389 Philipello v. Nelson Family Farming Trust

Richard F. Brown

The following is not a legal opinion.  You should consult your attorney if the case may be of significance to you.
 
Philipello v. Nelson Family Farming Trust, 349 S.W.3d 692 (Tex. App.—Houston [14th Dist.] 2011, pet. denied), held that an outstanding mineral interest did not proportionally reduce the 1/8 royalty reserved by the grantor in a deed made subject to all previous mineral reservations.  The Nelson Family Farming Trust (“Grantor”) conveyed a 110.26 acre tract (“Property”) to Nathan P. and Shari K. Philipello (“Grantee”).  The Property was subject to an outstanding mineral interest.  The Deed included the following:
 
Property (including any improvements): BEING 110.26 acres of land, more or less, [the Deed then describes the Property in various ways including by metes and bounds].
 
This Deed is subject to all previous mineral and/or royalty reservations.
 
Reservations from Conveyance:  SAVE AND EXCEPT and there is hereby reserved for Grantor and Grantor’s heirs, administrators, successors or assigns, for a period of ten (10) years from the date of this conveyance, one-eighth (1/8) of the royalty in oil, gas and other minerals in and under and that may be produced with the oil and gas.
 
Grantor contended that Grantor reserved 1/8 of the royalty from the Property.
 
Generally, when a deed reserving a 1/8 royalty provides that the grantor who owns an undivided, fractional mineral interest reserves a royalty “in and under the property conveyed,” courts will find that the grantor reserved only 1/8 proportionately reduced by the fraction of minerals that the grantor owned before the conveyance.  If, however, the grantor reserves a 1/8 royalty “in and under the property described,” courts will find that the grantor reserved a full 1/8 royalty interest, without proportionally reducing the 1/8 by the fraction of minerals owned by the grantor.  Because the Deed between Grantor and Grantee did not specify whether the royalty interest applied to the described property or to the conveyed property, the court found that the common law from the two lines of cases did not apply.
 
The Deed reserved “one-eighth (1/8) of the royalty in oil, gas and other minerals in and under and that may be produced with the oil and gas.”  Before the reservation, the Deed contained a description of the 110.26 acres included in the Property, but the Deed did not contain any description of the fractional mineral interest that was being conveyed.  Given this context, the court concluded “that it is not reasonable to construe the [‘]oil, gas, and other minerals in and under[’] as referring to the oil, gas, and other minerals in and under the undivided, fractional mineral interest conveyed by [Grantor] in the Deed.”  The court held that the unambiguous language of the Deed reserved to Grantor a 1/8 royalty in the Property.
 
Grantee also raised various canons of construction in support of Grantee’s position, including the canon that any doubts in the proper construction of a deed should be resolved against the grantor.  However, because the court held that the Deed was unambiguous, the court recited that there was no need to apply canons of construction.
 
The case is interesting because the court held that the usual rules applied to resolve cases like this do not apply.  Because this Deed was silent as to the interest of Grantor in the minerals, the court concluded that the reservation must apply to the only interest actually described, which was the entire Property.