Joint Tenancy Severed by Conduct Alone
The condensed version of the facts: From 1931 until 1951, the four original Owners owned the parcel as tenants in common. In 1951, they took part in a “straw man” transaction whereby they regained title specifically “not in tenancy in common but in joint tenancy.” Over the next several decades, the parcel was leased to different entities for oil and gas production. At no time did the Owners formally execute a deed or agreement severing the joint tenancy. During the next 34 years, one by one, each of the Owners passed on.
All the while, the living Owners and the heirs of the deceased Owners would execute documents, such as leases or lease administration agreements, indicating that the heirs had acquired title to their individual ancestor’s interest in the property. The opinion does not specify whether these documents were recorded, but the tenor of the case suggests that they were not. Oil and gas royalties were distributed amongst the surviving Owners and the heirs of the deceased Owners.
In 1981 the last surviving Owner made a deed to herself and her daughter for the entire original parcel, “as joint tenants,” and died four years later. It wasn’t until 2004 that the heirs of the first three Owners subsequently purported to “assign” their interests to a third party, triggering the instant action by the daughter, for a determination of title.
The Court, relying heavily on principles first articulated in three 19th-century English and Irish equity cases, held that “a joint tenancy may be terminated by the owners’ course of conduct,” without the need for an actual conveyance or express agreement of record. In one breath, the Court states that “[i]ntent per se is not determinative; the question is whether the [Owners] by their actions ... evidenced their mutual understanding and desire to hold the Property as tenants in common rather than as joint tenants.” But it then remands to the trial court to determine whether “that conduct rose to a level sufficient to show their intent to terminate the joint tenancy” [emphasis added to both quotations].
COMMENT: The Court made no distinction between the fee ownership of the parcel and ownership of the royalty rights under the leases. Nor did it consider the estate tax implications of its holding—a can of worms best left unopened at this juncture.
Each of the precedents analyzed by the Court, whether British or American, arise from materially different circumstances. Many of them involve personal property. Those that do concern realty arose in the context of a divorce or a joint will. And, none involve a bona fide purchaser from the survivor. In the instant case, the “survivor” brought suit to eliminate claims asserted by a transferee who could not claim BFP status (because it took from the heirs of the deceased tenants). But the broad language of this opinion may well create havoc if a transfer from the survivor to a BFP is subsequently challenged.
While several American jurisdictions have proscribed “course of conduct” severance by statute, title insurers should be mindful that mere proof of death of joint tenants may only be the beginning of the inquiry, not the end.
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