What Do You Mean When You Write: “Subject To”?

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The augurs of ancient Rome prognosticated by inspecting the entrails of birds. Similarly, courts divine meaning by interpreting the detritus of our documents. When we don’t leave a clear message behind, those who follow get to tell us what the words we used meant. Sometimes they are right; sometimes not.

Ruminations now rushes in where fools fear to tread. We’re going to extract some lessons from a Supreme Court of Texas decision about mineral rights and royalties. Bless those who labor in that world. If we get something wrong in this world of oil and gas and other things extracted, we’re sure to hear from those whose world we are about to invade.

When a married couple purchased a certain 55-acre property, their seller “reserved” a 1/4 mineral interest (actually an NPRI – a non-participating royalty interest) in the property. That means the original owner would continue to get 1/4 of the benefits from all oil, gas, and minerals extracted from beneath the property.

Property ownership involves what is likened to a “bundle of sticks.” That means there are many rights embodied within the concept of ownership. These rights can be separated and different owners can own different rights in the same property. So, in the “mineral rights” concept, one party can own the property’s surface and another can own the subsurface portion. Similarly, one can own all of a property’s land right down to the earth’s core, excluding the minerals in that “dirt,” and those can be owned by another. Just like a “total” property can have multiple owners, so can those minerals. So, here, the married couple had a 3/4 interest in the property’s minerals and their seller kept a 1/4 interest. So far, so good. [Read more…]

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Bye Bye LIBOR (And Friends)

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Yes, many readers may have heard whispers (or stage whispers) about the demise of LIBOR. Well, it goes on life support on December 31, 2021 and that might also be the date of its death. That’s when the banks that provide its underlying data will no longer be obligated to do so. Who cares? Those who set borrowing interest rates certainly do. Those who have loan documents based on some spread over a LIBOR rate where those documents didn’t consider a back-up rate if LIBOR ever went away care even more. [Read more…]

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Price; Quality; Time – Pick Two

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It is Labor Day weekend (and the start of Labor Day week). Ruminations has tried to present short blog postings on such weekends. Frankly, we’ve not been successful. Today’s posting is yet another attempt. So, with 30 words already behind us, here we go.

In the management field of study, there is something called the “Project Management Triangle.” We’re not sure when we first heard the term or discovered the concept it describes. So, when we went to research some “history,” we discovered it isn’t really an obscure secret in other fields of endeavor. Based on long experience though, our industry doesn’t yet seem to have discovered the concept. The “Project Management Triangle” has a number of other names: “Triple Constraint,” “Project Triangle,” and “Iron Triangle.” [“Iron Triangle” is also used to describe an aspect of Washington politics, and we leave the reader to explore that form of its use on her or his own.] [Read more…]

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Notwithstanding Anything To The Contrary Contained Herein

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When a carpenter or other craftsperson needs to make “that final adjustment,” she or he reaches into the toolbox and out may come a shim. We’ve all seen shims used, but not everyone knows they have a name. Those wedges, washers, and thin strips of material used to align parts or make them fit are called “shims.” We who draft agreements of every type also use shims. Reluctant as Ruminations is to use the word “all” and mean “all,” today’s use seems accurate. Who among us hasn’t slipped in at least one “notwithstanding anything to the contrary” into every agreement longer than several pages? That’s using a shim because it makes the parts of the agreement “fit” together.

Basically, this shim is used in two circumstances. The first is where, after reading what we’ve written, we realize that our crafted provision isn’t exactly right. We realize that there are one or more circumstances that don’t fit what we’ve written. We realize that what we’ve written needs adjustment. We’ve got to carve out some exceptions. So, instead of rewriting the provisions to make them say what they should say, we append a list of those things we realize don’t fit – but not of those things we didn’t realize don’t fit. [Read more…]

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Let’s Learn Our Trade – Warning: A Rant

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Imagine you are the computer user of the century. There is nothing about using a computer you don’t know. [So you think.] Your friends call you day and night asking, “How do I do this; how do I do that?” Coding? – No problem. Formatting to produce a publishable book using Microsoft Word? – No problem. Manipulating data to prove or disprove human involvement in climate change, if there is such a thing? – No problem.

Then, one day, boxes from all over the world show up at your door. There are no notes, no letters, and no instructions to tell you what you’ve got. But, one of the boxes has something that looks very much like a computer case. With that clue and looking at the generality of some of the other things that were in the other boxes, your best guess, a good one, is that these are the parts for a computer. You’ve looked inside a lot of computers before. After all, your friends have had you play with some connectors; you’ve replaced a hard drive or two, even a solid state one. But, can you assemble the parts to make a working computer? Do you really, really understand how to assemble a computer? Will your proficiency in using a computer, even playing with its cables and poking around inside the case be enough for you to put all of those parts together? [Read more…]

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As Set Forth On Exhibit A (Not Actually) Attached Hereto

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As we were reading a very recent decision issued by the Supreme Court of Alabama, we once again were preparing to write how wasteful it was for the parties to litigate the issues raised. This urge happens often enough that Ruminations has considered preparing “boilerplate” language to be inserted at the end of many blog postings. Then we got to the concurring opinion. It could apply to many of the “manufactured” disputes created by one party or the other and supported by their advocates. Though the following words by that concurring justice give away part of the story we are going to tell, its content and tone resonate with Ruminations. We suggest that we all step back each time issues like these arise and reconsider our thoughts about litigating them.

[Read more…]

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Did They Guaranty The Lease For Its Extended Term?

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We’ve written about guaranties before, most directly in postings that can be seen by clicking: HERE and HERE. Today, we drill down to the enforceability of a lease guaranty after the lease has been modified, but without notice to or knowledge of the guarantor. Today’s Ruminating is informed by a January, 2018 unpublished opinion from the Maryland Court of Special Appeals. [Readable by clicking: HERE.]

A church’s lease was guaranteed by its Pastor, his wife, and six other church members. The church defaulted and its landlord sued for the remaining rent under a three-year extension properly signed by the Pastor on behalf of the church, but without the knowledge of the six church members. In fact, they didn’t even have a hint that the lease had been extended despite each being some form of “leader” in the church, though those roles appeared to be substantially ceremonial. Their only financial connection to the church was their obligation to tithe to it. The lower court described them as “commercially” unsophisticated.

The lease extension was by way of amendment. The lease did not have an extension option. The additional three-year term was related to a rent reduction sought by the Pastor and agreed-to by the landlord. The church performed until it didn’t with eight months to go in the lease’s term. At that time, by agreement with its landlord, the church vacated its premises. [Read more…]

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Can A Tenant Walk Out And Lawfully Stop Paying Rent When It Tires Of The Space?

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A restaurant’s lease permitted leasehold mortgages with the following proviso:

Tenant shall have the right … to encumber Tenant’s leasehold interest under this Lease … through a Mortgage (`Leasehold Mortgage’) with an institutional lender…. Landlord agrees that in the event the Leasehold Mortgagee succeeds to Tenant’s interest under this Lease (in which event it shall assume all of Tenant’s obligations under this Lease), Landlord shall, at the time of such succession, recognize such mortgagee, trustee or lender as the then Tenant under this Lease upon the same terms and conditions contained in this Lease and for the then unexpired portion of the Term.

Any such leasehold lender had the right under the lease to take over the tenant-borrower’s leasehold interest through a foreclosure. [Read more…]

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