Wynne/Jackson Dev. L.P. v. PAC Capital Holdings, Ltd., 2013 Tex. App. LEXIS 6865, at *11-15(Tex. App. – Corpus Christi 2013, per denied). Traditionally the above NPRI reservation would be interpreted using the plain language of the reservation by multiplying the fractions together yielding a fixed 1/16 royalty interest. In this decision, the granting clause was superior to any conflicting language, in the other parts of the document. Many decisions throughout the years have followed this approach.
The Four Corners Rule
Luckel v. White, 819 S.W. 2d 459, 461 (Tex.1991) “The primary duty of a court when construing such a deed is to ascertain the intent of the parties from all of the language in the deed by a fundamental rule of construction known as the ‘four corners.”
The Estate Misconception Theory
Sundance Minerals, L.P. v. Moore, 354 S.W. 3d 507, 512 (Tex. App. – Fort Worth 2011, pet denied)
The court determined that a one-half (1/2) floating royalty was reserved when the grantor reserved “one-half (1/2) of the usual one-eighth royalty (1/8).” The court explained that the one-eighth (1/8) royalty was an example showing the type of interest intended to be reserved, and was not a limitation. The focus was on the “usual 1/8 royalty.”
The Estate Misconception Theory Stretched
Graham v. Proschaska, 429 S.W. 3d 650, 657 (Tex. App. – San Antonio 2013, pet denied)
The reservation was “one-half (1/2) of the one-eighth (1/8) royalty to be provided in any and all leases for oil, gas and other minerals now upon or hereafter given.” The court looked to the word ”the” as the modifier of the one-eighth (1/8) wrongly assuming that lease royalty would always be a one-eighth (1/8).
Medina Interest, Ltd. V. Trial, 2015 Tex. App. LEXIS 6382 at *15(Tex. App. – San Antonio 2015, pet denied)
The court interpreted the reservation “our undivided interest in and to the 1/8 royalties paid the landowner” to reserve a floating royalty interest.
Hysaw v. Dawkins, 2016 Tex. Lexis 100 (Tex. Jan. 29, 2016)
The mother devised to each child a NPRI of “an undivided one-third (1/3) of an undivided one-eighth (1/8) of oil, gas or other minerals”. She also provided that each child shall receive one-third (1/3) of the one-eighth (1/8) royalty.” The court ruled that “they cannot embrace a mechanical approach requiring the rote multiplication of double fractions whenever they exist.” The court concluded that the mothers intent was for all of her children to share in future royalties equally, bequeathing to each child a floating a one-third (1/3) royalty not limited by the one-eighth (1/8).
Thanks to the Kiefaber & Oliva LLP law firm for their Oil & Gas Royalty Issues presentation for simplifying the court cases and their interpretation.