 Tex. Prop. Code §12.011 255 Tex. Prop. Code §12.012



“A purchaser or lender for value without actual knowledge may conclusively rely on an affidavit that designates other property as the homestead of the affiant and that states that the property to be conveyed or encumbered is not the homestead of the affiant.”257

4.2.22 RESTRICTIONS

Chapter 201, Property Code, relates to addition to or modification of existing restrictions in a residential real estate subdivision in a city of more than 100,000 or the extra-territorial jurisdiction of the city, or the unincorporated area of a county of 2,400,000 or more, or a county of 30,000 or more adjacent to a county of 2,400,000 or more.258 The petition committee shall file a written notice of formation with the county clerk in the real property records.259 The petition must be filed with the county clerk in the real property records.260 The petition committee must file a certificate of compliance of an amendment or extension with the county clerk in the real property records.261

A property owner’s association of a residential development shall file the dedicatory instrument relating to the governance of the subdivision, planned unit development, condominium or townhouse regime, or similar planned development with the county clerk in the real property records.262

Chapter 204, Property Code, relates to extension of, addition to, or modification of existing restrictions on residential developments in a county of 2.8 million or more, a county of 250,000 or more adjacent to the Gulf and adjacent to a county of 2.8 million or more, and a county of 275,000 or more adjacent to a county of 3.3 million or more and containing part of a national forest.263 The petition for extension, modification or extension of restrictions is not effective until filed with the county clerk of the county in which the subdivision is located.264

Chapter 205, Property Code, relates to amendment of residential restrictions in a county of 65,000 or more and authorizes amendment of the restrictions to comply with HUD or VA requirements for insured or guaranteed mortgage loans. The amendment must be filed in the real property records in the county in which the subdivision is located.265

Chapter 206, Property Code, relates to extension of restrictions imposing regular assessments in residential certain subdivisions in a county of 2.8 million or more.266 A document certifying that a majority of owners voting on the issue approved of the extension must be recorded in the real property records in the county in which the subdivision is located.267

Chapter 208, Property Code, relates to amendment or termination of restrictions in a Historic Neighborhood in a city of 1.6 million or more in a county of 2.8 million or more.268 A document certifying that 75% of owners voting approved the amendment or termination of restrictions must be recorded in the real property records in the county in which the neighborhood is located.269

A property owner’s association in a residential subdivision with assessments must record a management certificate in each county in which a portion of the residential subdivision is located.270 Not later than the 30th day after the association sends a notice stating when the foreclosure sale of the owner’s lot for unpaid assessments occurred, the association must record an affidavit in the real property records of the county in which the lot is located, stating the date of the sale and a legal description of the land. Any person may rely conclusively on

256 Tex. Prop. Code §41.005 257 Art. XVI, Section 50(d), Texas Constitution 258 Tex. Prop. Code Section 201.001 259 Tex. Prop. Code Section 201.005 260 Tex. Prop. Code Section 201.007 261 Tex. Prop. Code Section 201.008 262 Tex. Prop. Code Section 202.006 263 Tex. Prop. Code Section 204.002 264 Tex. Prop. Code Section 204.005 265 Tex. Prop. Code Sections 205.002, 205.004 266 Tex. Prop. Code Section 206.002 267 Tex. Prop. Code Section 206.003 268 Tex. Prop. Code Section 208.002 269 Tex. Prop. Code Section 208.005 270 Tex. Prop. Code Section 209.004



the information stated in the recorded affidavit.271 [Tex. Prop. Code Section 209.010 ] If before the expiration of the 180 day redemption period after foreclosure, the redeeming lot owner fails to record a deed from the foreclosing purchaser or fails to record an affidavit stating that the lot owner has redeemed the land, the lot owner’s right of redemption as against a bona fide purchaser or lender for value expires after the redemption period. The purchaser of the land at the foreclosure sale or the person to whom the person who purchased the land has transferred the land may presume conclusively that the lot owner did not redeem the land unless the lot owner files in the real property records a deed from the purchaser of the land at the foreclosure sale or an affidavit stating that the lot owner redeemed the land and containing the legal description. After the redemption period and any extension expires, the association or a third party foreclosure purchaser shall record an affidavit in the real property records stating that the lot owner did not redeem the land during the redemption period and any extended redemption period. The association or a third party foreclosure purchaser may file an affidavit in the real property records stating that citation was served in a forcible entry and detainer action to recover possession and containing a legal description. Any person may rely conclusively on the information in the affidavit.272

Chapter 210, Property Code, applies extension or modification of residential restrictions in a county of more than 170,000 and less than 175,000, and a county of more than 45,000 and less than 75,000 adjacent to a county of more than 170,000 and less than 175,000.273 The extension or modification shall be effective when the resolution certifying the vote results is filed as a dedicatory instrument with the county clerk of the county of the subdivision.274

Chapter 211, Property Code, applies to amendment and enforcement of restrictions in residential subdivisions in counties of less 65,000.275 If the amendment procedure receives the required number of votes, the election canvassing committee chairperson shall file in the real property records in each county in which the subdivision is located, an instrument indicating the procedure was adopted.276

5.0 INSTRUMENTS NOT REQUIRED TO BE RECORDED IN REAL PROPERTY RECORDS.

There are various instruments, rights, or proceedings which are not required to be filed for record in the county clerk's office in order to be constructive notice to the world. Among those instruments, rights, or proceedings are:

• Patents (the record of a patent in the General Land Office is notice to the world);277 • A parol partition of land;278 • The probate of a will in Texas (such is considered an in rem proceeding and notice to the world);279 • Orders concerning the property in the probate proceeding in Texas, such as an order setting aside property

as homestead (therefore, a buyer from an administrator by later court order could not be a bona fide purchaser;280 however, the purchaser is not deemed on constructive notice of an inventory or matters in the inventory in a probate proceeding);281

• The appointment of a receiver (the property deemed to be in custodial legis);282 • Heirship (although a judgment determining heirship may be recorded and, although the Probate Code

provides for prima facie evidence of recited facts by five year recordation of affidavits of heirship, the lack of a requirement of recordation of an heir's claim means that there can generally be no bona fide purchaser as to an unknown heir);283

271 Tex. Prop. Code Section 209.010 272 Tex. Prop. Code Section 209.011 273 Tex. Prop. Code Section 210.002 274 Tex. Prop. Code Section 210.004 275 Tex. Prop. Code Section 211.002 276 Tex. Prop. Code Section 211.004 277 Arrowood v. Blount, 121 Tex. 52, 41 S.W. 2d 412 (Tex. 1931) 278 Aycouk v. Kimbrough, 71 Tex. 330, 12 S.W. 71 (1887) 279 Howth v. Farrar, 94 F. 2d 654 (5th Cir. 1938), cert. denied, 59 S. Ct. 75 (1938); Blocker v. Davis, 241 S.W. 2d 698 (Tex.

Civ. App.–Fort Worth 1951, writ ref'd n.r.e.) 280 Fosset v. McMahan, 74 Tex. 546, 12 S.W. 324 (1889) 281 Permian Oil Co. v. Smith, 129 Tex. 413, 73 S.W. 2d 490 (Tex. 1934) 282 First Southern Properties, Inc. v. Vallone, 533 S.W. 2d 339 (Tex. 1976) 283 Tex. Prob. Code Sections 52, 52A; New York & T. Land Co. v. Hyland, 8 Tex. Civ. App. 601, 28 S.W. 206 (1894, writ

ref'd); Ross v. Morrow, 85 Tex. 173, 19 S.W. 1090 (1892)



• According to the Restatement of Property and some cases in other jurisdictions, a purchase money mortgage given to a vendor or real estate (even though not expressly detailed in the deed), in the absence of contrary intent of the parties and subject to the operation of the recording laws, has priority over a purchase money mortgage on the land given to a lender who is not its vendor.284

• Title acquired by prescription or adverse possession.285 • Uniform Commercial Code filings (other than fixtures, as-extracted collateral and timber to be cut; e.g.

financing statements covering promissory notes as collateral and crop filings, whether specifically describing such collateral or generally describing collateral are filed in the central filing office of the state of Location of the Debtor, without a legal description).286

6.0 UCC

A purchase money security interest in fixtures has priority over a prior mortgage if the security interest is perfected (by local filing in the clerk's office in most cases) within 20 days after the goods become fixtures. The fixture filing is subordinate to a construction mortgage if the good become fixtures before completion of construction.287

A UCC financing statement covering timber must be filed in the office of the county clerk where a mortgage would be filed. The financing statement covering farm products (including crops) must be filed in the office of the Secretary of State in the state of location of the debtor.288 The financing statement covering as-extracted collateral, fixtures and timber to be cut (but not crops) must contain a description of the land sufficient for a mortgage.289

A financing statement is effective for five years unless (1) a continuation statement is filed within six months prior to the expiration of the five year period, or (2) a mortgage is effective as a filing or (3) it covers a manufactured home transaction (effective for 30 years) (but bankruptcy law also may toll).290

Article 9 does not apply to “the creation or transfer of an interest in or lien on real property, including a lease or rents thereunder, the interest of a vendor or vendee in a contract for deed to purchase an interest in real property, or the interest of an optionor or optionee in an option to purchase an interest in real property, except to the extent that provision is made for.” 291 A lender that has received a collateral assignment of a note secured by a mortgage may record documentation evidencing its foreclosure of the note. “If necessary to enable a secured party to exercise under Subsection (a)(3) the right of a debtor to enforce a mortgage nonjudicially, the secured party may record in the office in which a record of the mortgage is recorded:

“(1) a copy of the security agreement that creates or provides for a security interest in the obligation secured by the mortgage; and “(2) the secured party's sworn affidavit in recordable form stating that: (A) a default has occurred; and (B) the secured party is entitled to enforce the mortgage nonjudicially.”292

7.0. FEDERAL RECORDING STATUTES

7.1 Environmental Liens

The costs of removal or remediation by the United States are a lien upon the real property of the person subject to and affected by the action.293 The lien arises at the later of the time costs are incurred by the U.S. for response and the time that the person is provided written notice by certified or registered mail of the

284 ALH Holding Comp[any v. Bank of Telluride, 18 P. 3d 742 (Colo. 2000); Restatement (Third) of Property, Section 7.2 285 Houston Oil Co. v. Olive Sternenberg & Co., 222 S.W. 534 (Tex. Comm'n App. 1920, holding approved); Heard v. Bowen,

184 S.W. 234 (Tex. Civ. App.–San Antonio 1916, writ ref'd); MacGregor v. Thompson, 7 Tex. Civ. App. 32, 26 S.W. 649 (1894, no writ)

286 Tex. Bus. & Com. Code Sections 9.301, 9.501 287 Tex. Bus. & Com. Code sec. 9.334 288 Tex. Bus. & Com. Code sec. 9.301 289 Tex. Bus. & Com. Code sec. 9.502 290 Tex. Bus. & Com. Code sec. 9.515 291 Tex. Bus. & Com. Code Section 9.109(d)(11) 292 Tex. Bus. & Com. Code Section 9.607 293 42 U.S.C. sec. 9607 (1) (1)



potential liability.294 The United States also has a lien against property of a bona fide prospective purchaser for response costs for an amount not to exceed the increase in fair market value attributable to the response action. The lien shall arise when the costs are first incurred by the United States and shall continue until the recovery of the response costs, notwithstanding limitations in 42 U.S.C. 9613. The lien shall be subject to the rights of a purchaser, holder of a security interest or judgment lien creditor whose interest is perfected before the notice of lien by the U.S. is filed of record.295

7.2 Estate Tax Liens

A special lien for estate taxes on a closely held business is not effective against a purchaser or holder of a security interest unless a notice is filed. The notice is not required to be refiled.296 A special estate tax lien on farmland, trade or business is secured by a lien notice that must be filed. Refiling is not required.297 Filing of the (general) estate tax lien (effective for 10 years from death) is not required.298

7.3 Federal Tax Liens

The federal tax lien notice must be filed in the local county clerk's office in the county in which the land is located.299 The lien is not valid against a purchaser or holder of a security interest unless a notice is filed.300 A purchaser is one who for adequate and full consideration in money or money's worth acquires an interest valid against a subsequent purchaser.301 A holder of a security interest is a person who acquires an interest to secure performance or payment, to the extent the holder has parted with money or money's worth.302 The mortgagee has priority for subsequent advances made after the federal tax lien notice, as follows: (i) loan disbursements for construction on the land; (ii) obligatory disbursements by reason of the intervention of rights of third parties (such as bond or letter of credit); or (iii) advances within 45 days after the filing of the tax lien notice or before the lender has actual knowledge or notice of the filing, whichever is earlier. 303 The tax lien notice is effective for 10 years and 30 days from the date of assessment. A refiling within the last year of the notice extends the notice for an additional 10 years. 304 A federal tax lien against the purchaser is subordinate to a vendor's lien.305 If the tax lien notice is recorded more than 30 days before the nonjudicial sale, the I.R.S. must be given written notice by registered or certified mail or personal service not less than 25 days prior to the sale.306 The I.R.S. must be given similar notice before forfeiture of a land sales contract.307 The I.R.S. may redeem within 120 days of the sale. The Certificate of Redemption is not required to be filed within that 120 day period (it must be filed “without delay”).308 Other federal liens with provisions like those concerning priority and perfection of the federal tax lien include Federal Criminal Fines (against a person fined), the Black Lung Disabilities Trust Fund (payments for which an operator is liable), and Employee Retirement Income Security Act (payments on behalf of a liable employer, sponsor, or member of a controlled group).309 If an official receives public money paid to the Treasury and does not pay that money, the amount is a lien on the real property of the official from the date the distress warrant is issued. The lien shall be recorded in the office of the clerk in the appropriate district court.310

294 42 U.S.C. sec. 9607 (1) (2) 295 42 U.S.C. 9607(r) 296 26 U.S.C. secs. 6166, 6324A 297 26 U.S.C. sec. 6324B 298 26 U.S.C. sec. 6324 299 26 U.S.C. sec. 6323 (f) (1) (a); Tex. Prop. Code sec. 14.002 300 26 U.S.C. sec. 6323 (a) 301 26 U.S.C. sec. 6323 (h) (6) 302 26 U.S.C. sec. 6323 (h) (1) 303 26 U.S.C. sec. 6323 (c), (d) 304 26 U.S.C. sec. 6323 (g) 305 Slodov v. U.S., 98 S. Ct. 1778, 436 U.S. 238, 56 L. Ed.2d 251 (1978); Minix v. Maggard, 652 S.W.2d 93 (Ct.App. Ky. 1983) 306 26 U.S.C. sec. 7425 (c) (1) 307 26 U.S.C. sec. 7425 (c) (4) 308 26 C.F.R. sec. 400.5-1 309 18 U.S.C. sec. 3613; 30 U.S.C. sec. 934; 29 U.S.C. sec. 1368 310 31 U.S.C. sec. 3542



7.4 United States Judgment Liens

A judgment in favor of the United States in a civil action creates a lien on all real property of a judgment debtor on filing a certified copy of the abstract of judgment in the manner in which a notice of tax lien would be filed. The lien has priority over any other lien or encumbrance which is perfected later in time. The lien is effective, unless satisfied, for a period of 20 years. The lien may be renewed for one additional period of 20 years upon filing a notice of renewal in the same manner as the judgment is filed and shall relate back to the date the judgment is filed if:

(a) the notice of renewal is filed before the expiration of the 20-year period to prevent the expiration of the lien; and

(b) the court approves the renewal of the lien.311

7.5 Forfeitures

If the United States recovers land by forfeiture order, it is not required to file the order in the real property records or to file a lis pendens, in order to protect its interest from the effect of a subsequent lien or conveyance by the former owner of the title to the land.312 7.6 Lis Pendens

“Where the law of a State requires a notice of an action concerning real property pending in a court of the State to be registered, recorded, docketed, or indexed in a particular manner, or in a certain office or county or parish in order to give constructive notice of the action as it relates to the real property, and such law authorizes a notice of an action concerning real property pending in a United States district court to be registered, recorded, docketed, or indexed in the same manner, or in the same place, those requirements of the State law must be complied with in order to give constructive notice of such action pending in a United States district court as it relates to real property in such State.”313

7.7 Bankruptcy If the debtor transfers property by sale or, according to a minority of cases, if a foreclosure occurs and a

good faith purchaser (not the creditor) buys at the foreclosure, then the trustee or debtor-in-possession may not avoid the sale or foreclosure if made to the bona fide purchaser without knowledge of the case for present fair equivalent value unless a copy or notice of the petition is filed in the office of the county where the land is located before the transfer is perfected by recording.314 However, Section 101 (54) of the Bankruptcy Code now defines transfer as the creation of a lien, foreclosure, and any direct or indirect, absolute or conditional, voluntary or involuntary, mean of disposing or parting with property or an interest in property. Revised Section 549 (c) protects a post-petition transfer of an interest to a good faith purchaser for present fair equivalent value. The change may protect post-petition foreclosures, mortgages and easements to bona fide purchasers for present fair equivalent value, but it is important to note that Section 549 requires present fair equivalent value, so that a lender purchasing at its own foreclosure may not be protected. The definition of purchaser in Section 101 also provides that a purchaser is a transferee of a voluntary transfer, which may totally exclude foreclosure sales. Section 362 (b)(24) also excludes from the stay a transfer not avoidable under Section 549, which suggests that a foreclosure may be protected under Section 549. The new law is clearly intended to protect post-petition mortgages by the debtor to a good faith lender.

The stay will not prevent enforcement of a lien in real property following entry of an order of the court finding that the filing of a bankruptcy petition was part of a scheme to delay, hinder and defraud creditors and involved transfer of all or part of ownership or another interest in real property without consent of the secured creditor or court, or multiple bankruptcy filings. If the order is recorded in the real property records, it will be

311 28 U.S.C. §3201 312 United States v. Colonial National Bank, N.A., 74 F.3d 486 (4th Cir. 1996) 313 28 U.S.C. Section 1964 314 11 U.S.C. Section 549(c); In re Penfil, 40 B.R. 474, 11 C.B.C.2d 178 (Bankr. E.D. Mich. 1984) (a mortgagee buying at its

own foreclosure will not be protected under Section 549(c) as a good faith purchaser for present fair equivalent value since it simply satisfied antecedent debt)



binding in any other bankruptcy case filed no later than 2 year after the order, unless modified by subsequent court order. Local recorders must accept a certified copy of this order.315

Under Section 544 of the Bankruptcy Code, the trustee or debtor-in-possession is treated as a bona fide purchaser and lien creditor in order to set aside various transfers; thus, the trustee can set aside unrecorded liens, deeds, contracts, and suits for which no lis pendens has been filed. These suits or transactions are not void but are simply voidable in an adversary proceeding. Deeds and mortgages not recorded within 30 days may be voidable preferences.316

If the court order so provides, a superpriority lien (or other lien) granted by the bankruptcy court does not have to be perfected under state law.317

8.0 TYPES OF NOTICE

8.1 CONSTRUCTIVE NOTICE

An instrument that is properly recorded in the proper county is constructive notice of the instrument to all persons.318 [Tex Prop. Code §13.002 ]

8.1.1 DEFINITION

Instruments affecting real estate will be notice to third parties if eligible to be recorded, and if filed for record in the county in which part of the land is located.319 Notice by filing for recordation ("constructive notice") is as effective as actual notice although, in a sense, it is the opposite of actual notice. Constructive notice is the result of filing for recordation in accordance with recording statutes. Unlike actual notice, where the inference of notice of an outstanding interest may be rebutted, constructive notice is irrefutable.320

8.1.2 EFFECT OF FILING

Once filed, instruments such as Deeds and Deeds of Trust will constitute constructive notice even though never recorded. A party claiming under the instrument has no duty to verify compliance with the law by the clerk by recordation.321 Like a deed, a federal tax lien is effective as constructive notice from the time filed, even though it was never recorded or indexed.322 The instrument is constructive notice when delivered to the clerk and received in the clerk's official capacity.323 As a result, a Deed filed after the filing of an abstract of judgment, but before the indexing of the abstract of judgment, will take priority. Abstracts of judgment are not effective to create judgment liens until recorded and indexed.324 Recordation in the wrong records (such as a mortgage in the Deed records) does not affect constructive notice.325 Acceptance of the instrument by the clerk is conclusive that the appropriate recording fees have been received if the grantee's mailing address is not listed.326 Even if no recording fees are received by the clerk, the clerk must immediately or reasonably exercise the right to refuse to receive the instrument upon the tender of the instrument. If the clerk receives and retains the instrument in his or her official capacity awaiting payment for the fees, the clerk waives the privilege to require payment and must file and record. The return of the instrument at a later date in such circumstances will not affect the validity of the filing.327 “While a county clerk is not expressly required by statute to file stamp the date and time an instrument arrives in the clerk’s office for filing upon receiving and accepting the instrument, the county

315 Sec. 362 (b) (20), 362 (d) (4) 316 11 U.S.C. Section 547 317 Small v. Beverly Bank, 936 F.2d 945 (7th Cir. 1991); In re Waste Conversion Techs., 205 B. R. 1004 (D. Conn. 1997) (if

case dismissed, court may order recordation of order creating lien) 318 Tex. Prop. Code Section 13.002 319 Tex. Prop. Code Section 11.001 320 Hexter v. Pratt, 10 S.W. 2d 692 (Tex. Comm'n App. 1928, judgm't adopted) 321 William Carlisle & Co. v. King, 103 Tex. 620, 133 S.W. 241 (1910); Throckmorton v. Price, 28 Tex. 605 (1866); David v.

Roe, 271 S.W. 196 (Tex. Civ. App.–Fort Worth 1925, writ dism'd w.o.j.) 322 Hanafy v. United States, 991 F. Supp. 794 (W. D. Tex. 1998) 323 Hanafy v. U.S., 991 F. Supp. 794 (N.D. Tex. 1998) (Federal tax lien notice is constructive notice from time filed, even

though not yet indexed) 324 Belbaze v. Ratto, 69 Tex. 636, 7 S.W. 501 (1888); American Exch. Nat'l Bank v. Colonial Trust Co., 186 S.W. 361 (Tex.

Civ. App.–Texarkana 1916, no writ) 325 Kennard v. Mabry, 78 Tex. 151, 14 S.W. 272 (1890); Knowles v. Ott, 34 S.W. 295 (Tex. Civ. App. 1895, writ ref'd) 326 Tex. Prop. Code Section 11.003 327 American Exch. Nat'l Bank v. Colonial Trust Co., 186 S.W. 361 (Tex. Civ. App.–Texarkana 1916, no writ)



clerk must devise some method for immediately and accurately noting that date and time. Just as the clerk must develop a method for noting the date and time a particular instrument is delivered in person, so must the clerk develop a method for noting the date and time of delivery of an instrument that arrives in the mail. A county clerk must obtain the approval of the judiciary he or she serves before changing the hours the clerk’s office is open to the public.”328

8.1.3 CHAIN OF TITLE

“Chain of title” refers to the documents which show the successive ownership history of the land. The chain of title is ‘the successive conveyances, commencing with the patent from the government, each being a perfect conveyance of the title down to and including the conveyance to the present holder.’”329The recordation of an instrument is only constructive notice if it is in the "chain of title." An instrument by the grantor is in the chain of title if executed (as of the date of signature usually, not the date of recordation) by the grantor subsequent to the date of the Deed into the grantor and prior to the date or execution of the Deed to the grantee. It is the date of the conveyance itself, and not the date of recordation, that is controlling as to whether an instrument is in the chain.330 A purchaser is required to look for conveyances made prior to the purchase by his or her immediate vendor or by any remote vendor through whom he or she claims. Even though a prior Deed was recorded after a subsequent Deed to a second grantee out of the same grantor, the prior Deed is constructive notice to all subsequent purchasers from the second grantee.331

Examples of instruments which are not in the chain of title and which are not constructive notice are:

• Recitations and restrictions in a Deed of Trust if the Deed of Trust has been released of record;332 • Instruments executed by the person who was in the chain of title if the instruments were executed

before that person obtained title (for example, a Deed from a former owner if the Deed was executed before the date of execution of the Deed into that former owner);333

• Mortgages with after-acquired property clauses which are executed before date of the Deed of the property into the mortgagor.334 (The case indicted that such would be in the chain if recorded after date of Deed into mortgagor.);

• A mortgage executed under an assumed name if title is in the real name;335 • An affidavit by grantee under an unrecorded Deed is not in the grantor's chain of title (and is not

constructive notice to a later buyer from that grantor);336 • Where a lienholder executes an erroneous release covering land and then executes a correction of

release reciting the land which remains subject to the lien, but the lienholder was not joined in the correction instrument by the mortgagors, the corrective release is not in the chain of title (likewise there is no duty to check for Deeds made by the grantor after the Deed to the original grantee).337 A trustee in bankruptcy may avoid a mortgage that was erroneously released;338

An exclusive sales agreement acknowledging that the equipment installed on the land shall remain the property of the person installing the equipment is not in the chain of title; it is not an essential link or conveyance.339

• Where a mineral lessee was given a lease with warranties and without exception to prior Deed of Trust and said lease was recorded, the Deed of Trust was foreclosed and the lessor later acquired title, such lease remains effective by estoppel and is also in the chain of title so that a later purchaser from the lessor cannot take free of such lease;340

• Where the common grantor has previously conveyed by unrecorded Deed to the first grantee and the first grantee has conveyed by recorded Deed to the adverse claimant, a second grantee from

328 A.G. Opinion JC-0323 (January 5, 2001) 329 Munawar v. Cadle Company, 2 S.W. 3d 12, 18 (Tex. App. – Corpus Christi 1999, pet. denied) 330 Fitzgerald v. LeGrande, 187 S.W. 2d 155 (Tex. Civ. App.–El Paso 1945, no writ) 331 Houston Oil co. v. Kimball, 103 Tex. 94, 1223 S.W. 533 (1909); Delay v. Truitt, 182 S.W. 732 (Tex. Civ. App.–Amarillo

1916, writ ref'd) 332 Fleming v. Adams, 392 S.W. 2d 491 (Tex. Civ. App.–Houston [1st Dist.] 1965, writ ref'd n.r.e.) 333 Breen v. Morehead, 104 Tex. 254, 136 S.W. 1047 (1911) 334 First Nat'l Bank v. Southwestern Lumber Co., 75 F.2d 814 (5th Cir. 1935) 335 Bradford v. Lembke, 118 S.W. 159 (Tex. Civ. App. 1909, no writ) 336 Reserve Petroleum co. v. Hutcheson, 254 S.W. 2d 802 (Tex. Civ. App.–Amarillo 1952, writ ref'd n.r.e.) 337 Swanson v. Grassedonio, 647 S.W. 2d 716 (Tex. App.–Corpus Christi 1982, no writ) 338 Gilbert v. Banc One Mortgage Corp., 274 B.R. 541 (Bankr. D. Kan. 2002) 339 Munawar v. Cadle Company, 2 S.W. 3d 12 (Tex. App. – Corpus Christi 1999, pet. denied) 340 Caswell v. Llano Oil Co., 120 Tex. 139, 36 S.W. 2d 208 (Tex. Comm'n App. 1931, opinion adopted)



the common grantor is not on constructive notice of the recorded Deed to the adverse claimant since the adverse claimant's Deed is not in the chain,341 (It will make no difference if the first grantee's Deed to the adverse claimant recites that the first grantee had received the Deed from the common grantor);342

• A Sheriff's Deed executed as to the debtor after the supposed fraudulent conveyance from the debtor to the mother is not in the chain of title so that a later buyer from the mother is not on constructive notice of the possible fraudulent nature of the Deed to the mother, regardless of whether the Deed to the mother or the Sheriff's Deed is recorded first;343

• The effect of an instrument not being in the chain of title may be that it would be cut off by a bona fide purchaser pursuant to the recording statutes, even if it is filed for record. For Example, A executes Deed to B, B executes Deed to C, and neither Deed is recorded. Then A executes a subsequent Deed to C which is recorded. The Deed to C from A is subsequent to the Deed to B and is not in the chain of title as to a purchaser from B so that B's purchaser could be a bona fide purchaser and cut off the rights of C.344

• A bona fide purchase has a duty only of reasonable inquiry to determine whether a recorded deed of trust has been foreclosed, if no trustee’s deed is of record. That duty of reasonable inquiry includes a search of the real property records in the chain of title, and if the deed of trust remains unsatisfied, an inquiry of the mortgage company identified in the recorded deed of trust.345

8.1.4 RECITATIONS IN INSTRUMENTS IN CHAIN

A purchaser will be charged with (constructive) notice of the contents of instruments in that person's chain. Even though the purchaser has never had any actual knowledge of such instruments, the purchaser must review the documents referred to in the instruments in his or her chain and any other agreement to which such incorporated documents may also refer.346 If purchaser thereafter fails to secure the referenced documents or secure information relating to the referenced instruments, he or she may be relieved of (constructive) notice thus imputed by a sufficient showing of diligent search to secure such documents.347 Such recitals will be considered as notice even though the instrument in the chain may have covered only a portion of the property in question and the referenced document may have affected only the remaining part of the property now constituting one parcel.348

Examples of the binding effect of such recitals are:

• A vendor's lien in the Deed in the chain, although the Deed was not of record;349 • Recordation of a Deed of Trust imposes on a purchaser the duty of reasonable inquiry as to

whether it has been foreclosed.350 • A reference in the Deed of Trust that it was subject to a prior unrecorded Deed of Trust is

constructive notice of the unrecorded Deed of Trust;351 • A recitation in a Deed referring to an unrecorded Deed of Trust puts all parties in the chain of title

on notice of the Deed of Trust;352 • A recitation in the Deed in the chain to a prior contract covering the land operates as constructive

notice of such contract;353 341 Southwest Title Ins. Co. v. Woods, 449 S.W. 2d 773 (Tex. 1970) 342 Lumpkin v. Adams, 74 Tex. 96, 11 S.W. 1070 (1889) 343 White v. MacGregor, 93 Tex. 556, 50 S.W. 564 (1899) 344 Fullenwider v. Ferguson, 30 Tex. Civ. App. 156, 70 S.W. 222 (1902, writ ref'd) 345 Realty Portfolio, Inc. v. Hamilton, 125 F. 3d 292 (5th Cir. 1997) 346 Houston Title Co. v. Ojeda De Toca, 733 S.W. 2d 325 (Tex. App.–Houston [14 Dist.] 1987), rev'd on other grounds, Ojeda

de Toca v. Wise, 748 S.W. 2d 449 (1988); Westland Oil Dev. Corp. v. Gulf Oil Corp., 637 S.W. 2d 903 (Tex. 1982); Abercrombie v. Bright, 271 S.W. 2d 734 (Tex. Civ. App.–Eastland 1954, writ ref'd n.r.e.); Waggoner v. Morrow, 932 S.W. 2d 627 (Tex. App–Houston [1st Dist] 1996, no writ) (absent being unable to obtain a copy of the instrument upon diligent search and inquiry)

347 Loomis v. Cobb, 159 S.W. 305 (Tex. Civ. App.–El Paso 1913, writ ref'd); Westland Oil Dev. Corp. v. Gulf Oil Corp., 637 S.W. 2d 903 (Tex. 1982)

348 Tuggle v. Cooke, 277 S.W. 2d 729 (Tex. Civ. App.–Fort Worth 1955, writ ref'd n.r.e.); MBank Abilene N.A. v. Westwood Energy Inc., 723 S.W. 2d 246 (Tex. App.–Eastland 1986, no writ)

349 Gilbough v. Runge, 99 Tex. 539, 91 S.W. 566 (1906) 350 In re Hamilton, 125 F. 3d 292 (5th Cir. 1997) 351 Gordon-Sewall & Co. v. Walker, 258 S.W. 233 (Tex. Civ. App.–Beaumont 1924, writ dism'd w.o.j.) 352 Garrett v. Parker, 39 S.W. 147 (Tex. Civ. App. 1896, writ ref'd)



• A recitation in a Deed in the chain to other deeds of even date, which granted easements over the land.354

• A recitation in the Deed that it was to be held in escrow for ninety (90) days, and that, if the debt was not paid, then the Deed was to be delivered to the grantee, was evidence that the Deed was a mortgage and put subsequent parties on notice thereof.355

• A reference to an unrecorded partition and easement (which was shown on the partition survey) which was not described as to the land in the deeds. A buyer is bound by recitals and references in or disclosed by an instrument that forms an essential link in the chain of title.356

• An option, with a right to impose restrictions on adjacent land, referred to in a deed in the chain of title is constructive notice of the option and restriction, even though the deed conveying pursuant to the option and imposing the restriction was executed at a later date and was not in the chain of title to the adjacent land.357

• An incomplete reference in a deed to existing restrictions is not a general statement; it is sufficiently specific and is notice to subsequent purchasers in the chain by stating “Said lot is restricted in its use, and the restrictions said are filed with the county clerk of Harris County under File No. __ in Vol. __ Page __.”358

Recitals in a Deed in the chain of title of the total consideration, which shows clearly that the sales price was far less than the fair market value, will raise fact issues of notice of a claim that the Deed was a mortgage when coupled with other facts, such as continued possession by the grantor and late recording of the Deed.359 The purchaser is occasionally charged with notice of the inadequacy of consideration recited in Deeds in his or her chain of title so as to necessitate inquiry. Apparently this duty does not exist if the Deed has been of record for numerous years and if it is a Deed in the chain prior to that to his or her grantor. Examples of limits on the duty of inquiry caused by a recital would include an instrument indicating that a person was a "Mrs." This recital does not indicate that she was married at the time of acquisition of the property which recited her name in such a manner but simply may imply that she had been married at one time. Therefore, it does not give notice of rights of the heirs of her husband.360

8.1.5 ADEQUACY OF DESCRIPTION OF INDEBTEDNESS

A mortgage will constitute constructive notice by recordation, even though it fails to mention the original amount of the note, if the note can otherwise be reasonably identified, such as by date, parties, maturity date and rate of interest.361

8.1.6 ADEQUACY OF DESCRIPTION OF LAND

An instrument is constructive notice only if it reasonably describes the land.362 If the Deed mistakenly omits property sold pursuant to a contract, such failure to convey by mutual mistake will prevent the Deed from being constructive notice as to the omitted property.363 It appears that an instrument containing a Mother Hubbard clause which transfers an interest in adjoining land or a blanket description in a conveyance will be constructive notice as to that interest in Texas; one view adopted elsewhere is that land conveyed by a Mother Hubbard or blanket description clause

353 Houston Ice & Brewing Co. v. Henson, 93 S.W. 713 (Tex. Civ. App. 1906, no writ); Cumming v. Johnson, 616 F.2d 1069,

1075 (9th Cir. 1979) 354 Jones v. Fuller, 1993 Tex. App. LEXIS 1123; substituted op., reh’g denied, cause remanded, in part, 856 S.W. 2d 597, 1993

Tex. App. LEXIS 1754 (Tex. App. Waco 1993); later proceeding Jones v. McDonald, 880 S.W. 2d 260 (Tex. App. Waco 1994, no writ)

355 Moorhead v. Ellison, 56 Tex. Civ. App. 444, 120 S.W. 1049 (1909, writ ref'd) 356 Waggoner v. Morrow, 932 S.W. 2d 627 (Tex. App. – Houston [14th Dist.] 1996, no writ) (unrecorded partition essential link

in the chain) 357 Herman v. Shell Oil Co., 93 S.W.3d 605 (Tex. App. – (Tex. App. – Houston [14th Dist.] 2002, no pet.). 358 Holloway Trust v. Outpost Estates Civic Club, Inc., 135 S.W.3d 751 (Tex. App.—Houston [1st Dist.] 2004, pet. filed) 359 Ramirez v. Bell, 298 S.W. 924 (Tex. Civ. App.–Austin 1927, writ ref'd) 360 Griggs v. Houston Oil Co., 213 S.W. 261 (Tex. Comm'n App. 1919, judgm't adopted) 361 Clementz v. M.T. Jones Lumber Co., 82 Tex. 424, 18 S.W. 599 (1891) 362 Wiseman v. Watters, 107 Tex. 96, 174 S.W. 815 (1915); Texas Osage Coop. Royalty v. Clark, 314 S.W. 2d 109 (Tex. Civ.

App.–Amarillo 1958), writ ref'd n.r.e., 159 Tex. 441, 322 S.W. 2d 506 (1959) 363 United States v. Creamer Indus., Inc., 349 F.2d 625 (5th Cir.), cert. denied, 382 U.S. 957 (1965); Prewitt v. United States,

792 F.2d 1353 (5th Cir. 1986); Northeast Independent School District v. Aldredge, 528 S. W. 2d 341 (Tex. Civ. App.–Amarillo 1975, writ ref'd n.r.e.)



and not by specific description will not be constructive notice as to an innocent purchaser364 A reference in a real property instrument to the volume and page number, film code number, or county clerk file number of the "real property records" (or similar words) for a particular county is equivalent to a reference to the deed records, deed of trust records, or other records, and provide constructive notice of the existence of the referenced instrument.365

8.1.7 MULTIPLE COUNTIES

If an instrument is recorded in the proper county at the time but a new county containing the land conveyed is subsequently created, such event will not affect the validity of the prior recording.366 If a tract of land constituting a unit of land is located in more than one county, an instrument must be recorded in the county in which a part of the land is located. 367 Such instrument is notice if recorded in one county.368

8.1.8 LOCATION OF COUNTIES

Counties may litigate the location of their boundaries.369 Counties may settle bona fide boundary disputes out of court if they act in good faith.370

8.1.9 ACKNOWLEDGMENT/JURAT

If an instrument is not properly acknowledged or sworn to, it is not entitled to be recorded, and any recording is not constructive notice.371 If an instrument is only acknowledged by the buyer or grantee, then it is not constructive notice.372 A grant from the state or the United States does not have to be acknowledged.373 If an instrument properly acknowledged was recorded in the wrong county, then a certified copy may be filed in the proper county and will then constitute constructive notice.374 A certified copy of a real property instrument that has been recorded in a county of this state other than the county where the land is located is valid against a creditor or purchaser.375

Section 12.001 of the Property Code provides that an instrument concerning real or personal property may be recorded if it has been acknowledged, sworn to with a proper jurat, or proved according to law. Section 11.001 of the Property Code provides that, to be effectively recorded, an instrument relating to real property must be eligible for recorded and must be recorded in the county in which part of the property is located.

8.1.10 IMPROPER RECORDATION

Even though an instrument is properly acknowledged, it will not constitute constructive notice if, because of error of the clerk or otherwise, it does not appear from the record to be properly acknowledged.376

8.1.11 RECORDATION OF JUNIOR INSTRUMENT

If a Junior Deed is executed before the Senior Deed is recorded and the Junior Purchaser pays value and has no notice of the prior Deed, then it is immaterial (in a controversy with the Senior Purchaser) whether the Junior Deed is ever recorded or is recorded before the Senior Deed.377 The grantee under the Junior Deed will have superior rights.

364 See cases cited in J. Hiram Moore, Ltd. v. Greer, 172 S.W.3d 609 (Tex. 2005); See also Luthi v. Evans, 223 Kan. 622, 576

P.2d 1064 (1978) (based on Kansas Law requiring specific description for constructive notice) 365 Tex. Prop. Code §11.007 366 Tex. Prop. Code Section 11.001; Lumpkin v. Muncey, 66 Tex. 311, 17 S.W. 732 (1886) 367 Tex. Prop. Code Section 11.001 368 Brown v. Lazarus, 25 S.W. 71 (Tex. Civ. App. 1893, no writ) 369 Tarrant Co. v. Denton Co., 44051 43rd Jud. Dist. Court, Parker Co.; Tex. Local Gov’t Code Section 22.009. In re Tarrant

County, 16 S.W. 3d 914 (Tex. App. – Ft. Worth 2000 no pet.) 370 Yoakum County v. Gaines County, 139 Tex. 44S, 163 S. W. 2d 393 (1942) 371 Tex. Prop. Code Sections 11.001, 12.001; Tandy v. Dickinson, 371 S.W. 2d 81 (Tex. Civ. App.–Amarillo 1963, no writ) 372 Sweeney v. Vasquez, 229 S.W. 2d 96 (Tex. Civ. App.–San Antonio 1950, writ ref'd) 373 Tex. Prop. Code Section 12.006 374 Tex. Prop. Code Section 12.004 375 Tex. Prop. Code §13.003 376 Hart v. Patterson, 17 Tex. Civ. App. 591, 43 S.W. 545 (1897, no writ); Weber v. Moss, 3 Tex. Civ. App. 13, 21 S.W. 609

(1893, no writ) 377 Penny v. Adams, 420 S.W. 2d 820 (Tex. Civ. App.–Tyler 1967, writ ref'd); Matthews v. Houston Oil Co., 299 S.W. 450

(Tex. Civ. App.–Beaumont 1927, no writ); Houston Oil Co. v. Kimball, 103 Tex. 94, 122 S.W. 533 (1910); Watkins v. Edwards, 23 Tex. 443 (1859); White v. McGregor, 92 Tex. 556, 50 S.W. 564 (1899); Raposa v. Johnson, 693 S.W.2d 403 (Tex. App.—Ft. Worth 1985, writ ref’d n.r.e.)



8.1.12 ENGLISH LANGUAGE

A real property instrument may not be recorded unless it is in English. An authenticated instrument in a foreign language executed before August 22, 1897 may be recorded and act as constructive notice from filing if an English translation is recorded with the instrument and the accuracy of the translation is sworn to. An instrument acknowledged outside the United States or its territories that contains a certificate, stamp, or seal of a notary public or other official or an apostille relating to the acknowledgment, any portion of which is not in English, may be recorded and act as constructive notice from the date of filing if a correct English translation of any non-English portion is recorded with the original instrument, the accuracy of the translation is sworn to before an officer authorized to administer oaths, and any apostille relating to the acknowledgment complies with the Hague Convention dated October 5, 1961.378

8.2 ACTUAL NOTICE

8.2.1 DEFINITION OF ACTUAL NOTICE

Actual notice means that notice which fairly puts a person on inquiry; if the means of the knowledge are at hand and if pursued by a proper inquiry, then the full truth would be ascertained. Means of knowledge with the duty of using them are, in equity, equivalent to actual knowledge. If there is a duty to investigate, then negligent ignorance is the same as actual knowledge. Actual knowledge, therefore, consists of those things which a reasonably diligent inquiry would have disclosed.379 A person has actual notice if he or she has or should have express knowledge of a matter or if the knowledge should be implied.380

8.2.2 EFFECT OF SUSPICIOUS CIRCUMSTANCES

In addition to clear circumstances where a person discloses the claim of an interest in property,381 other suspicious circumstances may arouse the need of investigation. The refusal of a spouse to sign an instrument may give notice of the inability of the other spouse to execute same. The omission of land from an inventory may indicate the decedent did not own the land.382

8.2.3 NOTICE TO AGENT

Notice to an agent will constitute notice to the principal, provided that the agent is one who had the power to act with reference to the subject matter to which the notice relates. Notice to an agent will not include a person who has no such power, such as a traveling salesman with power to sell goods and collect small accounts but with no power to adjust an account in question pursuant to which a mortgage was created.383 Notice given to a party's attorney by an abstract disclosing a lis pendens in a case later dismissed will be considered notice to the principal.384 The purchaser is generally legally charged with such facts as come to his or her attorney's knowledge in the course of employment as an attorney to examine title.385 Therefore, even though a case may have been dismissed for want of prosecution, the attorney and principal have a further obligation to investigate the suit to determine if there is any claim which may remain outstanding although the lis pendens does not continue as constructive notice to the world.386

8.2.4 NOTICE TO A TITLE COMPANY IN EXAMINATION

In doing an examination, the title company acts exclusively for itself and is not acting as agent for the proposed insured. In acting as escrow agent, the title company has a limited scope of authority to close the transaction and not to investigate the title.387

378 Tex. Prop. Code §11.002 379 Hexter v. Pratt, 10 S.W. 2d 820 (Tex. Comm'n App. 1928, judgm't aff'd); Mann v. Old Republic National Title Insurance

Co., 975 S.W. 2d 347 (Tex. Civ. App.−Houston [14th Dist.] 1998, no writ) 380 Laws v. Bailey, 2002 Tex. App. LEXIS 7425 (No. 14-01-00108, Tex. App. – Houston [14th Dist.] Oct. 17, 2002, no pet.) 381 Zamora v. Vela, 202 S.W. 215 (Tex. Civ. App.–San Antonio 1918, no writ); Price v. Cole, 35 Tex. 461 (1871), rev'd on

other grounds, 45 Tex. 531 (1876) 382 Permian Oil Co. v. Smith, 129 Tex. 413, 73 S.W. 2d 490 (1934); Fannin Bank v. Blystone, 417 S.W. 2d 502 (Tex. Civ.

App.–Waco 1967), writ ref'd n.r.e., 424 S.W. 2d 626 (Tex. 1968) 383 J.M. Radford Grocery Co. v. Citizens Nat'l Bank, 37 S.W. 2d 1080 (Tex. Civ. App.–El Paso 1931, writ dism'd) 384 Hexter v. Pratt, 10 S.W. 2d 692 (Tex. Comm'n App. 1928) 385 Ramirez v. Bell, 298 S.W. 924 (Tex. Civ. App.–Austin 1927, writ ref'd) 386 Hexter v. Pratt, 10 S.W. 2d at 692 387 Tamburine v. Center Sav. Ass'n, 583 S.W. 2d 942 (Tex. Civ. App.–Tyler 1979, writ ref'd n.r.e.)



8.2.5 CONTINUED MONITORING

If notice is given to a party, that party only has a reasonable obligation of investigation at that time and does not have a continued obligation of monitoring to see if an event transpires at a later day. For example, if tax agents of the Internal Revenue Service are notified that a divorce is pending, this fact does not obligate the IRS to continue to monitor to see if the divorce later occurs, and if the land is awarded to the non-taxpayer.388

8.3 POSSESSION – DUTY OF INQUIRY

8.3.1 LIMIT OF INQUIRY

The purchaser is charged with notice of whatever information he or she may secure from the party occupying the property as to that party's claim and those under whom that party claims. However, if this inquiry would not reveal any third party ownership, then the possession imputes no notice to the purchaser. For example, if within one or two days of the sale, the purchaser talked to a party in possession who simply said he was "just living there and did not know who claimed property, if anyone", there was no imputed knowledge due to the party in possession.389

8.3.2 TENANTS

Possession by a tenant of the owner, whose interest is not reflected of record, will be sufficient to put third party on notice of the owner's rights.390 If the tenant was originally a tenant of a grantor who has conveyed by an unrecorded Deed, a subsequent creditor or purchaser will be put on notice of the unrecorded Deed if the tenant in possession has attorned to the grantee.391 However, if the tenant is not aware of the claim of the grantee under the Deed and has not attorned392 to the grantee, then a subsequent creditor or purchaser from the grantor is not put on notice of the unrecorded Deed. Such creditor or subsequent grantee can only be presumed to have learned what would have been disclosed by reasonable inquiry.393

8.3.3 POSSESSION BY A PARTY WHO HAS A RECORDED INTEREST

At times a party in possession will have an interest of record, such as an undivided fee simple ownership or a recorded lease. If that person also has another right or interest in the property, such as by an unrecorded deed from other co-tenants or unrecorded extension of lease or option to purchase, that person's possession puts a purchaser or creditor on duty of inquiry as to the nature and extent of ownership by the person who has the interest of record, and as to whether he or she has any other remaining interests not reflected of record.394 However, there are certain older cases to the contrary on this issue, stating that if there is possession by a party who has an interest reflected of record, then a subsequent creditor or purchaser has no obligation to further inquire as to his or her rights.395 Possession of an entire tract gives notice of the claim of the party in possession, even if that party holds record title to only a portion of it.396

8.3.4 CONTINUED POSSESSION BY A GRANTOR UNDER A RECORDED DEED

Normally, continued possession by a grantor under a recorded deed does not put a subsequent purchaser or lender under the obligation of inquiry as to whether the grantor has any claim to the property. For example, 388 Prewitt v. United States, 792 F.2d 1353 (5th Cir. 1986) 389 Stanford v. Dumas, 137 S.W. 2d 1071 (Tex. Civ. App.–Amarillo 1940, writ dism'd judgmt cor.) 390 Watkins v. Edwards, 23 Tex. 443 (1859) 391 Garth v. Stuart, 59 Tex. Civ. App. 391, 125 S.W. 611 (1910, writ ref'd); Duncan v. Matula, 26 S.W. 638 (Tex. Civ. App.

1894, no writ) 392 Attorn - To agree to become tenant to one as owner or landlord of an estate previously held of another, or to agree to

recognize a new owner of a property or estate and promise payment of rent to him. Black's Law Dictionary 128 (West 1990).

393 Bowles v. Belt, 159 S.W. 885 (Tex. Civ. App.–Amarillo 1913, writ ref'd) 394 Alkas v. United Sav. Ass'n of Texas, Inc., 672 S.W. 2d 852 (Tex. App.–Corpus Christi 1984, writ ref'd n.r.e.); Collum v.

Sanger Bros., 98 Tex. 162, 82 S.W. 459 (1904); Aldridge v. North East Indep. School Dist., 428 S.W. 2d 447 (Tex. Civ. App.–San Antonio 1968, writ ref'd); Long Falls Realty Co. v. Anchor Elec. Co., 405 S.W. 2d 170 (Tex. Civ. App.–Dallas 1966, no writ); Kelly-Springfield Tire Co. v. Walker, 149 S.W. 2d 195 (Tex. Civ. App.–Beaumont 1940, writ dism'd judgmt. cor.)

395 Linthicum v. Greer, 75 S.W. 2d 315 (Tex. Civ. App.–El Paso 1934, writ dism'd w.o.j.); David v. State Bank, 238 S.W. 979 (Tex. Civ. App.–Amarillo 1922, no writ); Dallas Land & Loan Co. V. Sugg, 237 S.W. 955 (Tex. Civ. App.–Austin 1922, writ ref'd); Jackson v. Berliner, 127 S.W. 1160 (Tex. Civ. App. 1910, writ ref'd); Hamilton v. Ingram, 13 Tex. Civ. App. 604, 35 S.W. 748 (1896, no writ)

396 Alkas v. United Savings Ass'n, 672 S.W. 2d 852 (Tex. App.–Corpus Christi 1984, writ ref'd n.r.e.)



there is no obligation to inquire as to whether the deed was, instead, a mortgage, whether the deed was fraudulently secured, or whether the deed was executed by mutual mistake.397 However, if the deed from the grantor was not promptly recorded, then that fact, together with other circumstances, may cause the subsequent purchaser or lender to have an obligation to inquire as to the reason for possession.398 Furthermore, long continued possession (such as six years) by the grantor after the execution of the deed and inconsistent acts by the grantor, such as later conveyances, should put a later purchaser on inquiry notice as to whether the grantor claims any rights in the property.399

8.3.5 PRIOR POSSESSION

If possession by a third party has terminated before the buyer acquires an interest in the land, the buyer has no obligation of inquiry as to the rights of the third party in the property, even if the buyer knew of the former possession.400

8.3.6 EXTENT OF POSSESSION

Possession reflected simply by improvements, but not by on-site occupancy of the property by the party responsible for the improvements (for example, improvements such as a small chicken house), will not be sufficient possession to put a buyer on inquiry as to the claim of right to the improvements. Such improvements do not constitute notice that a third party claims the land.401 A purchaser is charged with constructive notice, or “implied notice” of an occupant’s claims the purchaser might have reasonably discovered on proper inquiry. The duty arises only if the possession is (1) visible, (2) open, (3) exclusive, and (4) unequivocal. Possession as a tenant in a multi-unit structure does not satisfy the criteria necessary to give constructive notice of a claim of ownership, since one would expect occupants on such property. Such possession is not exclusive or unequivocal.402 Possession and notice are not manifested by a garden maintained by a grantee claiming under an unrecorded deed, and an innocent creditor will acquire its lien free of the prior, unrecorded deed. Possession must be more significant, such as through structures or buildings.403 Possession of the land for a trucking business on a daily basis, signs for trucks identifying the business, parking trucks and mechanical work was sufficiently open and visible.404

9.0 PROTECTED PARTIES BY RECORDING LAWS OR EQUITY

9.1 BONA FIDE PURCHASER FOR VALUE IN GOOD FAITH WITHOUT NOTICE

9.1.1 DEFINITION

A bona fide purchaser is one who pays valuable consideration without notice and in good faith.405 In order to be a purchaser for value without notice, the party must show that, before the party had actual or constructive notice of the recording of the prior instrument, there was a delivery of the deed (or deed of trust) and payment of the purchase price or advance of the funds.406 A party can be a bona fide purchaser or the equivalent even thought the party only acquires equitable title (such as a contract purchaser who has paid the contract price). A party can also be a bona fide mortgagee.407

9.1.2 BONA FIDE PURCHASER AS TO RECORDABLE INTEREST

A bona fide purchaser for valuable consideration without notice may take free of the following:

397 Eylar v. Eylar, 60 Tex. 315 (1883); Dallas Trust & Sav. Bank v. Pickett, 59 S.W. 2d 1090 (Tex. Civ. App.–Waco, 1933, writ

dism'd w.o.j.); Jiles v. Citizens Nat'l Bank, 257 S.W. 945 (Tex. Civ. App.–Texarkana 1923, writ dism'd w.o.j.); Gray v. Allen, 243 S.W. 684 (Tex. Civ. App.–San Antonio 1922, writ dism'd w.o.j.), aff'd, 269 S.W. 510 (Tex. Civ. App.–San Antonio 1925, writ dism'd w.o.j.)

398 Ramirez v. Bell, 298 S.W. 924 (Tex. Civ. App.–Austin 1927, writ ref'd) 399 Anderson v. Barnwell, 52 S.W. 2d 96 (Tex. Civ. App.–Texarkana 1932), aff'd, Anderson v. Browley, 126 Tex. 182, 86 S.W.

2d 41 (Tex. Comm'n App. 1935, opinion adopted) 400 Maxfield v. Pure Oil Co., 91 S.W. 2d 892 (Tex. Civ. App.–Dallas 1936, writ dism'd w.o.j.) 401 Howard v. Leonard, 185 S.W. 2d 490 (Tex. Civ. App.–San Antonio 1945, writ ref'd w.o.m.) 402 Madison v. Gordon, 39 S.W. 3d 604 (Tex. 2001) 403 Omohundro v. Jackson, 36 S.W. 3d 677 (Tex. App. - - El Paso 2001, no pet.) 404 APEX Financial Corp. v. Garza, 2004 Tex. App. LEXIS 496 (no. 05-02-00872-CV, Jan. 21, 2004, pet. denied) 405 Sparks v. Taylor, 99 Tex. 411, 90 S.W. 485 (1906) 406 LaFon v. Grimes, 86 F.2d 809 (5th Cir. 1936) 407 Batts & Dean v. Scott, 37 Tex. 59 (1872); Graves v. Guaranty Bond State Bank, 161 S.W. 2d 118 (Tex. Civ. App.–

Texarkana 1942, no writ)



• Extensions of liens if the debt is more than four years overdue;408 • Unrecorded prior assignments of the lien (in relying on a release or transfer from

record owner);409 • Decree awarding title in eminent domain action;410 • A claim that the executor legally qualified did not have the authority to convey the

property;411 • Claims of devisee to the property where the will was not probated within four years

of death and the purchaser relied upon the deed from heirs of the decedent executed more than four years after death of the decedent;412

• Any later revocation of the will on which the purchaser relies;413 • Claims of the beneficiaries or those claiming by, through or under the person

designated as Trustee in that person's individual capacity where the instrument naming the person as Trustee does not identify the trust or name the beneficiaries (to identify the trust there must be a disclosure of the essential terms of the trust, not simply a reference to the date of an instrument);414

• An unrecorded Sheriff's Deed on a foreclosure for ad valorem taxes;415 • A person purchasing from a partner acting on behalf of the general partnership, and

apparently carrying on in the ordinary course the business of the partnership, although the partner so acting has in fact no authority to act for the partnership in the particular matter, and the purchaser has no knowledge of the fact that the partner has no such authority, or a conveyance not apparently for carrying on in the ordinary course by a partner to a predecessor in title is binding if the subsequent purchaser was a holder for value without knowledge of the partner’s lack of authority.416

• Unrecorded plats dedicating easements417 and unrecorded instruments creating easements appurtenant.418

• Unrecorded releases where the purchaser was acquiring the note and lien;419 • Pending suits concerning title where no lis pendens has been filed;420 • Unrecorded judgments awarding title;421

• Pending bankruptcy where no notice or copy of petition was filed in connection with the pending case.422

9.1.3 BONA FIDE PURCHASER v. EQUITABLE INTEREST

A bona fide purchaser or lender will take free of equitable interests including:

408 Tex. Civ. Prac. & Rem. Code Section 16.037; Mercer v. Daoran Corp., 676 S.W. 2d 580 (Tex. 1984); Cadle Co. v. Butler,

951 S.W. 2d 901 (Tex. App.−Corpus Christi 1997, no writ) 409 Fannin Inv. & Dev. Co. v. Neuhaus, 427 S.W. 2d 82 (Tex. Civ. App.–Houston [14th Dist.] 1968, no writ); Steele v. Orts,

390 S.W. 2d 343 (Tex. Civ. App.–Texarkana 1965, writ ref'd n.r.e.) 410 Parker v. Fort Worth & D.C. Ry. Co., 84 Tex. 333, 19 S.W. 518 (1892) 411 Tex. Prob. Code Section 188; Dallas Services for Visually Impaired Children, Inc. & Broadmoor II, 635 S.W. 2d 572 (Tex.

Civ. App.–Dallas 1982, writ ref'd n.r.e.) 412 Tex. Prob. Code Section 73 413 Glover v. Coit, 36 Tex. Civ. App. 104, 81 S.W. 136 (Tex. Civ. App. 1904, no writ) 414 Tex. Prop. Code Section 101.001; Kagan v. Moody, 309 S.W. 2d 515 (Tex. Civ. App.–Houston 1957, writ ref'd n.r.e.), cert.

denied, 358 U.S. 873 (1958) 415 Griggs v. Montgomery, 22 S.W. 2d 688 (Tex. Civ. App.–Beaumont 1929, no writ) 416 Tex. Bus. Org. Code Section 152.302 417 Popplewell v. City of Mission, 342 S.W. 2d 52 (Tex. Civ. App.–San Antonio 1960, writ ref'd, n.r.e.); City of Richland Hills

v. Bertelsen, 724 S.W. 2d 428 (Tex. App.–Fort Worth 1987, no writ) 418 Pokorny v. Yudin, 188 S.W. 2d 185 (Tex. Civ. App.–El Paso 1945, no writ) 419 Biswell v. Gladney, 213 S.W. 256 (Tex. Comm'n App. 1919, judgm't adopted) 420 Tex. Prop. Code Section 13.004; Hartel v. Dishman, 135 Tex. 600, 145 S.W. 2d 865 (1940) 421 Ball v. Norton, 238 S.W. 889 (Tex. Comm'n App. 1922, judgm't adopted) 422 11 U.S.C.A. Section 549; but see In re McConville, 110 F. 3d 47, cert. denied, 139 L. Ed. 2d 315, 118 S. Ct. 412, 66 U.S.

L.W. 3336 (1997) (lender not protected, but constructive trust imposed for purchase money advance); In re Rice, 83 B.R. 8 (B. A.P. 9th Cir. 1987) (assignee of mortgage not protected)



• A claim of a right to reform due to a mutual mistake;423 • A claim that the deed was procured by fraud;424 • Rights of a spouse or heirs of such spouse whose name was not shown on the deed

vesting title to community title;425 • Any claims of parties by adoption by estoppel;426 • Any claim that the deed was, in actuality, given as a mortgage.427

9.1.4 INTERESTS AS TO WHICH THERE CANNOT BE A BONA FIDE PURCHASER

There can be no bona fide purchaser taking free and clear of the following interests, regardless of whether these interests are reflected by a recorded instrument:

• Title by adverse possession;428 • A claim that a deed was given while the person was a minor or insane;429 • Any claim that the deed was forged;430 • Any claim of heirs, whether known by the bona fide purchaser;431 • A conveyance by a person who had the identical name of the record owner but who

was not the same person;432 • A forced sale of the homestead in a probate court to pay unsecured creditors;433 • A mechanic's lien claim timely perfected for prior labor or materials.434

9.1.5 VALUABLE CONSIDERATION

In order to be a bona fide purchaser, the bona fide purchaser must pay valuable consideration. The purchaser must show more than cancellation of antecedent debt; execution of a deed of mortgage for antecedent debt is not considered valuable consideration.435 Likewise, the crediting of a bid on a judgment is not valuable consideration.436 However, the following will be considered valuable consideration:

• Payment of the purchase price; • A release of a valid lien on land; • A release of a chattel mortgage; • An unconditional obligation to assume a loan to a third party (where approved by

the lender at least); • Extension of time for payment of a previously-outstanding loan; • The giving of a negotiable instrument to the seller;

423 Farley v. Deslande, 69 Tex. 458, 6 S.W. 786 (1888) 424 Pure Oil Co. v. Swindall, 58 S.W. 2d 7 (Tex. Comm'n App. 1933, holding approved); Ramirez v. Bell, 298 S.W. 924 (Tex.

Civ. App.–Austin 1927, writ ref'd); Hickman v. Hoffman, 11 Tex. Civ. App. 605, 33 S.W. 257 (1895, writ ref'd) 425 Tex. Fam. Code 3.104; Harvey v. Humphreys, 178 S.W. 2d 733 (Tex. Civ. App.–Galveston 1944, writ ref'd w.o.m.); Patty v.

Middleton, 82 Tex. 586, 17 S.W. 909 (1891); Edwards v. Brown, 68 Tex. 329, 4 S.W. 380 (1887) 426 Moran v. Adler, 570 S.W. 2d 883 (Tex. 1978) 427 Brown v. Wilson, 29 S.W. 530 (Tex. Civ. App. 1895, no writ) 428 Houston Oil Co. v. Olive Sternenberg, 222 S.W. 534 (Tex. Comm'n App. 1920, judgm't approved); Heard v. Bowen, 184

S.W. 234 (Tex. Civ. App.–San Antonio 1916, writ ref'd); MacGregor v. Thompson, 7 Tex. Civ. App. 32, 26 S.W. 649 (1894, no writ)

429 Gaston v. Bruton, 358 S.W. 2d 207 (Tex. Civ. App.–El Paso 1962, writ dism'd w.o.j.); Pure Oil Co. v. Swindall, 58 S.W. 2d 7 (Tex. Comm'n App. 1933, opinion approved); McLean v. Stith, 50 Tex. Civ. App. 323, 112 S.W. 355 (1908, writ ref'd)

430 Pure Oil Co. v. Swindall, 58 S.W. 2d 7 (Tex. Comm’n App. 1933, opinion approved) 431 New York & T. Land v. Hyland, 8 Tex. Civ. App. 601, 28 S.W. 206 (1894, writ ref'd) 432 Blocker v. Davis, 241 S.W. 2d 698 (Tex. Civ. App.–Fort Worth 1951, writ ref'd n.r.e.); Pure Oil Co. v. Swindall, 58 S.W. 2d

7 (Tex. Comm'n app. 1933, opinion approved) 433 Cline v. Niblo, 117 Tex. 474, 8 S.W. 2d 633 (1928); Mallou v. Payne & Vendig, 750 S.W. 2d 251, 256 (Tex. App.–Dallas

1988, no writ) 434 Keating Implement & Mach. Co. v. Marshall Elec. Light & Power Co., 74 Tex. 605, 12 S.W. 489 (1889) 435 Turner v. Cochran, 94 Tex. 480, 61 S.W. 923 (1901); Bowen v. Lansing Wagon Works, 91 Tex. 385, 43 S.W. 872 (1898);

McKamey v. Thorp, 61 Tex. 648 (1884); Walter Connally & Co. v. Gaston, 295 S.W. 953 (Tex. Civ. App.–Texarkana 1927, writ dism'd w.o.j.), Jackson v. Waldstein, 10 Tex. Civ. App. 156, 30 S.W. 47 (1895, writ ref'd)

436 Aycock v. Thompson, 146 S.W. 641 (Tex. Civ. App.–Galveston 1912, no writ)



• The completed furnishing of a home and board to the seller.437

If the consideration given is grossly inadequate in comparison to the value of the land (for example, a payment of 1/15th of the value of the land), then it will not be considered valuable consideration or, in the alternative, it will raise the question of the lack of good faith by the purchaser.438 Stock given by a purchaser can constitute valuable consideration; in one transaction the stock was consideration because the corporation had actual assets, the cooperation paid dividends, and the stock was later sold for value.439In order to prove that a purchaser is a bona fide purchaser, there must be a showing of consideration. A mere recital to that effect in the deed is not sufficient evidence.440 Where the purchaser becomes aware of the adverse interest by reason of its recordation or actual notice before payment in full of the consideration, then the purchaser is a bona fide purchaser only on a pro tanto basis. The relief awarded is dependent upon the equities of the case: there may be a lien in favor of the buyer for the amount paid, there may be a grant to the buyer of a portion of the land paid for, or there may be a granting of the land to the buyer with a right by the true owner to payments of amounts still owed.441 A mortgagee making advances under its future indebtedness clause after notice of the prior adverse claim (e.g., a previously unrecorded instrument) will not have priority as to such advances.442 Consideration will be deemed to be paid when effectively delivered, even though not actually received by the seller prior to notice to the bona fide purchase, such as where money is held in a bank account for the seller after all conditions for delivery were met.443

9.1.6 BURDEN OF PROOF AS TO BONA FIDE PURCHASER STATUS (

The burden of proof lies with the buyer or mortgagee to prove that it is a bona fide purchaser or lender for value against prior unrecorded interest such as unrecorded deeds or pending suits.444 However, the burden of proof lies on the owner of an equitable interest (such as a right to reform a deed or a resulting trust) to show that the subsequent purchaser was not a bona fide purchaser for value without notice.445

9.1.7 APPLICATION OF BONA FIDE PURCHASER STATUS TO DIFFERENT KINDS OF TRANSFERS

A purchaser at an execution sale may be a bona fide purchaser.446 A purchaser from an heir of the record owner can be a bona fide purchaser as to unrecorded prior deeds from the deceased record owner.447 Likewise, a person may be an innocent purchaser at an administrator's or executor's sale as to prior unrecorded deeds by the

437 Lafon v. Grimes, 86 F.2d 809 (5th Cir. 1936); Tillman v. Heller, 78 Tex. 598, 14 S.W. 700 (1890); Morris v. Meek, 57 Tex.

385 (1882); Batts & Dean v. Scott, 37 Tex. 59 (1872); Reserve Petroleum Co. v. Hutcheson, 254 S.W. 2d 802 (Tex. Civ. App.–Amarillo 1952, writ ref. n.r.e.); Red River Nat'l Bank v. Latimer, 110 S.W. 2d 232 (Tex. Civ. App.–Texarkana 1937, no writ); J.M. Radford Grocery v. Citizens Nat'l Bank, 37 S.W. 2d 1080 (Tex. Civ. App.–El Paso 1931, writ dism'd); Jiles v. Citizens Nat'l Bank, 257 S.W. 945 (Tex. Civ. App.–Texarkana 1923, writ dism'd); City of Houston v. Ritchie, 191 S.W. 362 (Tex. Civ. App.–Galveston 1916, writ ref'd); Keenon v. Burkhardt, 162 S.W. 483 (Tex. Civ. App.–Amarillo 1913, writ ref'd); Beavers v. Baker, 58 Tex. Civ. App. 35, 124 S.W. 450 (1909, no writ ref'd); Davis v. Carter, 55 Tex. Civ. App. 423, 119 S.W. 724 (1909, no writ)

438 Nichols-Stewart v. Crosley, 87 Tex. 443, 29 S.W. 380 (1895); Neeley v. Intercity Management Corp., 623 S.W. 2d 942 (Tex. App.–Houston [ist Dist.] 1981, no writ); Hicks v. Sias, 102 S.W. 2d 460 (Tex. Civ. App.–Beaumont 1937, writ ref'd); McAnnally v. Panther, 26 S.W. 2d 478 (Tex. Civ. App.–Eastland 1930, no writ); Beckham v. Medlock, 19 Tex. Civ. App. 61, 46 S.W. 402 (1898, writ ref'd)

439 McRae Exploration & Production, Inc. v. Reserve Petroleum Company, 962 S.W. 2d 676 (Tex. App. – Waco 1998, no pet.) 440 Watkins v. Edwards, 23 Tex. 443 (1859); Summerlin v. Smith, 279 S.W. 284 (Tex. Civ. App.–Texarkana 1925, writ dism'd

w.o.j.) 441 Kenedy Pasture Co. v. State, 111 Tex. 200, 231 S.W. 683 (1921), cert. denied, 258 U.S. 617 (1922); Durst v. Daugherty, 81

Tex. 650, 17 S.W. 388 (1891) 442 J.M. Radford Grocery v. Citizens Nat'l Bank, 37 S.W. 2d 1080 (Tex. Civ. App.–El Paso 1931, writ dism'd) 443 Sparks v. Taylor, 99 Tex. 411, 90 S.W. 485 (1906) 444 Raposa v. Johnson, 693 S.W. 2d 43 (Tex. App.–Fort Worth 1985, writ ref'd n.r.e.); Westland Oil Dev. Corp. v. Gulf Oil, 637

S.W. 2d 903 (Tex. 1982); Hartel v. Dishman, 135 Tex. 600, 145 S.W. 2d 865 (1940); Turner v. Cochran, 94 Tex. 480, 61 S.W. 923 (1901); Jackson v. Waldstein, 10 Tex. Civ. App. 156, 30 S.W. 47 (1895, writ ref'd)

445 Neeley v. Intercity Management Corp., 623 S.W. 2d 942 (Tex. App.–Houston [1st Dist.] 1981, no writ); Miles v. Martin, 159 Tex. 336, 321 S.W. 2d 62 (1959); Delay v. Truitt, 182 S.W. 732 (Tex. Civ. App.–Amarillo 1916, writ ref'd); Mangum v. White, 16 Tex. Civ. App. 254, 41 S.W. 80 (1897, no writ)

446 Plumb v. Kleimann, 234 S.W. 2d 444 (Tex. Civ. App.–Galveston 1950, writ ref'd n.r.e.); Smith v. Olson, 23 Tex. Civ. App. 458, 56 S.W. 568 (1900, writ ref'd)

447 Keenon v. Burkhardt, 162 S.W. 483 (Tex. Civ. App.–Amarillo 1913, writ ref'd)



decedent.448 A trustee or debtor in possession in a bankruptcy is treated as a bona fide purchaser and may take free and clear of prior unrecorded transfers by the debtor.449 An oil and gas lessee can be a bona fide purchaser; it is not treated as simply having acquired an option.450

9.1.8 STATUTES PROTECTING BONA FIDE PURCHASERS )

Some statutes other than the "must" recording law also provide protection to bona fide purchasers. A third party may rely upon the presumed authority of a spouse who is the record owner to convey or deal with nonexempt property.451

A beneficiary may not question a conveyance, transfer or encumbrance by the trustee if trust is not identified and the names of the beneficiaries are not disclosed in the conveyance or transfer to the trustee.452

Sections 2252.091-2252.094, Government Code, prohibit a government entity from buying or selling land to or from a trustee until the trustee submits a copy of the trust “identifying the true owners.” Otherwise, the conveyance will be void.

Under Section 252.005 of the Texas Business Organizations Code (Unincorporated Nonprofit Associations), a person who gives value without notice that a person acting on behalf of the nonprofit association lacks authority may conclusively rely upon a statement of authority recorded in the county clerk's office.453

A bona fide purchaser for value may rely upon an affidavit stating that an executory contract was properly forfeited pursuant to Sections 5.061, et seq. of the Property Code, if the buyer under the forfeited contract is not in possession of the land.454 Under the Texas Property Code Section 5.066, the seller must conduct a nonjudicial sale of the land if the buyer defaults on a executory contract to buy land used or to be used as a residence. This section provides that a purchaser for value who relies on a affidavit regarding the sale acquires title free of the contract.455

Section 17 (Section 141.017, Property Code) of the Texas Uniform Transfers to Minors Act (Chapter 141, Property Code) provides that a third person in good faith may deal with any person purporting to make a transfer or act in the capacity or the custodian.456

A Durable Power or Attorney remains effective as to a person who, without actual knowledge of the termination of a Durable Power of Attorney by revocation, by the principal's death, by annulment of marriage or divorce from the agent, or by the qualification of a guardian of the estate of the principal, acts in good faith under or in reliance on the power. As to acts taken in good-faith reliance on an affidavit of lack of knowledge of termination of the Power of Attorney, the affidavit is conclusive.457

A good faith purchaser for valuable consideration without knowledge who relies on an affidavit of heirship takes title free of the interest of a child if the child is not mentioned in the affidavit and if the child has not under a court decree been found to be entitled to treatment as a child (and was not otherwise recognized as a child).458

A bona fide purchaser for value without actual notice of the claim of an omitted heir who acquires title after a judgment determining heirship takes title free of that interest.459

A purchaser for value in good faith without knowledge of a will who acquires property from the heirs of a decedent more than four years from the date of death of the decedent takes title which the heirs would have had in the absence of a will.460

448 Lumpkin v. Adams, 11 S.W. 1070 (Tex. 1889); Jackson v. Berliner, 127 S.W. 1160 (Tex. Civ. App. 1910, writ ref'd) 449 11 U.S.C.A. Section 544 450 Deaton v. Rush, 113 Tex. 176, 252 S.W. 1025 (Tex. Comm'n App. 1923, opinion adopted) 451 Tex. Fam. Code Section 3.104 452 Tex. Prop. Code Sections 101.001, 114.082 453 Tex. Bus. Org. Code Section 252.005 454 Tex. Prop. Code Section 5.063 (c) 455 Tex. Prop. Code Section 5.066 456 Tex. Prop. Code Section 141.017 457 Tex. Prob. Code Sections 486, 487 458 Tex. Prob. Code Section 42(b) (2) 459 Tex. Prob. Code Section 55 460 Tex. Prob. Code Section 73(b)



A bona fide purchaser without actual notice of the claim of an omitted person may conclusively rely upon a judgment determining those persons entitled to receive property and the persons' shares under a probated will (as a muniment of title). 461

A bona fide purchaser may rely upon the small estate affidavit. A bona fide purchaser may rely on a recorded small estate affidavit, which is approved by the probate court. The bona fide purchaser without actual or constructive notice of an heir who is not disclosed in the recorded affidavit acquires title free of the interests of the undisclosed heir, but subject to any claim of a creditor of the decedent. A purchaser has constructive notice of an omitted heir if an affidavit, judgment or heirship or title transaction in the chain of title identified the heir as an heir of the decedent.462

An innocent purchaser for valuable consideration in good faith and without notice of any illegality in the title may rely upon acts of a legally qualified executor, administrator, or guardian.463

If a purchaser for value buys property from a person receiving property based on a presumption of death, the right of restoration does not extend to that property.464

“A purchaser or lender for value without actual knowledge may conclusively rely on an affidavit that designates other property as the homestead of the affiant and that states that the property to be conveyed or encumbered is not the homestead of the affiant.”465

A person purchasing from a partner acting on behalf of the general partnership, and apparently carrying on in the ordinary course the business of the partnership, although the partner so acting has in fact no authority to act for the partnership in the particular matter, and the purchaser has no knowledge of the fact that the partner has no such authority, or a conveyance not apparently for carrying on in the ordinary course by a partner to a predecessor in title is binding if the subsequent purchaser was a holder for value without knowledge of the partner’s lack of authority.466

An act committed by an agent (each governing person and each officer or agent) of a limited liability company described by Subsection (a) for the purpose of apparently carrying out the ordinary course of business of the company, including the execution of an instrument, document, mortgage, or conveyance in the name of the company, binds the company unless the agent does not have actual authority to act for the company; and the person with whom the agent is dealing has knowledge of the agent's lack of actual authority.467

9.1.9 TYPES OF DEEDS ON WHICH A BONA FIDE PURCHASER CAN RELY

A party acquiring by a pure "right, title and interest" quitclaim deed cannot be a bona fide purchaser for value as to prior unrecorded instruments or equitable interests. The test is not whether the word "quitclaim" is used but whether the grantor's "right, title and interest" as distinguished from the land itself, was conveyed; a deed which has a warranty clause but purports only to convey the "right and title" of the grantor will, nevertheless, be a quitclaim deed. If a deed is a quitclaim deed, then the grantee and all of those claiming under the grantee will be deemed to be on notice of unrecorded instruments by the grantor.468 A purchaser of a quitclaim deed, such as a constable’s deed cannot take the protection afforded a bona fide purchaser, because the grantee in a quitclaim deed is not an innocent purchaser without notice.469 A purchaser under a sheriff’s deed that conveyed “all the estate, right, title and interest which … Lincoln… had…” is a quitclaim; consequently the purchaser cannot be an innocent bona fide purchaser for value. A purchaser of a quitclaim takes with notice of all defects in title and all equities of third parties.470 A person may be a bona fide purchaser even though there is no warranty in the deed, such as when the deed says "all my interest...being an undivided one-half

461 Tex. Prob. Code Section 89C 462 Tex. Prob. Code sec. 137 463 Tex. Prob. Code Sections 188, 662 464 Tex. Civ. Prac. & Rem. Code Section 133.003; Tex. Prob. Code Section 72 465 Art. XVI, Section 50(d), Texas Constitution 466 Tex. Bus. Org. Code Section 152.302 467 Tex. Org. Code Section 101.254 (effective Jan. 1, 2006) 468 Threadgill v. Bickerstaff, 87 Tex. 520, 29 S.W. 757 (1895); Rodgers v. Burchard, 34 Tex. 442 (1870); Houston Oil Co. v.

Niles, 255 S.W. 604 (Tex. Comm'n App. 1923, holding approved); Miller v. Pullman, 72 S.W. 2d 379 (Tex. Civ. App.–Galveston 1934, writ ref'd)

469 Diversified, Inc. v. Hall, 23 S.W. 3d 403 (Tex. App. – Houston [1st Dist] 2000, pet. denied) 470 Kidwell v. Black, 104 S.W.3d 686 (Tex. App. – Fort Worth 2003, pet. denied) APEX Financial Corp. v. Garza, 2004 Tex. App.

LEXIS 496 (no. 05-02-00872-CV, Jan. 21, 2004, pet. denied)



interest", or such as when the deed from the administrator's sale (or other representative's sale) appears to be in the nature of a quitclaim, if it appears that the purpose was to sell and buy the land itself, not a mere chance at title, although the deed may have conveyed "all the right, title and interest of the estate".471 The omission of a covenant of warranty, while not preventing bona fide purchaser status, may be a circumstance to be considered the issue of whether the grantees purchased in good faith or with knowledge.472 Section 34.21(j) of the Tax Code also provides: “ (j) A quitclaim deed to an owner redeeming property under this section is not notice of an unrecorded instrument. The grantee of a quitclaim deed and a successor or assign of the grantee may be a bona fide purchaser in good faith for value under recording laws.”

9.1.10 DATE THAT ONE IS A BONA FIDE PURCHASER

The date to determine when a person is a bona fide purchaser is the delivery date of the deed, which is presumed to be the date of execution of the deed and not the date of acknowledgement of the deed.473

9.1.11 RECORDING BY BONA FIDE PURCHASER

It is immaterial whether the junior deed of the bona fide purchaser is ever recorded or whether it is recorded before the senior deed. Failure to record does not affect the status of the purchaser as a bona fide purchaser.474 Likewise, failure of a prior purchaser to record a deed before a notice of lis pendens has been filed will not affect that person's ownership of the property. However, if the plaintiff in the law suit recovers title against the named defendant, then a buyer from the plaintiff in the suit may be a bona fide purchaser who cuts off the rights of the grantee whose deed was not of record and who was not named as a defendant in the suit.475

9.1.12 SUBSEQUENT PURCHASERS FROM BONA FIDE PURCHASER

A purchaser from a bona fide purchaser will take good title even though he or she is not an innocent purchaser.476 Once a mortgagee takes without notice, subsequent purchasers in that creditor’s chain of title are protected regardless of whether the subsequent purchaser knew of the claimant’s adverse claim.477

9.2 CREDITORS

9.2.1 DEFINITION OF CREDITOR

Under the recording statutes, a prior unrecorded deed or mortgage will be invalid as to a subsequent creditor. Such creditor means a claimant whose claim is fixed by some legal process as a lien on the land, such as by attachment, execution, judgment, landlord or mechanic's lien, or a tax lien (such as IRS or state tax lien).478 A mortgagee will be a "creditor" upon securing a judicial order of foreclosure and order of sale or execution sale.479 A junior lender secured by a mortgage to secure antecedent debt is not a lien creditor and cannot postpone a prior unrecorded deed.480 A trustee or debtor-in-possession in a bankruptcy will be treated as a judgment creditor in order to set aside unrecorded interests.481

9.2.2 EFFECT OF RIGHTS OF CREDITOR ON RECORDABLE INTEREST

A lien creditor will take free and clear of prior recordable, but unrecorded, interests unless the creditor has notice of same.

471 White v. Dupree, 91 Tex. 66, 40 S.W. 962 (1897); Bryan v. Thomas, 365 S.W. 2d 628 (Tex 1963) 472 Davidson v. Ryle, 103 Tex. 209, 124 S.W. 616 (1910); Keenon v. Burkhardt, 162 S.W. 483 (Tex. Civ. App.–Amarillo 1913,

writ ref'd) 473 Popplewell v. City of Mission, 342 S.W. 2d 52 (Tex. Civ. App.–San Antonio 1960, writ ref'd n.r.e.) 474 Cavanaugh v. Peterson, 47 Tex. 197 (1877); Matthews v. Houston Oil Co., 299 S.W. 450 (Tex. Civ. App.–Beaumont 1927,

no writ) 475 Herbert v. Smith, 183 S.W. 2d 191 (Tex. Civ. App.–Austin 1944, writ ref'd w.o.m.) 476 Popplewell v. City of Mission, 342 S.W. 2d 52 (Tex. Civ. App.–San Antonio 1960, writ ref'd n.r.e.); Benn v. Security Realty

v. Dev. Co., 54 S.W. 2d 146 (Tex. Civ. App.–Beaumont 1932, writ ref'd) 477 Omohundro v. Jackson, 36 S.W. 3d 677 (Tex. App – El Paso 2001, no pet.) 478 Prewitt v. United States, 792 F.2d 1353 (5th Cir. 1986); United States v. Creamer Indus., Inc., 349 F.2d 625 (5th Cir. 1965);

Underwood v. United States, 118 F.2d 760 (5th Cir. 1941); Bowen v. Lansing Wagon Works, 91 Tex. 385, 33 S.W. 872 (1898)

479 McDonald v. Powell Lumber Co., 243 S.W. 2d 192 (Tex. Civ. App.–Beaumont 1951, writ ref'd) 480 Turner v. Cochran, 94 Tex. 480, 61 S.W. 923 91901) 481 11 U.S.C.A. Section 544; Segrest v. Hale, 164 S.W. 2d 793 (Tex. Civ. App.–Galveston, 1941, writ ref'd w.o.m.)



Examples of such recordable interests are:

• an equitable right to have a deed corrected to convey a lot originally intended to be included in the conveyance (but not included due to mutual mistake);482

• an unrecorded contract for sale;483 • a prior unrecorded deed;484 • a divorce decree not filed of record in the real property records;485 • an unrecorded sheriff's deed;486 or • an unrecorded extension of deed of trust.487

9.2.3 UNRECORDABLE EQUITIES AND THE CREDITOR

The lien creditor will not cut off "unrecordable equities" such as:

• all rights and obligations of ownership in the land, is vested with equitable title from the date of contract or possession, which is superior to a judgment lien against a seller.488

• a completed contract for sale where no deed had been executed to the purchaser as of yet;489

• a deed intended as a mortgage;490 • a deed of trust released by mutual mistake;491 • a right to reform a deed where by mutual mistake the grantor conveyed a

greater interest than intended;492 • a case where the record owner holds in trust for the benefit of the cestui que

trust;493 • a situation where title was held in the individual name for the benefit of a partnership

and a prior mortgage pursuant to which a lender is claiming priority had been signed for the partnership by all of its partners.494

9.2.4 BURDEN OF PROOF AGAINST CREDITOR

The burden of proof lies on the holder of the unrecorded instrument, such as a deed or mortgage, to show that the creditor had notice of the instrument at the time the lien attached or prior thereto.495 A creditor who has a lien by levy of attachment must show that it is owed money.496 A creditor, such as the IRS, has actual notice of an unrecorded interest if its agent knows of the interest before recordation of the creditor’s lien.497

9.2.5 SUBSEQUENT PURCHASER FROM CREDITORS

If the creditor does not have notice of the outstanding unrecorded interest at the time its lien is created, then a buyer at the execution sale (on the debt owed the creditor) will take free and clear of the outstanding unrecorded interest (where the interest was not recorded at the time of the lien was created). The purchaser will be protected through the rights of the creditor even though the purchaser may have notice of the facts at the time of sale. The buyer, in 482 United States v. Creamer Indus., Inc., 349 F.2d at 625; Henderson v. Odessa Bldg. & Fin. Co., 24 S.W. 2d 393 (Tex.

Comm'n App. 1930); North East Indep. School Dist. v. Aldridge, 528 S.W. 2d 341 (Tex. Civ. App.–Amarillo 1975, writ ref'd n.r.e.)

483 Linn v. LeCompte, 47 Tex. 440 (1877) 484 Whitaker v. Farris, 45 Tex. Civ. App. 378, 101 S.W. 456 (1907, writ ref'd) 485 Prewitt v. United States, 792 F.2d 1353 (5th Cir. 1986) 486 Wiggins v. Sprague, 15 Tex. Civ. App. 590, 40 S.W. 1019 (1897, no writ) 487 The Cadle Co. v. Butler, 951 S.W. 2d 901 (Tex. App.–Corpus Christi 1997, no writ) 488 Cadle Company v. Harvey, 46 S.W. 3d 282 (Tex. App. – Ft. Worth 2001, pet. denied) 489 Texas American Bank/Levelland v. Resendez, 706 S.W. 2d 343 (Tex. App.–Amarillo 1986, no writ) 490 Michael v. Knapp, 4 Tex. Civ. App. 464, 23 S.W. 280 (1893, no writ) 491 First State Bank v. Jones, 107 Tex. 623, 183 S.W. 874 (1916) 492 Cetti v. Wilson, 168 S.W. 996 (Tex. Civ. App.–Fort Worth 1914, writ ref'd) 493 Calvert v. Roche, 59 Tex. 463 (1883) 494 Lone Star Indus., Inc. v. Lomas & Nettleton Fin. Corp., 586 S.W. 2d 192 (Tex. Civ. App.–Eastland 1979, writ ref'd n.r.e.) 495 Barnett v. Squyres, 93 Tex. 193, 54 S.W. 241 (1899); Diltz v. Dodson, 207 S.W. 356 (Tex. Civ. App.–Fort Worth 1918, no

writ); Whitaker v. Farris, 45 Tex. Civ. App. 378, 101 S.W. 456 (1907, writ ref'd) 496 Parks v. Worthington, 101 Tex. 505, 109 S.W. 909 (1908); Colonial Leasing Co. of New England v. Logistics Control

Group Int'l, 762 F.2d 454 (5th Cir. 1985) 497 Prowse v. Walters, 941 S.W. 2d 223 (Tex. App.–Corpus Christi 1996, writ denied)



essence, steps into the shoes of the creditor.498 Once the creditor takes without notice, subsequent purchasers for value in the creditor’s chain of title are protected, regardless of whether the purchaser knew of the adverse claim.499

9.3 ESTOPPEL

9.3.1 AFTER-ACQUIRED TITLE

A deed will operate to vest the after-acquired title of the grantor in the grantee where such deed is not a quitclaim deed and does not purport simply to be the interest acquired by the grantor through a source named in the deed.500 "It is not...essential that a deed should contain covenants of warranty in order for the doctrine of estoppel to apply, for this, whenever a deed is executed under circumstances that will estop the grantor to dispute the title of the grantee, any title or right with reference to the property subsequently acquired by the grantor will immediately pass to the grantee."501 Express or statutory warranties in the deed are not necessary.502 Estoppel will apply even though the deed is a gift deed.503 If the grantor in a Deed obtains title (at the foreclosure sale or later) through a lien to which the grantor did not except in its warranty deed (the warranties being applicable to such lien), then the title it acquires will inure to its prior grantee.504 Presumably the benefits of the doctrine of estoppel by deed to a grantee in a deed are assigned, as are the covenants in such Deed, to a later grantee who receives a quitclaim from the first grantee.505 A grantor under a warranty deed will be estopped to claim rights pursuant to an executory limitation.506Estoppel by Deed will not apply in favor of a grantee in a partition Deed.507 The rule of after-acquired title will also apply to mortgages.508

9.3.2 ESTOPPEL AS TO RESERVATIONS

If a party conveys and gives any assurances of title and reserves a mineral interest in favor of itself but does not except to prior outstanding interests, then it is estopped to claim any additional interest to the extent that the prior interests remain outstanding.509 This rule of estoppel set forth in the Duhig case will not apply, however, if the Deed refers to a prior Deed (which create the separate reservations) by language such as "reference to which is made for all purposes" or "for all legal purposes."510

9.3.3 BINDING EFFECT OF RECITALS ON GRANTEE

A grantee in a Deed will be bound by the terms and provisions of the deed, including reservations of mineral where the grantor's interest, if any, in the land is disputed. The grantee and its successors may not thereafter acquire superior title free of the reservation even by subsequent conveyance from a third party who acquired title by limitations.511 However, before the grantor can secure a mineral interest by estoppel by reservation, the grantee must have all of the interest that the grantor purported to convey to the grantee.512

9.3.4 RECITALS IN A PARTITION DEED

False recitals in a partition deed will estop the grantor to dispute the title acquired in reliance on the truth of the recitals.513

9.3.5 TRUSTEE’S DEED RECITALS

498 Linn v. LeCompte, 47 Tex. 440 (1877); Grace v. Wade & Mains, 45 Tex. 522 (1876) 499 Omohundro v. Jackson, 36 S.W.3d 677 (Tex. App. – El Paso 2001, no pet.) 500 Wilson v. Wilson, 118 S.W. 2d 404 (Tex. Civ. App.–Beaumont 1938, no writ) 501 Wilson v. Beck, 286 S.W. 315, 320 (Tex. Civ. App.–Dallas 1926, writ ref'd) 502 Lindsay v. Freeman, 83 Tex. 259, 18 S.W. 727 (1892); Blanton v. Bruce, 688 S.W. 2d 908 (Tex. App.–Eastland 1985, writ

ref'd n.r.e.); Texas Pacific Coal & Oil Co. v. Fox, 228 S.W. 1021 (Tex. Civ. App.–Fort Worth 1921, no writ) 503 Robinson v. Douthit, 64 Tex. 101 (1885) 504 Burns v. Goodrich, 392 S.W. 2d 689 (Tex. 1965); Robinson v. Douthit, 64 Tex. 101 (1885) 505 Flanniken v. Neal, 67 Tex. 629, 4 S.W. 212 (1887) 506 Gutierrez v. Gutierrez, 30 S.W. 3d 558 (Tex. App. – Texarkana 2000, no pet.) 507 Zapatero v. Canales, 730 S.W. 2d 111 (Tex. App.–San Antonio 1987, writ ref'd n.r.e.) 508 Shield v. Donald, 253 S.W. 2d 710 (Tex. Civ. App.–Fort Worth 1952, writ ref'd n.r.e.) 509 Duhig v. Peavey-Moore Lumber Co, Inc., 135 Tex. 503, 144 S.W. 2d 878 (1940) 510 Harris v. Windsor, 156 Tex. 324, 294 S.W. 2d 798 (1956) 511 Adams v. Duncan, 147 Tex. 332, 215 S.W. 2d 599 (Tex. 1948); Greene v. White, 137 Tex. 361, 153 S.W. 2d 575 (1941) 512 Dean v. Hidalgo County Water Improvement Diost. Number Two, 320 S.W. 2d 29 (Tex. Civ. App.–San Antonio 1959, writ

ref'd n.r.e.) 513 Wilson v. Beck, 286 S.W. 315 (Tex. Civ. App.–Dallas 1926, writ ref'd)



If a deed of trust provides that recitals in the trustee's deed concerning the sale shall be prima facie evidence of the truth thereof, and the trustee's deed does have such recitals, then subsequent purchasers after the trustee deeds execution are protected under the doctrine of innocent purchaser, and the borrower is estopped form denying that title passed due to the improper sale.514

9.3.6 NEGLIGENT DELIVERY

Even though a deed is not properly delivered because of lack of consent of the grantor and, as a result, has no effect to pass title, those claiming as innocent purchasers may be able to secure title by establishing that the grantor was guilty of negligence in causing the unauthorized delivery and, therefore, should be estopped to deny the transfer.515

9.3.7 MISREPRESENTATION OF TITLE

If a party who has title to the property represents to a third party that another person executing a deed actually has good title to the property, then that third party relying upon the misrepresentation will be able to establish title because of estoppel as to the recorded owner.516

9.3.8 CONVEYANCE IN REPRESENTATIVE CAPACITY

A conveyance in a representative capacity only by a party who does not expressly convey his or her individual interest will, nevertheless, convey whatever interest that person owns individually where that party's deed purports to convey the property (as opposed to a quitclaim deed). Conveyances where such estoppel has been recognized include those by an estate representative,517 agents on behalf of principals,518 trustee,519 and corporations by officers (such issue was discussed although estoppel was not applicable in the case at hand).520

9.3.9 CONVEYANCE AS A RELEASE OF LIEN

A deed from the fee owner results in a release of its separate lien; the deed grants all of the grantor's interest in the land.521

9.3.10 ESTOPPEL BY MORTGAGOR

A party who executes notes and mortgages on land (or assumes such liens) cannot take title under a foreclosure of a prior lien without discharging the notes secured by inferior mortgages; the mortgagees' liens will be reinstated on the land.522

10.0 CURATIVE RECORDING LAWS

10.1.1 MARKETABLE RECORD TITLE ACTS

A Model Marketable Record Title Act, based on the Michigan Marketable Record Title Act, was prepared by Lewis M. Simes of The University of Michigan. Marketable Record Title Acts (with the required chain of title noted) have been adopted in numerous states and jurisdictions, including:

Connecticut - §47-33b, et seq. (40 years); Florida - §712.01 et seq. (30 years); Guam – 21 GCA §39101, et seq. (root since 1/1/1935) Illinois - 735 ILCS 5/13-118 (40 years); Indiana - §32-20-1-1, et seq. (50 years); Iowa - §614.29, et seq. (40 years); Kansas - §58-3401, et seq. (25 years); 514 Randolph v. Citizens Nat'l Bank, 141 S.W. 2d 1030 (Tex. Civ. App.–Amarillo 1940, writ dism'd judgm't cor.) 515 Houston Land & Trust Co. v. Hubbard, 37 Tex. Civ. App. 546, 85 S.W. 474 (1905, no writ) 516 Nichols-Stewart v. Crosby, 87 Tex. 443, 29 S.W. 380 (1895); Henry v. Thomas, 74 S.W. 599 (Tex. Civ. App. 1903, writ

ref'd); New York & T. Land v. Hyland, 8 Tex. Civ. App. 601, 28 S.W. 206 (1894, writ ref'd) 517 Tomlinson v. H.P. Drought & Co., 127 S.W. 262 (Tex. Civ. App. 1910, writ ref'd) 518 Ford v. Warner, 176 S.W. 885 (Tex. Civ. App.–Amarillo 1915, no writ) 519 Grange v. Kayser, 80 S.W. 2d 1007 (Tex. Civ. App.–El Paso 1935, no writ) 520 Carothers v. Alexander, 74 Tex. 309, 12 S.W. 4 (1889); see also American Savings & Loan Assoc of Houston v. Musick, 517

S.W. 2d 627 (Tex. Civ. App.–Houston [14th Dist.] 1974), rev’d on other grounds 531 S.W. 2d 581 (Tex. 1975) 521 Fannin Inv. & Dev. Co. v. Neuhaus, 427 S.W. 2d 82 (Tex. Civ. App.–Houston [14th Dist.] 1968, no writ) 522 Milford v. Culpepper, 40 S.W. 2d 163 (Tex. Civ. App.–Dallas 1931, writ ref'd)



Michigan - §565.101, et seq. (40 years; 20 years minerals); Minnesota - §541.023 (40 years); Nebraska - §76-288, et seq. (22 years); North Carolina - §47B-1, et seq. (30 years); North Dakota - §47-19.1-01, et seq. (20 years); Ohio - §5301.47, et seq. (40 years); Oklahoma - Title 16 §71, et seq. (30 years); Rhode Island - §34-13.1-1, et seq. (40 years) South Dakota - §43-30-1, et seq. (22 years); Utah - §57-9-1, et seq. (40 years); Vermont - Title 27 §601, et seq. (40 years); Wisconsin - §893.33 (30 years); and Wyoming - §34-10-101, et seq. (40 years).

The purposes of the Acts have been well stated in some cases construing various provisions of the Acts. These Acts should be contrasted with other, more narrowly drawn Marketable Title Acts, such as provisions in California Civil Code §880.020, which clear title from particular defects such as restrictions, easements, reversions and options based on passage of time, but which do not generally extinguish a competing chain of title.

"The Marketable Title Act is a comprehensive plan for reform in conveyancing procedures and encompasses within its provisions the collective sanctions of (a) a curative act, (b) a recording act, and (c) a statute of limitations. It is a curative act in that it may operate to correct certain defects which have arisen in the execution of instruments in the chain of title. It is a recording act in that it requires notice to be given to the public of the existence of conditions and restrictions, which may be vested or contingent, growing out of ancient records which fetter the marketability of title...It is as well a statute of limitations in that the filing of a notice is a prerequisite to preserve a right of action to enforce any right, claim, or interest in real estate founded upon any instrument, event, or transaction which as executed or occurred more than 40 years prior to the commencement of the action, whether such claim or interest is mature or immature and whether it is vested or contingent.

"Curative statutes are a form of retrospective legislation which reach back on past events to correct errors or irregularities and to render valid and effective attempted acts which would be otherwise ineffective for the purpose the parties intended, particularly irregularities in conveyancing requirements. They operate to complete a transaction which the parties intended to accomplish but carried out imperfectly...

"Statutes of limitations are based on the theory that it is reasonable to require that stale demands be asserted within a reasonable time after a cause of action has accrued."523

"The marketable title concept is simple, although it has fathered many variations in draftsmanship. This idea is to extinguish all claim of a given age (30 years in the Florida Statute) which conflict with a record chain of title which is at least that old. The Act performs this task by combining several features, which generally, are singly labeled as 'statutes of limitations,' 'curative acts,' and 'recording acts.'

"The new Act is in fact all of these: It declares a marketable title on a recorded chain of title which is more than 30 years old, and it nullifies all interests which are older than the root of title. This nullification is subject to a group of exceptions - including interests which have been filed for record in a prescribed manner....

"The chief purpose of the Act is to extinguish stale claims and ancient defects against the title to real property...The Act is different from a statute of limitations. In a statute of limitations, a claim of vested, present interest is cut off because of the claimant's failure to sue. If suit is not filed, the claim is lost. By the Marketable Record Title Act, any claim or interest, vested or contingent, present or future, is cut off unless the claimant preserves his claim by filing a notice within a 30-year period...If a notice is not filed, the claim is lost. The act also goes beyond a curative act. Curative legislation only corrects certain minor or technical defects through the passage of time, whereas under the Marketable Record Title Act, most defects or clouds on title beyond the period of 30 years are removed and the purchaser is made secure in his transaction."524

523 Wichelman v. Messner, 250 Minn. 88, 83 N.W. 2d 800, at 816 (1957) 524 Marshall v. Hollywood, 236 So. 2d 114 at 119 (Fla. 1970)



10.1.2 TEXAS AND MARKETABLE RECORD TITLE ACTS

Texas, of course, has no Marketable Record Title Act, but marketability is still relevant. In the absence of provisions to the contrary, the law implies that the seller will furnish marketable title.525

There is no statutory definition of marketable title in Texas. The case of Blomstrom v. Wells, 239 S.W. 227, at 230 (Tex. Civ. App. -- San Antonio 1922, writ dism.), stated the dilemma of marketable title well: "The ordinary mind does not understand the meaning of the term 'marketable title.'"

There are few reported cases on marketable title in Texas, but the definition is typically a title about which there can be no fair and reasonable doubt.526

Marketable title has also been defined as meaning:

"One reasonably free from such doubt as would affect the market value of the estate; one which a prudent man with knowledge of all the facts and their legal bearing would be willing to accept...not doubts based on captious, frivolous or astute niceties, made up for the occasion, but grave and reasonable doubts, such as would induce a prudent man to hesitate in accepting a title...."527

These definitions provide little illumination, resulting in resort to case law analyses of fact situations. There is, however, a paucity of case law on marketability of title, particularly in the last 40 years.

However, one can deduce that the following matters cause title to be unmarketable:

• Adverse possession title (where no suit has been brought).528 • Title resting on presumptions of fact (such as a deed executed by the president of a corporation

without reference to consent by the board of directors).529 • Ex parte affidavits of use (do not provide record evidence of marketable [or merchantable]

title).530 • An heirship affidavit or recitations of heirship (are not sufficient for title to be marketable[unless

ancient]).531 • Gaps in county records destroyed by fire.532 • Boundary changes due to accretion or avulsion.533 • Access to the land dependent on prescriptive easement (may be unmarketable).534 • Limitations on access (may render title unmarketable).535

Consequently, many Texas titles are not marketable. Among the problems causing unmarketability in Texas are:

• Gaps in County Records. The following (among other) courthouse records were destroyed:

Blanco (burnt 8-14-1876) Bowie (burnt 1-21-1889)

Brazos (Book A missing) Brown (burnt 3-29-1880) Cameron (Books C & D burnt in 1854) Chambers (burnt 12-2-1875) 525 Lambert v. Taylor Telephone Co-operative, 276 S.W. 2d 929 (Tex. Civ. App.–Eastland 1955, no writ); Medallion

Homes, Inc. v. Thermar Investments, 698 S.W. 2d 400 (Tex. App.–Houston [14th Dist.] 1985, no writ) 526 Corbett v. McGregor, 84 S.W. 278 (Tex. Civ. App. 1904, no writ) 257; Texas Auto Co. v. Arbetter, 1 S.W. 2d 334, at 336 (Tex. Civ. App.–San Antonio 1927, writ dism.) 528 Adkins v. Gillespie, 189 S.W. 275 (Tex. Civ. App. 1916, no writ); Alexander v. Glasscock, 271 S.W. 2d 333 (Tex.

Civ. App.–Texarkana 1954, no writ); Blomstrom v. Wells, 239 S.W. 227 (Tex. Civ. App.–San Antonio 1922, writ dism.)

529 Austin v. Carter, 296 S.W. 2d 649 (Tex. Civ. App.–Eastland 1927, no writ) 530 Cline v. Booty, 175 S.W. 1081 (Tex. Civ. App.–San Antonio 1915, writ ref'd); Owens v. Jackson, 35 S.W. 2d 186

(Tex. Civ. App.–Austin 1931, writ dism.) 531 Foster v. Eoff, 19 Tex. Civ. App. 405, 47 S.W. 399 (1898, writ ref'd) 532 Temple Lumber Co. v. Brook, 165 S.W. 507 (Tex. Civ. App. 1914. writ ref'd) 533 Gaines v. Dillard, 545 S.W. 2d 845 (Tex. Civ. App.–Ft. Worth 1976, writ ref'd, n.r.e.) 534 Nance v. McClellan, 54 S.W. 2d 1109 (Tex. Civ. App. 1932), aff'd, 126 Tex 500, 89 S.W. 2d 774 (1936) 535 Dusenbery v. Jones, 359 F.Supp. 712 (D.Kan. 1972)



Clay (burnt 2-25-1873) Denton (burnt 12-23-1875 Edwards (Book A burnt) Erath (burnt 8-6-1866) Falls (Book K burnt) Frio (Book B stolen/missing) Gillespie (Book A burnt) Goliad (burnt 6-6-1870) Grimes (burnt 1848) Hamilton (Book A burnt) Hood (burnt 3-5-1875) Houston (burnt 2-2-1865) Jack (Book P missing) Jasper (burnt 10-28-1849) Karnes (burnt 7-18-1865) Kimble (burnt 4-22-1884) Lamar (burnt 3-31-1916) Lampasas (burnt 12-25-1871) Lee (burnt 2-11-1898) Liberty (burnt 12-11-1874) Limestone (burnt 10-24-1873) Llano (burnt 12-13-1874 and 10-17-1880) Madison (burnt 6-5-1865 and 1-20-1873) Mason (Books C & E burnt) Milam (burnt 4-9-1874) Montague (burnt 2-25-1873) Parker (burnt 5-13-1874) Rains (burnt 11-20-1879) Red River (Book U and part of Book A Rockwall (burnt 3-16-1875) Rusk (part burnt 3-25-1876) Sabine (burnt 11-22-1875) Shelby (burnt 6-1-1882) Tarrant (burnt 3-22-1876) Titus (burnt 9-20-1888) Trinity (burnt 12-1878) Van Zandt (Book A missing) Wood (burnt 12-11-1878) Zapata (burnt 1863)536

Other Ancient Gaps in the Chain of Title.

• Lack of Recorded Access to the Land. Although legal access generally exists in Texas, it frequently is not based on a recorded easement or recorded dedication, particularly in rural areas.

• Deeds From Corporations, Trustees of Disclosed Trusts and Partnerships, where the resolution or other evidence of authority is not recorded.

• Heirship Affidavits (which are less expensive than determinations of heirship).

10.1.3 TEXAS AND GOOD TITLE

A good title is title free of litigation, palpable defects, and grave doubts. It is both legal and equitable title fairly deducible of record.537 The Texas title insurance policies insure against loss or damage because of lack of "good and indefeasible" title. The ALTA policies insure against "unmarketability" of title. The distinction between "good" title and "marketable" title theoretically exists: a marketable title is on that is free from reasonable (as opposed to

536 Leopold, Texas Practice, Vol. 3, §8.27 537 Collins v. Martin, 6 S.W. 2d 126 (Tex. Civ. App.–Ft. Worth 1928, no writ)



grave) doubt.538 In most cases of title issues a distinction does not exist, unless one contrasts title good in fact with marketable title.539 Even where a distinction may be argued to exist, most matters at issue will constitute "defects" in title, which the Texas policies also insure against. In consideration by the former Texas Board of Insurance of possible marketable title coverage, criticism of marketable title coverage centered primarily on destroyed court house records and presumptions (without record evidence such as corporate resolutions) of authority to convey, which it was explained did not affect actual ownership (or any insurance of ownership, since the policy does insure against adverse ownership) or prevent acquisition of good title, but which might cause unmarketability of the title.

Current Texas law prohibits insurance against unmarketability of the title.540

The Texas Real Estate Commission (TREC) contracts require the Seller to furnish a General Warranty Deed conveying good and indefeasible title.

10.2 RECORDING AND ADVERSE POSSESSION LAWS

10.2.1 THE THREE YEAR STATUTE

A person must bring suit to recover property held in peaceable and adverse possession under title or color of title no later than three years after the cause of action accrues.541

10.2.2 THE FIVE YEAR STATUTE

A person must bring suit no later than five years after the cause of action accrues to recover property held in peaceable and adverse possession by one who pays applicable taxes, and cultivates, uses, or enjoys the property, and claims that property under duly registered deed.542

10.2.3 THE 10 YEAR STATUTE

A person must bring suit no later than ten years after the cause of action accrues to recover property held in peaceable and adverse possession by another who cultivates, uses, or enjoys the property.543

10.2.4 TWENTY FIVE YEAR STATUTE (CLARIFY)

A person, regardless of legal disability, may not maintain an action to recover property held for 25 years in peaceable and adverse possession by another who holds the property in good faith and under a deed or other instrument purporting to convey the property that is recorded in the deed records.544

10.2.5 TWENTY FIVE YEAR STATUTE

It is prima facie evidence that title passed from the apparent record title holder if for one or more years during the 25 years preceding suit the person holding apparent record title did not exercise dominion or pay taxes, and the opposing party has openly exercised dominion over and asserted a claim to the land and has paid taxes annually before delinquent for 25 years545

10.3 GENERAL CURATIVE STATUTES 10.3.1 Cure of Defects

A person has a right of action for four years after recordation of an instrument conveying land because of lack of signature of a proper corporate officer, partner, or company officer, manager, or member; failure of the record to show authority of the board of directors or stockholders of a corporation, partners of a partnership, or officer, managers, or members of a company; execution by a corporation, partnership or other company that has been dissolved; execution by a trustee without record of authority; failure of the record or instrument to show an acknowledgment or jurat that complies with applicable law; or

538 Connely v. Putnam, 111 S.W. 164 (Tex. Civ. App.–1908, no writ) 539 Hollifield v. Landrum, 71 S.W. 164 (Tex. Civ. App.–1903, no writ) 540 Tex. Ins. Code Section 2502.002 541 Tex. Civ. Prac. & Rem. Code Section 16.024 542 Tex. Civ. Prac. & Rem. Code Section 16.025 543 Tex. Civ. Prac. & Rem. Code Section 16.026 544 Tex. Civ. Prac. & Rem. Code Section 16.028 545 Tex. Civ. Prac. & Rem. Code Section 16.029



wording that may create an implied lien in favor of the grantor. This provision does not apply to forgery.546 Tex. Civ. Prac. & Rem. Code Section 121.004 ended the requirement for a notary seal to an acknowledgement taken in another state that does not require the notary to attach the seal. 10.3.2 AFFIDAVIT AS RELEASE

An affidavit by the title insurance company reflecting payment made pursuant to a payoff statement shall act as a release of a mortgage on a one-to-four family residence will act as a release of the mortgage if recorded in the real property records.547

10.3.3 JUDGMENT LIENS AGAINST THE GOVERNMENT

The land owned by the state, including land in the name of state agencies, and land of a political subdivision of the state are exempt from attachment, execution, and forced sale. A judgment lien or abstract of judgment may not be filed against the state, a unit of state government, or a political subdivision of the state; any such judgment lien or abstract of judgment is void and unenforceable.548

10.3.4 PATENTS

“When sovereign land is sold or disposed of to private persons and a patent is not issued from the state or the republic passing the legal title, the legal title remains with the sovereign entity. The private owner of the land is often unaware that a title without a patent is ineffective and is without legal recourse to acquire the patent because the lands of public domain are now constitutionally dedicated to the Permanent School Fund (PSF). Under the Texas Constitution, the General Land Office and the School Land Board manage and administer PSF, but do not have the authority to issue the patent because current law requires them to receive the land's fair market value in full before the patent is issued. H.J.R. 53, effective January 1, 2002, (added new Section 2B, Article VII, Texas Constitution and authorizes) the legislature, under specified conditions, to provide for the surrender of interest in land belonging to the State of Texas.”549

Those conditions under which a patent may be issued, excluding mineral rights, are:

(1) the land is surveyed, unsold, permanent school fund land according to the records of the General Land Office; (2) the land is not patentable under the law in effect before January 1, 2002; and (3) the person claiming title to the land:

(A) holds the land under color of title; (B) holds the land under a chain of title that originated on or before January 1, 1952; (C) acquired the land without actual knowledge that title to the land was vested in the State of Texas; (D) has a deed to the land recorded in the appropriate county; and (E) has paid all taxes assessed on the land and any interest and penalties associated with any period of tax delinquency.

This section does not apply to:

(1) beach land, submerged or filled land, or islands; or (2) land that has been determined to be state-owned by judicial decree.

This section may not be used to:

(1) resolve boundary disputes; or (2) change the mineral reservation in an existing patent”550

Section 11.084, Natural Resources Code, authorizes the School Land Board, by unanimous vote, to approve a patent or release of the state’s interest in land, excluding mineral rights, if the

546 Tex. Civil Prac. & Rem. Code sec. 16.033 547 Tex. Prop. Code Section 12.017 548 Tex. Prop. Code Section 43.002 549 Bill Analysis, HJR 53, 77th Regular Session, 2001 550 Art VII, Section 2B, Texas Constitution



board finds that the land is unpatented, the land is not patentable under law in effect before January 1, 2002, and the person claiming title to the land (1) holds the land under color of title, (2) holds the land under a chain of title that originated on or before January 1, 1952, (3) acquired the land without actual knowledge that the title was vested in the State of Texas, (4) had a deed to the land recorded in the appropriate county, (5) has paid all taxes assessed on the land, and any interest and penalties. This statute does not apply to beach land, submerged land, filled land, islands, land determined to be state-owned by judicial decree. The statute may not be used to resolve boundary disputes or change mineral reservations in existing patents. Section 11.085 provides that the person claiming title may apply for the patent by filing with the commissioner an application, and by attaching a copy of supporting documentation. The commission may adopt rules to administer these sections.



EXHIBIT 1

ELECTRONIC RECORDING

MEMORANDUM OF UNDERSTANDING

THIS MEMORANDUM OF UNDERSTANDING is between Suzanne Henderson, Tarrant County Clerk, (“CLERK”), Tarrant County (“COUNTY”), Hart InterCivic, Inc. (“ELECTRONIC RECORDING PROVIDER”), and PeirsonPatterson, LLP (“COMPANY”) with offices at 1111 West Arkansas Lane, Arlington, Texas 76016-6325.

Tarrant County desires to offer the recording of real property documents by electronic means providing for the receiving and transmitting of documents electronically in substitution for conventional paper based documents and to assure that transactions are not legally invalid or unenforceable as a result of the use of available electronic technologies, to the mutual benefit of the parties of the transactions.

For purposes of this Memorandum of Understanding, Electronic Recording is defined to be the electronically based submitting of documents from COMPANY to COUNTY and electronically based receipt of confirmation of recording from COUNTY to COMPANY based on the level of automation and structure of the transaction and is characterized by four different levels of automation and structure as follows:

Level I -- Submitting organizations transmit scanned image copies of ink signed documents to the county. The county completes the recording process in the same way as paper using the imaged copy as the source document. An electronic recording endorsement is returned to the organization in the form of a label or printing process in order for the submitting organization to append that information to the original paper document.

Level 2 -- Submitting organizations transcript scanned images of ink signed documents along with electronic indexing information to the county. The county performs an electronic examination of the imaged documents and indexing data, and then completes the recording process using the imaged copy and electronic indexing information. The electronic version of the recorded document is returned electronically to the submitting organization along with the electronic recording data.

Level 3 -- Submitting organizations transmit documents which have been created, signed and notarized electronically along with the electronic indexing information. Electronic signatures must comply with UETA and E-Sign specifications. The county performs an electronic examination of the electronic documents and indexing information then completes the recording process using the electronic documents. The electronic version of the recorded document and electronic recording data is returned to the submitting organization.

Level 4 -- Submitting organizations transmit “Smart” documents which are a single object containing the electronic version of the document in such a way that enables the electronic extraction of data from the object. Smart documents are required to be signed and notarized electronically. The Smart document is endorsed electronically by the county and returned in Smart document format to the submitting organization.

Title Insurance Companies, Mortgage Bankers, Full Service Banks and other trusted entities may, directly or through a trusted third party provider, submit real property records for Electronic Recording. Electronic Recording mandates a close working relationship as well as mutual trust between the COUNTY, COMPANY, AND ELECTRONIC RECORDING PROVIDER. All parties of the Electronic Recording transaction desire to operate and maintain a secure recording system that safeguards parties to



recordation from deceit, fraud and forgery. This Memorandum of Understanding outlines the procedures and rules for the trusted relationship between the parties involved in Electronic Recording in order to facilitate a safe and secure Electronic Recording relationship.

Participation in the Electronic Recording program is voluntary and the decision to do so is a business judgment.

There will be no added fees or costs of any kind charged by the COUNTY for Electronic Recording although COMPANY will be required to meet COUNTY requirements in order to record electronically.

County Requirements

The Electronic Recording Program of Tarrant County is defined by the requirements attached to this Memorandum of Understanding.

Attachment A defines the technical specifications including format, levels of recording supported, transmission protocols, and security requirements of the electronic records required by COUNTY. Company agrees to provide the transmission to the COUNTY following the specifications outlined. Company understands that the specifications may change from time to time. In the event changes to the specification are required, the COUNTY will provide a written notice to the Company within a reasonable timeframe.

Attachment B contains the document and indexing specifications for the Electronic Recording program. For each document, the COUNTY specific document code is provided along with the required indexing information. Any COUNTY specific editing rules will also be described in this attachment.

Attachment C contains the processing schedules and hours of operation for the Electronic Recording Program. No party shall be liable for any failure to perform processing of the transactions and documents where such failure results from any act of Nature or other cause beyond the party’s reasonable control (including, without limitation, any mechanical, electronic or communications failure which prevents the parties from transmitting or receiving the electronic recording transactions. If the COUNTY system causes delays or power failures interfere with the normal course of business. By this agreement, COUNTY is assuming no contractual liability whatsoever for any failure to record any document, delay in recording any document, or for the quality or content or lack thereof of any document presented for recording.

Attachment D provides the payment options supported for the Electronic Recording program.

County Responsibilities

COUNTY shall attempt to protect the integrity of the Recordation process through ongoing monitoring of documents received and recorded through Electronic Recording means. COUNTY shall work with ELECTRONIC RECORDING PROVIDER and COMPANY to install, configure, and administer necessary infrastructure components to facilitate Electronic Recording.

COUNTY shall test and maintain Electronic Recording software and hardware required to operate the Electronic Recording capability. COUNTY, however, shall be held harmless and not liable for any damages resulting from software or equipment failure and assumes no contractual liability for any damages whatsoever via any part of this document.

COUNTY shall institute security to authenticate verbal communications with.

COUNTY shall apply the same level of diligence in handling documents submitted electronically as those submitted through the normal manual process.

Electronic Recording Provider Responsibilities

ELECTRONIC RECORDING PROVIDER is responsible for providing, supporting, and maintaining



Electronic Recording Software and internal Recording Software to COUNTY.

ELECTRONIC RECORDING PROVIDER shall ensure that Electronic Recording Software is secure and that once documents are received, that they remain immutable until such time as they are recorded. Limited to software executable and not the network environment provided by the COUNTY.

ELECTRONIC RECORDING PROVIDER shall work with COMPANY, and COUNTY to resolve issues encountered in the Electronic Recording process that are within the scope of the ELECTRONIC RECORDING PROVIDERS software

ELECTRONIC RECORDING PROVIDER, through the Electronic Recording software, shall maintain an audit trail of documents received, ID received from, dates and times received, receipts receipt to COMPANY received, receipts transmitted, and any errors encountered.

Company Responsibilities

COMPANY shall work to insure that all security measures and credentials implemented are protected. COMPANY assumes all responsibility for documents submitted through unique credentials provided to COMPANY for the purposes of engaging in Electronic Recording.

COMPANY shall be diligent in ensuring that documents submitted for Electronic Recording have been checked before submission, for errors, omissions, scanning defects, illegible areas, and other deformities that would impact the validity of the document.

COMPANY acknowledges that Electronic Recording permits them to prepare, sign and/or transmit in electronic formats documents and business records and the document or records shall be considered as the “original” record of the transaction in substitution for, and with the same intended effect as, paper documents and, in the case that such documents bear a digital or electronic signature, paper documents bearing handwritten signatures.

By use of electronic or digital certificates to sign documents COMPANY intends to be bound to those documents for all purposes as fully as if paper versions of the documents had been manually signed.

By use of electronic or digital certificates to sign documents, COMPANY intends to be bound by those electronic signatures affixed to any documents and such electronic signature shall have the same legal effect as if that signature was manually affixed to a paper version of the document.

By use of digital certificates to seal electronic files containing images of original paper documents or documents bearing manual signatures, COMPANY shall recognize such sealed images for all purposes as fully as the original paper documents and shall be responsible for any failure by Users to comply with quality control procedures for assuring the accuracy and completeness of the electronic files.

The COMPANY and or its’ employees attest to the accuracy and completeness of the electronic records and acknowledge responsibility for the content of the documents submitted through the Electronic Recording Program. Should a dispute or legal action arise concerning an electronic transaction, the COUNTY will be held harmless and not liable for any damages.

COMPANY is responsible for receiving receipt of documents recorded by COUNTY insuring that the source of the receipt is known to be the COUNTY. COMPANY is responsible for forwarding these documents to COUNTY insuring that the source of the documents is known to be the COMPANY who has been authenticated and that the documents to be recorded pass from COMPANY to COUNTY without modification. COMPANY must maintain an audit trail of all activity, available to COUNTY or ELECTRONIC RECORDING PROVIDER, at their request, to resolve issues or investigate potential fraudulent activity. The audit trail must contain, at a minimum, submitter ID, submitted content at point of receipt from COMPANY, submitted content as at point of delivery to COUNTY, dates and times submitted, size, and checksum.

COMPANY is responsible for supporting any technical issues associated with Electronic Recording.



COMPANY shall work, in good faith, with ELECTRONIC RECORDING PROVIDER, and COUNTY to resolve issues with the Electronic Recording process.

COMPANY shall provide end user support to both ELECTRONIC RECORDING PROVIDER and COUNTY through which problems or issues can be reported and addressed. In the event that problem is determined to be with the Electronic Recording software and not the infrastructure provided the COMPANY shall work to resolve issues with COUNTY and ELECTRONIC RECORDING PROVIDER.

COMPANY is solely responsible for any and all costs of the system or services that enables COMPANY to meet the Electronic Recording Program requirements.

COMPANY is responsible for coordinating all technical problems and issues through COUNTY.

General Understandings

COUNTY will not incur any liability for the information electronically transmitted by the COMPANY to COUNTY.

COUNTY will not incur any liability for any breach of security, fraud or deceit as a result of Electronic Recording.

Neither the COUNTY, nor COMPANY, nor ELECTRONIC RECORDING PROVIDER shall be liable to the other for any special, incidental, exemplary or consequential damages arising from or as a result of any delay, omission or error in the Electronic Recording transmission or receipt.

The COUNTY and COMPANY will attempt in good faith to resolve any controversy or claim arising out of or relating to Electronic Recording through either negotiation or mediation prior to initiating litigation.

Any party may terminate this Memorandum of Understanding for any reason by providing 30 days written notice of termination.

The COUNTY, ELECTRONIC RECORDING PROVIDER and COMPANY acknowledges that the electronic recording process is an emerging technology and that State and National standards will continue to evolve. To further the technology and the electronic recording process, the COUNTY and COMPANY will meet once at 30 days and again at 120 days to discuss changes and additions to this Memorandum of Understanding.

Agreed and Accepted:

TARRANT COUNTY HART INTERCIVIC, INC.

~ __________

Suzanne Henderson, County Clerk

Date: _______________________ Date: _______________

____________________________ PeirsonPatterson. LLP

County Administrator’s Office

Date: _______________________ _____

Date:



Technical Specifications

Format of the transmitted File

PRIA file format standard will be used. Images will be in multi- page Group IV TIFF format. The can work with the ELECTRONIC RECORDING PROVIDER and COUNTY to provide additional fields (extentions) to the current PRIA standard.

Communications Protocol and Options

TCP/IP, HTTP and HTTPS

Security Framework

Encryption will be l28bit file and image encryption. SSL and user login/password will be employed. User passwords will be changed on a quarterly basis.

Returned File Format

PRIA file format standard will be used. Images will be in multi-page Group IV TIFF format.

Levels of Electronic Recording Supported

Level 2 and 3

Electronic Signatures and Use of Digital Certificates

The use of Electronic Signatures and Digital Certificates will not be used at this time. However, COUNTY reserves the right to revisit this at a later date with COMPANY. COMPANY acknowledges that Electronic Signatures and Digital Certificates will be used in the future and will work with COUNTY to accommodate their use.

Imaging Standards

Documents will be scanned at 200dpi.

Documents will be scanned in portrait mode.

Document images will be captured as multi- page Group IV TIFF images.

Scanned documents will be legible. Legible in this instance means a clear, readable image — including signatures and notary seals — and in which all portions of each page are captured.

Document font size must meet PRIA minimum standards.



Attachment B

Documents and Indexing Specifications

Documents shall be accepted for filing according to the provisions of Texas law and PRIA standards.



Attachment C

Service Offering

Hours of Operation

Documents may be submitted at any time during the week. Documents will only be processed on those days and hours that the COUNTY Recording Office is open to the public for business. Documents will not be processed on COUNTY holidays, weekends, “snow days etc., or in the event of network or equipment failure. COUNTY will attempt to notify COMPANY of any disruption in service.

Processing Schedules

Documents received prior to 3PM will be processed the same business day.

Documents received after 3PM may be processed the next working day.

Turnaround Timeframe

Documents received prior to the times listed above will be processed (accepted or rejected) at those times.

Alternative Delivery Options

There are no other electronic delivery options at this time.

Return to Options

Submitted documents that are accepted for recording will be provided to the COMPANY in electronic format after acceptance. Confirmation of acceptance and recordation will be provided to the COMPANY in electronic format after recordation is complete. This confirmation will include the document image and COUNTY indexing data. COUNTY reserves the right to make changes to the index at a later date.

Submitted documents that are rejected will be returned to the COMPANY in electronic format after rejection, along with a description of the reason(s) for rejection.

Initially, reasons for rejections will be tabulated and discussed at 30 days and 120 days with the COMPANY.

Service Help Contact Information

COUNTY RECORDING CONTACTS:

Paul Seaberry

817-884-1061

Pseaberry~tarrantcounty. com



COMPANY BUSINESS CONTACT:

PeirsonPatterson, LLP

Dave Sheehan

817-461-5500

dave~ppdocs.com

COMPANY TECHNICAL CONTACT:

PeirsonPatterson, LLP

Zack Boonjue

817-461-5500

zack~ppdocs. corn

COUNTY eRECORDING VENDOR:

Hart Intercivic, Inc

Mike Guentzel

800-223-4278

rnguentzeI~hartic. corn



Attachment D

Payment Options

Payment Options

Escrow accounts are acceptable as the form of payment. Accounts will be summarized on a monthly basis. COMPANY will be responsible for maintaining adequate funds to enable e-Recording.

Requirements for each:

Escrow account must be in place in advance of any submissions.

Account Setup Procedures

Upon execution on the MOU, the COMPANY will submit funds in an amount no less than $100.00 for initial deposit in the escrow account. COMPANY paying by ACH must contact Tarrant County Clerk Accounting to establish account. The CLERK will provide electronic deposit instructions necessary for funds settlement.

ACH Payments:

COMPANY agrees to settle account daily by submitting collections via ACH to the Tarrant County Clerk bank account. Company will provide all necessary reports in connection with ACH transactions.

Reporting and Reconciliation

COUNTY will be responsible for maintaining and reconciling their receipts. Documents will not be accepted if adequate funds are not available by escrow account balance. COMPANY will be responsible for submitting account information with each document batch, and for reconciling their records. COMPANY file number may be transmitted for COMPANY reconciliation purposes.

Exception Handling

Any discrepancy in fees discovered by COUNTY after document acceptance will be corrected by COUNTY within five county business days and COMPANY will be provided with a notification of the error.



EXHIBIT 2



THIS MEMORANDUM OF UNDERSTANDING, dated _______________, is between

Office of County Clerk, Fort Bend County (“COUNTY CLERK” which also means Fort Bend County), Hart InterCivic, Inc. (“ELECTRONIC RECORDING PROVIDER”), and ___________________________ (“COMPANY”) with main office at

____________________________________________________________________

The Fort Bend County Clerk desires to offer the recording of real property documents by electronic means providing for the receiving and transmitting of documents electronically in substitution for conventional paper based documents and to assure that transactions are not legally invalid or unenforceable as a result of the use of available electronic technologies, to the mutual benefit of the parties of the transactions.

For purposes of this Memorandum of Understanding, Electronic Recording is defined to be the electronically based submitting of documents from COMPANY to COUNTY CLERK and electronically based receipt of confirmation of recording from COUNTY CLERK to COMPANY based on the level of automation and structure of the transaction and is characterized by four different models (a.k.a. levels) of automation and structure as follows:

MODEL 1 Submitting organizations transmit scanned image copies of ink signed documents to the county clerk. The county clerk completes the recording process in the same way as paper using the imaged copy as the source document. An electronic recording endorsement is returned to the organization in the form of a label or printing process in order for the submitting organization to append that information to the original paper document.

MODEL 2 Submitting organizations transmit scanned images of ink signed documents along with electronic indexing information to the county clerk. The county clerk performs an electronic examination of the imaged documents and indexing data, and then completes the recording process using the imaged copy and electronic indexing information. The electronic version of the recorded document is returned electronically to the submitting organization along with the electronic recording data.

MODEL 3 Submitting organizations transmit documents, which have been created, signed and notarized electronically along with the electronic indexing information. Electronic signatures must comply with UETA and E-Sign specifications. The county performs an electronic examination of the electronic documents and indexing information then completes the recording process using the electronic documents. The electronic version of the recorded document and electronic recording data is returned to the submitting organization.



MOU – ELECTRONIC RECORDING

Fort Bend County

MODEL 4 Submitting organizations transmit “Smart” documents which are a single object containing the electronic version of the document in such a way that enables the electronic extraction of data from the object. Smart documents are required to be signed and notarized electronically. The Smart document is endorsed electronically by the county and returned in Smart document format to the submitting organization.

Program Eligibility

Title Insurance Companies, Mortgage Bankers, Full Service Banks and other trusted entities may, directly or through a trusted third party provider, submit real property records for Electronic Recording. Electronic Recording mandates a close working relationship as well as mutual trust between the COUNTY CLERK, COMPANY, AND ELECTRONIC RECORDING PROVIDER. All parties of the Electronic Recording transaction desire to operate and maintain a secure recording system that safeguards parties to recordation from deceit, fraud and forgery. This Memorandum of Understanding outlines the procedures and rules for the trusted relationship between the parties involved in Electronic Recording in order to facilitate a safe and secure Electronic Recording relationship.


There will be no added fees or costs of any kind charged by the COUNTY CLERK for Electronic Recording although COMPANY will be required to meet COUNTY CLERK requirements in order to record electronically.

County Requirements

The Electronic Recording Program of Fort Bend County is defined by the requirements attached to this Memorandum of Understanding.

Attachment A defines the technical specifications including format, levels of recording supported, transmission protocols, and security requirements of the electronic records required by COUNTY CLERK. COMPANY agrees to provide the transmission to the COUNTY CLERK following the specifications outlined. Company understands that the specifications may change from time to time. In the event changes to the specification are required, the COUNTY CLERK will provide a written notice to the Company within a reasonable timeframe.

Attachment B contains the document and indexing specifications for the Electronic Recording program. For each document, the COUNTY CLERK specific document title is provided along with the required indexing information. The COUNTY CLERK has the right to edit, change and delete any indexing information provided as necessary.




Fort Bend County

Attachment C contains the processing schedules and hours of operation for the Electronic Recording Program. Neither party shall be liable for any failure to perform processing of the transactions and documents where such failure results from any act of Nature or other cause beyond the party’s reasonable control (including, without limitation, any mechanical, electronic or communications failure which prevents the parties from transmitting or receiving the electronic recording transactions. If the COUNTY CLERK system causes delays or power failures interfere with the normal course of business, the COUNTY CLERK will notify the affected COMPANY with a choice of using a courier service or waiting until the problem has been remedied.


COUNTY CLERK Responsibilities

COUNTY CLERK shall attempt to protect the integrity of the Recordation process through ongoing monitoring of documents received and recorded through Electronic Recording means.

COUNTY CLERK shall work with ELECTRONIC RECORDING PROVIDER and COMPANY to install, configure, and administer necessary infrastructure components to facilitate Electronic Recording.

COUNTY CLERK shall test and maintain Electronic Recording software and hardware required to operate the Electronic Recording capability. COUNTY CLERK, however, shall be held harmless and not liable for any damages resulting from software or equipment failure.

COUNTY CLERK shall institute security to authenticate communications with COMPANY.

COUNTY CLERK shall apply the same level of diligence in handling documents submitted electronically as those submitted through the normal manual process.




Fort Bend County

ELECTRONIC RECORDING PROVIDER Responsibilities

ELECTRONIC RECORDING PROVIDER is responsible for providing, supporting, and maintaining Electronic Recording Software and internal Recording Software to COUNTY CLERK.

ELECTRONIC RECORDING PROVIDER shall ensure that Electronic Recording Software is secure and that once documents are received that they remain immutable until such time as they are recorded. Limited to software executable and not the network environment provided by the COUNTY CLERK.

ELECTRONIC RECORDING PROVIDER shall work with COMPANY, and COUNTY CLERK to resolve issues encountered in the Electronic Recording process that are within the scope of the ELECTRONIC RECORDING PROVIDERS software

ELECTRONIC RECORDING PROVIDER, through the Electronic Recording software, shall maintain an audit trail of documents received, ID received from, dates and times received, receipts transmitted to COMPANY, and any errors encountered.

COMPANY Responsibilities




By use of electronic or digital certificates to sign documents COMPANY intends to be bound to those documents for all purposes as fully as if paper versions of the documents had been manually signed.




Fort Bend County

By use of electronic or digital certificates to sign documents, COMPANY intends to be bound by those electronic signatures affixed to any documents and such electronic signature shall have the same legal effect as if that signature was manually affixed to a paper version of the document.

By use of digital certificates to seal electronic files containing images of original paper documents or documents bearing manual signatures, COMPANY shall recognize such sealed images for all purposes as fully as the original paper documents and shall be responsible for any failure by Users to comply with quality control procedures for assuring the accuracy and completeness of the electronic files.

The COMPANY and or its’ employees attest to the accuracy and completeness of the electronic records and acknowledge responsibility for the content of the documents submitted through the Electronic Recording Program. Should a dispute or legal action arise concerning an electronic transaction, the COUNTY CLERK as well as Fort Bend County will be held harmless and not liable for any damages.

COMPANY is responsible for receiving receipt of documents recorded by COUNTY CLERK insuring that the source of the receipt is known to be the COUNTY CLERK. COMPANY is responsible for forwarding these documents to COUNTY CLERK insuring that the source of the documents is known to be the COMPANY who has been authenticated and that the documents to be recorded pass from COMPANY to COUNTY CLERK without modification. COMPANY must maintain an audit trail of all activity, available to COUNTY CLERK or ELECTRONIC RECORDING PROVIDER, at their request, to resolve issues or investigate potential fraudulent activity. The audit trail must contain, at a minimum, submitter ID, submitted content at point of receipt from COMPANY, submitted content as at point of delivery to COUNTY CLERK, dates and times submitted, size, and check sum.

COMPANY is responsible for supporting any technical issues associated with Electronic Recording. COMPANY shall work, in good faith, with ELECTRONIC RECORDING PROVIDER, and COUNTY CLERK to resolve issues with the Electronic Recording process.

COMPANY shall provide end user support to both ELECTRONIC RECORDING PROVIDER and COUNTY CLERK through which problems or issues can be reported and addressed. In the event that problem is determined to be with the Electronic Recording software and not the infrastructure provided the COMPANY shall work to resolve issues with COUNTY CLERK and ELECTRONIC RECORDING PROVIDER.

COMPANY is solely responsible for any and all costs of the system or services that enables COMPANY to meet the Electronic Recording Program requirements.

COMPANY is responsible for coordinating all technical problems and issues through COUNTY CLERK.




Fort Bend County

General Understanding

COUNTY CLERK will not incur any liability for the information electronically transmitted by the COMPANY to COUNTY CLERK.

COUNTY CLERK will not incur any liability for any breach of security, fraud or deceit as a result of Electronic Recording.

Neither the COUNTY CLERK nor COMPANY, nor ELECTRONIC RECORDING PROVIDER shall be liable to the other for any special, incidental, exemplary or consequential damages arising from or as a result of any delay, omission or error in the Electronic Recording transmission or receipt.

The COUNTY CLERK and COMPANY will attempt in good faith to resolve any controversy or claim arising out of or relating to Electronic Recording through either negotiation or mediation prior to initiating litigation.


The COUNTY CLERK, COMPANY, and ELECTRONIC RECORDING PROVIDER understands that the electronic recording process is an emerging technology and that State and National standards will continue to evolve. To further the technology and the electronic recording process, the COUNTY CLERK agrees to provide written notification to COMPANY of any proposed changes and additions to this Memorandum of Understanding. At that time, an addendum to the Memorandum of Understanding will be submitted to the COMPANY for signature.




Fort Bend County


By: ___________________________ (COMPANY)

Name ________________________________, Title __________________________

Date: ________________________________

By: ___________________________ (COMPANY)

Name ________________________________, Title __________________________

Date: ________________________________

By: ___________________________ (COUNTY CLERK)

Name_Dr. Dianne Wilson , Title County Clerk

Date: ______________________

By: ___________________________ (ELECTRONIC RECORDING PROVIDER)

Name_________________________________

Date: ________________________________



Attachment A



PRIA file format standard will be used. Images will be in multi- page Group IV TIFF format. The COMPANY can work with the ELECTRONIC RECORDING PROVIDER and COUNTY CLERK to provide additional fields (extensions) to the current PRIA standard.

Communications Protocol and Options

TCP/IP, HTTP and HTTPS

Security Framework

Encryption will be 128bit-file and image encryption. SSL and user login/password will be employed. User passwords will be changed on a quarterly basis.


PRIA file format standard will be used. Images will be in multi-page Group IV TIFF format.


MODEL 3 & MODEL 4

MODEL 3 AND MODEL 4 will not be used at this time. However, COUNTY CLERK reserves the right to revisit this at a later date with COMPANY.

Imaging Standards




Scanned documents will be legible. Legible in this instance means a clear, readable image – including signatures and notary seals – and in which all portions of each page are captured.

Document font size must meet PRIA minimum standards.

Margins will consist of a minimum of a 3” top margin on the first page, 1” top margin on subsequent pages and ½” side and bottom margins on all pages.



Attachment B


Eligible Document Types

All document types sized 8 ½” by 14” or smaller will be acceptable, with the following exceptions:

1. Military Discharges must be original or a military certification

2. Death Certificates (if filed as an attachment) must be an original or certified copy from the original issuing agency

COUNTY Specific Document Type Coding

Please refer to Attachment E, PRIA Logical Data Dictionary, which lists all the acceptable “Document Types”. It is the COUNTY CLERK intention to NOT reject documents based on “incorrect” or non-County specific document types. Rather the COUNTY CLERK will correct the document type as part of the acceptance process.

Indexing Fields for each Document Code

All documents submitted will require the minimum index fields:

Grantor(s)

Grantee(s)

Document Type

Number of Pages

Recording Fee

Property Address (only if noted on documents)

GF # (if applicable)

Returnee Name (Submitter’s Name)

Grantee’s Legal Mailing Address, which includes Street or Post Office Box, City, State and ZIP Code, MUST be clearly identified on property conveyance as per Texas Property Code 11.003



Specific Editing requirement for each Document

Business names will be entered into the “LAST NAME” field.

Business names should be indexed as they appear on the document, excluding punctuation with the exception of the”&’ and .com. Examples:

123 BROADWAY GRILL! = 123 BROADWAY GRILL

not ONE TWENTY THREE BROADWAY GRILL

not ONE TWO THREE BROADWAY GRILL!

JACK FROST, PC = JACK FROST PC

A-1 OPTICAL INSURANCE CO = A1 OPTICAL INSURANCE CO

Not A-1 OPTICAL INSURANCE CO

Not A 1 OPTICAL INSURANCE CO

VAN DER WALL BAR & GRILL = VAN DER WALL BAR & GRILL

Not VANDERWALL BAR & GRILL

Not VANDERWALL BAR AND GRILL

All words in a business name should be spelled out as far as possible. No abbreviations should be made. Examples:

FORT BEND COUNTY LIGHTING INDUSTRIAL COMPANY should be indexed:

FORT BEND COUNTY LIGHTING INDUSTRIAL COMPANY and not as:

FT BEND CO LIGHTING INDUST COMPANY or

FORT BEND CO LIGHTING INDUSTRIAL CO

If the complete business name will not fit into the field, do not abbreviate, rather drop the last name that won’t fit.

Indexing Keying Standards

PRIA Standard Index fields will be used when possible. However the COUNTY CLERK reserved the right to make changes to the index fields as necessary.



Document Imaging Quality Control Standards


Submitters will be responsible for the clarity and brightness of the image.

Notary Requirements per Document

It is the responsibility of the COMPANY to confirm that notary signatures and seals are present on all documents that require them. All portions of the seal must be clearly visible and legible.

COUNTY CLERK will not reject a document lacking a notary signature or seal if it not required in the state or country that executed the document.

Inked notary seals are strongly recommended, in place of embossed notary seals that require “darkening” by the COMPANY prior to submittal.

COUNTY CLERK may at its discretion place a “disclaimer” on each document submitted regarding clarity.

Eligible Document Batches

Documents batches will be submitted by escrow account number. In no event will electronic document batches exceed 25 documents in any batch. The County Clerk will consider at a later date to increase the batch limits as the e-Recording process matures.



Attachment C

Service Offering

Hours of Operation

Documents may be submitted at any time during the week. Documents will only be processed on those days and hours that the COUNTY CLERK Office is open to the public for business. Documents will not be processed on COUNTY holidays, weekends, closed due to weather, or in the event of network or equipment failure. COUNTY CLERK will attempt to notify COMPANY by email or phone of any disruption in service. A county holiday schedule is available upon request.

Processing Schedules & Turnaround Timeframe

Documents received prior to 3PM (CST) will be processed (accepted or rejected) the same business day. Documents received after 3PM (CST) may be processed (accepted or rejected) the next working day.

Alternative Delivery Options

There are no other electronic delivery options at this time.

Return to Options

Submitted documents that are accepted for recording will be provided to the COMPANY in electronic format after acceptance. Confirmation of acceptance and recordation will be provided to the COMPANY in electronic format after recordation is complete. This confirmation will include the document image and COUNTY CLERK indexing data. COUNTY CLERK reserves the right to make changes to the index at a later date.




Service Help Contact Information

COUNTY RECORDING CONTACTS:

DIANE SHEPARD: 281-341-8664 [email protected]

PAULINE RANDOLPH: 281-341-8660 [email protected]

COMPANY BUSINESS CONTACT

COMPANY TECHNICAL CONTACT

COUNTY eRecording Vendor: Hart Intercivic, Inc

________________________: 800-223-4278 [email protected]

Name Email address



Attachment D

Payment Options

Payment Options

Escrow account is the only acceptable as the form of payment. Accounts will be summarized on a monthly basis. COMPANY will be responsible for maintaining adequate funds to enable e-Recording. Additional payment methods (ACH, LegalEase, Credit Card) will be considered as the e-Recording process matures.

Requirements for each:

Escrow account must be in place in advance of any submissions.

Account Setup Procedures

Upon execution on the MOU, the COMPANY will submit funds in an amount no less than $100.00 for initial deposit in the escrow account.

Reporting and Reconciliation

COUNTY CLERK will be responsible for maintaining and reconciling their receipts. Documents will not be accepted if adequate funds are not available by escrow account balance. COMPANY will be responsible for submitting account information with each document batch, and for reconciling their records.

Exception Handling

Any discrepancy in fees discovered by COUNTY CLERK after document acceptance will be corrected by COUNTY CLERK within five business days and COMPANY will be provided with a notification of the error.

End of MOU



EXHIBIT 3



THIS MEMORANDUM OF UNDERSTANDING is between the Office of the County Clerk, Brazoria County (“COUNTY CLERK”), Landata Technologies, Inc., (“ELECTRONIC RECORDING PROVIDER”), and ________________________ (“COMPANY”) with main office at ________________________________.

Pursuant to Texas Local Government Code, Chapter 195, COUNTY CLERK desires to offer the recording of real property documents by electronic means providing for the receiving and transmitting of documents electronically in substitution for paper based documents to the mutual benefit of the parties of the transactions.

For purposes of this Memorandum of Understanding, Electronic Recording is defined to be the electronically based submission of documents from COMPANY to COUNTY CLERK and electronically based receipt of confirmation of recording from COUNTY CLERK to COMPANY based on the level of automation and structure of the transaction characterized by the following four levels of electronic recording:

Level 1 – Submitting organizations transmit scanned images of ink signed documents to the COUNTY CLERK. The COUNTY CLERK performs an electronic examination of the imaged documents, and then completes the recording process using the imaged copy. The electronic version of the recorded document imprinted with the recordation stamps is returned electronically to the submitting organization.

Level 2 -- Submitting organizations transmit scanned images of ink signed documents along with electronic indexing information to the COUNTY CLERK. The COUNTY CLERK performs an electronic examination of the imaged documents and indexing data, and then completes the recording process using the imaged copy and electronic indexing information. The electronic version of the recorded document imprinted with the recordation stamps is returned electronically to the submitting organization.

Level 3 -- Submitting organizations transmit documents created, signed and notarized electronically along with the electronic indexing information. Electronic signatures must comply with UETA and E-Sign specifications. The COUNTY CLERK performs an electronic examination of the electronic documents and indexing information then completes the recording process using the electronic documents. The electronic version of the recorded document imprinted with recordation stamps is returned electronically to the submitting organization.

Level 4 -- Submitting organizations transmit “Smart” documents which are a single object containing the electronic version of the document in such a way that enables the electronic extraction of data from the object. Smart documents are required to be signed and notarized electronically. The Smart document is endorsed electronically by the COUNTY CLERK and returned in Smart document format to the submitting organization.

Program Eligibility



Title Insurance Companies, Mortgage Bankers, Full Service Banks and other trusted entities that are approved as persons/entities authorized to file electronically pursuant to V.T.C.A Local Government Code, Section 195.003, may utilize the submitter application of the Electronic Recording Provider or its business partner(s), to submit real property records for Electronic Recording. Electronic Recording mandates a close working relationship as well as mutual trust between the COUNTY CLERK, COMPANY, AND ELECTRONIC RECORDING PROVIDER. All parties of the Electronic Recording transaction desire to operate and maintain a secure recording system that safeguards parties to recordation from deceit, fraud and forgery. This Memorandum of Understanding outlines the procedures and rules for the trusted relationship between the parties involved in Electronic Recording in order to facilitate a safe and secure Electronic Recording relationship.


There will be no added fees or costs of any kind charged by the COUNTY CLERK for Electronic Recording although COMPANY will be required to meet COUNTY requirements in order to record electronically.

COUNTY CLERK Requirements

The Electronic Recording Program of the COUNTY CLERK is defined by the requirements attached to this Memorandum of Understanding (see Attachments A-D).

Attachment A defines the technical specifications including format, levels of recording supported, transmission protocols, and security requirements of the electronic records required by COUNTY CLERK. Company agrees to provide the transmission to the COUNTY CLERK following the specifications outlined. Company understands that the specifications may change from time to time. In the event changes to the specification are required, the COUNTY will provide a written notice to the Company within a reasonable timeframe.

Attachment B contains the document and indexing specifications for the Electronic Recording program. For each document, the COUNTY CLERK specific document code is provided along with the required indexing information. Any COUNTY CLERK specific editing rules will also be described in this attachment.

Attachment C contains the processing schedules and hours of operation for the Electronic Recording Program. No party shall be liable for any failure to perform processing of the transactions and documents where such failure results from any act of Nature or other cause beyond the party’s reasonable control (including, without limitation, any mechanical, electronic or communications failure which prevents the parties from transmitting or receiving the electronic recording transactions. If the COUNTY CLERK system causes delays or power failures interfere with the normal course of business. By this agreement, COUNTY CLERK is assuming no contractual liability whatsoever for any failure to record any document, delay in recording any document, or for the quality or content or lack thereof of any document presented for recording.


COUNTY CLERK Responsibilities

COUNTY CLERK shall attempt to protect the integrity of the Recordation process through ongoing monitoring of documents received and recorded through Electronic Recording means.

COUNTY CLERK shall work with ELECTRONIC RECORDING PROVIDER and COMPANY to install, configure, and administer necessary infrastructure components to facilitate Electronic Recording.

COUNTY CLERK shall test and maintain Electronic Recording software and hardware required to operate the Electronic Recording capability. COUNTY CLERK, however, shall be held harmless and



not liable for any damages resulting from software or equipment failure and assumes no contractual liability for any damages whatsoever via any part of this document.

COUNTY CLERK shall institute security through the ELECTRONIC RECORDING PROVIDER to authenticate communications with COMPANY.

COUNTY shall apply the same level of diligence in handling documents submitted electronically as those submitted through the normal manual process.

ELECTRONIC RECORDING PROVIDER Responsibilities

ELECTRONIC RECORDING PROVIDER is responsible for providing, supporting, and maintaining Electronic Recording Software installed in the COUNTY CLERK office.

ELECTRONIC RECORDING PROVIDER shall ensure that Electronic Recording Software is secure and that documents submitted electronically by COMPANY to the COUNTY CLERK are immutable until such time as they are recorded. Limited to software executable and not the network environment provided by the COUNTY CLERK.

ELECTRONIC RECORDING PROVIDER shall work with COMPANY, and COUNTY CLERK to resolve issues encountered in the Electronic Recording process that are within the scope of the ELECTRONIC RECORDING PROVIDERS software.

ELECTRONIC RECORDING PROVIDER, through the Electronic Recording software, shall maintain an audit trail of documents received. The audit trail must contain, at a minimum, submitter ID, submitted content at point of receipt from COMPANY, submitted content as at point of delivery to COUNTY, dates and times submitted, size, and checksum and any errors encountered.

COMPANY Responsibilities




By use of electronically signed documents COMPANY intends to be bound to those documents for all purposes as fully as if paper versions of the documents had been manually signed.

By use of electronically signed documents, COMPANY intends to be bound by those electronic signatures affixed to any documents and such electronic signature shall have the same legal effect as if that signature was manually affixed to a paper version of the document.

By use of electronic files containing images of original paper documents or documents bearing manual signatures, COMPANY shall recognize such sealed images for all purposes as fully as the original paper documents and shall be responsible for any failure by Users to comply with quality control procedures for assuring the accuracy and completeness of the electronic files.

The COMPANY and or its’ employees attest to the accuracy and completeness of the electronic records and acknowledge responsibility for the content of the documents submitted through the Electronic



Recording Program. Should a dispute or legal action arise concerning an electronic transaction, the COUNTY CLERK will be held harmless and not liable for any damages.

COMPANY is responsible for receiving receipt of documents recorded by COUNTY CLERK insuring that the source of the receipt is known to be the COUNTY CLERK. COMPANY is responsible for forwarding these documents to COUNTY insuring that the source of the documents is known to be the COMPANY who has been authenticated and that the documents to be recorded pass from COMPANY to COUNTY CLERK without modification. COMPANY is responsible for supporting any technical issues associated with Electronic Recording. COMPANY shall work, in good faith, with ELECTRONIC RECORDING PROVIDER, and COUNTY to resolve issues with the Electronic Recording process.

COMPANY shall provide end user support to both ELECTRONIC RECORDING PROVIDER and COUNTY through which problems or issues can be reported and addressed. In the event that problem is determined to be with the Electronic Recording software and not the infrastructure provided, the COMPANY shall work to resolve issues with COUNTY CLERK and ELECTRONIC RECORDING PROVIDER.

COMPANY is solely responsible for any and all costs of the submitter application, system or services that enable COMPANY to meet the Electronic Recording Program requirements.

COMPANY is responsible for coordinating all technical problems and issues through the ELECTRONIC RECORDING PROVIDER and COUNTY CLERK.

General Understandings

COUNTY CLERK will not incur any liability for the information electronically transmitted by the COMPANY to COUNTY CLERK.

COUNTY CLERK will not incur any liability for any breach of security, fraud or deceit as a result of Electronic Recording.

Neither the COUNTY CLERK, nor COMPANY, nor ELECTRONIC RECORDING PROVIDER shall be liable to the other for any special, incidental, exemplary or consequential damages arising from or as a result of any delay, omission or error in the Electronic Recording transmission or receipt.

The COUNTY CLERK and COMPANY will attempt in good faith to resolve any controversy or claim arising out of or relating to Electronic Recording through either negotiation or mediation prior to initiating litigation.


The COUNTY, ELECTRONIC RECORDING PROVIDER and COMPANY acknowledges that the electronic recording process is an emerging technology and that State and National standards will continue to evolve. To further the technology and the electronic recording process, the COUNTY CLERK agrees to provide written notification to COMPANY of any proposed changes and modifications to this Memorandum of Understanding. At any time an addendum to this Memorandum of Understanding may be submitted to COMPANY for signature.


BRAZORIA COUNTY LANDATA TECHNOLOGIES, Inc.



____________________________ ____________________________

Joyce Hudman, County Clerk

Date: ______________________ Date: ______________________

[COMPANY]:________________

___________________________

Date: ______________________



Attachment A



Images will be in a multi-page Group IV TIFF format. Index data will be delivered in an industry standard non-proprietary format.

Security Framework

ELECTRONIC RECORDING PROVIDER will insure that electronic recording packages are transmitted in a secure environment.


Images will be in a multi-page Group IV TIFF format with the appropriate recordation stamps. Index data will be delivered in an industry standard non-proprietary format.


Levels 1, 2 and 3 as defined by the Property Records Industry Association (PRIA) will be supported at this time and may be changed in the future.

Electronic Signatures and Use of Digital Certificates

The use of Electronic Signatures and Digital Certificates will not be used at this time. However, COUNTY CLERK reserves the right to revisit this at a later date with COMPANY. COMPANY acknowledges that Electronic Signatures and Digital Certificates will be used in the future and will work with COUNTY CLERK to accommodate their use.

Imaging Standards





COMPANY is responsible for the clarity and brightness of the images.



Attachment B


Eligible Document Types

All document types sized 8 ½” by 14” or smaller will be acceptable, with the following exceptions:

1. Military Discharges must be original or a military certification

2. Death Certificates (if filed as an attachment) must be an original or certified copy from the original issuing agency

COUNTY CLERK Specific Document Type Coding

The COUNTY CLERK will only accept approved document types for electronic recording. The ELECTRONIC RECORDING PROVIDER’S submitter application will enforce this requirement.

Indexing Fields for each Document Code

The COUNTY CLERK will require the following index information to be supplied per document, as part of the electronic recording package:

1. Document Type 6.____________

2. Number of Pages 7.____________

3. ______________ 8.____________

4. ______________ 9.____________

5. ______________ 10.___________

Additional index information may be added and required at any time.

Indexing Keying Standards

The COUNTY CLERK reserves the right to make changes to the index fields as required.

Notary Requirements per Document

It is the responsibility of the COMPANY to confirm that notary signatures and seals are present on all documents required. All portions of the seal must be clearly visible and legible.

Inked notary seals are strongly recommended, in place of embossed notary seals that require “darkening” by the COMPANY prior to submittal.

COUNTY CLERK may at its discretion place a “disclaimer” on each document submitted regarding clarity.



Attachment C

Service Offering

Hours of Operation

Documents may be submitted at any time during the week. Documents will only be processed on those days and hours that the COUNTY CLERK Office is open to the public for business. Documents will not be processed on COUNTY CLERK holidays, weekends, if the office is closed due to weather, etc., or in the event of network or equipment failure. COUNTY CLERK will attempt to notify COMPANY of any disruption in service. A COUNTY CLERK holiday scheduled is available upon request.

Return to Options

Submitted documents that are accepted for recording will be provided to the COMPANY in electronic format after acceptance. Confirmation of acceptance and recordation will be provided to the COMPANY in electronic format after recordation is complete. Returned packages will include the document image complete with all COUNTY CLERK recordation stamps.




Attachment D

Payment Options

Payment Options

Acceptable forms of payment include; ACH electronic transfer of funds, LegalEase, and Escrow Account transfers.

Exception Handling

Any discrepancy in fees discovered by COUNTY CLERK after document acceptance will be corrected by COUNTY CLERK. COMPANY will be provided with a notification of the error.



EXHIBIT 4

HOUSTON (May 31, 2005) – Stewart Title of Fort Bend has completed the first electronic recording of real estate documents into the Fort Bend County Clerk’s Anthem System for document management and recordation. The e-recording was done via the Landata e-Recording System (LERS) by Landata Technologies Inc.

“Electronic recording saves time and resources on both sides,” said Dr. Dianne Wilson, Fort Bend County Clerk. “The county doesn’t have to deal with all the paper generated by a filing and the filer doesn’t have to deal with traffic or bad weather to come to the courthouse.”

“Advancements such as this are the reason why our office has been able to handle a doubling of total filings over the last 11 years without an increase in staff,” said Wilson.

Stewart Title of Fort Bend had earlier this year used the Landata system to e-record in adjacent Brazoria County . However, this is the first e-recording from a LERS submitter into the Hart InterCivic Anthem system.

“We thank Hart InterCivic’s staff for their tireless efforts to integrate the Anthem System into LERS – completing design, development and testing of the integration within two weeks,” said Alan Cellura, president and chief executive officer, Landata Technologies. “With this integration, the LERS application is truly a state-of-the-art solution for submitters.”

LERS is a desktop system for electronic recording, providing title companies and other submitters the same recording functionality as that offered in person at the counter in the courthouse.

“e-Recording cuts our handling of the closing file,” said Mary Alice Gonzalez, president, Stewart Title of Fort Bend . “In addition, we can get a copy of the recorded documents to the buyer and the lender immediately after closing, instead of waiting several days.”

The division supervisor for official public records of Fort Bend County , Diane Shepard, accepted the county’s first electronically-filed real estate property records on April 28. At that time, the four packages – each containing the deed and notices – were generated via LERS and submitted by Stewart Title of Fort Bend County . Scanned images of the documents in addition to index information (grantor, grantee and property information) and cashiering information (document type and number of pages) were received by the county.

The recording was accepted and the document package was electronically stamped, cashiered and loaded into the county’s Anthem database. The electronically recorded and stamped documents were returned along with receipt information to the submitter within several minutes of receipt.

“A submitter can do electronic recording of mortgages, title transfers, liens and other closing documents in Fort Bend County , acting as a remote recording facility through this open systems platform,” said Cellura.

Located immediately southwest of Houston, Fort Bend has been in the top 20 counties in the United States for population growth for more than 15 years. The U.S. Bureau of Census reports that Fort Bend County grew 57 percent in population to 354,452 in the decade 1990-2000. For 2004, Fort Bend County’s population is estimated at 442,620.

Landata Technologies also has implemented e-recording in Bexar County, Texas, and Washington, D.C. , and is working with county clerks and recorders in other jurisdictions across the country.

About Landata Technologies Inc.

Landata Technologies, a wholly owned subsidiary of Stewart Information Services Corp., offers Landata e-STAR Plus™ (an end-to-end solution that manages land records),document conversion services (document / film scanning and indexing), e-recording and data warehousing with e-commerce to government entities and title companies.

About Stewart

Stewart Information Services Corp. (NYSE-STC) is a technology driven, strategically competitive, real estate information and transaction management company. Stewart provides title insurance and related information services required for settlement by the real estate and mortgage industries through more than 7,800 policy-issuing offices and agencies in the United States and international markets. Stewart also provides post-closing lender services, automated county clerk land



records, property ownership mapping, geographic information systems, property information reports, flood certificates, document preparation, background checks and expertise in tax-deferred exchanges. More information can be found at http://www.stewart.com.

Hart Anthem™ is a trademark of Hart InterCivic Inc.



EXHIBIT 5

Brazoria County Clerk demonstrates electronic recording of real estate documents filed via Landata Technologies e-Recording System™

SAN ANTONIO (Jan. 24, 2005) - Brazoria County (Texas) Clerk Joyce Hudman demonstrated to local title companies how the Landata e-Recording System (LERS) works in conjunction with the county's new Landata e-STAR Plus™ document records system to accept electronically-filed real estate documents.

Representatives from eight area title companies viewed the demonstration, which took place at the Clerk's office in Angleton, Texas, on Jan. 21. According to Hudman, 77,136 real property documents were filed during 2004 in Brazoria County, a growing county of nearly 250,000 residents located just south of Houston.

"LERS provides title companies and any other submitters the same recording functionality as that offered in person at the counter in the courthouse," said Alan Cellura, president and chief executive officer, Landata Technologies.

"With this desktop e-recording system, Landata Technologies provides the platform and the submitting title company acts as a remote recording facility," said Cellura. "Basically, any submitter can do electronic recording of mortgages, title transfers, liens and other closing documents here in Brazoria County through this open systems platform."

Hudman accepted the county's first electronically-filed real estate property records on Dec. 13, 2004. At that time, the package containing the deed and deed of trust was generated via LERS and submitted by Stewart Title of Brazoria County. Scanned images of the documents in addition to index information (grantor, grantee and property information) and cashiering information (document type and number of pages) were received by the Brazoria County Clerk.

The recording was accepted and the document package was electronically stamped, cashiered and loaded into the county's e-STAR database. Funds to pay for the recording were automatically transferred from the submitter's account to the Clerk's account through an ACH funds transfer. The electronically recorded and stamped documents were returned along with receipt information to the submitter within an hour of receipt.

"The electronic filing of real property record documents will be a more efficient and effective way of recording," said Hudman. "It will be a great benefit - a win-win situation both for the taxpayers of Brazoria County and the land title industry as well."

Brazoria County officials anticipate that 25 percent to 30 percent of real property records will now be filed electronically.

"LERS is a standalone application that any title company can use, regardless of its title production software," said Cellura. "It also is different from other e-recording applications because it can manage multiple document types using a rules-based architecture."

Cellura said Landata Technologies will be working with all interested title companies within Brazoria County to implement LERS. The system was implemented in Bexar County (San Antonio), Texas, in fall 2004, and is now processing approximately 3,000 documents per month.

About Landata Technologies Inc. Landata Technologies, a wholly owned subsidiary of Stewart Information Services Corp. (NYSE-STC), offers electronic document conversion with indexing services, recordation systems, e-recording and data warehousing with e-commerce to government entities and title companies.

About Stewart Stewart Information Services Corp. is a technology driven, strategically competitive, real estate information and transaction management company. Stewart provides title insurance and related information services through more than 7,800 issuing locations in the United States and several international markets. Stewart meets the needs of the real estate and mortgage industries through the delivery of information services required for settlement using e-commerce. These services include title reports, flood determinations, document preparation, property reports and background checks.



Stewart also supplies post-closing services to lenders, automated county clerk land records, property ownership mapping and GIS for governmental entities. Stewart provides expertise in tax-deferred exchanges. More information about Stewart can be found at www.stewart.com.



EXHIBIT 6

Friday, November 18, 2005 Company Products Order Library Tools Links Support

View E-Recording Guide

e-Recording available through PeirsonPatterson, LLP (www.ppdocs.com).

PeirsonPatterson, LLP (Arlington) has teamed up with leaders in the e-Recording industry allowing title companies and lenders the ability to electronically file and receive recording verification of real estate filings. The process now only takes a couple hours, instead of days or weeks. This service is available to any entity authorized to submit documents for recording in the perspective county.

• register

What is recording?

Recording is the act of entering deeds, mortgages, easements, and other written instruments that affect title to real property into the public record. The purpose of recording is to give notice, to anyone who is interested, of the various interests that parties hold in a particular property. Recording determines the legal priority of instruments that affect title to a particular property.

• register

What is "e-Recording"?

"e-Recording" is the same as traditional recording with one big difference. Instead of a person physically delivering or mailing the executed documents to the recording entity (County Clerk) and then waiting a long period of time before getting the recording information, the documents are delivered - with specific indexing data â€“ electronically over the Internet. This allows the recording entity to assign the recording information in a timelier manner and return an image of the recorded documents with their recording information.

• register

How does "e-Recording" work?

After closing, the executed and notarized documents are scanned by either the title company or lender at 200dpi in TIFF or PDF format.

Complete the required County indexing information via the e-Recording portal on www.ppdocs.com.

The scanned documents are uploaded to www.ppdocs.com via HTTP protocol.

The indexing information and scanned documents are submitted to the appropriate County.

County records the document and returns an electronically stamped copy in a couple hours or less.

• register

Who can use "e-Recording"?

Title insurance companies, mortgage bankers, full service banks, attorneys and other approved parties to record documents affecting the title to real property in the respected county are eligible to record documents electronically.



• register

What type of documents are eligible for "e-Recording"?

The type of documents available for e-Recording vary by county. See the table below for an overview. However, some counties will allow additional types of documents to be e-Recorded. Electronically recorded instruments have not been fully embraced by large lenders. It is recommended that you contact your investor to verify that they will accept electronically recorded instruments.

• register

How much does "e-Recording" cost?

You can e-Record your documents for the cost of the County's filing fees plus a $5 convenience fee. PeirsonPatterson, LLP will bill you monthly for all filing fees and convenience charges for that month.

• register

Current list of Counties accepting e-Recordings for real estate transactions.

State County Deeds Mortgages Releases Assignments Availability

Arizona Maricopa Y Y Y Y Fall 2005

Arapahoe-PT N N Y N Fall 2005

Boulder Y Y Y Y Fall 2005

Boulder - Public Trustee N N Y N Fall 2005

Douglas - Public Trustee N N Y N Fall 2005

El Paso Y Y N Y Now

Jefferson Y Y Y Y Fall 2005

Pueblo-PT N N Y N Fall 2005

Weld Y Y Y Y Fall 2005

Colorado

Weld - Public Trustee N N Y N Fall 2005

District of Columbia Washington Y Y Y Y Fall 2005

Bay Y Y Y Y Fall 2005

Broward Y Y Y Y Fall 2005

Duval Y Y Y Y Fall 2005

Florida

Orange N Y Y Y Fall 2005

Cook Y Y Y Y Now

Lake Y Y Y Y Fall 2005

Illinois

Winnebago N Y Y Y Now



Kennebec Y Y Y Y Fall 2005 Maine

York Y Y Y Y Fall 2005

Massachusetts Middlesex N Y Y Y Y Now

Ingham N Y Y Y Fall 2005

Macomb Y Y Y Y Now

Oakland Y Y Y Y Fall 2005

Michigan

Ottawa Y Y Y Y Now

Missouri City St. Louis N Y Y Y Fall 2005

New Hampshire Merrimac Y Y Y Y Fall 2005

Gloucester Y Y Y Y Fall 2005 New Jersey

Monmouth N Y Y Y Fall 2005

Mecklenburg N N Y N Fall 2005 North Carolina

New Hanover N N N Y Now

Oklahoma Tulsa Y Y Y Y Now

Pennsylvania Philadelphia N N Y N Fall 2005

Bexar Y Y Y Y Fall 2005

Brazoria Y Y Y Y Fall 2005

Dallas Y Y Y Y Fall 2005

Denton Y Y Y Y Now

Ft. Bend Y Y Y Y Now

Nueces Y Y Y Y Fall 2005

Tarrant Y Y Y Y Now

Webb Y Y Y Y Fall 2005

Texas

Williamson Y Y Y Y Now

Henrico Y Y Y Y Fall 2005 Virginia

Spotsylvania Y Y Y Y Fall 2005

Washington King N Y Y Y Now



Pierce N Y Y Y Fall 2005

Snohomish N Y Y Y Now

Brown N Y Y Y Fall 2005

Dane soon Y Y Y Fall 2005

Wisconsin

Milwaukee N Y Y Y Fall 2005

© 2005 PeirsonPatterson, LLP. All rights reserved.

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EXHIBIT 7

Nov 18 2005

Hart InterCivic’s Anthem System Integrates with Landata e-Recording System to Enable Remote Electronic

Recording

published October 26, 2005

Landata Technologies Inc. and Hart InterCivic have signed an alliance agreement supporting integration between the Landata e-Recording System™ (LERS) and the Hart InterCivic Anthem™ System, a document management and imaging system for county clerks and registers of deeds that fully supports electronic recording through its eRecorder module. “This agreement provides full-service support via LERS for submitters – usually title companies, attorneys, banks and lenders – to seamlessly electronically record all types of real estate documents in counties using the Anthem System,” said Alan Cellura, president and chief executive officer, Landata Technologies. “With this integration, submitters can remotely file electronic land records with county recorders from their offices, utilizing Hart’s Anthem recordation system and eRecording module,” said Cellura. “Our LERS/Anthem program helps counties reduce operating costs in cashiering, indexing, stamping, return mailing and personnel.” Earlier this year, Hart InterCivic’s Anthem System in Fort Bend County, Texas, (located just southwest of Houston), accepted real estate documents recorded electronically using LERS. Landata Technologies and Hart InterCivic currently are working to implement the LERS e-recording integration in Tarrant County, Texas, and have plans to implement this same integration with Anthem Systems in Colorado, North Carolina and Washington by year-end. “We are excited about helping our county customers to further streamline their processes and to make their offices more efficient,” said Matt Walker, vice president of business development for Hart InterCivic. “Our integration with LERS helps us to continue to promote increased adoption of eRecording technology, thus adding another submission stream for electronically submitted documents to be processed by our Anthem eRecorder module.” The Hart Anthem eRecorder module offers the county a proven way to electronically accept and record multiple document types. The open architecture provides a vendor-neutral approach that handles all levels of electronically recorded documents faster and with the assurance that industry standards have been met. LERS is a desktop, standalone application on an open systems platform, using a rules-based architecture to manage all document types for imaging and transmission. The secure electronic submission of documents includes electronic document images, index information and cashiering information. About Landata Technologies, Inc. Landata Technologies, a wholly owned subsidiary of Stewart Information Services Corp. (NYSE-STC), offers electronic document conversion with indexing services, recordation systems, e-recording and data warehousing with e-commerce to government entities and title companies. More information can be found at http://www.landata.com/.



About Stewart Information Services Corporation Stewart Information Services Corp. is a technology driven, strategically competitive, real estate information and transaction management company. Stewart provides title insurance and related information services required for settlement by the real estate and mortgage industries through more than 8,000 policy-issuing offices and agencies in the United States and international markets. Stewart also provides post-closing lender services, automated county clerk land records, property ownership mapping, geographic information systems, property information reports, flood certificates, document preparation, background checks and expertise in tax-deferred exchanges. More information can be found at http://www.stewart.com. About Hart InterCivic, Inc. From electronic voting to the most effective technologies for automating local government processes, Hart InterCivic’s name stands for exceptional expertise, absolute accessibility, and trusted transactions. Hart InterCivic is a leader in providing products and services that help redefine the relationship between state and local governments and the citizens they serve. Hart InterCivic, with offices in the U.S., including company headquarters in Austin, Texas, is working nationwide to bring governments closer to citizens through complete government technology solutions. More information about Hart InterCivic is available from the company’s Website at www.hartintercivic.com. Anthem is a trademark of Hart InterCivic Inc. LERS is a trademark of Landata Technologies Inc.

Contact Information

Michelle M. Shafer 512.252.6669 [email protected]

Secondary Contact Information

Alan Cellura 877.LANDATA [email protected] Stewart Information Services

[email protected]

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