On Jan. 1, 2007, the University of Oklahoma faced Boise State University in the Tostitos Fiesta Bowl Championship. I will save the OU fans from recalling too much of the weeping and gnashing of teeth endured during, and long after, one of the more memorable “David vs. Goliath” matchups in college sports history. The most memorable and consequential play from this contest, in my opinion, is the fourth down and 18 play call that vaulted Boise State University and its head coach, Chris Petersen, onto the national college football landscape.

With 18 seconds remaining from the 50-yard line, Boise State’s quarterback takes the shotgun snap, tiptoes and whips a pass to his slot receiver in the middle of the field near the hash. The slot receiver then pitches to a sprinting Jerard Rabb to the near side, who barrels down the sideline before diving into the endzone and scoring a touchdown. This is the most famous iteration of the classic sandlot football play known as the “Hook and Lateral.” If you have not stopped reading this article – and if you have, OU fans, I do not begrudge you – I think I can wheel this one around for an article fit for the Oklahoma Bar Journal’s Energy Law issue.

So, the question here is what the “Hook and Lateral” has to do with energy law? Against Boise State, OU’s defense committed a cardinal sin: losing outside leverage to the sideline. Or, as my dad would say, “Never leave the back gate open.” And Okla. Stat. tit. 84, §8 provides what OU’s defense did not on the “Hook and Lateral”: outside leverage.

 

THE ‘HOOK AND LATERAL’

Consider this fact pattern: In March 2009, “Mama” dies testate in California. Mama left three heirs-at-law, three daughters, two living in eastern Oklahoma, i.e., “Daughter No. 1” and “Daughter No. 2,” and one living in California,i.e., “Daughter No. 3.”

In 2010, the client, we will call him the “Mineral Buyer,” contacts Daughter No. 1, Daughter No. 2 and Daughter No. 3 and offers to purchase their respective undivided interest in and to the oil, gas and other minerals (the “minerals”) that Mama owned at the time of her death. In December 2010, Mineral Buyer closes and acquires Daughter No. 1’s and Daughter No. 2’s respective undivided interest in the minerals, a combined undivided two-thirds interest in the minerals. Both mineral deeds include Daughter No. 1’s and Daughter No. 2’s exact inherited quantum of acreage under the law of intestate succession under Okla. Stat. tit. 84, §213(B)(2)(a). During this negotiation, purchase and sale, Daughter No. 1 and Daughter No. 2 each claimed an interest in the minerals through intestate succession from Mama; neither Daughter No. 1 nor Daughter No. 2 had any knowledge nor informed or advised the Mineral Buyer that Mama left a last will and testament at the time of her death. And before Mineral Buyer contacted Daughter No. 1 and Daughter No. 2,
each had leased their respective undivided interest in the minerals. Daughter No. 1 also executed an “affidavit of death and heirship” and attested that Mama died intestate and identified Daughter No. 1, Daughter No. 2 and Daughter No. 3 as Mama’s sole surviving heirs-at-law under Okla. Stat. tit. 84, §213.

After attempting to purchase Daughter No. 3’s undivided interest while negotiating and closing on the purchase and sale of Daughter No. 1’s and Daughter No. 2’s undivided interest in the minerals, in January 2011, Daughter No. 3, when Mineral Buyer inquires, informs Mineral Buyer that Mama did, indeed, leave a valid last will and testament at the time of her death in March 2009. But Daughter No. 3, despite Mineral Buyer’s requests for a copy of Mama’s last will and testament, refused to provide Mineral Buyer with a copy or any record of Mama’s last will and testament. But in June 2011, Daughter No. 3 sells, and the Mineral Buyer purchases and acquires an undivided one-third interest in the minerals from Daughter No. 3. This mineral deed also includes the exact inherited quantum of acreage through intestate succession from Mama under Okla. Stat. tit. 84, §213(B)(2)(a), an undivided one-third interest in the minerals.

Here comes the “Hook and Lateral”: In September 2011, more than two years after Mama’s death in March 2009, Daughter No. 3 files and opens a testate probate administration in Oklahoma and includes the minerals in Mama’s Oklahoma testate probate estate inventory. Daughter No. 3 administers Mama’s Oklahoma testate probate estate inventory and distributes an undivided two-thirds interest in the minerals to a trust. Daughter No. 3 is the sole beneficiary of the trust. Daughter No. 3 then leases the undivided two-thirds interest in the minerals to Operator. Mineral Buyer leases its undivided one-third interest in the minerals to Operator. Operator recognizes and credits Daughter No. 3 with an undivided two-thirds interest in the minerals, the undivided two-thirds interest in the minerals that Mineral Buyer believed it had acquired from Daughter No. 1 and Daughter No. 2
in late 2010. Operator remits to Daughter No. 3 oil and gas production proceeds attributable to an undivided two-thirds interest in the minerals. Operator does recognize Mineral Buyer’s undivided one-third interest in the minerals, the undivided one-third interest it acquired from Daughter No. 3 in June 2011. Operator remits to Mineral Buyer oil and gas production proceeds attributable to an undivided one-third interest in the minerals.

 

THE DEFENSE: OKLA. STAT. TIT. 84, §8

Using Okla. Stat. tit. 84, §8, Mineral Buyer flexes outside leverage against Daughter No. 3 and files a quiet title and declaratory judgment lawsuit for the undivided two-thirds interest in the minerals. This is the text of Okla. Stat. tit. 84, §8:

The rights of a purchaser or encumbrancer of real property in good faith, and for value, derived from any person claiming the same by succession, are not impaired by any devise made by the decedent from whom succession is claimed, unless the instrument containing such devise has been duly admitted to probate by a court of this state having jurisdiction to administer upon the estate of the decedent within two (2) years after the death of the decedent, or unless within one (1) year after the death of the decedent a petition to admit said will to probate has been duly filed in the court of this state having jurisdiction to admit said will to probate and the proceedings have been pursued by the petitioner with diligence.

For Okla. Stat. tit. 84, §8 to shelter Mineral Buyer, he must meet these elements:

1. a purchaser purchases real property or an encumbrancer encumbers real property;
2. in good faith;
3. for value;
4. from any person claiming an interest in real property through intestate succession;
5. without either actual notice or constructive notice of a last will and testament for the decedent from whom succession is claimed; and
6. the last will and testament for the decedent is admitted to probate by a court in Oklahoma with jurisdiction more than two years after the decedent’s death; or
7. a petition to admit to probate the last will and testament for the decedent from whom intestate succession is claimed is not filed in a court of this state with competent jurisdiction within one year after the death of the decedent, or if a petition to admit to probate the last will and testament for the decedent from whom intestate succession is timely filed, the proceedings are not pursued by the petitioner with diligence.

It is cliché, but we lawyers all know the “devil is in the details.” To date, as far as this author is aware, there is no published opinion interpreting Okla. Stat. tit. 84, §8 from either the Oklahoma Court of Civil Appeals or the Supreme Court of Oklahoma.

The first element is basic: The “purchaser” or “encumbrancer” must either “purchase” or “encumber” real property owned by the decedent at the time of death. “Real property” in Oklahoma includes both the surface estate and the mineral estate. A hurdle is the definition of “encumbrance.” Black’s Law Dictionary defines “encumbrance” as “[a] claim or liability that is attached to property or some other right and that may lessen its value, such as a lien or mortgage; any property right that is not an ownership interest. An encumbrance cannot defeat the transfer of possession, but it remains after the property or right is transferred.”1

This definition could include a consensual mortgage, judgment lien, oil and gas lease, joint operating agreement, easement or right-of-way, mechanic’s and materialmen’s lien, oil and gas lien, tax lien, non-participating royalty interest, production payment, restrictive covenant or encroachment or claim of adverse possession.

Elements two and three require definition. Although elements two and three do not include explicit language requiring the absence of actual notice and constructive notice to seek shelter under Okla. Stat. tit. 84, §8, a fair interpretation of elements two and three requires that a “purchaser” or “encumbrancer” under Okla. Stat. tit. 84, §8 either “purchase” or “encumber” real property without both actual notice and constructive notice of the decedent’s last will and testament, i.e., meet the standard for a “bona fide purchaser for value” or a “BFP.” A comprehensive exposition of the “bona fide purchaser for value” rule in Oklahoma is beyond the boundaries of this article, but the essential elements include the 1) payment of valuable consideration, 2) good faith and the absence of purpose to take an unfair advantage of third persons and 3) with the absence of notice, actual or constructive, of outstanding rights of others.2

Elements two and three should concern those seeking shelter under Okla. Stat. tit. 84, §8 (landmen and professional mineral buyers, I am talking to you) after purchasing from or encumbering real property through one claiming an interest in real property by intestate succession from an out-of-state decedent, like Mama. Those of us who practice testate or intestate probate administration or determination of heirship and quiet title litigation run across this decrepit fact pattern: out-of-state decedent leaves a last will and testament (or not), and personal representative (or personal administrator) completes either a testate or intestate probate administration (or not) in the decedent’s state of domicile, but personal representative (or personal administrator) does not open an ancillary testate or intestate probate administration here in Oklahoma for the administration of the decedent’s Oklahoma estate. Said devisee (or heir-at-law) to the decedent then gripes about retaining legal counsel in Oklahoma for a testate (or intestate) probate administration in Oklahoma to distribute, say, a minuscule undivided mineral interest under the decedent’s last will and testament (or by intestate succession under Okla. Stat. tit. 84, §213). Then consider whether a decedent’s last will and testament admitted to probate in another jurisdiction, like California or Texas, places the world on either actual notice or constructive notice of the decedent’s last will and testament, even though a court of competent jurisdiction in Oklahoma maintains exclusive, plenary jurisdiction over real property in Oklahoma administered and distributed through an intestate or testate probate administration or a determination of heirship and quiet title lawsuit.

For an “out-of-state” decedent or an “in-state” decedent at the time of death, consider the oft-used “affidavit of death and heirship” under Okla. Stat. tit. 16, §§٦٧, 82, and 83 with the decedent’s purported last will and testament attached. The OBA Title Examination Standards Handbook dictates that a last will and testament is ineffectual to pass title to real property until the decedent’s last will and testament is admitted to probate, and the decedent’s estate in Oklahoma is administered under the Oklahoma Probate Code.3

Codified in 1910, amended in 1967, Okla. Stat. tit. 84, §8 had read like this:

The rights of a purchaser or incumbrancer of real property in good faith, and for value, derived from any person claiming the same by succession, are not impaired by any devise made by the decedent from whom succession is claimed, unless the instrument containing such devise is duly proved as a will, and recorded in the office of the county court having jurisdiction thereof or unless written notice of such devise is filed with the county judge of the county where real property is situated, within four years after the devisor’s death.

Let us suggest here that Daughter No. 3 recorded a “memorandum of trust” for the trust, the devisee under Mama’s last will and testament, within either the one-year or two-year “window” under Okla. Stat. tit. 84, §8. Does this provide the world with constructive notice of a devise included in Mama’s last will and testament?4 Every conveyance entitled to be recorded provides constructive notice under Okla. Stat. tit. 16, §16, but a “memorandum of trust” is not a conveyance.5Consider these facts: Daughter No. 3,
as lessor, executed and delivered an oil and gas lease to Operator, as lessee, as a “married woman, dealing in her sole and separate property”; consider also that Daughter No. 3, as grantor, executed and delivered the mineral deed to Mineral Buyer, as grantee, as “a married woman dealing in her sole and separate property,” not as trustee of the trust.

Suppose that Mama’s California estate planning counsel mails a copy of Mama’s purported last will and testament and a copy of the trust instrument to Daughter No. 1 and Daughter No. 2 within the one-year window or the two-year window under Okla. Stat. tit. 84, §8. Is this actual knowledge imputed to the Mineral Buyer? Under Mama’s scenario, neither provided a copy of Mama’s last will and testament to nor notified Mineral Buyer that Mama left a last will and testament at the time of her death. And remember, Mineral Buyer inquired as to the existence of a valid last will and testament for Mama.

Element four rigs a bear trap: from any person “claiming” through intestate succession. Well, any person can “claim” an interest in real property through intestate succession, but it is not until the decedent is, in fact, deceased that a decedent’s heirs-at-law are then vested with the decedent’s interest in any real property comprising the decedent’s purported intestate estate at the time of death subject to the administration of the decedent’s estate by a court of competent jurisdiction in Oklahoma. And a decedent’s heirs-at-law are not determined until a court of competent jurisdiction finds and decrees the decedent’s heirs-at-law under Okla. Stat. tit. 84, §213. Effective application of Okla. Stat. tit. 84, §8 requires a court of competent jurisdiction in Oklahoma first determining the decedent’s heirs-at-law under Okla. Stat. tit. 84, §213, and second, a purchaser or encumbrancer qualifying as a “bona fide purchaser for value” or a “BFP.”

If one hurdles the first five elements of Okla. Stat. tit. 84, §8, then either element six or element seven remains. Element six is easy; element seven is not. Element six requires that the decedent’s last will and testament is admitted to probate in Oklahoma more than two years after the decedent’s death. Or element seven requires a petition to admit to probate the last will and testament for the decedent filed within one year after the death of the decedent, but the proceedings are not pursued by the petitioner with diligence. For element seven, define the standard for “pursuing a testate probate proceeding with diligence.”

A question: Well, what happens after the two-year window under Okla. Stat. tit. 84, §8? One could make an argument – not a good one, I do not think – that Okla. Stat. tit. 84, §8 operates like a statute of limitation or a statute of repose for a testate probate administration as applied to an interest in real property. This author is not aware of a statute of limitation or statute of repose for opening, administering and closing either an intestate or testate probate administration in Oklahoma. As discussed earlier, a decedent’s real property vests at the time of death, subject to the administration of the decedent’s estate. Interpreting Okla. Stat. tit. 84, §8 as a statute of limitation or statute of repose would seem unconstitutional, that is, “theft by legislation.”

The better argument is that one who purchases from or encumbers real property through one claiming through intestate succession after the two-year window under Okla. Stat. tit. 84, §8 is protected from a devise in a decedent’s purported last will and testament. Or the argument is that after the two-year window under Okla. Stat. tit. 84, §8, there is an absolute bar against any devise that impairs the rights of a purchaser from or encumbrancer of real property through one claiming by intestate succession under Okla. Stat. tit. 84, §213. I think the argument here is that after the two-year window under Okla. Stat. tit. 84, §8, a purchaser or encumbrancer may presume the decedent died intestate.

 

CONCLUSION

With Mama, Daughter No. 3
did not appeal the grant of summary judgment in favor of the Mineral Buyer under Okla. Stat. tit. 84, §8. So, to date, as far this author knows, neither the Oklahoma Court of Civil Appeals nor the Supreme Court of Oklahoma has interpreted Okla. Stat. tit. 84, §8. But, if a mineral buyer or landman purchases a mineral interest or acquires an oil and gas lease from one claiming through intestate succession within two years of the decedent’s death (or within one year, if a petition for probate is filed for the decedent), said mineral buyer or landman had better have their respective “head on a swivel.”

 

ABOUT THE AUTHOR

Zachary J. “Zac” Foster is a shareholder with Mahaffey & Gore PC in Oklahoma City and practices oil and gas law.

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1. See Encumbrance, Black’s Law Dictionary (10th ed. 2014).
2. See Big Four Petroleum Co. v. Quirk, 1988 OK 21, ¶10, 755 P.2d 632, 634; Okla. Stat. tit. 25, §9 “Good faith consists in an honest intention to abstain from taking any unconscientious advantage of another, even through the forms or technicalities of law, together with an absence of all information or belief of facts which would render the transaction unconscientious.”
3. See 2022 Title Examinations Standards Handbook, Oklahoma Bar Association, at §3.2(D)(3); Yeldell v. Moore, 1954 OK 260, ¶10, 275 P.2d 281, 283.
4. See Okla. Stat. tit. 25, §§9,10, 11, 12, and 13; Crater v. Wallace, 1943 OK 250, 140 P.2d 1018; Riverbend Land, LLC v. State of Oklahoma, ex rel., 2019 OK CIV APP 31, 443 P.3d 588.
5. See Okla. Stat. tit. 16, §16 “Every conveyanceof real property acknowledged or approved, certified and recorded as prescribed by law from the time it is filed with the register of deeds for record is constructive notice of the contents thereof to subsequent purchasers, mortgagees, encumbrancers or creditors.” (emphasis added).