Publication

EXAMINING THE “LIFE” OF A CORRECTION INSTRUMENT AFTER BROADWAY BANK AND CONCHO

CELIA C. FLOWERS, Tyler
Flowers Davis, P.L.L.C.

State Bar of Texas
OIL, GAS & MINERAL TITLE EXAMINATION
June 30–July 1, 2022 Houston

TABLE OF CONTENTS
I. INTRODUCTION 1
II. LIFE BEFORE BROADWAY AND CONCHO 1
A. Myrad Case 1
B. Legislative Response to Myrad 1
III. TEXAS TITLE EXAMINATION STANDARDS 2
IV. SUMMARY OF FACTS AND HOLDINGS IN THE BROADWAY BANK CASE 2
A. Caution Added by the Title Examination Standards Board 2
V. SUMMARY OF FACTS AND HOLDINGS IN THE CONCHO CASE 2
VI. DIVESTING RECORD OWNERS OF THEIR INTEREST 3
VII. RATIFICATION ISSUE 4
VIII. INDEXING OF DOCUMENTS INTO COUNTY RECORDS 4
IX. A CLOSER LOOK AT SECTION 5.029 5
X. EFFECT ON THE TITLE EXAMINATION PROCESS 7
XI. NO LIMITATION PERIODS 8
XII. WHAT MAY APPEAR IN THE NEXT LEGISLATIVE SESSION 8
A. Relation Back and Knowledge 8
B. Notice Issue 8
C. Revision Of Statute 9
D. Add Limitation Period 9
XVI. SUMMARY 9
EXHIBIT A 11

EXAMINING THE “LIFE” OF A CORRECTION INSTRUMENT AFTER BROADWAY BANK AND CONCHO
I. INTRODUCTION
The stability and certainty of title to real property in Texas cannot be overstated. The Supreme Court has upheld and promoted such stability for over 100 years in its many opinions related to record title, notice, and protection of subsequent purchasers. In April of 2021, the Texas Supreme Court decided Concho Resources, Inc. v. Ellison, 627 S.W.3d 226 (Tex. 2021) (“Concho”) wherein the court allowed the subsequent actions of parties to divest an ownership interest of the current interest owner. Then, in May of 2021, the Texas Supreme Court decided Broadway National Bank v. Yates Energy Corp. 631 S.W.3d 16 (Tex. 2021). In that case the court held that a material correction deed only needed to be executed by the original parties to the document requiring the correction regardless of subsequent transfers by those original parties. The Supreme Court’s recent opinions in Broadway and Concho appear to have altered centuries-old policy in favor of allowing subsequent actions (even by parties who own no current interest) to retroactively alter the interest conveyed in the public records without the consent of the current, vested owners. Title examiners must be conscious of these opinions in conducting their examinations of the status of real property titles in Texas.

II. LIFE BEFORE BROADWAY AND CONCHO
For many years, common law allowed the correction of errors in documents based on mutual mistake. In that regard, courts accepted the use of a correction instrument to correct the defects of a deed when the correction instrument referred to those defects and states in the correction instrument that it had the same effect upon the rights of the parties that a court’s judgment would have. In other words, if a court were to preside over a dispute regarding a mutual mistake with all of the interested parties before the court, the agreement of all those parties would have the same effect as the court’s judgment itself would have. For example, one would see correction deeds prepared to correct elements of a legal description signed by all of the respective parties who would have required to be present before the court in order for a judgment to be rendered on the description. In this connection, the correction had to reflect that its intent was to conform the deed to the intent of the parties involved in the original transaction, and therefore, it related back to the original date. Myrad Props. v. LaSalle Bank Nat’l Ass’n, 300 S.W.3d 746 (Tex. 2009), citing Doty v. Barnard, 92 Tex. 104, 47 S.W. 712, 713 (1898); Adams v. First Nat’l Bank of Bells/Savoy, 154 S.W.3d 859, 871 (Tex. App.— Dallas 2005, no pet.); Humble Oil & Refining Co. v. Mullican, 144 Tex. 609, 192 S.W.2d 770, 771-72 (Tex. 1946); see also, Smith v. Liddell, 367 S.W.2d 662, 666 (Tex. 1963); Sanborn v. Crowdus Bros. & Co., 100 Tex. 605, 102 S.W. 719, 720 (Tex. 1907); Halbert v. Green, 156 Tex. 223, 293 S.W.2d 848, 852-53 (Tex. 1956).

Attorneys utilized several different methods to draft these correction instruments. The standard practice developed to require the signatures of any subsequent purchasers because those persons were the record title holders, while the actual original parties were not necessarily required to sign if their interest was not affected.

A. Myrad Case
The Myrad case – rendered in 2008 – provides an illustration the issue of correction instruments. Myrad Properties, Inc. v. LaSalle Bank Nat’l Ass’n, 300 S.W.3d 746, 750 (Tex. 2009). The issue in Myrad involved the foreclosure of two properties. Although the deed of trust covered two tracts of land, the substitute trustees’ deed conveyed only one of those tracts after the foreclosure. Thereafter, the substitute trustee used a correction deed to add the second tract that was originally described in the deed of trust.

As to use of a correction deed to cure an otherwise unambiguous deed erroneously conveying only one property, the Supreme Court held “to allow correction deeds to convey additional separate properties not described in the original deed would introduce unwarranted and unnecessary confusion, distrust, and expense into the Texas real property records system.” Myrad, 300 S.W.3d at 750. As a result of the Myrad holding, parties, even those in agreement, were pushed into filing a lawsuit for reformation to correct a document if it was necessary to have the correction document relate back to the date of the prior instrument it was replacing. Because the correction instrument related back to and became effective as of the time of the instrument it purported to correct, subsequent parties would be put on constructive notice of the deed’s existence and bound by its recitals in spite of the fact those previous owners had conveyed their interest. Adams v. First Nat’l Bank of Bells/Savoy, 154 S.W.3d 859, 871 (Tex. App.—Dallas 2005, no pet.).

B. Legislative Response to Myrad
In response to the court’s holding in Myrad, fearing the inconvenience, delay and expense of a court ordered correction instruction, and with persistent persuasion from the title industry, the legislature passed legislation to limit the Myrad holding and to provide a “self-help” process to correct prior documents without going through a courthouse procedure. The intent of the title industry (and presumably the legislature) was to codify the existing common law. Sections 5.027 through 5.031 were added to the Texas Property Code to set out a method to correct non-material errors as well as material errors in documents that had been recorded in the real property records.

Albeit Sections 5.027 through 5.031 were subject to Section 13.001 of the Texas Property Code which provides protection to “a creditor or a subsequent purchaser for a valuable consideration without notice of an unrecorded instrument,” the statute provided a means for the correction document to relate back to the date of the original transaction and provide the correct terms of the transaction (i.e. the intent of the parties to the original transaction). However, the correction deed could not affect the rights of the intervening bona fide purchaser for value who has no real or constructive notice. Tex. Prop. Code § 5.027 (c) and 5.030(c).

III. TEXAS TITLE EXAMINATION STANDARDS
The practice of obtaining the signatures of all parties whose interest was affected on the correction instrument is embedded in the Texas Title Examination Standards (“Standards”). Myrad 300 S.W.3d at 750; White v. McGregor, 92 Tex. 556, 50 S.W. 564 (1899). The Title Examination Standards Board consists of title insurance, real estate, oil and gas, and title law professionals. The Standards reflect a consensus among well-seasoned industry professionals as to what is required to maintain the stability of title in the State of Texas. Moreover, Title Standard 2.20 of the Title Examination Standard, Chapter II – Marketable Title, Correction Instruments, plainly sets out that a correction deed materially altering a prior deed “should be considered effective only if joined by all persons whose interest are affected.” If the prior (or “original”) owner’s interest is affected, the prior (or “original”) owner would also join along with the current owners, whose interest would also be affected. In short, anyone who owns any interest or whose ownership interest will be affected in any way should be required to sign the correction instrument for that instrument to be effective. This fundamental principle is set forth in the Standards and has been consistently upheld at Texas common law.

IV. SUMMARY OF FACTS AND HOLDINGS IN THE BROADWAY BANK CASE
Broadway Bank involved the correction of a 2005 deed wherein Broadway Bank, acting as a trustee conveyed an undivided mineral interest to one of the beneficiaries under a trust. However, the parties only intended to convey a life estate, rather than the entire fee simple interest. To correct the mistake the Bank filed the first Correction Deed a year later, but that deed was not executed by the beneficiary who was the original grantee. There were several conveyances made after the first Correction Deed including a royalty deed executed by the beneficiary. Then, in 2013, the original grantors and the original grantee to the 2005 mineral deed executed an Amended Correction Deed correcting the 2005 conveyance to convey only a life estate. The Amended Correction Deed was not signed by any of the subsequent interest owners.

The Supreme Court, reviewing the applicable provisions of the Texas Property Code, held that the 2013 Amended Correction Deed was valid because it was signed by the “original” parties to the 2005 transaction. The Court further held, that unless one of the “original” parties were “unavailable”, only the “original” parties to the transaction must sign the correction instrument. The signatures of the parties to the subsequent transactions, who were the apparent current record title owners, were not required. The Court failed to define “unavailable”. Additionally, the Court did not address the inconsistency of their interpretation of Section 5.029 with the applicable Texas Title Examination Standard.

A. Caution Added by the Title Examination Standards Board
After the Broadway Bank case was decided, the Title Examination Standards Board added the following caution to its Standards:
“In Broadway Nat ’l Bank v. Yates Energy Corp., 631 S.W.3d 16, 2021 WL 194002 (Tex. 2021), the Texas Supreme Court held that a material correction made in a correction instrument signed by parties who no longer held an interest in the property was valid without the joinder of the then current owners. Notwithstanding this holding, an examiner should not rely on a purported correction instrument that makes a material correction to an earlier instrument under Tex. Prop. Code section 5.029 unless all who could be adversely affected by the correction, i.e., creditors and subsequent purchasers have joined in its execution because an examiner cannot ordinarily determine whether such party is protected or unprotected by Tex. Prop. Code section 5.030. In the case of a nonmaterial correction, if the correction instrument has not been executed by all parties to the original instrument and current owners, then the examiner should not presume that the parties that executed the correction instrument complied with the requirements of subsection 5.030(d). Moreover, an examiner should use caution in determining whether a particular correction is material or nonmaterial. Because of the difficulty in determining the materiality of a correction, absent a judicial resolution, the examiner should exercise caution in relying on a correction instrument in which not all affected persons have joined.”

V. SUMMARY OF FACTS AND HOLDINGS IN THE CONCHO CASE
The Concho case involved another fundamental title principle upon which all title examinations start — the identification of the subject property to be examined. This fundamental title principle is also embedded in the Texas Title Examination Standards. V.T.C.A., Property Code T. 2, App., Title Examination Standard 2.20.

In Concho, a road that had been in place many years was considered the boundary line between two pieces of property which were conveyed in a 1927 deed. The location of the road and the description of the properties calling to that road were in several recorded documents. The oil and gas leasehold ownership was different under the two tracts.

Then, in 2008, decades after the 1927 deed, an agent for one of the current leasehold owners approached the landowners who owned record title of both the surface and the minerals requesting a boundary stipulation to cure a title requirement as to the location of a well. The owners agreed to sign a boundary stipulation changing the boundary line between the tracts from the road to another location. Part of the basis for the stipulation was that it reflected the “called acreage” in the 1927 deed originally filed among the parties. The change in the boundary affected the ownership of 154 acres. Approximately 5 years later, a party affected by the boundary stipulation filed suit to have the stipulation set aside as void based on the assertion, in part, that the 1927 deed was unambiguous as to the location of the boundary between the two tracts. However, the Texas Supreme Court did not agree. In reversing the Corpus Christi appellate court’s decision, the Texas Supreme Court held “that the Boundary Stipulation [was] a valid agreement between the mineral owners of the two tracts at issue” based partially on the rationale that owners could freely decide to bind themselves to an agreement to resolve property disputes in an effort to avoid litigation. The high court also held that a document, which was essentially a “letter of intent,” signed by the leasehold owners served as a ratification that signified their acknowledgement and acceptance of the boundary change. The boundary agreement in this case contained express wording to retroactively transfer title to all estates in the disputed 154 acres from the current owner(s) to the party on the other side of the unambiguous public road boundary without the joinder or acceptance of all those leasehold owners that owned a recorded, vested interest in the tract. The boundary agreement thus resulted in the conveyance of approximately 154 acres of leasehold interest to a different owner.

As set out in the Standards and consistently upheld at Texas common law, the location of the property must be properly defined by its unambiguous boundaries, regardless of any nominal acreage discrepancies recited in property conveyances. This rule known as the “Stribling rule” encompasses multiple common law principles and statutory requirements for determining boundaries as well as the “priority or dignity of calls” rules. This property rule has been accepted by the courts regardless of the size of any asserted acreage discrepancy. Stribling v. Millican DPC Partners, LP, 458 S.W.3d 17 (Tex. 2015).

Despite these title standards, the Supreme Court in the Concho decision allowed the “called acreage” to control over unambiguous boundaries expressly identified in the public property records. The “public road” was clearly described as the unambiguous boundary between the tracts in the recorded 1927 deed and the oil and gas leases creating the leasehold interest The court’s holding allows a later subjective determination of “uncertainty” to control over the unambiguously defined location of record. This holding may not only be interpreted to apply to the “uncertainty” or error in a boundary agreement but also an error in a deed justifying the use of a correction deed under the property code. Title examiners will now have no means to confirm whether boundaries in documents filed of record are the “correct” boundaries if “off record” facts are allowed to dictate the existence of a boundary lines in contradiction of descriptions shown of record.
Unfortunately, the opinion serves to undermine the reliance title examiners have placed on recorded title conveyances with unambiguous boundary descriptions. This inability to rely on record title will result in inconsistencies in title examination, as well as jeopardize the availability of financing by lending institutions relying on real property as collateral.

How can a title examiner conduct investigations of “off record” facts relating to each prior conveyance in a title chain? How far does that examiner have to investigate the past documents to look for acreage “discrepancies” or other undefined “circumstances” that would somehow give indication (or not) that the parties did not really mean to convey certain property despite the existence of recorded conveyances that clearly define the boundaries?

VI. DIVESTING RECORD OWNERS OF THEIR INTEREST
The Concho and Broadway Bank opinions serve to allow the divestiture of a current owner’s real property interest. The potential schemes by undivided interest owners, prior owners and/or adjacent landowners to unilaterally divest record title owners are endless. Such schemes can certainly lead to increased jury trials with unpredictable results based upon juries finding acreage discrepancies “too large”, or juries finding other off record “circumstances” to justify disallowing unambiguous boundaries referred to in ancient documents or the subsequent correction of a prior deed to control as the proper original intention of the parties. V.T.C.A., Property Code T. 2, App., Title Examination Standard 13.40. The oil and gas and real estate industries, their lenders, title insurance policies, oil and gas title opinion writers, and professional landman that investigate and confirm the titles to facilitate their client’s business activities cannot properly function without certainty in recorded legal titles.

Of course, at any time, landowners with a common boundary can execute a “boundary agreement” if they want to change that boundary. Texas law provides the means for such action by allowing the parties to adequately describe the new boundary line location in writing and execute a document with cross-conveyance language that includes present words of grant to convey the land that is being moved from one side of the boundary to the other side of the new boundary. Such action violates no title law principles or property rules. However, what is troubling is to allow that agreement to affect other interest owners in the property that were not parties to the agreement.

Recall that Myrad confirmed the longstanding common law property title principle, that “correction deeds” – cannot retroactively change the nature or amount of vested property title ownership in an earlier conveyance in any material way. Myrad Properties Inc. v. LaSalle Bank National Association GMAC, 300 S.W.3d 746, 750 (Tex. 2009). In conjunction with the stability of title in Texas, the Myrad case ultimately held that if a real property interest is recorded with no obvious ambiguity or error on the face of an earlier conveyance, a “correction deed” – no matter how named or characterized – of said earlier conveyance cannot divest title from the current, vested title owner. See id.

It appears a motivating policy for the Texas Supreme Court in the Myrad holding was the preservation of the notice effect by recordation. 300 S.W.3d at 746. Myrad fully supports the procedures every title examiner employs to confirm titles by examining recorded title conveyances relying on the effect of notice given by those recorded instruments. An instrument such as a boundary stipulation does not meet the “correction deed” definition. That type of instrument, used to divest current interest owners, has never been permitted under Texas common law nor is it permitted under the correction deed statute. See, Tex. Prop. Code § 5.027. The correction statute requires an “ambiguity or error” in the original conveyance description. Such error is non-existent in the 1927 deed examined in the Concho case. See, Howard Williams, Recordation Hiatus and Cure by Limitation, 29 Tex. L. Rev. 1 (Nov. 1950), discussing the title search “quadrivium” of White v. McGregor, 50 S.W. 564 (Tex. 1899); Houston Oil Co. of Texas v. Kimball, 122 S.W. 533 (Tex. 1910); Delay v. Truitt, 182 S.W. 732 (Tex. Civ. App.—1916, error ref’d); Breen v. Morehead, 136
S.W. 1047, 1049 (Tex. 1911).

Apart from title examiners’ record title concerns, the Concho opinion’s allowance of a decision solely based on claimed “subjective intent” is an invitation to unpredictable jury trials. The uncertainty is additionally compounded by the Concho court’s perceived allowance of a subjective intent assertion without allowing it to be questioned or “second-guessed” despite clear evidence in the record to rebut that assertion. Concho Resources, Inc. v. Ellison, 627 S.W.3d 226 (Tex. 2021).

VII. RATIFICATION ISSUE
The court in Concho points to a “letter of intent” sent by one party to the other to support its holding. The 2008 “letter of intent” in Concho is not a legally effective ratification that could transfer and divest the leasehold owner’s vested title. This type of letter is a customary practice in the industry that invites negotiated documents which would later serve as the actual conveyance. Stated otherwise, the letter examined in Concho would arguably never be viewed as anything other than an agreement to later agree. That type of agreement, without conveyance language of any type, could not divest a leasehold owner.

Landmen often preliminarily “accept” a suggested written or oral description of the subject property with no expectation that title to the property would be divested in the process. Presumably, an oil and gas title attorney who examined the title in Concho would have advised a landman receiving the 2008 letter that it was a “letter of intent” that contemplated a future recordable assignment if a final “deal” were to be consummated. A title examiner reviewing a record title would not have notice of the unrecorded 2008 letter. Even if the examiner were provided a copy of the letter in Concho, it did not contain the necessary conveyance language. There has never been a Texas case holding that a client could lose a vested, recorded lease title through a preliminary “acceptance” of a proposed legal description modification where the agreement was expressly made subject to the landman’s promise to send a “more formal, recordable document” for review and approval. Simply put, the letter was not a conveyance and was not made a conveyance by merely countersigning and returning the “acceptance” letter. The fact that the letter, itself, refers to a later “recordable” form of document(s) indicates its author knew the letter itself would not meet the requirements to transfer the title. Westbrook v. Atlantic Richfield Co., 502 S.W.2d 551 (Tex. 1973).

Notwithstanding, the Supreme Court in Concho correctly held the [Stipulation] executed between the surface owners did not qualify as a statutory “correction deed”, and that any attempt to treat the Stipulation as a “conveyance” to retroactively change the 1927 Deed Tract description fails, because that would make the Stipulation a void common law “correction deed”, and thus incapable of any “ratification.”

VIII. INDEXING OF DOCUMENTS INTO COUNTY RECORDS
To understand how a subsequent conveyance made by a party that had divested itself of its interest would not be captured by a search of the property records, one must understand how a document is filed with the County Clerk into the public records. When a document is filed, the county clerk indexes that document by Grantor (seller/debtor/lessor) in the “Grantor” index and by Grantee (buyer/lender/lessee) in the “Grantee” index. These are separate indexes. This is even true in most of the counties that use electronic indexes. The index must be searched by the Grantor’s or Grantee’s name. The search of these records provides the history of the property in the form of documents filed under a person’s name as grantor or grantee. It is the search of that information that allows an examiner to determine the current owners of the various property interests.

The Broadway Bank and Concho opinions ignore the mechanics of indexing the public record that title examination depends upon. Essentially, the opinions upend any certainty for title examiners in relying on a search of the public property records in the manner currently used (i.e., one searches A’s name until A sells to B, then one searches B’s name and so on). Stated otherwise, following these opinions, title examiners will now have no means of confirming the current record title holder because a prior owner (whose name would not have been searched after conveying all of his interest) can execute a correction instrument affecting the current owner’s interest without the current owner joining in the instrument—in fact without even giving the current owner notice. Additionally, as this statute is now interpreted by the Court, the examiner could never certify as to the title owners without disclaimer because after the determination of the record title holder, any of the prior owners could unilaterally declare there was a mistake and divest the current title holder without notice or consent using the correction deed. The examiner’s opinion of current ownership can be upended the day after the opinion was issued by a correction deed divesting the current owner of his interest without the owner executing the deed or even knowing the divesture has occurred.

Some believe the courthouse indexing no longer matters because title companies exist that index deeds and other instruments geographically (indexed by the property) and because the use of electronic searches are becoming more prevalent. However, it is not the indexing of the title company that is of consequence. The recording of the document at the County Clerk’s office is the significant yardstick of “recording”. In fact, the correction statute addresses this issue to some extent as it tells the County Clerk how to index the Correction Deed.
Section 5.027 confirms that a correction instrument can correct an ambiguity or error in a recorded “original” instrument of conveyance including an ambiguity or error that relates to the description of or extent of the interest conveyed if the instrument complies with Section 5.028 or 5.029.

Section 5.028 pertains to “Nonmaterial Corrections.” This section requires a person “who has personal knowledge of facts relevant to the correction” of a recorded original instrument of conveyance to prepare or execute a correction instrument to make a nonmaterial change that results from a clerical error. The statute sets out a list of those matters that would fall under the nonmaterial category. The person who executes a correction instrument under this section shall disclose in the correction instrument the basis for their personal knowledge of the facts relevant to the correction of the recorded original instrument of conveyance. This section requires that a person who executes a correction instrument that is “not signed by each party to the recorded original instrument” to send a copy of the correction instrument and notice by first class mail, email, or other reasonable means to each party to the original instrument of conveyance and “if applicable, a party’s heirs, successor or assigns.”

Section 5.029 includes similar but different language. In addition to nonmaterial corrections the parties to the original transaction or the parties’ heirs, successors, or assigns, as applicable may execute a correction instrument to make a material correction to the recorded original instrument of conveyance. The statute outlines the type of material correction that can be made. In Section 5.029 (b) the statute requires that a correction instrument must be executed by each party to the original instrument the correction instrument is executed to correct or if applicable, a party’s heirs, successors, or assigns.

Section 5.030 confirms that a correction instrument that complies with Section 5.028 or 5.029 is effective as of the effective date of the recorded original instrument and creates a presumption that the facts stated in the correction instrument are true. The section further states that an instrument in compliance with these sections is “notice to a subsequent buyer of the facts stated in the correction instrument”. The Supreme Court appears to believe that Section 5.030 is rendered pointless if the heirs, successors, or assigns are required to execute the correction deed.

IX. A CLOSER LOOK AT SECTION 5.029
Texas Property Code Section 5.029 allows a material correction to a recorded original instrument of conveyance and enumerates a number of specific instances where the section can be utilized. Section 5.029 (b) provides that a correction instrument under that section must be “executed by each party to the recorded original instrument of conveyance the correction instrument is executed to correct or, if applicable, a party’s heirs, successors, or assigns.” The Supreme Court’s holding in Broadway Bank interprets this section to allow former property owners to sign a
material correction deed years after the original deed, without notice before or after to current owners, and by doing so, divest current owners of their recorded title. (In the Broadway Bank case, the former owners unilaterally tried to reduce an outright fee simple conveyance to a life estate only, without the consent of the current owners). No notice to current record owners is required before doing so, and no notice except recording is required after.

Any statute or any court’s opinion that allows an owner of real property to be divested of their interest without their knowledge and consent has serious consequences to industries relying on “record title”. So, of course, to allow a previous owner to “correct” a conveyance and divest current owners of recorded title to any part of their property interest without written (recordable) consent or even without their knowledge would turn our system (a very dependable one) of checking titles to land and reporting on its ownership into an unworkable and undependable system.

The Broadway Bank opinion goes on to state that the Supreme Court’s understanding of the “if applicable” provision was to “provide a substitute person or entity to sign when a party to the original conveyance is unavailable to sign a correction instrument for a material error.” But “unavailable” does not mean “if applicable.” This interpretation reads “unavailable” into the statute where it does not exist. There is no definition given by the Court of “unavailable.” What reasoning exists for the original parties to a previous conveyance to execute the correction deed document changing the property’s ownership if they do not own a current interest in the property? Those parties would never be required to execute a deed to convey the property. The current interest owners would be the current record title holders and the proper parties to convey an interest in the property by deed. Additionally, the prior owners who do not currently own any interest would not be required parties to a lawsuit to determine the disputed ownership of property if the dispute did not affect their interest. The Court’s reasoning would make all parties in a chain of title necessary parties to execute deeds to convey the property and be necessary parties to a trespass to try title action.

The term “original parties” has no real meaning if those parties are no longer the current owners. If that were the case, “original party” could then mean any party in the chain of title because any of the prior owners could subsequently claim there was an error in the original conveyance. The more likely interpretation of “if applicable,” and one the Legislature surely meant, is that the correction document is executed by the original party while he or she is the record title holder or if the original party is dead or has conveyed the property, by the original parties’ heirs, successors, or assigns— because those parties are now the record title holders.

Because those original parties are dead or have conveyed the property, it would be applicable for the new and current owners to sign the correction deed. The four dissenting Texas Supreme Court justices in Broadway Bank agreed that when an original grantee has conveyed the property at issue, the current owners are the applicable successors or assigns to execute a correction deed affecting that property – which would be consistent with common law and the Standards. White v. McGregor, 92 Tex. 556, 50 S.W. 564 (1899). Under the majority’s decision, a court first must find that the original owners made any actual “error.” This would apply to conveyances made many years before the conveyance to the current owner by virtually any owner in the chain of title. How could a future purchaser have any objective knowledge of the subjectivity of the “original” owners (meaning any owner before the current owner) in determining whether there was an error? Under the Court’s interpretation of the statute, those “original” owners can simply unilaterally correct an instrument after conveyances to subsequent owners without the agreement of the subsequent owners. The Court reasons 5.030 protects the subsequent bona fide purchaser. So as a title examiner, you could arguably never depend on record title the day of the examination, because a prior owner could subsequently change the interest conveyed.

Determining the identity of the “original owner” and whether the “original owner” was “unavailable” (whatever that means) forces title examination by subjective-intent analysis and jury fact-finding missions The argument that a Correction Deed executed by the original parties will be in the chain of title because 5.030 provides that it replaces the original deed that it purports to correct demonstrates the lack of understanding of the way deeds are indexed in the county records in Texas. As referenced above, unlike some states that index instruments on a tract basis, county clerks (and title examiners) in Texas rely solely on a grantor-grantee indexing system. Thus, an examiner who traces title on the grantor-grantee basis would not discover a correction deed executed by an original grantor who had already conveyed all his interest in the subject land. The opinion would imply that a party who subsequently acquired the property from the record owners under the chain of title rule could not be an innocent purchaser because the correction deed executed by the original grantor after he had already conveyed his interest would automatically become part of the chain of title like it was in the proper order with the other conveyances found by the search. A subsequently filed instrument executed by a grantor who had conveyed his interest is not a part of the chain of title because the examiner would never see the subsequently filed instrument—whether or not the relation back is effective as between the executing parties.

X. EFFECT ON THE TITLE EXAMINATION PROCESS
Although most likely not the Broadway Bank or Concho Courts’ intent, the holdings in these cases will serve to undermine the reliance title examiners have placed on recorded title conveyances. This inability to rely on record title will result in inconsistencies in title examination, provide unsure results, increase time and expense, and cause wide-spread delays in conducting real estate and energy industry development Additionally, the availability of financing by lending institutions relying on real property as collateral will be jeopardized.

The appearance of a correction deed in the prior chain of title presents more confusion. How can a current title examiner know who the “original” parties were and whether they were “unavailable”? Does any prior owner qualify as an “original” party? How can a title examiner conduct investigations of “off record” facts relating to each prior conveyance in a title chain? Does the examiner have to talk to all parties that are in the chain of title and confirm they have not unilaterally found a matter they think needs correction? If an “original” party did not sign the correction deed (just the parties affected by the correction), how does the examiner determine the “original” party was unavailable? Or is the correction deed invalid? How far does that examiner have to look into the past documents for “discrepancies” or other undefined “circumstances” that would somehow indicate (or not) that the parties did not really mean to convey the property in spite of the existence of other conveyances filed of record clearly conveying the interest?

Myrad, and cases cited therein confirm, preserving the notice effect due to recording is the cornerstone for protection of vested property titles. 300 S.W.3d at 750. That is why common law principles for “correction deed” law prohibit material, retroactive changes in a prior recorded conveyance to an unambiguous land description or to the nature of the property interest conveyed. See id. Myrad stands for the principle that a subsequent conveyance by any prior owner that divests later owners in the chain of title of any part of their vested title is not valid against the current owner who did not execute the correction deed.

As stated above, in going forward in the examination, the examiner searches only the current owners of the various property interest. The examiner does not search an owner in the chain of title that had divested its interest prior to the search. The idea of now having to perform forward searches of everyone in the chain of title would change the standards of all searches and make those searches unthinkably cumbersome. Additionally, an examiner who sees a correction deed in the chain of title would require undefined and unlimited “off record” investigations, searching for possible matters affecting title that are unknown and even unknowable. Stribling v. Millican DPC Partners, LP, 458 S.W.3d 17 (Tex. 2015). Operating under these opinions, a title examination and formal title opinion could never be conclusive, due to matters that are not known to the potential buyers, borrowers, and lenders that may subsequently be raised to defeat their ownership.

The Broadway Bank court’s opinion will change the examination of a correction deed in the chain of title from an issue easily discernable by the examiner that all parties who owned a current record title interest had executed the correction deed to a question of fact for a jury as to who were the “original parties” and whether one of original parties were “unavailable” (out of town, incapacitated or whatever that definition becomes). If the current owner happens to be the one that signed, does the examiner have to confirm the “original” owner is now dead, not capable of signing, out of the country (or at least out of town) so that he is one of the “applicable” parties referred to in the statute as interpreted by this Court? Every correction deed in the chain of title renders the title one that can only be decided by a court of law and not a mere title examination of the deed records. A correction deed in the chain of title would always be a title flaw presenting fact questions.

Additionally, under the Court’s interpretation, in every instance of a correction deed that is not executed by the true current owner, the current owner must file suit against the prior owner (who voluntarily divested his own self of his interest) to prove the current owner’s status. So the subsequent owner divested of title by a correction deed (in which all stated facts are presumed true) must first discover he has been divested because he is not given actual notice (though notice is even required under the “non-material” part of the correction statute), go to the expense to obtain a lawyer, determine if he must sue, file suit within the statute of limitations or be barred from getting the title for which he has already paid. Further, the current owner would not win on summary judgment due to the fact issues regarding his bona fide purchaser status. During this time, that current owner must be making his mortgage payment or face foreclosure by his mortgage holder, whose title used for collateral has also been divested. Of course, even if the true current owner prevails with a jury, he is still facing the costs, not to mention, the waste of judicial resources.

This point is made in Concho where an examiner would not be obligated to search for (and would not even know to do so) the subsequent 2008 stipulation in because it was executed 20 years after the lease was executed. Concho Resources, Inc. v. Ellison, 627 S.W.3d 226 (Tex. 2021). There would be no reason to conduct further investigation as to the leasehold interest after it was vested and properly recorded. And, even if the subsequent stipulation came to the title examiner’s attention, its execution subsequent to the lessee’s vested recorded title would have no effect on the lessee’s title or any lender lien rights securing financing for the proposed drilling.

XI. NO LIMITATION PERIODS
The judicial remedy of deed reformation has a four-year statute of limitations. However, the holdings of the courts in Broadway Bank and Concho impose no such limitation period for the self-help provisions of the correction deed statute or the time in which must pass before you can rely on a description or rely on a conveyance. So current owners divested of their interest by “voluntary agreement” between prior owners (even those having no current interest) fall under the 4-year statute of limitations and therefore must file a lawsuit to protect their interest within a four-year period. There is no statute of limitations applicable to the prior owners who made the error on the deed that limits them to a time under which they must raise the issue with the subsequent owners.

XII. WHAT MAY APPEAR IN THE NEXT LEGISLATIVE SESSION
Changes to the Correction Deed Statute may have a place at the 88th Legislative Session coming in 2023. There are discussions among industry about whether the correction deed statute itself should be changed in response to Broadway Bank and, if so, what changes would clarify how correction deeds can be accomplished and how to give effect to the recorded correction deeds already in the record. The desire to clarify the statute is tempered by the fear of creating another issue with the statute that has not been reviewed by the courts.

A. RELATION BACK AND KNOWLEDGE
In reviewing whether to propose changes to the correction deed statute the concepts of relation back of the correction instrument to the date of the instrument being corrected and the statutory requirement of knowledge of the original transaction need to be considered. As discussed above, current record title holders can agree to change their boundaries/description or correct a prior instrument’s errors at any time. The change they agree on does not relate back to the “original” error date. To comply with Section 5.028 the correction cannot be retroactive unless the person executing the correction document has personal knowledge of the original transaction. This is understandable as this Section allows anyone (not just parties to the original transaction) with knowledge of the original transaction to execute the correction instrument when the correction is nonmaterial. However, there is no mention of the “knowledge” of the original transaction as a requirement in Section 5.029. This might be because this section involving material corrections anticipates the involvement of the parties to the original transaction or the “parties’ heirs, successors or assigns, as applicable.” If one reads the “knowledge” requirement into Section 5.029 then the original parties’ heirs, successors or assigs may not have the knowledge of a mistake that occurred in the original transaction in which they were not a party. That would arguably preclude them from executing the correction instrument. Would knowledge of the original transaction be important if the material correction does not affect the original owners’ interest? The Standard notes that all parties whose interest would be affected must sign the correction instrument. Therefore, IF the prior owner’s interest would be affected, then the signature of those prior parties would presumably be needed as well. But if the current owners discover an error made by the prior owner that does not affect that prior owners’ interest at the time of the correction deed, would knowledge of the original transaction be meaningful.

B. NOTICE ISSUE
Another issue that could be addressed with a change to the correction deed statute might be a notice requirement. Section 5.028, which covers non-material corrections, requires the original parties to be noticed “by sending a copy of the correction instrument and notice by first class mail, email, or other reasonable means to each party to the original instrument of conveyance and if applicable, a party’s heirs, successor or assigns.”

There is no such notice provision in 5.029 that covers material corrections. Certainly, if there is a notice provision in the nonmaterial section, it would make sense in light of the current case law that a notice provision be added to the material correction Section 5.029. However, when current vested title interest owners are subject to being divested of their interest by prior owners that have no current interest, one would believe the level of notice would be something more than is required in Section 5.028, which covers only nonmaterial corrections.
When there has been a subsequent transfer of the interest of the “original” party and the current interest owners are correcting the prior conveyance, should the notice be made to the “original” owners by the subsequent owners who are making a correction regardless of whether the proposed correction affects the “original” owners’ interest? What if the “original” parties who have conveyed all their interest have decided they made a mistake and want to correct it? Should the notice be given by the “original” owners to any subsequent owners that the “original” owners are making a correction that will/may affect the subsequent owners’ interest? Should notice be required at all if a party’s interest is not affected? In both situations, the party that is being asked to execute a correction for the benefit of the other party may hold the transaction hostage and require money for their signature.

So, what kind of notice should the statute require when a party is going to be divested of their current record title? If it is actual notice, then it begs the question of how that actual notice will be evidenced.

C. OTHER THOUGHTS ON REVISION OF STATUTE
Perhaps the Sections referring to “if applicable” can be easily revised. Section 5.028 requires notice to be given to “each party to the original instrument of conveyance and, if applicable, a party’s heirs, successors, or assigns.” Section 5.029 requires the parties to the original transaction “or the parties’ heirs, successors, or assigns, as applicable” to execute a correction instrument. Remember the Supreme Court in Broadway Bank interpreted this “if” or “or” provision to mean if the original parties are “unavailable” without a definition of unavailable. Would the revision simply be to revise the statute to define “unavailable” or “as/if” applicable. Possibly an instruction or definition could be added confirming these Sections apply to give notice to or require signatures by the parties to the original transaction only if those original parties’ interest will be affected. If the original owners are not affected, the only the current interest owners would be necessary parties to the correction instrument. In other words, revise the statute to have meaning consistent with the Title Examination Standards. If the original parties “are not living or have conveyed all of their interest” then the proper parties would be original parties’, heirs, successors, or assigns whose interest would be affected. Then it is clear to the industry who is required to sign a correction deed for it to be effective and clear to the industry how to treat a correction deed in the chain of title.

D. ADD A LIMITATIONS PERIOD
The negative impact of these cases may be reduced if the legislature added a limitations period limiting the time in which the “original” parties can file suit to correct their original transaction when it affects the subsequent or current owners’ interest. As stated before, the current owners divested of their interest by “voluntary agreement” between prior owners fall under the 4-year statute of limitations and therefore must file a lawsuit to protect their interest within a four-year period. It would make sense to impose a similar limitations period on the “original” owners.

XVI. SUMMARY
The Broadway Bank and Concho courts’ construction of Property Code sections 5.027 through 5.030 have the potential to invite fraud, promote litigation, and undermine stability of title. Attached as Exhibit A is an example of the absurd results title examiners will now face. Under the courts’ decision, owners and examiners would have the burden to monitor deed records going forward after the original conveyances to determine if prior owners have filed any correction document that would change the current owners’ interest. The “correction” deed could even be secretly created and filed without notice to the current record owners of the interest. Certainly, this goes against the intent of the correction deed statute.
These decisions will increase the burden of searching title prior to acquiring property or issuing title insurance. No longer will title examiners be able to stop searching title on parties who have conveyed all their interest in the relevant property, because those parties may still divest current owners by unilaterally executing a correction deed changing the property or type of interest conveyed to them without notice.

Instead, title examiners would now have to run everyone in the chain of title out ad infinitum—even after they are no longer in the chain of title—lest they overlook a correction deed that would defeat vested title of a record title owner or even its predecessors up the chain being examined. These cases show little respect for valid recorded title, which is the very thing the title industries rely on.

The Myrad case clearly and concisely stated the dangers of this type of situation. Even the Concho case recognizes subsequent agreements by themselves could not retroactively bind others who had an interest in the tracts and were not parties to the agreement.

Under the current case law if a correction deed is found, the examiner has no idea if the “original owner” was “unavailable” (whatever that means) and therefore, every time a correction deed is used, the title will become questionable and examiners will be forced to make burdensome requirements to determine if the correction deed is valid (or not). The Supreme Court has provided title examiners no answers to that dilemma.

EXHIBIT A

Examples of the ridiculous results

In 2008, Abbey owns 100 acres of land in Smith County. In 2009, Abbey has two 50 acre tracts surveyed out of the 100.0 acre tract. Later in 2009, Abbey sells the two 50-acre tracts to Alice. Alice sells one of the 50-acre tracts and ½ of the minerals thereunder to Ben in 2010. In 2012, Alice sells the other 50-acre tract and ½ of the minerals thereunder to Candice. In 2015, Alice sells all interest she has in the property (which is only a mineral interest) to Doug. In 2015, Doug executes an oil and gas lease to Pond Petroleum on Ben’s 50 acres and an oil and gas lease to Dry Hole Exploration on Candice’s 50 acres.

One of the calls of the 2009 survey in the deed to Ben was incorrect. A dispute arises over the boundary line between the two 50-acre tracts. Ben and Candice are agreeable to settle that matter by signing a correction deed to move the boundary line 50 feet further onto Ben’s property.

In this scenario prior to Broadway Bank and under the preferred reading of 5.029, Ben and Candice could simply enter into a correction deed correcting the description. They were the assignees of the “original” owner. The “original” owners have no remaining interest. Abbey had conveyed all her interest to Alice and Alice had conveyed all her interest so neither had a reason to sign as their interest would not be affected. (Forget that warranty rabbit trail argument – warranties have NOTHING to do with record title.) Unless Pond and Dry Hole joined the deed, their interests could not be affected during the life of their lease. Seems simple….

With the Court’s reading of 5.029, the correction deed would have to executed by Alice too (OR would it have to also be executed by Alice and Abbey because the mistake was made during the time Abbey owned the property)? But when Ben and Candice go to Abbey to get the correction deed signed, Abbey refuses to sign without the payment of money. (See that is how it works when you ask someone to sign something, they want to be paid). SO the only party that does not agree is the party who owns no interest.
Under the Dissent’s interpretation of Sec. 5.029, Ben and Candice could proceed because they were the only necessary parties and would have been the only necessary parties in the resulting lawsuit regarding the title if they had not agreed. Now with the Court’s reading of 5.029, does the statute itself cause Abbey to now be a necessary party in a lawsuit in a dispute where she owns no interest?

Under the Court’s reading of 5.029, would it be wiser for Ben and Candice (who agree) to do a boundary line agreement with conveyance language that is not retroactive? Contrary to Concho, I would believe that if Pond and Dry Hole’s interest was affected, they would have to be parties to the boundary line agreement.
If the agreement is agreeing to a boundary on the surface of the property in the future and not affecting the mineral ownership boundary lines, then there is no need for Pond or Dry Hole to sign. If the agreement is affecting surface and minerals, then (before Concho) clearly Pond and Dry Hole would have to sign and agree to the boundary change.

Author: Celia Flowers

TABLE OF CONTENTS
I. PAPER DOCUMENTS ARE GRADUALLY BEING REPLACED BY ELECTRONIC DOCUMENTS. 4
II. ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT (E-SIGN)-, UNIFORM ELECTRONIC TRANSACTIONS ACT (UETA), AND UNIFORM REAL PROPERTY ELECTRONIC RECORDING ACT (URPERA). 4
A. The E-SIGN Authorized Electronic Contracts Almost Twenty Years Ago. 4
1. Parties to the Electronic Contract Must Consent. 4
2. The E-SIGN Exempts Some Types of Transactions. 4
B. The UETA also Authorized Electronic Signatures in Business Contracts Over Twenty Years Ago. 5
1. Parties Using Electronic Signatures in Electronic Contracts Must Consent. 5
2. The UETA Expressly Exempts Some Types of Transactions. 6
3. Definitions Under the UETA Demonstrate the Act’s Broad Nature. 6
4. The UETA has been Broadly Adopted by Individual States’ Legislatures. 7
C. The URPERA Enabled Recordation of Electronic Contracts Many Years Ago. 7
1. The Recording of Paper Documents Electronically Led the Way to Electronic Document Recordation. 7
2. The URPERA has been Adopted in Fewer States. 7
III. THE RECENT ADOPTION OF REMOTE ONLINE NOTARIZATION ACT (RON). 7
A. An Acknowledgment by a Notary Allows a Document to be Recorded in the Public Records. 8
B. Requirements for Notarization are Recognized by the Acts Enabling Electronic Contracts. 8
C. RON Enables Notarization by a Notary When the Party is in a Different Location. 8
1. RON Changed the Definition of Personal Appearance. 8
2. A Discussion of RON Applying the Texas Act Emulated by the ALTA Model Act. 9
D. RON also Requires Consent. 10
E. RON Provides for Methods of Confirming the Identity of the Signer. 10
1. Knowledge Based Authentication (KBA). 10
2. Credential Analysis. 10
3. Visual Confirmation. 10
F. RON Adds an Additional Notary Commission. 11
G. Document Retention is Required by RON. 11
H. The Principal and the Notary May be in Different Locations. 11
1. Regulations were Added by the Secretary of State to Implement RON. 11
IV. RON PRESENTS ISSUES COMMON AMONG THE STATES. 12
A. Mandatory Disclosure. 12
B. Multifactor Authentication (discussed in detail above). 12
C. Audio-Video Recording. 13
D. Location of the Notary. 13
E. Location of Signer. 13
F. Secure Technology. 13
G. Retention of Data. 14
H. Fees. 14
I. Defective Acknowledgments. 14
V. Recording Laws. 14
A. State Laws Should Confirm a Document Utilizing RON can be Recorded. 14
B. Why is “Papering Out” Important? 14
1. “Papering Out” – How to Solve the Issue of Recording. 16
VI. OTHER ISSUES. 17
A. Statute of Limitations for Defective Acknowledgments using RON. 17
B. Jurisdictional Requirements. 17
C. Amendments to the Model Act. 17
D. Title Insurance Coverage. 18
E. Where is the Original? 18
F. Title Opinions Reviewing Documents that are Totally Electronic. 18
VII. ADVANTAGES OF RON. 19
A. No Mail Outs. 19
B. Landmen and Attorneys May Want to Consider a Third-Party Vendor. 19
VIII. RISKS OF RON. 20
A. Unauthorized Access. 20
B. Fraud. 20
C. Mistakes and Errors. 20
IX. UTILIZATION OF RON IN THE OIL AND GAS INDUSTRY. 20
X. ELECTRONIC DOCUMENTS, SIGNATURES, NOTARIZATIONS AND RECORDING WILL CONTINUE TO AFFECT CURRENT PRACTICES. 21

 
 
ELECTRONIC SIGNATURES, REMOTE ONLINE NOTARIES AND E-RECORDING

I. PAPER DOCUMENTS ARE GRADUALLY BEING REPLACED BY ELECTRONIC DOCUMENTS.
In the traditionally paper-intensive industries of oil and gas and real estate, old school paper trails are being replaced with electronic documents, signatures, acknowledgements, and recordings. The federal Electronic Signatures in Global and National Commerce Act (E-SIGN) act has been around for almost twenty years and legitimizes the use of electronic signatures and documents. Additionally, many states have adopted specific electronic signature and other technology-driven acts affecting acknowledgments of signatures and recording of legal documents that change the definition of “presence before a notary” without case law catching up to provide interpretation of those laws. This paper addresses the legal side of these technology-driven model acts, including the Uniform Electronic Transactions Act (UETA), the Uniform Real Property Electronic Recording Act (URPERA) and the Remote Online Notarization Acts (RON). While the number of states adopting these types of acts is increasing, the details in recording documents in various jurisdictions and acceptance between states impact the use for conveyancing documents. The transition from paper-recorded documents and in-person acknowledgments to fully electronic enforceable instruments in all jurisdictions has its challenges.

II. ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT (E-SIGN)-, UNIFORM ELECTRONIC TRANSACTIONS ACT (UETA), AND UNIFORM REAL PROPERTY ELECTRONIC RECORDING ACT (URPERA).
A. The E-SIGN Authorized Electronic Contracts Almost Twenty Years Ago.
President Clinton signed the E-SIGN in 2000. See 15 U.S.C. §§7001-7031. The federal statute recognizes that electronic contracts, electronic signatures and other electronic records are the legal equivalent to paper documents with original signatures. See 15 U.S.C. §7001(a)(1)-(2). Being a federal act, E-SIGN affects people who wish to do business electronically in all 50 states.
1. Parties to the Electronic Contract Must Consent.
E-SIGN requires consumers to affirmatively consent to allow the use of electronic records, including electronic signatures, in consumer transactions. See 15 U.S.C.§7001(c)(1)(A). Before the consumer consents, he must be provided with a “clear and conspicuous statement” informing him of the option to have the record provided electronically or made available in paper form as well as the right to withdraw the consent (among other disclosures.) See 15 U.S.C. §7001(c)(1)(B). Consumers must be given a statement of the software and hardware requirements necessary to access and retain the electronic records. See 15 U.S.C. §7001(c)(1)(C). Additionally, consumers must electronically confirm their consent in a manner that “reasonably demonstrates” they can access information in the particular electronic form that will be used to provide the information to the consumer. See id. The legal effectiveness, validity, or enforceability of any contract executed by a consumer shall not be denied solely because of the failure to obtain electronic consent or confirmation of consent by that consumer. See 15 U.S.C. §7001(c)(3).
2. The E-SIGN Exempts Some Types of Transactions.
The act applies to all transactions, including interstate or foreign, unless an exception applies. The E-SIGN provisions do not apply to a contract or other record to the extent it is governed by a statute, regulation, or other law governing the creation and execution of wills, codicils, or testamentary trusts. See 15 U.S.C. §7003(a)(1). Additionally, E-SIGN does not apply to a state statute, regulation, or other law governing adoption, divorce, or other matters of family law. See 15 U.S.C. §7003(a)(2). Further, the act does not apply to many provisions of the Uniform Commercial Code in effect in any state. See 15 U.S.C. §7003(a)(3). Among the other excluded transactions, the provisions of the E-SIGN do not apply to court orders or notices, or official court documents (including briefs, pleadings, and other writings) required to be executed in connection with court proceedings. See 15 U.S.C. §7003(b).
B. The UETA also Authorized Electronic Signatures in Business Contracts Over Twenty Years Ago.
In July of 1999, the National Conference of Commissioners on Uniform State Laws, also known as the Uniform Law Commission, (ULC) approved a uniform act to enable the use of electronic signatures in business contracts and recommended it for enactment in all the states. If a state adopts the ULC’s official version of the UETA, the E-SIGN Act provides that state law will supersede where a conflict exists between the E-SIGN Act and the UETA.
See 15 U.S.C. §7002(a)(1). See also Allen v. WELLS FARGO BANK, NA, Dist. Court, ND Texas 2016. Allen asserted Wells Fargo violated 15 U.S.C. §7003 because the substitute trustee’s deed was electronically recorded. Wells Fargo argued 15 U.S.C. §7003 was “inapplicable” in the present case as Texas state law modifies, limits and supersedes that statute. The court agreed and only exercised diversity jurisdiction over this case.
The UETA applies to electronic records or electronic signatures relating to a transaction. See Tex. Bus. & Com Code Ann. §322.003. The UETA does not require a record or signature to be created, generated, sent, communicated, received, stored or otherwise processed or used by electronic means or in an electronic form. See Tex. Bus. & Com Code Ann. §322.005(a). In other words, the act allows the use of electronic records or signatures in a transaction but does not require parties to use an electronic method.
1. Parties Using Electronic Signatures in Electronic Contracts Must Consent.
The UETA only applies to transactions where each party has agreed to conduct transactions by electronic means. See id. at (b). The E-SIGN, on the other hand, simply states that a party may not be required to use or accept electronic signatures or electronic records. See U.S.C. §7001(b)(2). Whether the parties have agreed to conduct a transaction by electronic means is to be determined from the context and surrounding circumstances, including the parties’ conduct. See Tex. Bus. & Com Code Ann. §322.005(b). If the issue is raised, the party seeking to enforce the contract must prove the parties intended to be bound by electronic communication. As an example, in one case the parties agreed to explicitly communicate only in writing at the inception of the relationship. However, while conducting business together, the parties communicated primarily through email because of its speed. One party stated that she could only be reached by email. The court reasoned that these actions demonstrated a preference for email communication; therefore, the Court held this was consent to conduct business through email. See Crestwood Shops, LLC v. Hilkene, 197 S.W. 3d 641 – Mo Court of Appeals, Western Dist. 2006.
In another case, the Court held legally sufficient evidence of an agreement to conduct business electronically where the parties exchanged communications regarding offers and counteroffers about the subject property via e-mail messages and ultimately agreed via email. See Dittman v. Cerone, No. 13-11-00196-CV, 2013 WL 865423, at *7-8 (Tex. App.-Corpus Christi Mar. 7, 2013, no pet.). Email communications are frequently used during negotiations to buy oil and gas leases or mineral/royalty interests as well as during mergers and acquisitions. Email has virtually replaced typed letters sent by mail as the traditional form of correspondence. Offers and counteroffers are often communicated by email until the ultimate agreement is reached and final documents are emailed for signature. Of course, the absence of a final agreement within the electronic communications could imply the parties had not consented to use the electronic means.
See Central Illinois Light v. Consolidation Coal, 235 F. Supp. 2d 916. See also McClare v. Rocha, 86 A. 3d 22 – Me: Supreme Judicial Court 2014 – “Jim says he would be happy to speak with McClare directly if it would facilitate an agreement” appears to provide evidence that the reference to the sale price contained in the same email was not intended to comprise all of the details of a not-yet-completed agreement.
Additionally, there must be evidence of a clear agreement for consent. References to other necessary documents or telephone communications may indicate the parties did not clearly consent to the use of the electronic means for the entire contract terms. See id.
The determination of whether an electronic signature exists, or a record is “signed,” is also a question of fact. That determination should be made considering all surrounding circumstances. See Tex. Bus. & Com Code Ann. §322.002, Official Comment No. 7. Where a party has expressly stated another method of signing, an electronic signature is not acceptable. For instance, if one party tells the other party to sign and return the paper document, an electronic signature will not suffice. See Powell v. City of Newton (2010) 364 N.C. 562 [703 S.E.2d 723, 727-728]. Similarly, where the parties specifically discuss how they will sign an agreement which differs from an electronic method, then an electronic signature will not work. See J.B.B. Investment Partners, Ltd. v. Fair, 232 Cal. App. 4th 974, 990-91 (Ct. App. 2014).
A party who agrees to conduct one transaction by electronic means may refuse to conduct other transactions electronically. See Tex. Bus. & Com Code Ann. §322.005(c). Therefore, a party can decline to conduct a future transaction electronically after initially agreeing to conduct a transaction electronically. Moreover, the parties to an electronic transaction may vary the provisions of the UETA by agreement. See id. at (d). However, not all the UETA provisions may be varied by the parties. For example, a party’s right to refuse to conduct subsequent transactions electronically may not be waived. See id. at (c). Additionally, a party’s right to be provided documents created in the transaction in a form that can be retained by the party cannot be waived. See Tex. Bus. & Com Code Ann. §322.008(d).
2. The UETA Expressly Exempts Some Types of Transactions.
The UETA does not apply to a transaction to the extent it is governed by a law governing the creation and execution of wills, codicils, or testamentary trusts. Further, the UETA does not apply to most provisions of the Uniform Commercial Code. See Tex. Bus. & Com Code Ann. §322.003(b).
3. Definitions Under the UETA Demonstrate the Act’s Broad Nature.
The UETA defines a “record” as “information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form”. See Tex. Bus. & Com Code Ann. §322.002(12). An “electronic record” is a record that is “created, generated, sent, communicated, received, or stored by electronic means”. See id. at (7). Electronic records include emails, voice mail, facsimile and any information stored on a computer, including scanned or digital images of documents. See id. at Official Comment No. 6.
The idea of an electronic signature is clearly intended to be broad and not specially defined in order to cover a variety of different electronic medium. For example, an “electronic signature” does not have to be an electronic duplication of the signer’s actual signature. The “electronic signature” can also be an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with intent to sign the record. See id. at (8). Electronic signatures include a named affixed to an email, a personal applying of a symbol, standard webpage click-through process, or clicking an “I Agree” button on web site. See id. at Official Comment No. 7.
The key concept of the UETA is that a record or signature will not be denied legal effect or enforceability solely because it is in electronic form. See Tex. Bus. & Com Code Ann. §322.007(a). Likewise, a contract will not be denied legal effect or enforceability solely because an electronic record was used in its formation. See id. at (b). If a law requires a record to be in writing, an electronic record satisfies the law. See id. at (c). Similarly, if a law requires a signature, an electronic signature satisfies the law. See id. at (d). If a law requires a signature or record to be notarized, acknowledged, verified, or made under oath, the requirement is satisfied if the electronic signature of the person authorized to perform the notary act, together with all other information required by law, is attached to or logically associated with the signature or record. See Tex. Bus. & Com Code Ann. §322.011.
4. The UETA has been Broadly Adopted by Individual States’ Legislatures.
The UETA has been adopted on a state-by-state basis and has been enacted in 47 states along with the District of Columbia, Puerto Rico and the U. S. Virgin Islands. Washington, Illinois, and New York have not adopted the UETA; however, similar legislation governing electronic transactions have been enacted in those states. See Uniform Law Commission (ULC). (1999). Electronic Transactions Act. Retrieved April 25, 2019, from https://www.uniformlaws.org/committees/community.
C. The URPERA Enabled Recordation of Electronic Contracts Many Years Ago.
In 2002, the ULC began work on the Uniform Real Property Electronic Recordation Act (URPERA) to harmonize local recording laws used in the different states. The URPERA removed any doubts that existed under prior law regarding the record ability of electronic documents containing electronic signatures. The URPERA permits, but does not require, local filing offices to create electronic recording systems. See URPERA §3(a). Like the UETA, the URPERA recognizes electronic signatures, electronic verification/acknowledgment of documents, and the general validity of electronic documents. See id.
1. The Recording of Paper Documents Electronically Led the Way to Electronic Document Recordation.
The technology to support electronic signatures and notarization has been available since early 2000’s. With that technology, the signer of the document was intended to be physically present before the notary. The computer technology affixed the signatures and acknowledgments. The URPERA allowed county clerks and recorders to electronically record information in the real property and land records. Paper documents executed the traditional way could still be used, but a recording office could convert them to electronic form. See id. at §4. The URPERA paved the way for electronic recording by the record clerks. However, in counties where electronic recording was not available, some of the documents required in a transaction were signed electronically, but those documents requiring recordation were still executed by original signatures in the presence of the notary. In these “hybrid” transactions, the documents that needed to be recorded in the public record were printed out, “wet signed”, and acknowledged by the notary while the other documents, not requiring recording, were simply electronically signed and acknowledged.
2. The URPERA has been Adopted in Fewer States.
As of March 2019, only 35 states have adopted the URPERA, as well as the U.S. Virgin Islands, and it continues to be introduced by state legislatures for adoption. In 2019, West Virginia and Alaska introduced legislation to adopt the URPERA. So far, Oregon, California, Montana, North Dakota, Colorado, Nebraska, Iowa, Missouri, Louisiana, Ohio, New Jersey, Maine, Vermont, New Hampshire, and Massachusetts have not adopted the URPERA. In many of the states that have not adopted the uniform act, a state statute addresses the recordation of electronically signed documents. See Uniform Law Commission (ULC) (Ed.). (2004). Real Property Electronic Recording Act. Retrieved April 16, 2019, from https://www.uniformlaws.org/committees/ community.

III. THE RECENT ADOPTION OF REMOTE ONLINE NOTARIZATION ACT (RON).
With the adoption of the E-SIGN, the UETA, and the URPERA, recording offices utilizing electronic recording cover areas where approximately 80% of the US population live. See id. Despite the widespread availability, few real estate conveyances are originated in total electronic form. The lack availability of electronic recording leaves many rural areas without access. This was partially due to the fact the official recorder’s requirements for filing are left to the individual states to make the decision whether to adopt and implement electronic filing systems. See Tex. Bus. & Com Code Ann. §322.003, Official Comment No. 3. With the change in how the notarization process can take place with RON, there is a renewed possibility of using fully electronic documents even in areas where the recorder has not implemented electronic recording.
A. An Acknowledgment by a Notary Allows a Document to be Recorded in the Public Records.
Although the subject matter and form of contracts differ, any contract can be created, executed, acknowledged, and maintained in a wholly electronic format. Real estate transactions, which include an oil and gas transactions, differ from other commercial transactions in that some of the documents necessary to the transaction require recording in the public record to protect the parties’ rights as to third parties. Of course, the contract signed by the parties is enforceable between the parties without any further action. Therefore, the decision whether to use an electronic medium for the agreements between the parties should be a matter for the parties to determine. See id.
However, for the agreements or documents to be effective as to third parties, state laws generally require recording with a governmental office designated by the state as the official custodian of those records. Most recording statutes require an acknowledgement of the signer’s signature by a notary for recording. If an electronic filing system has not been adopted by the governmental office, recording requires a piece of paper with an original notarized signature to perfect rights against third parties. Certainly, this requirement that a document be recorded to protect the parties’ rights is a consideration for the parties in deciding whether to enter into an electronic contract or agreement. See id.
Therefore, even with the UETA and the URPERA justifying the use of fully electronic documents, the move to wholly electronic documents has been hindered partially because the governmental entity in charge of recording was not set up to electronically record fully electronic documents. Therefore, a paper document remained essential for recording purposes.
As time passed, more county recorders across the nation began to implement electronic recording. The recorders in many large cities across the country accept electronic filing of documents. However, in many rural areas where no electronic recording systems are in place, the parties still must submit paper documents with “wet signed” and properly acknowledged signatures for the recorders to allow the document to be filed of record.
B. Requirements for Notarization are Recognized by the Acts Enabling Electronic Contracts.
The UETA allows the notary public and the filing entity to act electronically; however, the act does not eliminate any of the other requirements of the notarial laws. See §1.00(2) for an analysis of the UETA. The Act simply allows the signing and the notarization to be done electronically. The person executing the document must still appear in the room with the notary. The notary must satisfy himself as to the identity of the signer and swear to that identification. See Tex. Bus. & Com Code Ann. §322.011.
C. RON Enables Notarization by a Notary When the Party is in a Different Location.
1. RON Changed the Definition of Personal Appearance.
RON enables notarization of signatures to occur using audio-video technology via the internet where the notary and the signer are in different locations. See §1.00(2) for an analysis of the UETA; see also “Love, R. & Flowers, C.” (December 2018). What’s the Legal Basis for Ron? Texas Land Title Institute. Essentially, it changed the definition of “personal appearance” required for a notarization to include an on-line audio-visual internet appearance that satisfies certain conditions. See Tex. Civ. Prac. & Rem. Code §121.006(c). Therefore, the execution of documents requiring notarization can be completed without the signers having to be in the notary’s physical presence. With the implementation of RON, a landman would no longer have to travel to the location of the lessor to notarize the oil and gas lease. Similarly, complicated assignments requiring the signatures of multiple parties can be handled without the parties each signing while physically present in the room with a notary.
a. States’ Adoption of RON is Increasing.
The first RON bill passed in Virginia in 2011. In 2015, Montana approved the use of RON for transactions involving real estate located in the state. In 2017, RON bills were passed in Texas and Nevada. Remote notarization laws have now passed in twenty-two states: Virginia, Texas, Vermont, Michigan, Indiana, Minnesota, Montana, Nevada, Ohio, Utah, Tennessee, Arizona, Idaho, Kentucky, Maryland, North Dakota, South Dakota, Oklahoma, Washington, Iowa, Nebraska (pending governor’s signature) and Florida (pending governor’s signature). Some of the state’s statutes required the writing of regulations. Texas & Nevada released RON regulations in 2018. In 2020, the following states have passed RON Legislation: Arizona, Florida, Idaho, Indiana, Iowa, Kentucky, Maryland, Michigan, Minnesota, Montana, Nebraska, Nevada, New Jersey, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, and Washington. See American Land Title Association (ALTA).
b. The Model Bill for RON was Drafted by the Real Estate Industry.
The American Land Title Association (ALTA), using the Texas legislation as a starting point, worked with the Mortgage Bankers Association (MBA) to release a model bill for RON in 2017. The ULC added RON to the Uniform Law on Notarial Acts (RULONA), which was originally promogulated in 2010. New Section 14A dealing with remote notarization was added in 2018. ULONA has been enacted in 12 states: Colorado, Idaho, Iowa, Minnesota, Montana, North Dakota, Oregon, Pennsylvania, Rhode Island. Vermont, Washington, and West Virginia. See Uniform Law Commission (ULC), Law on Notarial Acts, Revised Law on Notarial Acts, Revised – Uniform Law Commission (2018), https://www.uniformlaws.org/committees/community (last visited May 20, 2019).
The authors of the model did not include any participants from the oil and gas industry. The act centered around the real estate and mortgage industries. Because RON applies to documents requiring notarization, it affects the oil and gas industry when it comes to the recordation of documents. Although, the needs of the oil and gas industry were not specifically considered, the security provisions implemented by the act, as discussed later, provide for a secure manner of notarization that applies in all instances of use of RON.
2. A Discussion of RON Applying the Texas Act Emulated by the ALTA Model Act.
In Texas, RON was the result of Texas House Bill 1217 (HB 1217), which became effective July 1, 2018. HB 1217 made the following statutory changes to various codes in Texas allowing for RON implementation:
a. RON Changed the Texas Civil Practice and Remedies Code Chapter 121.
The Texas Civil Practice and Remedies Code Chapter 121, Acknowledgments & Proofs of Written Instruments, was amended to expand the definition of personal appearance to include, “an interactive two-way audio and video communication.” See Tex. Civ. Prac. & Rem. Code, Chapter 121.006(5)(c)(2) and (5)(d). Thus, a continuous feed transmitted over a internet connection is now a vehicle for a notary to remotely take an acknowledgment or sworn statement. See “Love, R. & Flowers, C.” (December 2018). What’s the Legal Basis for Ron? Texas Land Title Institute, at Page 1. This new vehicle for a notarization was made expressly subject to the new Subchapter C, Online Notary Public, of Chapter 406 of the Texas Government Code, discussed below.
The Secretary of State was authorized and directed to adopt rules and standards by July 1, 2018. The final rules and standards were adopted August 19, 2018.
b. Texas Government Code Chapter 406 was Amended to Support RON.
Chapter 406 of the Government Code now includes Subchapter C, entitled Online Notary Public. Subchapter C includes the following:
The new subchapter included new terminology with the following definitions:
a. “Credential analysis” by a third party;
b. “Electronic” and “Electronic document” to encompass non-paper documents;
c. “Electronic notarial certificate,” “Electronic seal,” and “Electronic signature” to capture the act of online notarization by a notary;
d. “Identity proofing” by a third party; and
e. “Notarial act”, “Online notarization”, “Online notary public”, “principal”, and “Remote presentation” to structure and standardize RON. See Tex. Gov’t Code Ann. §406.101.
The new terminology outlines new ways of authentication of documents- verifying the correct person is signing the document – using identity proofing and credential analysis as discussed further below. These methods are in addition to the notary seeing the person visually through the video feed and comparing with signer’s state issued photo ID. The notary visually looking at the signer and the signer’s ID was the only method used where notarization takes place with the notary and the signer in the same room. Additionally, the required technology provides for a linking of the signature, identity, and document to the time it was signed thus creating an audit trail.
D. RON also Requires Consent.
As with the UETA, RON also requires the consent of the parties to conduct the notarization using the online technology. The technology captures the parties’ verification of their consent at the beginning of the transaction process so the consent can be recorded before the signer proceeds to signing and acknowledgment. Proof of that consent is captured by the technology and the consent is verifiable in the future, if needed.
E. RON Provides for Methods of Confirming the Identity of the Signer.
1. Knowledge Based Authentication (KBA).
The signer must correctly answer dynamic knowledge-based authentication questions provided by a reputable third-party vendor. This consists of a series of timed, personal questions, which only the true signer should be able to answer. See The Mortgage Industry Standard Maintenance Organization, Inc. (MISMO) Standards for Remote Online Notarization.
2. Credential Analysis.
The signer presents an ID that will be subjected to a technological credential analysis to confirm the ID is not fraudulent or modified. RON service providers must use automated software processes to aid the notary with their role in verifying each signer’s identity. See id. The ID must pass an authenticity test using technology to confirm that the credential is not fraudulent or inappropriately modified. This requires the technology to use information held or published by the issuing source of the ID or authoritative sources, as available, to confirm the validity of credential details. Confirmation of all this information must be accomplished during the notary session, and the output of the authenticity test is provided to the notary. The output may simply indicate a “pass” or “fail”. See id.
3. Visual Confirmation.
The ID is compared to the person being viewed in real time through the audio-video transmission. See id. The notary will view the picture on the ID and compare with the visual of the signer through the audio video transmission. Before RON, the only method to confirm identification was an in person visual confirmation.
F. RON Adds an Additional Notary Commission.
In Texas, Sections 406.105 – .107 of Subchapter C of the Government Code, also went to great lengths to create a new position and commission for an “online notary public.” Only a licensed “online notary public” may perform an “online notarization.” The online notary must first qualify and be commissioned as a traditional notary. That notary may then go the extra step to obtain the online notary license simply by filing an application. Of course, the application and process are “on-line”. See “Love, R. & Flowers, C.,” (December 2018). What’s the Legal Basis for Ron? Texas Land and Institute, at Page 1. Once the application is filed, the commission will be approved without any educational requirements or additional training.
G. Document Retention is Required by RON.
Perhaps the greatest burden an online notary public will face is the record retention requirement included in the model act and in Texas. Specifically, Section 406.108 of the Texas Government Code requires the notary to keep a “secure electronic record of electronic documents notarized by the online notary public.” Section 406.108 includes the actual video and audio conference as a part of the specific storage requirements. The record must be backed-up, tamper proof, secure, and maintained for 5 years. See id.
The real estate and mortgage industries both have current record retention requirements imposed by their various state and national regulator. The oil and gas industry, however, has not been subject to such requirements. Nevertheless, if the landman or attorney wants to obtain a license as a remote online notary to conduct the online notarization themselves, the landman or attorney will have to meet the document retention requirement.
H. The Principal and the Notary May be in Different Locations.
The Texas version of the rule, Section 406.110 of the Texas Government Code, specifically states that RON can be used regardless of where the principal is physically located at the time of the online notarization. The code does not say the notary can be located elsewhere in another state. See id., at Page 3. Traditional legal theory has been that a notary loses his/her authority once outside the jurisdiction of licensure. See National Notary Association website, nationalnotary.org and American Association of Notaries, texasnotary.com. And, of course, a Texas notary must be a Texas resident, or a resident of a contiguous state but acting in Texas. Nothing is said about an online notary licensed under another state’s laws taking an acknowledgment of a Texas resident’s signature, wherever the Texas resident may be. See “Love, R. & Flowers, C.,” (December 2018). What’s the Legal Basis for Ron? Texas Land Title Institute, at Page 3.
1. Regulations were Added by the Secretary of State to Implement RON.
Some of the other states’ legislation included both the actual creation of RON and the rules governing the process. However, in Texas, the legislation did not include the rule making. The Secretary of State proceeded, as directed by the legislature, and promulgated rules that were adopted August 19, 2018, after a period for public comment. These rules were codified in the Texas Administrative Code, Chapter 87, Notary Public. The Secretary of State chose to repeal the existing rules for notary publics, reorganize, and adopt new rules. See id.
The new rules implemented modern consistent administrative provisions to track the Government Code as amended. These rules outline the procedure for the submission of the Online Notary application. Again, it is important to note, an applicant must already be a notary public, and then, the notary can apply for an online notary commission. The application is required to be completed and submitted online. See “Love, R. & Flowers, C.,” (December 2018). What’s the Legal Basis for Ron? Texas Land Title Institute, at Page 2. The online notary is a distinct and separate commission on top of the standard notary commission. See id. The online notarization and notary seal will indicate that the notarization is remote and by a commissioned remote online notary. See Tex. Admin. Code §§87.0, et seq. In addition, the electronic technology will utilize “Public Key Infrastructure (PKI) technology from a PKI service provider that is X.509 compliant.” See id. PKI is a set of hardware, software, processes, policies and procedures that enable the secure use of digital signatures and encryption.
See Wikipedia contributors. (2019, June 13). Public key infrastructure. In Wikipedia, The Free Encyclopedia. Retrieved 18:32, June 17, 2019, from https://en.wikipedia.org/w/index.php?title=Public_key_infrastructure &oldid=901665342.
The provisions of Chapter 87 detail the records required to be retained. The recording shall include, at minimum: (1) confirmation by the notary public that the principal has successfully completed identity proofing and credential analysis; (2) visual confirmation of the identity of the principal through visual inspection of the credential used during credential analysis; and (3) the actual notarial act performed. If the principal is personally known to the online notary public, the audio-visual conference shall include a statement to that effect and a recording of the actual notarial act performed. See Tex. Admin. Code §87.41.
On the issue of whether the online notary must be physically located in Texas at the time of the notarization, Section 87.41(a) states, “An online notarization may only be performed by a notary who is commissioned as an online notary public.” See id. This could be read to require a Texas commissioned online notary for Texas property. However, there is not current recorded cases clarifying this issue. Nevertheless, it would be logical that if the parties are in Texas and dealing with Texas property, the notary must be commissioned in Texas.
In this connection, however, one must remember that the Texas rules only apply to Texas notaries. This does not address the outstanding question of using out of state remote on-line notaries with a notary commission issued by another state to notarize when the signing parties are located in Texas. Another question arises as well as if the signing party is physically located outside of Texas and the notary is commissioned in another state. See “Love, R. & Flowers, C.,” (December 2018). What’s the Legal Basis for Ron? Texas Land Title Institute, at Page 3.

IV. RON PRESENTS ISSUES COMMON AMONG THE STATES.
As previously discussed, RON has been adopted in a variety of states. Although there is a model act created by industry, the ULC has not promulgated a uniform act. The ULC did revise the RULONA to include RON; however, the committee has not indicated it would be addressing any other uniform act covering the other issues raised by RON. As a result, the states that continue to adopt RON may do so by using the framework adopted by another state or the model legislation created by ALTA and TMBA. However, nothing keeps the states from adopting their own unique version. Because the subject matter of RON is unique and the industry cooperative efforts have identified issues associated with RON that should be addressed in any proposed legislation, there are common issues identified that should be addressed in the states’ legislation. Without a uniform act proposed by ULC, the states are left to piece the legislation together themselves.
A. Mandatory Disclosure.
Any legislation introduced should require the disclosure of the use of remote online notarization in the notarial certificate. See Mortgage Bankers Association—American Land Title Association: Model Legislation for Remote Online Notarization, §8(4). Prior to the use of RON, the party’s consent is necessary. The idea of this disclosure is to make it transparent the transaction involved a RON.
B. Multifactor Authentication (discussed in detail above).
Any Legislation should require identity to be verified through the following processes using public and private/proprietary data sources: (1) remote presentation of a government-issued credential; (2) credential analysis; and (3) identity proofing. See ALTA.org, & Mortgage Bankers Association. (n.d.). Model Legislation for Remote Online Notarization §8(2)(b). Retrieved May 20, 2019, from https://www.alta.org/advocacy/ online-notarization.cfm. Virginia’s and Montana’s statutes provide for no regulation regarding these three means of multifactor authentication. Montana is updating their statute in 2019 to bring it more in line with the model act. Vermont’s statute allows the use of RON but has no prescriptive measures. Vermont’s law will not become effective until the Secretary of State promulgates rules and that process has been slow. Utah and Idaho just passed their legislation following this provision of the model act. States that do not provide for this security make other states nervous regarding accepting their notaries’ acknowledgments. If a state that has no requirements for authentication, licenses a RON notary and does not prohibit that notary from working outside the state, it could compromise the stability of the land records in states that went to great lengths to require security and authentication requirements.
C. Audio-Video Recording.
Any legislation should require the creation and retention of an audio-video recording of the notarial act and define what should specifically retained similar to required by the Secretary of State in Texas. See ALTA.org, & Mortgage Bankers Association. (n.d.). Model Legislation for Remote Online Notarization §§6(2)—(4). Retrieved May 20, 2019, from https://www.alta.org/advocacy/online-notarization.cfm. Most of the states who adopted legislation have this requirement.
D. Location of the Notary.
As previously discussed, the location of the notary was left open ended in Texas. The proponents of any legislation may want to consider requiring the notary to be physically located within the state where the parties and property are located while performing RON.
See ALTA.org, & Mortgage Bankers Association. (n.d.). Checklist for Conforming Laws Related to Remote Online Notarization (“RON”). Retrieved May 20, 2019, from https://www.alta.org/advocacy/online-notarization.cfm. See also ALTA.org, & Mortgage Bankers Association. (n.d.). Model Legislation for Remote Online Notarization §1(2) & §5. Retrieved May 20, 2019, from https://www.alta.org/advocacy/online-notarization.cfm.
Virginia, Texas, and Michigan failed to delineate this requirement. California has debated this point in considering its legislation. Most of the other states adopted a form of the model act and addressed this issue.
E. Location of Signer.
The laws should specifically allow the signer, whose signature is being notarized, to be located outside the state at the time of RON.
See ALTA.org, & Mortgage Bankers Association. (n.d.). Checklist for Conforming Laws Related to Remote Online Notarization (“RON”). Retrieved May 20, 2019, from https://www.alta.org/advocacy/online-notarization.cfm. See also ALTA.org, & Mortgage Bankers Association. (n.d.). Model Legislation for Remote Online Notarization §2 & §3. Retrieved May 20, 2019, from https://www.alta.org/advocacy/online-notarization.cfm.
F. Secure Technology.
The law should require secure technology that restricts access to electronic notarial records, requires venders and notaries to take precautions in preparation and transmission of electronic records, and determine if access to the records should be granted to some third parties like a title agent, escrow agent or title insurer engaging the notary.
See ALTA.org, & Mortgage Bankers Association. (n.d.). Checklist for Conforming Laws Related to Remote Online Notarization (“RON”). Retrieved May 20, 2019, from https://www.alta.org/advocacy/online-notarization.cfm. See also ALTA.org, & Mortgage Bankers Association. (n.d.). Model Legislation for Remote Online Notarization §6(3) & §§7(1)—(3). Retrieved May 20, 2019, from https://www.alta.org/advocacy/online-notarization.cfm.
This is a subject the oil and gas industry should weigh in on to provide guidance as to what third parties can later have access to the records. In the case of the oil and gas industry parties, the definition of third parties should at least be expanded to address access by the company that currently owns the oil and gas lease or interest. The model act provides the “parties” shall be provided access. Of course, that would include the parties who had their signatures notarized. This concept limits any company wherein its officers, who executed the documents, might not be the parties the company needs to access the documents later. Companies in states where this legislation has already passed without consideration of the variation in parties that may need later access may want to seek reforms to that legislation.
G. Retention of Data.
The laws adopted should allow the notary to designate a third-party repository to hold the recording and electronic journal on their behalf.
See ALTA.org, & Mortgage Bankers Association. (n.d.). Model Legislation for Remote Online Notarization §6(4). Retrieved May 20, 2019, from https://www.alta.org/advocacy/online-notarization.cfm.
The states adopting RON have retention requirements ranging from five to ten years.
H. Fees.
The MBA-ALTA Model act and the RULONA amendment do not address fees for RON. Fees will most likely be regulated by the individual states’ statutes. The language in each state varies. Currently, the Virginia legislation does not provide for a set fee. A Montana and Michigan notary public may charge a fee not to exceed $10 for each notarial act. Indiana’s notary fee is $15 for each notarial act. Tennessee, Minnesota, Ohio, Texas, Utah and Nevada notaries can charge $25 for each notarial act.
I. Defective Acknowledgments.
The drafters of the law should consider whether they want documents filed with defective acknowledgments to be constructive notice to third parties and decide what the effect a defective acknowledgement should have upon recording. One alternative would be to implement a short statute of limitations for challenging the document based solely upon a defective remote online acknowledgment. Texas’s legislation did not address this issue. The subsequent legislative attempt to address this issue by imposing a statute of limitations in Texas did not make it out of the legislature. Therefore, in Texas the existing laws regarding the effect of defective acknowledgments for paper documents would appear to apply to RON documents.

V. Recording Laws.
A. State Laws Should Confirm a Document Utilizing RON can be Recorded.
Any law addressing RON should confirm that an electronic document notarized by RON is recordable in the official land records and, once recorded, will serve as constructive notice to third parties. The law should include a provision to allow the electronic documents to be printed out to a paper document in a form that will be accepted for recording by the recorders (“papering out”) who do not have electronic recording capabilities.
See ALTA.org, & Mortgage Bankers Association. (n.d.). Model Legislation for Remote Online Notarization, Pages 7-9. Retrieved May 20, 2019, from https://www.alta.org/advocacy/online-notarization.cfm.
Virginia, Montana, Texas, Nevada, Utah, and Indiana did not include any “papering out” provisions. The legislation in Vermont, Michigan and Ohio is not clear. Texas revisited this issue in the 2019 Legislature and passed a revision to allow “papering out” effective September 1, 2019.
B. Why is “Papering Out” Important?
The Texas Property Code, Chapter 12, Recording of Instruments, governs the recording of real property conveyances in Texas. As discussed above, as in many other states, in Texas, recording is necessary to impart constructive notice of the document to third parties. See Tex. Prop. Code, Ch. 13, Effects of Recording. Section 12.001 of the Texas Property Code addresses an acknowledgment by a notary, but it does not contemplate a remote online notarization, which necessarily involves an electronic signature and an electronic document. See “Love, R. & Flowers,
C.,” (December 2018). What’s the Legal Basis for Ron? Texas Land Title Institute, at Page 3.
Section 12.0011, Instruments Concerning Property, Original Signature Required for Certain Instruments, defines a “Paper document” as a document received by a county clerk in a form that is not electronic. See id. A remote online-notarized document is obviously an electronic document, not a paper document. This section becomes important when addressing the question of recording a remote online notarized document that needs to be “papered out,” or printed/copied, to be recorded in a county that does not electronically record. When the document is printed out, it becomes a paper document, but it is questionable whether it meets the requirements for recording a paper document. See id.
The existing law in Texas states a paper document may not be recorded unless it contains an original signature that is acknowledged, or the paper document is attached as an exhibit to an affidavit that has an original acknowledged signature. The provision allowing an affidavit to be attached was not comprehensive enough to apply to an electronic document. The legislation passed in Texas effective September 1, 2019 does provide a method for the electronic document to be printed out and the affidavit of a notary attached to authenticate the document as a true copy of the electronic document. This presented two immediate problems – one of the main features of remote online notarization is the avoidance of paper documents, and if an affidavit is used, how will the recorder index the affidavit so that it will appear in the chain of title? A second notary will also be required to acknowledge the signature of the affiant on the affidavit proving up the “papered out” document with an original signature of the second notary. Therefore, there would still have to be an original signature on the affidavit. See “Love, R. & Flowers, C.,” (December 2018). What’s the Legal Basis for Ron? Texas Land Title Institute, at Page 3. The original signature on the affidavit must be obtained from someone that is in the county where the property is located enabling the document to be recorded if the document is going to be recorded in person at the recorder’s office. Otherwise, the document must be sent by mail for recording, which brings in the possibility for the original affidavit verifying the electronic document to be lost.
Section 12.0011(c) also provides that an original signature “may not be required” for an electronic instrument that complies with the requirements of Chapter 15, Texas Property Code; Chapter 195, Local Government Code; Chapter 322, Business & Commerce Code; or “other applicable law.” Chapter 15 is the Uniform Real Property Electronic Recording Act adopted in 2005 in Texas. The Act allows the recording of electronic documents if the county clerk chooses to implement electronic recording. Also, 15.005(b)(3) allows the conversion of paper documents into an electronic form by the county clerk. See id. It is the practice in counties where electronic recording is available for the title company or attorney to make a copy of the original document and send to the county clerk through their electronic recording system.
Chapter 195 of the Local Government Code establishes the rules by which electronic documents may be recorded. Section 195.003 limits the persons who may file electronically. Persons who may file electronically with the county clerk must be: (1) an attorney licensed in the state; (2) a bank savings and loan association, savings bank or credit union doing business under law of the United States or this state; (3) a federally chartered lending institution, a federal government-sponsored entity, and instrumentality of the federal govern, or a person approved as a mortgagee by the United States to make federally insured loans; (4) a person licensed to make regulated loans in the state; (5) a title insurance company or title insurance agent licensed to do business in this state; (6) an agency of this state; or (7) a municipal clerk. If the County has a population of 500,000 or more, the Section also provides for the county to authorize a person to file electronic documents with a county clerk if the county enters into a memorandum of understanding with the person for that purpose. See Local Government Code, Chapter 195.003. The provision does not apply in a county smaller than 500,000. Clearly, a landman is not listed on the list to be able to electronically record at the county clerk’s office. However, an attorney is on the list authorized to electronically record. Therefore, this part of the statute appears to be a barrier for the landman attempting to electronically file an oil and gas lease unless a memorandum of understanding is reached with each county clerk in the large counties. This issue should be addressed at the state legislature level to include members of the oil and gas industry who typically file documents for similar purposes as the real estate industry. The states implementing RON with “papering out” provisions, thus allowing the second notary to attest that the document is a true and correct copy of the electronic original, would enable landmen to file documents in person at the recorder’s office or by mail.
Of course, on the real estate side, the already existing practice is a conversion of a “wet” signature original document to a pdf or other electronic document by the title company or attorney for filing electronically through the county clerk’s system. Clearly, an electronically signed document may be recorded in a county with electronic recording. See “Love, R. & Flowers, C.,” (December 2018). What’s the Legal Basis for Ron? Texas Land Title Institute, at Page 4. The problem facing landmen is to be sure the legislation includes the landman as one of the persons authorized to electronically record using the clerk’s electronic recording system. Primarily, in Texas the area of the state with oil and gas activity does not include the counties with the large populations so the landman taking leases in those areas utilizing RON and electronic documents would not be able to electronically regard.
1. “Papering Out” – How to Solve the Issue of Recording.
The fix for this situation in Texas, and other states, would be to alter the existing law to permit the recording of a paper document that is a copy of an electronic document remotely online notarized. The current version of the model act envisions simply recording a copy of the remotely notarized document, apparently assuming chain of custody and the remote notary seal will satisfy concerns regarding alteration or possibly fraud and forgery. As mentioned above, the Texas proposed solution was to attach an affidavit from a notary verifying the document is the original that has not been tampered with. Such a law would also need to direct the clerk as to indexing the document to provide notice via a grantor/grantee search. See id. If the law is not specific as to how the document should be indexed, many clerks would index the affidavit verifying the document by the affiant instead of the true grantor/grantee in the document. Thus, the instrument could be lost and not show up in the chain of title of either the grantor or grantee.
The new legislation in Texas expanded the permissible types of “paper documents” defined in Property Code Section 12.0011 allowed to be recorded to include a copy of an electronic record declared to be a true and correct copy of the electronic record by affidavit (as set out in the proposed Section 12.0013) by a notary public or other officer who may take an acknowledgment or proof of a written instrument under Section 121.001, Civil Practice and Remedies Code. See Tex. Prop. Code §12.0011(b); see also Senate Bill 2128, 86th Legislature, 2019-2020.
Rather than have the original remote online notary provide an affidavit verifying the electronic document, the affiant of a prove-up affidavit could be another notary who is able to confirm the authenticity of the document by confirming the document has not been tampered with. The declaration confirming the document has a signature and a seal of the notary attesting to the declaration. The idea of having two notaries in the transaction in a county where there is no electronic recording seems very cumbersome. The original notary may not be in the county where the document needs to be recorded. Yet, ideally the document should be able to be recorded in person at the clerk’s office without transmitting the document through the mail.
The idea of any notary being able to confirm the authenticity of the document is a departure from the persons allowed to electronically file in Local Gov’t Code 195.003. This would have typically been a title company employee but could be a lender or attorney. The proposed legislation in Texas provides a form for the Declaration of Authenticity to be used. As discussed above, this change opens the door in the oil and gas arena for the landman to be the notary that can attest to the electronic document and then file that document as if it was a paper document at the county clerk’s office.
In addition, the Local Government Code Chapter 193 in Texas will be amended effective September 1, 2019, to provide for indexing by the grantor/grantee of the exhibit document (being the copy of the electronic document) instead of indexing using the affiant of the affidavit. Additionally, Chapter 12 of the Property Code will be amended effective September 1, 2019, to add Section 12.0013, which would direct a county clerk to record a paper or tangible copy of an electronic record if the paper or tangible copy of the electronic record: (1) contains an image of an electronic signature or signatures that are acknowledged, sworn to with a jurat, or proved according to law; and (2) has been declared by a notary public or other officer who may take an acknowledgment or proof under Section 121.001, Civil Practice and Remedies Code, to be a true and correct copy of the electronic record.
A notary public or other officer who may take an acknowledgment or proof under Section 121.001, Civil Practice and Remedies Code, may declare that a paper or tangible copy of an electronic record is a true and correct copy of an electronic record by: (1) executing and attaching an official seal to a tangible paper declaration under penalty of perjury; and (2) affixing or attaching the declaration to the printed paper or tangible copy of an electronic record.
As a result of the legislation, the County Clerk must accept an electronically notarized document for recording if printed out and certified by a notary to be a true and complete copy of an electronic original. Such a provision would allow recordation of electronic documents in jurisdictions that do not currently accept electronic recordings.

VI. OTHER ISSUES.
A. Statute of Limitations for Defective Acknowledgments using RON.
In Texas, there is no separate statute of limitations to cut off challenges to remote notarization, the acknowledgment, and the recording. Not unlike the two-year statute currently in place for acknowledgments, a straightforward two-year statute makes sense, possibly dropping the current limiting language for a “ministerial defect.” See Tex. Civ. Prac. & Rem. Code §16.033 and Title Examination Standard 4.20. However, the move toward creating a separate statute of limitations in Texas for the RON stalled. As mentioned before, the only statute of limitation applicable would apply the same for RON as any traditional acknowledgment.
B. Jurisdictional Requirements.
As discussed, whether a notary has the right to acknowledge documents for parties outside the state where they are commissioned, and whether each state requires a notary to be commissioned in the state where the property or people are located, presents an issue as to the acceptance of the notarization of documents between states. Hopefully, time will take care of this issue as more states adopt legislation addressing jurisdictional requirements for a physical presence of a notary licensed under any state laws and more states adopt legislation addressing reciprocity issues from state to state. Additionally, the issue may be solved if the ULC drafted a uniform RON act or revised the RULONA and the URPREA to promote reciprocity.
C. Amendments to the Model Act.
The MBA and ALTA are collectively addressing technical standards but also modifications to the uniform model bill. Texas has been somewhat of a lead in this area, but all states will want to be observant as to any national trends or requirements. There might be positive changes made to include the landman and oil and gas attorneys if the American Association of Professional Landmen could weigh in with the other associations on changes that would include the needs of the land professional.
D. Title Insurance Coverage.
ALTA may also take affirmative steps to provide title insurance coverage for documents remotely notarized. Arguably, the Texas policy insuring language for Covered Risk 2. (a) (iii), (iv), (vi) already addresses this:
(iii)a document affecting title not properly created, executed, witnessed, sealed, acknowledged, notarized or delivered;
(iv) failure to perform those acts necessary to create a document by electronic means authorized by law:
(vi) a document not properly filed, recorded or indexed in the Public Records including failure to perform those acts by electronic means authorized by law.
E. Where is the Original?
The idea of a wholly electronic contract that is not a type of document that needs to be filed of record raises questions. If the document has been memorialized by recording in the public records, the document is always locatable. When RON is utilized, the notary or third-party vendor will have control of the executed documents for at least some period, and the document can be accessed by the parties. But what if the document is not the type of contract that would require recording? What is the original? Where is the original located? How would a party prove the document is authentic?
There is no case law interpreting RON. There is older case law interpreting UETA that can be analogous. If the document is wholly electronic, courts apply the usual rules of evidence. In a proceeding, evidence of a record or signature may not be excluded solely because it is in electronic form.
See §1.00 Ruiz v. Moss Bros. Auto Group, Inc., 232 Cal. App. 4th 836 – Cal: Court of Appeal, 4th Appellate Dist., 2nd Div. 2014- Discussed authenticating a signature. Any writing must be authenticated before the writing, or secondary evidence of its content, may be received in evidence. (Evid. Code, § 1401; People v. Valdez (2011) 201 Cal.App.4th 1429, 1435 [135 Cal.Rptr.3d 628]; People v. Goldsmith (2014) 59 Cal.4th 258, 271 [172 Cal.Rptr.3d 637, 326 P.3d 239].) “Authentication of a writing means (a) the introduction of evidence sufficient to sustain a finding that it is the writing that the proponent of the evidence claims it is or (b) the establishment of such facts by any other means provided by law.” (Evid. Code, § 1400, italics added; People v. Valdez, supra, at p. 1435 [proponent met its burden of producing evidence to show authenticity of writing “`when sufficient evidence has been produced to sustain a finding that the document is what it purports to be.'”]; People v. Skiles (2011) 51 Cal.4th 1178, 1187 [126 Cal.Rptr.3d 456, 253 P.3d 546] [“[W]riting can be authenticated by circumstantial evidence and by its contents.”].).
Certainly, if a document is fully electronic and is not recorded in the public records or held by a third-party vendor by agreement, the loss of the fully electronic document could be a total loss. Parties who desire to conduct business with totally electronic documents must pay attention to the back up of their electronic data. How could you prove to the court the document ever existed? The storage of electronic documents requires a layered backup system, so the electronic document is not lost. If a party undertakes handling their own document storage, much attention should be paid to redundancy.
F. Title Opinions Reviewing Documents that are Totally Electronic.
As time goes on, more and more documents will be electronically recorded, including documents that are totally electronic in nature. Title opinions covering oil and gas interests, just like commitments for title insurance coverage, have not made a distinction between paper documents sent for recording versus paper documents that have been electronically recorded. Additionally, title examiners have not commented on electronic documents electronically recorded. Because the legality of electronic documents and signatures has been around for almost twenty years, title attorneys general accept either method of recording. However, there is not any notation on those documents as to whether the documents were paper documents with original signatures recorded in the record or paper documents with original signatures that were converted to a pdf and filed electronically.
Most RON legislations require the acknowledgment of the document and notary stamp to disclose that the document was notarized with the use of RON. The landmen and attorneys doing title examinations and title opinions need to understand the RON legislation and rules in the states where they practice. Following the same reasoning as to the use of UETA and URPERA, where title opinion requirements were not made, if those laws and rules condone the use of RON, the use of electronic documents/signatures and acknowledgments need not be addressed in title opinions.

VII. ADVANTAGES OF RON.
A. No Mail Outs.
With the use of RON, documents will no longer have to be mailed out to the signers. Every time documents are mailed or transmitted by a private carrier such as “fed ex,” those documents are at risk to be lost. When the documents are returned, there is always a possibility the signer did not sign in all the required places. The RON process and technology tags all the locations in the documents where a signature or initial is needed so none are left off.
Sometimes documents are mailed out to accommodate the parties’ schedules. When a party cannot be present at a specific time, the party may utilize a power of attorney. The possibility of fraud increases with the use of powers of attorney in these instances of accommodating the parties. The utilization of RON should avoid the overuse of powers of attorney executed just for the convenience of the parties.
Signers using RON are not limited to any particular hours to sign the document. Notaries or vendors providing the notarization service can do so at any hour of the day or night. Additionally, once executed, the documents are immediately available to the parties. Once again, obtaining the “original” does not depend on the documents being returned by the mail or fed ex several days later.
B. Landmen and Attorneys May Want to Consider a Third-Party Vendor.
As noted in numerous places throughout this paper, the requirements surrounding RON are complicated and onerous. It is difficult, if not virtually impossible, for an individual landman or attorney to meet the security and retention requirements. As happens many times with regulatory changes, an entire industry has appeared to provide the services of RON for parties to utilize. Many of these vendors are flexible. Their service is reasonably priced and often less than utilizing a “mobile notary” (notary in a car) to drive to the parties’ location and notarize a document.
In choosing a vendor, depending on the client’s priorities, the landman or attorney might consider whether they can have an option to virtually attend the signing with the signer and the notary. In real estate, some vendors are accommodating the title agent conducting the entire closing using the virtual audio-video medium with the commissioned online notary doing the notarial act. Another option for the landmen, attorneys or their legal assistants is to become a commissioned RON notary themselves but use the vendor to provide the technology and document retention.
An additional consideration in choosing a vendor would be their retention of documents policy. Depending on the client’s requirements, the length of time the vendors keep the documents on the company’s behalf can be negotiated with the vendor. The vendors will provide information regarding methods to access the documents and train personnel on its use.

VIII. RISKS OF RON.
A. Unauthorized Access.
Access to electronic notarial records, electronic signatures and seals should be kept secure from unauthorized access or use. It may be impossible to make any electronic document tamper-proof; but, through the application of technology, the electronic document can be made tamper-evident, so that any changes made after execution can be easily detected. Most available technologies have this function.
B. Fraud.
Fraudulent manipulation of documents and complete forgeries have always been a threat to the oil and gas and real estate industries. Some of the fraud encompasses the forgery of signing someone else’s name and/or filing a false document. Although the new technology does not alleviate these issues, it goes a lot further than the current day practices to deter forgeries. Remember, under the current practice of notarization the only method the notary has of verifying a person’s identity is looking at the person’s ID and looking at the person sitting in front of them. The notary must decide in that moment if the picture in the ID is in fact that person. The notary has no way to verify that the ID is even official or real. As discussed above, RON technology requires additional authentication avenues that lead to more secure process.
C. Mistakes and Errors.
As with all transactions, electronic transactions are susceptible to mistakes and errors. UETA provides rules for determining the effect of such errors. “If the parties agree to use a security procedure to detect unintended changes or errors, and one party does not comply with the security procedure, the complying party may avoid the effect of the error or change to the electronic record. See Tex. Bus. & Com. Code Ann. §322.010(b)(c). If an automated transaction involves an individual on one side and an electronic agent on the other, the individual may avoid the effect of an erroneous electronic record if two requirements are met. First, the electronic agent must not have provided an opportunity to prevent or correct the error. Second, when the individual learned of the error, the individual: 1) promptly notified the other party; 2) took reasonable steps to return or destroy any consideration received; and 3) did not use or receive any benefit or value from the received consideration.” See id. at (c)(d).
If neither of the above rules apply, the legal effect of any changes or errors will be determined by the parties’ contract or by other applicable laws, including the law of mistake. See id. at (d). While the UETA procedures for avoiding the effect of certain erroneous transactions do not apply to all possible mistakes and errors involving electronic transactions, they do provide some guidance. Unfortunately, UETA does not address important security issues such as forgery, hacking, cyber-attacks and other forms of fraud. Parties must attempt to protect themselves from these potential abuses using security procedures such as passwords and encryption along with appropriate insurance coverage.
Interestingly, with the addition of RON, its requirements may reduce the number of mistakes and errors. The technology enables the parties to view the documents to be executed in advance. The idea is that if the parties review the documents beforehand, this extra time may allow mistakes to be discovered before execution of the documents.

IX. UTILIZATION OF RON IN THE OIL AND GAS INDUSTRY.
Obviously, an industry person who is dealing with documents required to be notarized can utilize RON to accommodate their clients. For example, a landman can be present from a distance with the lessor while the lessor executes an oil and gas lease enabling the landman to answer questions that arise without traveling miles to the lessor’s location anywhere in the country. Similarly, company representatives required to execute documents that require acknowledgments can execute at their convenience. Additionally, multiple companies’ representatives can appear around a virtual closing table for discussions and execution of documents requiring notarizations without travel. Likewise, those parties buying mineral interest or royalty interest can “close” that transaction around a virtual closing table and have the deeds or assignments executed immediately avoiding the time delay for mailing out documents thus preventing interference from outside forces. The documents are instantly available to all parties.

X. ELECTRONIC DOCUMENTS, SIGNATURES, NOTARIZATIONS AND RECORDING WILL CONTINUE TO AFFECT CURRENT PRACTICES.
In summary, the authorities for electronic signatures, notarization, and recording have existed for almost twenty years. The online notarization statutory implementation introduces only a few new concepts with no real change to the underlying act of notarization. The methods of identity proofing and credential analysis required are far more robust than the security of the current practice of in-person notarizations. The secure storage requirements implemented as a requirement for the notary also accommodates needed access of the documents by the signers. And, perhaps the most far reaching change is in the definition of “presence,” which was expanded so that the person signing the document requiring notarization does not have to be in the same room with the notary.
The concept of a “solely electronic” document, signed electronically and notarized electronically in the presence of the notary or by using RON and finally recorded electronically is logical. With the recognition that “personal appearance” can be achieved via the internet, the next step, of course, must be to implement the RON process as uniformly as possible in all states with adequate safeguards and requirements. The process must accommodate parties that may buy, sell, lease, or borrow against real property located in areas where electronic recording is not feasible or otherwise adopted. The national model act overlooked this, as did Texas. Yet, even those transactions may be electronic with the implementation of a “papering out” provision with the use of RON. Other issues remain, including the use of notaries in other states, without the safeguards provided in the Texas legislation and the model act, remotely notarizing transactions affecting real property of another state. The technology developed around RON can detect any access or changes made to the document proving the authenticity of the electronic document. For real estate, the title insurance underwriters can make choices and requirements about the use of RON in transactions where title insurance will be issued. But what about the oil and gas industry? Attention to current legislation already adopted to add provisions recognizing the specific needs of the oil and gas industry might be called for. Further attention by the industry is certainly called for in states still contemplating the form of their legislation. The technology is now available, and the benefits are obvious. Thus, hopefully, the oil and gas industry will begin to take advantage of these benefits and embrace the move to the fully electronic document.