The Texas Supreme Court has granted review of an El Paso Court of Appeals decision holding that a deed conveying a fixed 1/128th mineral and floating royalty interest in fact conveyed a non-participating 1/16th interest and a floating 1/16th royalty interest.
Cale Andrew Clifton, Christopher Matthew Clifton, Pamela Parker Clifton, COG Operating, LLC, Desert Partners IV, LP, Kelli Clifton Gossman, Lambert Land Co., LLC, KMF Land, LLC, McCamey Farm & Ranch, L.P., Kathy Parker in her Capacity as Independent Executor of the Estate of J. Loyd Parker, III, Springwood Mineral 4, LP, Robbin Lee Young, Young Oil and Gas, LP, and Lake Ranch, LP v. Scott W. Johnson and Florence H. Cummings (No. 23-0671, granted September 5, 2025; No. 08-22-00132-CV, July 10, 2023) arose from a royalty dispute over a 1951 conveyance of thousands of acres in Reeve County. The Grantors, J. B. Young, Elizabeth Cornell, and H. D. Cornell, deeded an undivided 1/128 interest in all oil, gas, and other minerals under the property to Grantees W. H. Holcomb and J. Marvin Rape. The deed further stipulated that Grantees would receive a 1/8 royalty in existing oil and gas leases and 1/16 of “royalties provided for in said lease insofar as the same cover the above described land ….” The Grantees, however, would not “have any interest in any bonus money received by Grantors, their heirs or assigns, in any future lease or leases given on said land or any part thereof,” but they would receive a 1/128 (“1/16 of the usual 1/8 royalty”) on oil, gas, and other minerals taken under those leases. The parties did not dispute that since the conveyance, Grantees and their successors had been paid a fixed royalty interest of 1/128.
In 2020, Johnson and Cummings, Grantees’ successors, each of whom owned a 1/5th interest in the conveyance, sued the remaining successors of the Grantees and the operator, COG, seeking a declaratory judgment that the deed conveyed a non-participating floating 1/16 instead of the fixed 1/128 interest. They also asserted claims for breach of contract, trespass to try title, monies had and received, and unjust enrichment,” all stemming from wrongfully accepting payment of a disputed royalty. All parties moved for summary judgment on the royalty claim and some counterclaimed for trespass to try title. The trial court denied Plaintiffs’ motion and granted the motions of all Defendants, ruling that the deed conveyed a fixed 1/128th interest. Plaintiffs appealed.
In an opinion by Justice Soto, the court of appeals reversed. First, the court ruled that the Grantors “intended to convey a mineral estate shorn of all attributes but for the right to receive royalty payments on any production on the land.” In this case, the court stated, the granting clause in the deed “provided that the Grantors were conveying an ‘undivided [] (1/128) interest in and to all of the oil, gas and other minerals in and under” the land. It then stipulated the right to receive royalties from production in current and former leases but held back rentals or bonus money under those leases. The court then turned to an “inconsistency” in the deed, i.e. the 1/128 interest in the granting clause and the 1/8 royalty on current leases, 1/16th royalty on those leases, and 1/16th of the usual 1/8th royalty on future leases. The court looked to the estate-misconception doctrine, which SCOTX recently discussed in Van Dyke v. Navigator Group, 668 S.W.3d 353 (Tex. 2023), for the conclusion that “there is a ‘rebuttable presumption that the term 1/8 in a double fraction in mineral interests of this era refers to the entire mineral estate.’” Van Dyke, 668 S.W.3d at 360-364. Noting that the estate-misconception doctrine “appli[es] not only when a deed contains a double fraction but also when it uses a fraction that is a multiple of 1/8…. In other words, the estate-misconception doctrine may apply in situations in which the granting clause contains a double fraction, such as ½ of 1/8th, as well as when it contains a multiple of a 1/8thfraction, such as 1/16th.”
The court then discussed the “legacy of the 1/8 royalty” or the “theory of ‘historical standardization,’” observing that “courts have long recognized that a deed’s use of a 1/8th fraction in describing a royalty interest was the result of the parties’ erroneous belief about the nature of a royalty interest.” Consequently, the court concluded that “[t]he 1/128thfranction [in the granting clause] is a multiple of 1/8 and therefore gives rise to the estate-misconception doctrine—it raises the presumption that the Grantors believed they only retained a 1/8th interest in the mineral estate and rather than conveying a 1/128th interest, they intended to convey 1/16th of what they believed they had.” That results in a 1/16thmineral interest conveyance, not a 1/128th, with a corresponding 1/16th floating royalty interest in the current and future leases. As to the the double fraction 1/16th of the usual 1/8th, it, too, means a “floating 1/16th royalty.” The trial court thus errored in granting Defendants’ motions for summary judgment.
Defendants urged the court to apply the “presumed-grant doctrine” on the basis that “the parties construed the Deed as conveying a 1/128th mineral interest for the last 70 years” and that the court should leave things as they are. But, since no Defendant raised the issue in their trial court pleadings, summary judgment motions, or appellate briefing, they did not preserve the issue for appeal. The court further denied Defendants’ request that it remand to the trial court for a determination of whether the doctrine applied. The court remanded to the trial court for further proceedings.
Oral argument has been scheduled for December 2.
