107 Riley v. Riley

Friday, November 6th, 2015

Richard F. Brown

The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.

Riley v. Riley, 972 S.W.2d 149 (Tex. App.—Texarkana 1998, n.p.h.) reviews homestead rights in oil and gas production and the applicability of the open mine doctrine. At the time Elbert and Bobbie Riley were married, Elbert Riley owned as separate property the Home Place (160 acres) and the River Place (74.7 acres). The Rileys farmed and ranched all of the property during their marriage for part of their support. There was also oil and gas production from the River Place. The Rileys lived on the Home Place throughout their marriage, and the widow Bobbie continued to live there after Elbert’s death. Bobbie claimed a homestead in 140 acres of the Home Place and 59.7 acres of the River Place, including the production of oil and gas. The size, configuration, and location of the homestead and the right to production were the principal issues in the case.

Bobbie was entitled to claim 200 acres as her homestead. During marriage, Elbert and Bobbie were entitled to claim a rural homestead of 200 acres for life on Elbert’s separate property. The surviving spouse Bobbie has the same homestead right in the property as both spouses had prior to the death of one spouse. Elbert’s siblings argued that Bobbie could not designate less than all of the Home Place so that she could also designate 59.7 mineral-rich acres in the River Place. However, a homestead designation may exclude part of a tract actually occupied to obtain acreage in another tract when the evidence shows that both properties were used in such a manner as to establish homestead rights in the properties.

Elbert’s siblings also contested Bobbie’s right to claim homestead rights in oil and gas royalties. The general rule is that a life tenant is entitled to nothing but interest on mineral royalties. Under the open mine doctrine, a homestead claimant is entitled to receive and expend all royalties from the homestead, when the homestead was producing oil or gas when the right in the property came into existence. Because the 59.7 acres in the River Place were producing and included in the homestead designation, Bobbie Riley was held entitled to those royalties.

As to royalties from the other 15 acres in the River Place, Bobbie asserted that her homestead designation entitled her to all of the royalties from the River Place, including the other 15 acres, because her homestead designation included the well sites of the producing wells on the River Place property. As support, Bobbie cited the “Rule of Capture.” Under the Rule of Capture, the owner of a tract of land acquires title to the oil or gas produced from wells on his land, even though part of the oil or gas may have come from adjoining lands. The Rule of Capture applies when separate tracts are above a common source of supply. However, the Rule of Capture is inapplicable to production from land within a pooled unit. Because the record was incomplete, the appellate court remanded this case for a determination of whether the non-homestead 15 acres were pooled with the producing wells, in which case, Elbert’s siblings would be entitled to the royalties attributable to the 15 acres.

This case is significant because it is a strong reminder of the primacy of homestead rights and the possibility that those rights may “cut across” boundaries that seem to be established.