DANGERS ASSOCIATED WITH USE OF AND …DANGERS ASSOCIATED WITH USE OF AND RELIANCE UPON PRIOR TITLE OPINIONS ALLEN D. CUMMINGS Haynes and Boone, LLP 1000 Louisiana Street, Suite 4300

DANGERS ASSOCIATED WITH USE OF AND RELIANCEUPON PRIOR TITLE OPINIONS

ALLEN D. CUMMINGSHaynes and Boone, LLP

1000 Louisiana Street, Suite 4300Houston, Texas 77002

ADVANCED OIL, GAS AND ENERGY RESOURCES LAW 2002State Bar of TexasOctober 3-4, 2002

Dallas

CHAPTER 10

ALLEN D. CUMMINGS

HAYNES AND BOONE, LLPHOUSTON, TEXAS

ALLEN D. CUMMINGS is Senior Counsel in the Houston office of HAYNES AND BOONE,LLP. Mr. Cummings specializes in oil and gas transactions and oil and gas litigation. He haspracticed law in the energy arena, in corporate legal departments and in private practice, since1975 and is Board Certified in Oil, Gas & Mineral Law by the Texas Board of LegalSpecialization.

Mr. Cummings has:• represented producers, large and small - onshore and offshore, in all aspects of

exploration, exploitation and production, including title examination, exploration,operating and other participation and sharing agreements, pooling and unitization,production purchases and sales, and financing;

• Represented financial institutions and producers in reserve-based financing andspecialized financing vehicles, such as tax credit, net profits and production paymentpurchases.

• Represented producers and financial institutions in the trial of oil and gas issues.

Allen Cummings is currently the Immediate Past Chair of the State Bar of Texas Oil, Gas &Energy Resources Law Section and he is a past Chair of the Oil, Gas & Mineral Law Section ofthe Houston Bar Association. He is also a frequent speaker at seminars dealing with oil, gas andenergy law, including those sponsored by the State Bar of Texas, the University of Texas Schoolof Law, the University of Houston Law Foundation, the Southwestern Legal Foundation, theRocky Mountain Mineral Law Foundation and the American Association of ProfessionalLandmen.

Dangers Associated With Use of and Reliance Upon Prior Title Opinions Chapter 10

PREFACE

This paper discusses the risks undertaken by a title examiner in relying on prior title opinions as partof the basis for his/her title opinion. We have not found any cases that directly treat this issue. In fact, wedid not find any cases that specifically address the liability of attorneys rendering title opinions. One casethat mentions an attorney’s liability for his title opinion is Gavenda v. Strata Energy, Inc., 705 S.W.2d690 (Tex. 1986). In this case an attorney hired to do a title opinion erroneously reported that the plaintiffswere entitled to a 1/16th royalty, rather than the actual 1/2 royalty, resulting in the Gavendas beingunderpaid by a 7/16th royalty. The suit sought to collect more than 2.4 million dollars underpaid to theGavendas, as a result of the examining attorney’s mistake in construing the reservation of a term non-participating royalty interest. The court merely noted that the attorney’s negligence in preparing hisopinion was attributed to the client.

Therefore, because we did not find any cases directly on point, we used analogous cases dealing generallywith attorney opinions, attorney liability to clients and third parties to prepare Part I of the paper dealingwith the standard of care and limitations on liability. The second part of the paper is based on thisauthor’s experience as a title examiner from 1978 to date.

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TABLE OF CONTENTS

PART ONE: Standard of Care and Limitations on Liability of the Title Examiner ............. 1

I. STANDARD OF CARE ........................................................................................................ 1A. General Rule..................................................................................................................... 1B. To Whom Does the Duty Extend?.................................................................................... 1C. Standard of Care ............................................................................................................... 2D. All the Facts and Circumstances ...................................................................................... 3

1. Experience................................................................................................................. 32. Method of Examination............................................................................................. 33. Complexity of Title ................................................................................................... 44. Purpose of Examination & Quantum of Risk............................................................ 4

II. LIMITATIONS ON LIABILITY......................................................................................... 4A. To The Client.................................................................................................................... 4B. To Third Parties................................................................................................................ 6

PART TWO: The Standard of Care in Practice (The Risks of Relying on Prior TitleOpinions) ................................................................................................................................. 7

III. INTRODUCTION ................................................................................................................. 7A. The Identity of the Examiner............................................................................................ 8B. Clear, Understandable and Internally Consistent ............................................................. 8C. The Opinion’s Purpose and Limitations........................................................................... 9

1. Title Memorandum.................................................................................................... 92. Lease Acquisition Opinion........................................................................................ 93. Drilling Title Opinion................................................................................................ 94. Division Order Title Opinion .................................................................................. 105. Reliance Expressly Limited .................................................................................... 10

D. Basis of Examination...................................................................................................... 10E. Time Period Covered...................................................................................................... 11F. Tabulation of Ownership................................................................................................ 11G. Prior Requirements Satisfied.......................................................................................... 12

IV. CONCLUSION .................................................................................................................... 12


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DANGERS ASSOCIATED WITHUSE OF AND RELIANCE UPONPRIOR TITLE OPINIONS

PART ONE:Standard of Care and Limitations onLiability of the Title Examiner

I. STANDARD OF CAREA. General Rule

In his treatise, Examination of Titles, GeorgeW. Thompson observed that "on the performanceof his duty, counsel undertakes to act withreasonable care and ordinary skill. Good faith andhonest service must be given, but questions of thepresence or absence of reasonable care andordinary skill must be determined by the facts ofeach case. . . ." G. Thompson, Examination ofTitles § 236, p. 253 (1929). The standard of carenoted by George W. Thompson in 1929 wasechoed in 1989 by the Texas Supreme Courtwhen it stated that "a lawyer in Texas is held to thestandard of care which would be exercised by areasonably prudent attorney." Cosgrove v. Grimes,774 S.W.2d 662, 664 (Tex. 1989); See also,Bobbitt v. Weeks, 774 S.W.2d 638, 639 (Tex.1989) per curiam and Ballesteros v. Jones, 985S.W.2d 485, 495 (Tex. App. – San Antonio 1998,pet. denied). In evaluating the attorney's conduct,all of the facts and circumstances existing at thetime of performance must be considered.Cosgrove, 774 S.W.2d at 665. Thus, the standardof care for all legal services is one of objectivereasonableness, the failure of which results in acause of action sounding in negligence. Id. at 664.As in any other action based on negligence, theparty claiming actionable injury must prove all ofthe essential elements: duty, breach, causation anddamages. Dyer v. Shafer, Gilliland, Davis,McCollum and Ashley, Inc., 779 S.W.2d 474, 477(Tex. Civ. App. – El Paso 1989, writ denied)(citing Cosgrove v. Grimes 774 S.W.2d 662 [Tex.1989]); See also General Motors AcceptanceCorp./Crenshaw, Dupree & Milam, L.L.P. v.Crenshaw, Dupree & Milam, L.L.P./GeneralMotors Acceptance Corp., 986 S.W.2d 632, 636(Tex. Civ. App. – El Paso 1998, pet. denied).

No case has been found which alters orspecially qualifies the standard of care based uponthe nature of the particular service to be performedby the attorney. However, the nature of theservice to be performed will dictate the particular

facts and circumstances to be considered indetermining whether the attorney has dischargedhis duty to exercise reasonable care and prudence.Thus, an attorney who undertakes to render anopinion of title has a duty to conduct suchexamination as a reasonably prudent attorney,taking into consideration all of the facts andcircumstances relating to that particularexamination. Such facts and circumstances whichshould be considered include: (1) the attorney'sexperience in such matters; (2) the complexity ofthe title; (3) the method of examination – i.e.,abstracts or "stand up"; (4) the purpose of theexamination; (5) the level of risk to which theclient is exposed relative to his ability to absorbthat risk; and (6) the level of communication withthe client.

B. To Whom Does the Duty Extend?Before addressing the characteristics of

reasonable care in the conduct of titleexaminations, or the effect of particular facts andcircumstances, the threshold question is: "to whomdoes an examining attorney owe the duty ofreasonable care?" The answer to that question isrelatively simple and clear when the only partiesconcerned with the results of the examination arethe attorney and his client, but such is rarely thecase. Frequently, a client will request a titleopinion as a means to assure his lender of title toproperty intended as security or to assure drillingpartners with respect to ownership of oil and gasrights before the partners risk substantial funds toexplore the property.

The duty to exercise reasonable care in theperformance of legal services, the breach of whichsounds in tort, arises out of the employmentcontract by which the client engages the attorney'sservices. Zidell v. Bird, 692 S.W.2d 550, 553(Tex. App. – Austin 1985, no writ). Thus, theattorney's common law duty to perform thecontracted services with reasonable care and skillclearly extends to the client with whom theattorney directly contracts and from whompayment is to be received, Id., that is to say,parties in direct privity with the attorney.Similarly, as in any intended third partybeneficiary context, one would expect the duty ofreasonable care and skill to extend to other partiesfor whom the benefit of the contracted serviceswas obtained. In First Municipal Leasing Corp. v.Blakenship, Potts, Aikman, Hagin & Stewart, 648S.W. 2d 410, 413 (Tex. App. – Dallas 1983, writref'd n.r.e.), the 5th Court of Appeals referred to













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Section 552 of the Restatement (Second) of Tortsas authority for the proposition that the attorney'sliability for negligent performance may extend notonly to the client with whom a direct contractualrelationship exists, but also to other parties forwhom the opinion is intended or to whom theattorney knows the client will furnish the opinion,provided that the other party demonstratesjustifiable reliance. Id. (quoting Restatement(Second) of Torts §522 (1977)). However, in FirstMunicipal Leasing, the court determined that therequisite reliance was not evidenced and, absentsuch reliance, declined to extend the duty ofreasonable care to a third party for whose benefitthe opinion was intended. Id. at 414.

Subsequently, in Berry v. Dodson, Nunley &Taylor, P.C., 717 S.W.2d 716 (Tex. App. – SanAntonio 1986, writ granted) (judgment below setaside and remanded by agreement of the parties717 S.W.2d 690 (Tex. 1987)), the 4th Court ofAppeals had the opportunity to consider whetherthe intended beneficiaries under a will couldsustain a cause of action based on an attorney'snegligent nonfeasance. Id. There, the court statedthat "persons outside the attorney-clientrelationship have no cause of action for injuriesthey might sustain due to the attorney's failure toperform a duty owed to his client." Id. at 718(collecting authorities).

However, the scope of the attorney’s dutywas expanded beyond the attorney-clientrelationship in McCamish, Martin, Brown &Loeffler v. F.E. Appling Interests, 991 S.W.2d 787,792 (Tex. 1999). McCamish affirmed theprinciple that an attorney is generally not liable formalpractice to a person not in privity with theattorney. Id. at 792. However, the Texas SupremeCourt went on to hold that an attorney may beliable to a non-client for negligentmisrepresentation even when the attorney cannotbe liable to the non-client for legal malpractice. Id.In McCamish, the attorney in question signed anagreement in which he represented that the boardof directors of his client had approved a settlementand release of claims. In fact, at the time theagreement was executed, the board of directors didnot have the authority to execute the agreement.The other party to the agreement filed suit againstthe client and against the attorney. The trial courtfound that because of the lack of privity betweenthe attorney and the other party, the attorney owedsuch party no duty, and therefore could not be heldliable for malpractice on a claim by the non-client.

The appellate court reversed, holding thateven though no privity existed, the attorney maystill owe a duty to the non-client to avoid negligentmisrepresentation. On petition for review to theTexas Supreme Court, the attorney sought reversalof the appellate court’s ruling because of the lackof privity. Without deciding the merits of the non-client’s claim, the Texas Supreme Courtconcluded that the non-client could pursue a claimfor negligent misrepresentation against theattorney. Id. at 789-91.

To establish a claim of negligentmisrepresentation, the claimant must show that theattorney failed to exercise reasonable care orcompetence in obtaining or communicating falseinformation, and that the claimant justifiably reliedon such information to his or her detriment. Id. at791, quoting Restatement (Second) Of Torts §552.

Insofar as McCamish held that a non-clientcould maintain a cause of action against anattorney for negligent misrepresentation, the TexasSupreme Court expressly disapproved of thelanguage in First Municipal Leasing.

C. Standard of CareHaving determined the parties to whom the

examining attorney's duty of care extends, the nextconsideration must be the measure of thereasonably prudent attorney. The standard isintended as an objective measure of an attorney'sperformance under the circumstances existing atthe time, Cosgrove, 774 S.W.2d at 665, andestablishes a minimum level of performance belowwhich liability may be imposed. See e.g. Black'sp.656, 1983, 5th ed. Abridged (definition ofreasonable care). "Ordinarily when an attorneyengages in the practice of law and contracts toprosecute an action in behalf of his client, heimpliedly represents that (1) he possesses therequisite degree of learning, skill, and abilitynecessary to the practice of his profession andwhich others similarly situated ordinarily possess;(2) he will exert his best judgment in theprosecution of the [matter] entrusted to him; and(3) he will exercise reasonable and ordinary careand diligence in the use of his skill and in theapplication of his knowledge to his client's cause."Cook v. Irion, 409 S.W.2d 475, 477 (Tex. Civ.App. – San Antonio 1966, no writ) (disapprovedon other grounds by Cosgrove, 774 S.W.2d 662,665 (Tex. 1989)). “An attorney may be liable tohis client in several situations, among those, ingiving an erroneous opinion or advice, in failing to







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give advice or opinion when legally obligated todo so, in disobeying a client’s lawful instructions, .. . .” General Motors, at 636. In title matters, thecircumstances of each examination determine thecontext in which the requisite degree of learning ,skill, judgment and care must be exercised.

D. All the Facts and CircumstancesAs noted earlier, the phrase "all of the facts

and circumstances" serves to define the reasonablyprudent attorney against whom the title examiner'sconduct is measured, and includes such factors asexperience, the method of examination,complexity of title, the purpose of theexamination, and the quantum of risk involved,among others. "If an attorney makes a decisionwhich a reasonably prudent attorney could makein the same or similar circumstances, it is not anact of negligence even if the result is undesirable."Cosgrove 774 S.W.2d at 665. (emphasis inoriginal). Liability attaches only when theattorney makes a decision which a reasonablyprudent attorney would not make because theattorney failed to investigate, failed to exerciseordinary care in handling the client's interests orfailed to adequately communicate with his client.See, Cosgrove, 774 S.W.2d at 662.

1. ExperienceThe experience of the attorney conducting the

examination at hand is a matter that relates notonly to the manner in which he conducts theexamination, but also to whether he should acceptthe assignment at all. The Texas DisciplinaryRules of Professional Conduct ("TDRPC") providein Rule 1.01 that "[a] lawyer shall not accept orcontinue employment in a legal matter which thelawyer knows is beyond the lawyer's competence."Supreme Court of Texas, State Bar Rules Art. X, §9 (Texas Disciplinary Rules of ProfessionalConduct) Rule 1.01 (a) (1990) (hereinafter Tex.Disciplinary Rules of Prof. Conduct). Althoughviolation of a disciplinary rule does not of itselfgive rise to a cause of action for malpractice,Dyer, 779 S.W.2d at 479, Rule 1.01 articulates apractical guideline for the title examiner. If theattorney is inexperienced in title matters generally,or if he is unfamiliar with the particular type ofexamination (e.g., one involving State Lands, orFederal Outer Continental Shelf lands), theattorney should consider whether to accept theassignment and associate the services of anotherattorney having more experience in the field, refer

the entire matter to another attorney, or refuse theassignment altogether.

2. Method of ExaminationWhether the proposed examination is to be

conducted based on abstracts or the recordscontained in the county clerk’s office haveconsiderable impact on the attorney's duty toinquire. Where abstracts are examined, theattorney should make certain that the clientunderstands the nature of the abstract to beexamined and, having once done so, may thenundertake the examination without the necessity ofhaving to look into matters outside the abstract.See, G. Thompson, Examination of Titles, § 236,page 253 (1929). If, however, the examination isto be conducted as a "stand-up" examination fromthe records of the county clerk or the localabstracter, the level of inquiry may besubstantially heightened for the examiner.

The Texas Property Code provides that aproperly recorded instrument is constructive noticeto all persons. TEX. PROP. CODE, § 13.002 (1984).Thus, as a technical matter, a title examiner couldargue that an examination based solely on theGrantor-Grantee indices contained in the clerk'soffice would be adequate. However, the standardto which the title examiner is held is that of areasonably prudent attorney, Cosgrove, 774S.W.2d at 662, not that of a bona fide innocentpurchaser without notice. Therefore, the examinermust look into matters outside the indices andconsider other records that may containtransactions affecting title, such as Probate andDistrict Court records. Although, strictlyspeaking, in the absence of recording, a CountyCourt proceeding to probate a Will does notconstitute notice of the transfer of title resultingtherefrom except as to parties claiming through theprobate, Winchester v. Boggs, 112 S.W.2d 207,208, 209 (Tex. Civ. App. – Eastland 1938, nowrit); See also, e.g., Parker v. Fort Worth & D.C.Ry. Co., 84 Tex. 333, 19 S.W. 518, 520 (Tex.1892) (Stayton, C.J.) (judgment in condemnationmust be recorded to give notice); Woodward v.Ortiz, 150 Tex. 75, 237 S.W.2d 286, 289 (Tex.1951) (party not charged with notice of a judgmentrecorded only in District Court minutes), the trueowners must trace their title to the decedent andhis predecessors. Thus, in conducting a titleexamination, a reasonably prudent attorney shouldgo beyond the Grantor-Grantee indices to includeall matters that might affect ownership, regardless









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of the propriety of such matters with respect toconsiderations of only record title.

Additionally, the examiner must inquire intomatters outside the chain of record title that arereferred to by instruments within the record titlechain, Westland Oil Development Corp. v. TheGulf Oil Corp., 637 S.W.2d 903 (Tex. 1982), andmust make reasonably diligent inquiry into thosematters indicated by the information at hand todiscover what is disclosed thereby. Id.; See also,Williams v. Slaughter, 42 S.W. 327, 328 (Tex.Civ. App. -- ________ 1897, writ ref'd.). Ofcourse, the examiner need not personally seek andobtain copies of instruments not contained withinthe county records and reasonably at hand.However, because notice of such "off-record"matters will be imputed to the client, for thebenefit of the client, the examiner should identifyall documents or matters that call for additionalinquiry and clearly describe the related dangers.

3. Complexity of TitleComplexity of title is a factor that relates to

the attorney's experience and training for the taskundertaken. In a locality where the ownership ofland has been relatively static, the probability ofdifficult title problems can be relatively low. Evennovice lawyers may be qualified to examine thesimple chain of title containing only a fewtransactions. However, even in areas consideredto be relatively simple, the complexity of the titleis often not ascertainable until after theexamination has commenced and is well underway. At such point, the experienced examinermay suddenly find himself uncertain; theinexperienced may find himself overwhelmed.Both must then decide the subsequent course oftheir action within the framework of the other factsand circumstances, taking into account thecomplexity of the problem, resources available,experience of the examiner, and risk to the client.

4. Purpose of Examination & Quantum of RiskTitle examinations are conducted for many

purposes: residential purchase, oil and gas leaseacquisition, oil and gas drilling, and in connectionwith property to serve as security for a loan.Identifying the purpose of the examination is theessential first step necessary for the title examinerto fulfill his duty to act as a reasonably prudentattorney. The purpose affects the scope andidentifies the principal concerns to be addressedby the examiner. For example, an opinionrendered in connection with acquisition of an oil

and gas lease for future development would beconcerned with identifying and noting severedroyalty interest, but may not necessarily beconcerned with expending significant time tracingthe ownership of such royalty. The expense oftracing the royalty ownership can often be delayeduntil a producing well necessitates a division orderopinion for the purpose of distributing theproceeds of production. A similar analogy may bedrawn for a mortgage opinion in which theprimary concern is the priority of the lender'ssecurity interest; the quality of the debtor's title isof secondary importance and extends only to aspecified percentage of value. Thus, thereasonableness of the examiner's conduct issometimes characterized by the purpose of theopinion.

Unlike purpose, which may serve to limitwhat is reasonably prudent conduct for theattorney, quantum of risk will serve only to raisethe standard to which the attorney is held. Forexample, where the attorney knows that his clientis particularly at risk, to the point that theattorney's performance becomes critical to thecontinued well being of the client, the attorneymay be held to a higher standard of prudence andcaution in the exercise of reasonable care.However, although the level of caution may beraised under such circumstances, the basicfunction that the title attorney performs has notbeen substantially altered. In any situation, thetitle attorney's duty is to identify defects andirregularities in title and title documents, advisethe client of the effect of such matters, andrecommend curative efforts that may beundertaken to minimize or eliminate the effect ofobjectionable matters. Based on his experienceand judgment, a title examiner will not notify theclient of defects, which in his opinion will notaffect the quality of his client's title. However, theexamining attorney must be careful not to crossthe line between legal and business judgments andassume business risks for the client. Only theclient may decide what risks to accept. Theattorney must be careful to clearly identify anddescribe those risks to the end that the client canmake informed decisions on risks to be taken.

II. LIMITATIONS ON LIABILITYA. To The Client

The preamble for the Texas DisciplinaryRules of Professional Conduct ("TDRPC")recognizes the many different roles performed bylawyers and observes that "[a]s advisor, a lawyer



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provides a client with an informed understandingof the client's legal rights and obligations andexplains their practical implications." Tex.Disciplinary Rules of Prof. Conduct preamble,para. 2 (1990). This phrase exemplifies thefunction of the title examiner to advise his clientas to the state and quality of the subject title. Theessence of the relationship between the titleexaminer and his client is further embodied inRule 1.03, which states "[the] lawyer shall explaina matter to the extent reasonably necessary topermit the client to make informed decisions. …"Id., at Rule 1.03(b). Thus, the central thread of theattorney-client relationship in the context of titleexamination is communication from the lawyer tothe client that rises to a level sufficient to permitreasonably informed decision making by theclient. Such communication must necessarilyencompass all aspects of the representationimportant to the client's ability to assess theinformation he receives. Id., at Rule 1.03comment 1. For example, the experience andability of the examining attorney, the nature of thematerials examined, the results of the examination,objections to the title, necessary remedialmeasures to be taken, and the examiner'scomments describing the scope of the examinationand calling the client's attention to other matters ofconcern not rising to the level of an objection, areall matters which are necessary to the client'sability to assess the quality of informationreceived and subsequently, to act on thatinformation. Rule 1.02(b) of the TDRPC states:"A lawyer may limit the scope, objectives andgeneral methods of the representation if the clientconsents after consultation." Id., at Rule 1.02(b).Initially, Rule 1.02(b) may seem to undo the effectof Rule 1.03(b) to require sufficientcommunication to permit informed decisionmaking by the client. However, the words "afterconsultation" restate Rule 1.03(b) within thecontext of Rule 1.02(b). The result is that theclient must be reasonably informed of the effectsbefore the representation may be limited.Consultation is defined within the rules asdenoting the "communication of information andadvice reasonably sufficient to permit the client toappreciate the significance of the matter inquestion." Tex. Disciplinary Rules of Prof.Conduct (terminology) (1990).

No Texas case or ethical opinion has beenfound which illustrates the scope of Rule 1.02(b),as it affects title examination. However, the scopeof this Rule should be broad enough to include a

title attorney limiting the scope of his examinationby relying on a prior opinion. The problem for thetitle attorney is that the Rule requires the “client’sconsent after consultation.” Accordingly, inadvance of conducting the examination, theattorney must give the client information andadvice reasonably sufficient to permit the client toappreciate the significance of the risks of relyingon the prior title opinion.

Thus, from the language of Rules 1.02 and1.03, it appears that, so long as the client consents,is well informed and understands all aspects ofsignificance, any limitation in the scope of therepresentation (i.e. limitation in the coverage ofthe opinion) is within the rules. Therefore, thetitle attorney has the duty to explain to his clientwhat the practical effect of limiting the opinion to,for example, the instruments actually examinedwill have with respect to the quality of theexamination and the attorney's liability to hisclient. That general premise is not altered by Rule1.08(g) which states that a lawyer may not limithis liability to a client for malpractice unless theclient is independently represented by counsel inconnection with the limitation. Tex. DisciplinaryRules of Prof. Conduct, Rule 1.08(g) (1990).Comment 6 to the Rule specifically states that theprohibition is not intended to apply to "customaryqualifications and limitations in legal opinions andmemoranda." Id., at comment 6.

Thus, so long as the effect of the limitation isclearly explained to the client, and the client freelyconsents, "customary" limitations contained in titleopinions which affect the liability of the examinerare implicitly approved. It should be noted,however, that such limitations go to the scope ofliability, not the measure of damages oncecompensable liability has been determined, andthat the lawyer's duty to perform his contract ofemployment with reasonable care has not beendiminished.

It is not uncommon for a title attorney to facethe situation in which he is challenged withpreparing an opinion at the direction of the client,but for the ultimate benefit of a third party. Thisscenario gives rise to inherent conflicts ofinterests. However, Rule 2.02 of the TDRPC,“safeguards against a lawyer’s exposure toconflicting duties and ensures that the client makesthe ultimate decision of whether to provide anevaluation” to a third party. McCamish at 793.Thus, Rule 2.02 protects the lawyer from potentialdisciplinary action arising from his preparation of


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an opinion for the benefit of a third party. Rule2.02 provides:

A lawyer shall not undertake anevaluation of a matter affecting a clientfor the use of someone other than theclient unless:

(a) the lawyer reasonably believes thatmaking the evaluation is compatible withother aspects of the lawyer’s relationshipwith the client; and

(b) the client consents after consultation.

Tex. Disciplinary Rules of Prof. Conduct,Rule 2.02 (1990).

By requiring that the evaluation becompatible with the attorney-client relationshipand that the lawyer first obtain the client’s consentafter consultation, Rule 2.02 helps shield theattorney from the inherent ethical dilemma thatarises from the attorney’s preparation of a workproduct for someone other than the client.However, the attorney may still face liabilityconcerns with regard to the third party’s relianceon the evaluation.

B. To Third PartiesMcCamish recognized the potential liability

of a lawyer to a third party. However, inMcCamish, the court noted that the lawyer’sliability to third parties may be limited in a coupleof ways. First, the court noted that for the lawyerto be liable to a third party, it is necessary that thethird party justifiably rely on the lawyer’sexamination. In this manner, the lawyer’s liabilityis limited to situations in which the lawyer (i) isaware that the information is to be communicatedto a non-client, and (ii) intends for the non-clientto rely on such information. McCamish, at 794.For instance, in Chapman Children’s Trust v.Porter & Hedges, L.L.P., 32 S.W.3d 429, 443(Tex. Civ. App. – Hous. (14 Dist) 2000, pet.denied), the court held that the law firm of Porter& Hedges, L.L.P. was not liable for negligentmisrepresentation since no allegation of relianceby the non-client had been made, and becauseeven if such an allegation was made, such reliancewould not be justified given the adversarial natureof the relationship.

Second, the court in McCamish held that a“lawyer may also avoid or minimize the risk of

liability to a non-client by setting forth (1)limitations as to whom the representation isdirected and who should rely on it, or (2)disclaimers as to the scope and accuracy of thefactual investigation or assumptions forming thebasis of the representation or the representationitself.” McCamish, at 794. In so limiting hisliability to the non-client, the lawyer mustexpressly set forth the manner in which therepresentations or the investigations wererestricted. Tex. Disciplinary Rules of Prof.Conduct, Rule 2.02 (1990), at comment 6. Inother words, in preparing his opinion, the titleattorney should expressly describe the materials onwhich he has relied and describe the manners inwhich his examination has been limited, includinga description as to whether the lawyer has reliedon a prior opinion. However, such a descriptiondoes not necessarily absolve the lawyer of hisliability to the third party. Although no Texascases were found regarding the issue, the UnitedStates Court of Appeals for the Third Circuit(interpreting Pennsylvania law) has held that“when a [lawyer] knows or has good reason toknow that the factual description of a transactionprovided by another is materially different fromthe actual transaction, [he] cannot escape liabilitysimply by including in [his] opinion letter astatement that [his] opinion is based on providedfacts.” Kline v. First W. Gov’t Sec., Inc., 24 F.3d480, 487 (3rd Cir.), cert. denied, 115 S.Ct. 613(1994). Accordingly, the lawyer cannot blindlyrely on a prior opinion and escape liability bysimply disclaiming all inaccuracies in such prioropinion. Instead, the lawyer’s reliance must bemeasured by the standard of reasonableness.Absent unreasonable reliance, the title attorneyshould be able to limit his exposure to non-clientsby disclaiming the accuracy of the information onwhich the lawyer has relied.

In the context of a lawyer’s potential liabilityto third parties for negligent misrepresentation, alawyer’s liability is further reduced by therequirement that the lawyer’s representation be ofa material fact. See McCamish, at 794.


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PART TWO:The Standard of Care in Practice(The Risks of Relying on Prior Title Opinions)

III. INTRODUCTIONTo evaluate the risks of relying on a prior title

opinion, we must first examine what a titleexaminer does. In the broadest sense, a titleexaminer reads the instruments in the chain of titlefrom sovereignty of the soil to the date ofexamination, and reaches legal judgments, basedon his training and experience, whether any of theinstruments examined (or the absence ofinstruments in the chain of title) creates reasonableuncertainty about the record ownership of the landunder examination. The examiner then describesher objections to the title and what action isnecessary to cure those objections. The ultimategoal is, of course, to assure the client that it has“marketable title” to the land under examination.In Texas, “marketable title” is one that (i) is freefrom reasonable doubt as to matters of law andfact, (ii) will not expose the purchaser to areasonable probability of litigation, (iii) is freefrom any outstanding contract, covenant, interest,lien, or mortgage sufficient to form a basis oflitigation, (iv) does not depend on estoppel in pais,on a question of presumption of fact, or onextrinsic evidence or parol evidence, unless thisevidence is of great probative force and readilyavailable, and (v) a prudent person advised of thefacts and their legal significance would willinglyaccept.1 If you have examined a title to oil and gasin Texas, you know that the examiner can rarelyrepresent that the title is “marketable.” Therefore,the examiner must evaluate and explain for theclient the risks associated with accepting title thatis less than marketable.

If a title examiner is asked to rely on a priortitle opinion prepared by another attorney, she is,in fact, being asked to rely on that attorney’sexperience and judgment as it relates to the priorexamination. Prior to commencing a titleexamination a careful examiner will evaluate, atleast subconsciously, their experience in light ofthe complexity of the title, the method ofexamination, the level of risk the client isundertaking (e.g. is examination for purposes ofdrilling a well or paying royalty) and the level ofcommunication with the client. If you rely on a

1 See Lund v. Emerson, 204 S.W.2d 639, 641 (Civ.App. – Amarillo 1947, no writ).

prior opinion you can, at best, hope that the priorexaminer did the same. Unfortunately, there is noway for the present examiner to know whatevaluations a prior examiner made. Therefore, theexaminer must seek to limit any liability, whichshe may have arising from relying on a prioropinion or to evaluate from the opinion itselfwhether it can reasonably be relied on, or both.The examiner may often be faced with the choiceof agreeing to rely on a prior title opinion or losingthe work.

As noted above, Disciplinary Rule 1.02(b)permits an attorney to limit the “scope, objectivesand general methods of the representation if theclient consents after consultation.” The problemfor the title attorney is that the Rule requires the“client’s consent after consultation.” Thereforethe examining attorney must give the client, inadvance of the examination, information andadvice reasonably sufficient to permit the client toappreciate the significance of the risks of relyingon the prior title opinion. Merely including arecitation in the title opinion, such as:

“This opinion is based in part upona prior title opinion by another titleexaminer. We have used this form oftitle examination at your request andwith assurance that you understand therisks associated with this form ofexamination.”

is probably not sufficient to limit the examiner’sliability for errors that arise, in whole or in part,from the prior title opinion, unless there is actuallyprior consultation with the client. Consultation, inthis context, must be sufficient to permit the clientto appreciate the risks of relying on a prior titleopinion, should include an evaluation by theexamining attorney of whether it is reasonable torely on the prior title(s) submitted by the client.Some clients require title examiners to expresslystate in their opinion whether it is reasonableunder the circumstances to rely on the prior titleopinions, submitted by the client. Any titleexaminer should, as a matter of practice,determine whether it is reasonable to rely on theprior title opinions furnished.

The prior title opinion takes the place ofexamining the instruments in the chain of title forthe period covered by the title opinion. Thepresent examiner is relying on the priorexaminer’s construction of and judgmentsconcerning the instruments in the chain of title.



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Therefore, to evaluate the risks of relying on aprior title opinion, both for herself and for theclient, the title examiner should examine the priortitle opinion with the same attention to detail andthoroughness as she examines the instruments inthe chain of title. The examiner should evaluatethe prior title opinion for the following:

1. The identity of the examiner or the firmrendering the opinion;

2. Whether the opinion is clear,understandable and internally consistent;

3. The purpose for the opinion and anylimitations on the opinion rendered;

4. The basis for examination;

5. The time period covered;

6. Whether the full ownership is shown andequals One; and

7. Whether title requirements have beensatisfied.

A. The Identity of the ExaminerIf the examiner, or firm, who signed the prior

opinion is recognized as an experienced andthorough title examiner, then this can be of somecomfort to the examiner relying on the opinion.Attorneys who regularly examine titles willrecognize the names of experienced and reliabletitle examiners or title examination firms.Moreover, attorneys and firms that regularlyrender opinions on oil and gas titles often use verysimilar forms of opinion and express theirobjections and requirements in similar ways. Evenif the prior examiner is well known, the inquiryshould not stop there. If the examiner is ofunknown reputation or the opinion is not in a formcustomarily used by title examiners in the areawhere the land is located, then the inquiry mustexamine the other considerations with more care.

B. Clear, Understandable and InternallyConsistentUnfortunately, there are title examiners

whose written communication skills aresubstandard. The key to a reliable title opinion isobjections and requirements that are clear andunderstandable. Objections should clearly statethe following: (i) the exact nature of the defect, (ii)

the names of the owners and the extent of theownership interest affected by the defect and (iii)the risks represented by failure to cure the defect.The requirement should clearly state (x) whatcurative instruments are required, (y) what shouldbe included in the curative instrument and (z) who,if anyone, must sign any curative instruments. Awell written objection and requirement is one that,in most instances, will permit an experiencedlandman to determine whether the requirement hasbeen satisfied, without obtaining a supplementalopinion from the examining attorney.Unfortunately, it is not all that uncommon to seean objection and requirement such as thefollowing:

The materials examined do notcontain probate proceedings on theEstate of John Brown, deceased.

Requirement: Submit for ourexamination probate proceedings on theEstate of John Brown, deceased.

If John Brown, deceased is listed as theowner of a 1/16 MI, then perhaps this requirementis satisfactory. If, however, John Brown, deceasedis not shown as an owner, then there is no way forthe client to whom the opinion is addressed, letalone a subsequent examiner, to discern the natureof the defect and what it takes to cure the defect.Therefore, on its face, this opinion is not clear andunderstandable. It is also not internally consistent,because the opinion does not connect up the ownernames shown in the requirements with thoseshown in the tabulation of ownership. Asubsequent examiner attempting to rely on thisopinion will not know, even if he examinesprobate proceedings on the Estate of John Brown,deceased, whether the defect noted by the priorexaminer has been cured. If after reading theobjection and the following requirement, thereader is in doubt about the nature of the defect,the risks associated with the defect and what needsto be done cure the defect, then it may be unwiseto rely on the opinion.

When a title opinion is not clear,understandable and internally consistent, as in theexample describe above, or when the opinion doesnot describe the full ownership for the periodshown, there may be the temptation, in order toplease the client, to “go behind” the title opinion.What this means is that a subsequent examinertries to construe what was really meant by the


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prior examiner when the opinion is not clear on itsface. Often, the client will provide the examiningattorney with what “curative” the client thinks isrequired to help the examiner “figure out” whatwas meant. In fact, the client is inviting theexaminer to GUESS and call it an opinion. Byagreeing to “go behind” a prior opinion thesubsequent examiner implicitly admits that hecannot rely on the prior opinion. Once the “gobehind” process begins, there is no really rationalstopping place. If part of the opinion is deemednot worthy of reliance, then how can an examinerreliably ascertain what other parts of the opinionare worthy of reliance. The trap for thesubsequent examiner is that he may not knowexactly what the prior examiner saw, (e.g. someunrecorded documents described only as “Client’sFile”) and he will not know what legal judgmentsthe prior examiner made about variousinstruments, unless it is spelled out in the prioropinion. It is, therefore, extremely dangerous for asubsequent examiner to select certain parts of anopinion that will be accepted and certain parts thatwill not be accepted, without examining exactlywhat the prior examiner had before him, when herendered the opinion. However, if the subsequentexaminer has that information, then he should notrely on the prior opinion – he should render hisown opinion.

C. The Opinion’s Purpose and Limitations.1. Title Memorandum

Not everything written on attorney letterheadthat looks like a title opinion is a title opinion. Itis not uncommon for client’s to ask title attorneysto provide “title memoranda,” in connection withacquisition and financing transactions. The scopeof the examination is customarily limited to theinterest of the seller/borrower for a limited period,based on instruments into and out of the sellerappearing of record. Sometimes, the client willalso furnish the attorney certain selectedunrecorded documents. The preparation of a “titlememorandum” is usually accomplished inconjunction with due diligence of the seller’s filesby a team of landmen. There may or may not beany communication between the due diligenceteam and the attorney preparing a titlememorandum. The title memorandum will mostoften expressly state that it is not intended as anopinion concerning title and will describe limitedexamination that took place. Often the solepurpose for a title memorandum is to confirm thatthe quantum of interest represented by the

seller/borrower conforms to the quantum ofinterest shown by the public records, without anyinquiry into other matters that would be covered ina title opinion. A title memorandum should not berelied on as the basis for a drilling title opinion, forexample, without examining and considering all ofthe instruments in the chain of title for the drill sitetract.

2. Lease Acquisition OpinionThese type of opinions are now relatively

rare, but were not uncommon in the late 1970s andearly 1980s. They still may, however, be offeredas a basis for title examination. The scope of thelease acquisition opinion may be limited tocertifying the interest covered by a particularlease, or to determining the owners of the mineralinterests in a particular tract of land. Theexamining attorney will often expressly excludeownership of landowner royalty andnonparticipating royalty from the coverage of theopinion. Therefore, a lease acquisition opinioncannot normally be used, for example, as the basisfor paying the owners of royalty.

3. Drilling Title OpinionThis is the most common form of title

opinion, and the one most commonly offered toexamining attorneys to rely on. The purpose ofthis opinion is to ensure that the lessees own all ofthe rights to explore for and develop oil and gas ina particular drill site tract. Commonly, thisopinion will also show the ownership of royalty,so that the oil and gas lessees can ascertain theirownership share of total production. However, ifthe royalty is complicated, its ownership may beexpressly excluded from coverage. Sometimesthese opinions may be limited in depth or limitedto a specific formation(s), particularly where thetarget formation is above or below a unitizedformation. If the opinion is depth limited, then itmay not be relied upon for an opinion coveringother depths in the same tract of land. If theroyalty ownership is not completely tabulated,then this opinion may not be relied upon as thebasis for an opinion setting forth how the proceedsof production will be paid to royalty owners.Often, the client will request that the examiningattorney not analyze the leases as part of hisexamination. If the quantum of minerals coveredby each lease is not set out in the opinion, then thedrilling opinion may not be relied upon as thebasis for an opinion setting forth how the proceeds


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of production will be paid to lessees, overridingroyalty owners or royalty owners.

4. Division Order Title OpinionThe purpose of a division order title opinion

is to set forth the share of production that will bepaid to royalty owners, nonparticipating royaltyowners, overriding royalty owners, and oil and gaslessees. The leases may or may not be describedin any detail. It may not be possible to ascertainfrom the tabulation of royalty ownership, how theminerals, i.e. the right to explore for and developoil and gas, are owned, because royalty ownershipand mineral ownership are often different.Therefore, a division order title opinion may notbe used as the basis for a drilling opinion.

5. Reliance Expressly LimitedIt is now common for title opinions to

expressly provide that the “opinion is preparedsolely for the use of our client, ____________, andno one other than our client is entitled to rely onthis opinion without our prior written consent.”This clause is intended to deprive non-clients fromjustifiable reliance on the attorney’s work productafter McCamish. Initially, at least, title opinionsare confidential attorney communications andattorney work product provided to the client.However, more often than not title opinions arenot treated as confidential and are widelydisseminated outside any identifiable controlgroup. With this in mind, a title examiner’s mainpurpose in limiting reliance is to avoid liability tonon-clients for negligent misrepresentation, oncehis title opinions are placed in the stream ofcommerce, either knowingly or inadvertently, bythe client. Therefore, this language alone may notprevent subsequent title examiners from relying onthe information contained in the prior opinion.The subsequent examiner should, however, advisehis client that any reliance by the client or theattorney is without any recourse against the priorexaminer. Whether the use of prior title opinionscontaining a clause limiting reliance, either createsa cause of action in the examining attorney or isthe basis for a claim that a title examiner hasbreached his duty to the client is beyond the scopeof this paper.

D. Basis of ExaminationThe next inquiry is on what the prior

examination is based. That is, is it based on (i)examination of an abstract of title prepared by atitle and abstract company, (ii) a standup

examination of the county records based on arunsheet prepared by either the examining attorneyor a landman, (iii) examination of copies ofinstruments from the county records, based on arunsheet prepared by a landman, (iv) another prioropinion, together with examination of an abstract,the county records or copies of instruments fromthe county records, or (v) some combination of (i),(ii) (iii) and (iv)?

If the examiner is basing his opinion on anabstract of title, then he has some comfort that theabstract contains all of the recorded instrumentsaffecting title to the land under examination. If itdoes not, then at least there was an abstractcompany, who would have been liable in damagesfor omitting instruments from the abstract.However, abstracts prepared by an abstractcompany now appear to be an historicalphenomenon that “seasoned” title examiners cantell war stories about.

Now title examination is commonly based ona run sheet prepared by a landman, using thegrantor-grantee indexes in the County and DistrictClerks’ offices, and, perhaps, a local titlecompany’s tract indexes. Sometimes, but rarely,the title examiner may prepare his own runsheet.After preparation of the runsheet, the client willdecide whether the title examiner will examine theinstruments noted in the runsheet in the countryrecords or copies of those instruments. Where atitle opinion indicates it is based on examination ofinstruments listed in a runsheet, the attorneyutilizing that opinion must evaluate several issues,which contribute to the risk of relying on thatopinion. Those issues include:

1. Does the opinion identify the landmanpreparing the runsheet, so the subsequentexaminer can determine if the landman has aCPL/RPL certification? Obviously, the priorexaminer’s opinion is only as good as therunsheet it is based on. While a CPL/RPLcertification is not a guarantee of quality, it isat least some indication that the landman whoprepared the runsheet is a professional whohas gone to the trouble of obtaining andmaintaining certification. Unfortunately, notevery landman is competent to prepare arunsheet for title examination. If thesubsequent examiner has no informationabout the landman preparing the runsheet,then he cannot really assess the risk ofwhether the runsheet was properly prepared.


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2. Is a copy of the runsheet attached as anexhibit to the opinion? Runsheets come in allflavors. The examining attorney may befurnished with nothing more that a list ofvolume and page numbers on tablet paper.Or, the examining attorney may be furnishedwith a typewritten list (and computerdiskette) of instruments sorted by file dateand identifying the instrument date, the filedate, Clerk’s File number, the volume andpage or document number where theinstrument is recorded, the grantor, thegrantee and a summary of the instrument.Sometimes the description of the runsheetwill indicate it is a “limited runsheet” withoutfurther explanation. Sometimes thedescription of the runsheet will not indicatedwhat records were reviewed by the landmanor will be limited to the County Clerk’srecords. Runsheets should cover both theDistrict Clerk’s records and the tax assessor-collector records for the taxing jurisdictionsin which the land under examination islocated. If the subsequent examiner can see acopy of the runsheet, he can evaluate thequality of the runsheet used for theexamination and whether the runsheet isinternally consistent. A copy of the runsheetwould allow the subsequent examiner toevaluate the quality of the runsheet relied on.

3. Does the prior opinion identify whatunrecorded documents were examined as partof the examination? A notation of “Client’sFile” under the Materials Examined headingin the prior opinion leaves the subsequentexaminer without any idea of whether theownership shown is the result of recorded orunrecorded documents. For example, thetabulation of ownership may give effect to anunrecorded assignment that is later recordedand appears in the materials for the presentexamination. Unless the prior examinerspecifically describes what unrecordeddocuments are reflected in the ownership, thesubsequent examiner could unknowingly giveeffect to a conveyance into or out of the clientthat has already been given effect by the priorexaminer. It is not unusual for explorationand production companies to obtain curativematerials and provide them to the examiningattorney, but never record these curativematerials. Unrecorded instruments are notconstructive notice to bona fide purchasers

for value without notice. Unless the priorexaminer specifically describes theunrecorded documents that are the basis fortitle and makes a recording requirement, asubsequent examiner may incorrectly assumethat title is based on recorded instruments,when it is not.

E. Time Period CoveredFor a subsequent examiner to know when to

commence his examination, he must know whattime period is covered by the prior examination.Therefore, the prior title opinion must expresslydemonstrate, on its face, the time period coveredby the examination. It is not enough to merelygive the ending date of the examination, becausethen there is uncertainty about whether theexamination commenced with sovereignty of thesoil or not. Every title opinion should demonstrateexamination from sovereignty of the soil to theclosing date of the opinion, by reliance on somecombination of abstracts, runsheets, and prioropinions. Beginning and closing dates mustinclude a time in order to ensure there are not gapsin coverage. The date the title opinion is renderedis not sufficient to determine the ending date of theexamination. Most likely the date the runsheetwas prepared was at least several days prior to thedate of the title opinion. Inexperienced landmenmay forget to note on their runsheet the beginningdate and time and the ending time and date of therunsheet. If there are undisclosed gaps incoverage, then an instrument affecting title couldhave been recorded during that gap, which wouldnot be examined. The “gap” instrument mayrender the present examiner’s opinion that relies inpart on the prior opinion, inaccurate, with potentialliability for the examiner.

F. Tabulation of OwnershipIn evaluating whether to rely on a prior title

opinion one of the most important considerationsis the tabulation of ownership. If the tabulation ofownership is limited to only the minerals, only theroyalty or only the leasehold interest, then it wouldnot be appropriate to rely on the opinion as a basisfor ownership broader than shown in the opinion.There are, however, some exceptions. If, forexample, the examiner is furnished with a LeaseAcquisition Opinion that shows the full mineralownership as unleased, then a subsequentexaminer could possibly rely on that opinion toprepare a drilling opinion. However, thesubsequent examiner could not rely on the Lease


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Acquisition Opinion and Drilling Opinion takentogether to prepare a division order title opinion,because there is not a prior opinion that covers theroyalty ownership. Therefore, whenever theopinion on which the examiner is asked to rely islimited in the ownership it covers, the examinermust carefully evaluate what additional materialsmust be relied upon to provide complete coverageof the ownership to be covered in the subsequentopinion.

When the opinion to be relied on purports tocover the full mineral, royalty and leaseholdinterest ownership, it is always a good idea toverify the tabulated ownership adds up to one orone hundred percent. If the tabulated ownershipadds up to either one or 100%, as applicable, theownership shown in the prior opinion may becorrect. If the tabulated ownership does not addup to one or 100%, then the ownership show isclearly not correct. If ownership does not add upto one or 100%, and the prior examiner has shownhow he arrived at the ownership, then thesubsequent examiner may be able to locate theerror with confidence. If the prior opinioncontains only a decimal interest, then it is unlikelythat the source of the error can be confirmed andthe opinion cannot be relied on.

If the tabulated ownership in the opinion tobe relied on does add up to one or 100%, that doesnot necessarily mean the ownership shown iscorrect. If the prior title examiner rather thancomputing royalty and leasehold ownershipseparately, computed royalty and then subtractedthe royalty from one or 100% to obtain theleasehold ownership of production, then the factthat the tabulated ownership adds up is of noconsequence. If an error was made in computingthe royalty, that error will be hidden by the methodused to obtain the leasehold ownership ofproduction. If the prior examiner does not showthe derivation of the tabulated ownership, there isno way for a subsequent examiner to know howownership was computed. This author has had theunfortunate experience of relying on an prioropinion where ownership was “forced.” Theproblem surfaced when division orders werecirculated and rejected by several of the royaltyowners. As a result the opinion had to be redonebased on a full examination from sovereignty.The client and this author learned a hard lessonabout relying on prior title opinions.

G. Prior Requirements SatisfiedIf an examiner intends to rely on a prior title

opinion, he must either ascertain whether the titlerequirements in the prior opinion have beensatisfied, or incorporate those requirements in hisopinion. However, as discussed above, therequirement in the prior opinion may make itdifficult, or even impossible, to determine thenature of the defect or what information in thecurative materials will cure the defect. Thisproblem is not solved for the client by carryingforward an incomprehensible objection andrequirement, unless the client intends to take thebusiness risk that the requirement, even ifunsatisfied, does not or will not affect ownership.

Also discussed above is the problem thatcurative materials collected by the addressee of theprior title opinion are often not recorded. Unlessthe client furnishing the prior title opinion alsoprovides the examiner with curative materials forthe prior requirements, the unsatisfiedrequirements will have to be carried forward in thenew opinion. If the subsequent examination isbased on a runsheet, the examining attorney or theclient should alert the landman to look formaterials that may cure the prior requirements.Often curative materials consist of various types ofaffidavits, which are not easy to identify in thegrantor-grantee index, unless the landman knowswhat he is looking for.

IV. CONCLUSIONIn spite of the risk involved, title examiners

often rely on prior opinions. Relying on prioropinions reduces the cost of title examination.Because prior opinions reduce the cost of titleexamination, clients may be eager for their titleexaminer to rely on anything that even remotelyresembles a title opinion. The examining attorneyshould treat the prior opinion the same as shewould any other instrument in the chain of title,because the prior title opinion is a substitute forexamining the instruments in the chain of title forthe period covered by the prior opinion. Theexamining attorney should carefully evaluate thetitle opinion tendered by the client and candidlydiscuss with her client any matters that concern theexaminer about using the prior opinion. If theclient still wants to go forward relying on a prioropinion that appears to be, in whole or in part,unreliable, then the proper disclaimers should bemade by the examining attorney. It may also bewise to include an objection and requirementrelated to the problems with the prior opinion.


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This will not make the client happy with its titleexaminer, but it will force the client to address theissues related to the examiner’s objection to theprior title opinion and perhaps protect theexaminer against liability.

Documents

DANGERS ASSOCIATED WITH USE OF AND …DANGERS ASSOCIATED WITH USE OF AND RELIANCE UPON PRIOR TITLE OPINIONS ALLEN D. CUMMINGS Haynes and Boone, LLP 1000 Louisiana Street, Suite 4300