320 In re Estate of Slaughter

Richard F. Brown

 
The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.
 
In re Estate of Slaughter, 305 S.W.3d 804 (Tex. App.—Texarkana 2010, no pet.), held that an exception as to “production royalty” under a will had the same effect as an exception of royalty in a deed. Slaughter died, and he left all of his land by his holographic will to his three sons (Tommy, Willie, and Charley), devising to each of them 158 acres of land. By devising to each of his sons 158 acres, Slaughter equally divided all of his real property. There was only one exception or reservation to this otherwise comprehensive disposition. Slaughter provided that his three sons were to “share and share alike production royalty and unproduction royalty.” Tommy died, and a controversy arose over ownership of the mineral rights when Tommy’s Executor attempted to lease Tommy’s tract. The Executor contended that the exception as to mineral rights under Slaughter’s will applied only to royalty that may be produced from Slaughter’s lands and that only the royalty in the entirety of Slaughter’s lands was owned equally by the three sons. Willie and Charley contended that each son owned an undivided one-third interest in the mineral estates (including royalty income) under the entirety of Slaughter’s lands. The issue “was whether the referenced language cover[ed] the entire mineral estate or whether it [was] limited to that portion of the full mineral estate which [was] designated as royalty.” The court was required to “determine if Slaughter’s intent in drafting this language was to vest his three sons jointly with the mineral estate underlying the entirety of Slaughter’s real property, or whether Slaughter intended to devise to each son the surface and mineral estates of their respective tracts of land (as designated in Slaughter’s will) except the right to receive royalties or payments in lieu of royalties.”
 
The court concluded that only the royalties and shut-in royalties in the entirety of Slaughter’s estate were owned in common by the three sons. First the court applied the rule of construction that the terms of a will are to be given their ordinary meaning unless the will itself clearly evidences an intent to use those terms in a technical or different sense. The court then relied upon existing and well-established precedents to determine that the mineral estate is comprised of five separate and distinct parts, which include the rights to: (1) develop, (2) lease (executive right), (3) receive bonus, (4) receive delay rentals, and (5) receive royalty payments. “Of the five attributes of the mineral estate, the right to receive royalties was excepted as a part of the separated mineral estate passing to each of the Slaughter sons as part of the devises of their separate tracts of land.” The court reasoned by analogy to conveyances of the mineral estate. If a mineral estate is conveyed, or in this case devised, then all interests are transferred unless they are specifically reserved.
 
Slaughter never used the term “mineral,” and the sole reservation was “production royalty and unproduction royalty.”  Production royalty was perfectly clear, so the only uncertainty as to the construction of the will must relate to the meaning of “unproduction royalty.” The court relied upon a dictionary definition of the prefix “un,” which means to “do the opposite of: reverse (a specified action).” Therefore, the court held that “unproduction royalty” meant “payments made in lieu of production royalties upon cessation of production, that is, shut-in royalties.”
 
The significance of the case is the court’s decision to treat the will as if it were a conveyance and then reason by analogy to precedents established in the construction of deeds to determine the intent of the testator. This allowed the court to draw upon a large body of established precedents to resolve the case. To hold otherwise could result in inconsistent precedents as to the passage of mineral title under deeds and wills, even if those deeds and wills used words that now have an accepted meaning in the oil and gas industry. “Unproduction royalty” now has a meaning, should that odd phrase ever be used again.