Today’s cautionary tale from the Fifth Circuit Court of Appeals should remind lawyers of the most important lesson in the law: Words have meaning.
That means that if you’re going to file a lien on property in a bankruptcy proceeding, your affidavit better include the right language.
Easy enough, right?
Let's turn to the facts in this case to find out how one litigant got this oh-so-wrong.
Wave Energy was involved in a Chapter 11 bankruptcy case. Wave's primary assets were the De Garza gas-producing wells in Zapata County, Texas. Prior to bankruptcy, Wave entered into a Joint Operating Agreement (JOA) with Whitson to drill and complete the De Garza Wells. Whitson, in turn, hired various vendors -- including Appellant Stokes & Spiehler Onshore, Inc. (S&S) -- to perform services on the De Garza Wells. S&S charged more than $150,000 for engineering services, but Whitson never paid. In an effort to recover, S&S timely filed and properly recorded its "Affidavit Claiming Lien on Mineral Property" against the De Garza Wells.
Texas law requires that an affidavit must contain a jurat, which is a certification by a third party, usually a notary. Without the jurat, a statement cannot be an affidavit.
The first sentence of S&S's lien filing states: "Affiant, Bruce M. Jordan, on oath swears that the following statements are true and are within his personal knowledge." Jordan, who is the president of S&S, then states that the filing "is made to perfect a lien against the mineral property described below." At the end of the document and below Jordan's signature stands the following:
This instrument was acknowledged before me on May 21st, 2009, by Bruce M. Jordan, as President of Stokes and Spiehler Onshore, Inc., a Louisiana corporation, on behalf of said corporation.
/s/ Raymond E. Beyt
Notary Public in and for the State of Louisiana
Wave's court-appointed bankruptcy trustee, Robert E. Ogle challenged the affidavit, claiming that the affidavit statements were insufficient to constitute the required jurat under Texas law. The bankruptcy court granted summary judgment to Ogle. On review, the Fifth Circuit Court of Appeals, in an unpublished opinion, determined that the notary's certification in this case was just an acknowledgment, not a jurat.
If a certification does not include language indicating that the oath was sworn in the notary's presence, there is no jurat. Without a jurat, there is no valid affidavit. Without that affidavit, S&S did not have a lien.
Like we said, words have meaning.