CMM Title Research & Due Diligence 3 — Questions and Answers
Question 1: When examining a mineral deed that contains a 'subject to' clause referencing a prior lease, a title examiner should primarily determine:
- Whether the lease has terminated or is still in force (Correct answer)
- The total acreage covered by the prior lease
- The identity of all working interest owners under the prior lease
- Whether the lessee has paid all delay rentals on time
Correct answer: Whether the lease has terminated or is still in force
The examiner must determine whether the referenced lease has terminated because a live lease encumbers the mineral estate and affects the bundle of rights being conveyed.
Question 2: Which of the following best describes a 'non-participating royalty interest' (NPRI)?
- A royalty interest that participates in lease bonuses and delay rentals
- A royalty carved from the mineral estate that does not share in lease bonuses, rentals, or executive rights (Correct answer)
- A working interest that bears no proportionate share of production costs
- A royalty interest held by the surface owner in lieu of damages
Correct answer: A royalty carved from the mineral estate that does not share in lease bonuses, rentals, or executive rights
An NPRI is carved from the mineral estate and entitles the owner to a fraction of production or its value but does not include the right to bonus, rentals, or the power to execute leases.
Question 3: In a title opinion, a 'curative' requirement typically means:
- The title is unmarketable and cannot be cured
- Specific documents or actions must be obtained to remove a title defect before closing (Correct answer)
- The operator must plug and abandon all dry holes before assignment
- Environmental cleanup must be completed prior to mineral acquisition
Correct answer: Specific documents or actions must be obtained to remove a title defect before closing
Curative requirements identify defects in the title chain that must be remedied—such as obtaining missing probate documents, correcting acknowledgments, or recording missing conveyances—before the title is acceptable.
Question 4: Which doctrine allows a court to reform a deed that, due to a mutual mistake, does not reflect the parties' true agreement?
- Adverse possession
- Equitable reformation (Correct answer)
- Estoppel by deed
- After-acquired title
Correct answer: Equitable reformation
Equitable reformation allows a court to correct a written instrument that, due to mutual mistake or fraud, does not accurately express the parties' actual agreement.
Question 5: A title examiner discovers a gap in the chain of title where a grantor's name differs slightly between documents. The BEST immediate step is to:
- Reject the title as unmarketable without further review
- Search for an affidavit of identity or other evidence that both names refer to the same person (Correct answer)
- Require a new deed from the current record owner
- File a quiet title action immediately
Correct answer: Search for an affidavit of identity or other evidence that both names refer to the same person
Minor name variations are often explained by an affidavit of identity or supporting records such as marriage certificates, which can cure the apparent gap without litigation.
Question 6: The 'executive right' in a mineral estate refers to:
- The right to receive royalty payments from production
- The right to lease the mineral estate and negotiate lease terms (Correct answer)
- The right to enter the surface for exploration purposes
- The right to receive delay rental payments
Correct answer: The right to lease the mineral estate and negotiate lease terms
The executive right is the power to execute oil and gas leases and bind all co-owners of the mineral estate to the terms negotiated; it can be separated from other mineral rights.
Question 7: Under the 'cy-pres' doctrine as applied in some states to charitable or institutional mineral grants, the primary effect on title research is:
- Charitable organizations are exempt from paying ad valorem taxes on minerals
- Courts may modify the original grant terms to meet changed circumstances rather than allowing the grant to fail (Correct answer)
- Mineral grants to charities automatically expire after 50 years
- Educational institutions must obtain legislative approval before leasing minerals
Correct answer: Courts may modify the original grant terms to meet changed circumstances rather than allowing the grant to fail
Cy-pres allows courts to modify the terms of a charitable gift or institutional grant so it can continue to serve its original purpose when literal compliance is impossible, affecting how such grants are interpreted in title research.
CMM Title Research & Due Diligence 3
When examining a mineral deed that contains a 'subject to' clause referencing a prior lease, a title examiner should primarily determine: