609 Dragon v. Harrell, No. 04-14-00711-CV, 2016 WL 1238165 (Tex. App.—San Antonio Mar. 30, 2016, pet. denied)

Richard F. Brown

Dragon v. Harrell, No. 04-14-00711-CV, 2016 WL 1238165 (Tex. App.—San Antonio Mar. 30, 2016, pet. denied) (mem. op.) (Deed conveying fraction of royalty or fractional royalty) held that a deed reserved a fraction of royalty, rather than a fixed royalty. Grantors owned 15/16 of the minerals subject to a life estate in 1/4 of the royalty, and Grantors owned the reversionary interest in the life estate. Grantors conveyed all of Grantors’ interest to Grantee, reserving unto Grantors:

. . . a free non-participating interest in and to the royalty on oil, gas and other mineral in and under the hereinabove described property consisting of ONE-HALF (1/2) of the interest now owned by Grantors together with ONE-HALF (1/2) of the reversionary rights in and to the presently outstanding royalty in on and under said property. . . .

The life tenant died. Grantors contended the reserved interest was a 1/2 royalty and Grantee contended the reserved interest was 1/2 of royalty.

The court concluded that the phrase “the interest now owned by Grantors” meant the royalty interest owned by the Grantors at the time the deed was executed. The opinion is not entirely clear, but apparently the Grantors did not contend that Grantors acquired an interest in the minerals when the life estate terminated. The dispute seemed to be focused on whether Grantors reserved a 1/2 royalty or 1/2 of royalty. Grantee contended that the reservation was “in and to the royalty” and not in minerals. The court agreed that the reservation was unambiguously a royalty reservation and noted that it did not describe the interest as being in and to the oil, gas and other minerals.

The issue then was the nature of the royalty interest reserved. The court reasoned that each phrase of the reservation had meaning, if “the interest now owned by Grantors” means the royalty interest owned by Grantors at the time the deed was executed. If “the interest now owned by Grantors” were to be construed as meaning Grantors’ entire estate, the following phrase on reversionary rights would be rendered meaningless. It was undisputed that Grantors’ owned only 15/16 of the minerals, and the court held that Grantors’ reserved interest was 1/2 of 15/16 of royalty.

The case is a deed construction case generally limited to its facts, but it highlights the continuing reluctance of the courts to construe any instrument as creating or reserving a large, fixed royalty.