Texas Supreme Court Denies Claim for Reformation of a Deed as Untimely

On March 24, 2015, the Texas Supreme Court decided the case of Cosgrove v. Cade. This case emphasizes that parties to a real estate transaction need to make sure that the written instruments conveying the property accurately reflect the property interests that are transferred.

The Cades sold property to the Cosgroves under a Real Estate Contract providing that “Sellers to retain all mineral rights.” The deed signed by the Cades, however, mistakenly conveyed the property in fee simple to the Cosgroves and did not retain or reserve the mineral rights. The deed was recorded in October, 2006.

Before entering into the sale, the Cades had leased the mineral estate. In 2011, the Cades learned from the mineral lessee that there was a problem with the mineral reservation in the 2006 deed. The Cades demanded that the Cosgroves agree to issue a correction deed, but the Cosgroves refused informing the Cades that the statutes of limitation barred any claim the Cades might have regarding the deed.

The Cades sued in February, 2011 to reform the deed. The trial court ruled that the Cades’ claims were time barred and granted summary judgment to the Cosgroves. On appeal, the court of appeals reversed the summary judgment.

The Texas Supreme Court reversed the court of appeals and rendered judgment against the Cades holding that the Cades waited too long to bring their claims. The Court held that a grantor who signs an unambiguous deed is presumed as a matter of law to have immediate knowledge of material omissions to the deed stating: “Today we expressly hold what we have suggested for almost half a century: Plainly obvious and material omissions in an unambiguous deed charge parties with irrebuttable notice for limitations purposes.” The Cades’ claims accrued from the date of the 2006 deed and the four-year statute of limitations period to reform the deed had expired before the Cades filed suit in 2011.

This case reemphasizes an important lesson – a party to a deed needs to make sure when signing a deed that the deed accurately reflects the transaction.