567 Leal v. Cuanto Antes Mejor LLC No. 04-14-00694-CV, 2015 WL 3999034 (Tex. App.—San Antonio July 1, 2015, no pet.)
Friday, June 16th, 2017
The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.
Leal v. Cuanto Antes Mejor LLC No. 04-14-00694-CV, 2015 WL 3999034 (Tex. App.—San Antonio July 1, 2015, no pet.) (mem. op.) (Fixed or floating royalty) held that a deed conveyed a floating royalty to the grantee. The parties aligned as the successors in interest to Grantor and Grantee in a 1988 deed, which provided:
There is reserved and excepted unto Grantors . . . all of the . . . minerals . . . except an undivided one-fourth (1/4) non-participating royalty interest hereinafter specifically conveyed to Grantees . . . . There is specifically conveyed to Grantees herein, . . . an undivided one-fourth (1/4) interest in and to all of the royalty paid on the production . . . of oil, gas and any and all other minerals. . . . Grantees shall not be required to join in the making of any oil, gas or other mineral lease . . . but shall be entitled to a non-participating interest in and to any royalty paid from the production . . . of oil, gas and any and all other minerals.
“An undivided royalty interest may be conveyed as a fixed fraction of total production or as a fraction of the total royalty interest. The conveyance of a fractional royalty transfers a fixed fraction of production of the minerals produced from the land irrespective of the percentage royalty in any subsequently negotiated oil and gas lease. On the other hand, if the undivided royalty interest is conveyed as a fraction of the total royalty interest, its amount (as a percentage of production) depends upon the royalty reserved in future leases. Thus, in contrast to a fractional royalty, a fraction of royalty ‘floats’ in the sense that it transfers a fraction of whatever royalty interest is reserved by the lessor under an existing mineral lease, or that is retained under a lease made in the future.”
Grantee asserted that Grantor’s reservation of “all minerals except an undivided one-fourth (1/4) non-participating royalty interest” conveyed a fixed royalty because this phrase does not refer to “the” or “of” a royalty and the deed does not refer to a lease, but instead, refers to all the production. Grantee also argued that the deed conveyance of a one-fourth interest in and to “all of the royalty paid on the production,” conveyed a fixed fraction of total production because the word “the” refers to all production. Grantee further contended that the deed should be construed against the Grantor.
The court noted that “the language on which [Grantees] rely—‘paid on production’ and ‘paid from the production’—states the grantors’ intent that any royalty paid to the grantee will not be paid unless and until there is production of oil, gas, or other minerals on the land.” The court further held that the actual quantity of the royalty is unambiguously expressed as a fraction of a royalty—“interest in and to all of the royalty” and “interest in and to any royalty.” The court concluded that Grantee was entitled to a share of mineral production equal to the stated fraction times the royalty retained in the lease; a floating royalty.
The case is another of a long line of cases construing deeds to determine if the disputed interest is a fixed or a floating royalty. It follows the usual pattern of a “four corners” analysis, which usually results in a floating royalty construction.