Bulletin: TX2010002

Dear Associates:

On December18, 2009, the Texas Supreme Court handed down its decision in the case of Myrad Properties, Inc. v. LaSalle Bank NA, et al, Cause No. 08-044. The main issue in this case for title companies is what kinds of changes can be made in a correction deed (or deed of trust). This is important because of the numerous times that lenders and other parties demand corrections.

The first thing to keep in mind is that correcting a deed is an important act and only the parties to the document can make those changes. It is not acceptable for the title company and its personnel to make corrections, especially to a recorded document. The parties must initial the changesand providea statement stating the document is being re-recorded to correct whatever the problem is. Alternatively, the parties could sign such a statement or file a correction deed or deed of trust that states why it is being corrected.

The reason the Court pays such attention to correction instruments is that such instruments maintain the same effective date or priority as the original instrument.

The Supreme Court lays out in the case the kinds of corrections that are allowed and the kinds that are not allowed.

Allowed: Correcting defects and imperfections

• Defective legal descriptions, such as errors in a metes and bounds description
  
  Although the court does not specifically mention it, it is a reasonable assumption that an error in the name of the Subdivision or recording information may be repaired by a correction deed. For changes to the lot or block, call a Texas underwriter.
  
  
• Incorrect acreage designation
  
  
• Defective description of a party's capacity
  
  Correcting from administrator to executor

Not allowed:

• Adding another parcel
• Adding mineral interests
• Changing a mineral interest
• Changing the nature of a mineral interest

For all other corrections, please contact a Texas underwriter. For example, in some areas of Texasthe practice of using Scrivener's Affidavits executed by the attorney that made the error in the document has been used for many years. Many times, it is the only way to correct a minor error when the parties are not available. It is not effective when a person such as a title company employee executes such an affidavit. Also generally ineffective is the practice of making corrections to a certified copy of the original recorded document unless the corrections are initialed by the parties and a statement as to why the corrections are being made is signed by the parties. In either event, only the corrections allowed by the Supreme Court can be made.

That said, it is important to remember that all corrections must be made a soon as they are discovered. Do not wait out of embarrassment. Failure to promptly record a document as well as failure to make corrections can cause large claims and losses.

If you have questions relating to this bulletin, please contact your local underwriting personnel or Stewart Legal Services.

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