Recently the Texas Supreme Court in Clifton v. Johnson addressed another double fraction of royalties case. The issue was whether the original deed in 1951 granted a fixed or floating royalty interest.
The deed granted a “1/128 (1/16 of the usual 1/8 royalty) as royalty”. For over 70 years, the mineral owner was paid a fixed 1/128 royalty. However, in 2020 the Plaintiff, successor to the original grantee, claimed the deed actually granted a floating 1/16 royalty. The Court held that the “deed’s plain language rebuts the presumption by showing that the parties used 1/8 for its ordinary numerical value, not as a term of art.
The Court looked to the language of the deed, which stated:
It is understood and herein stipulated that said land is under oil and gas leases providing for a royalty of 1/8 of the oil and certain royalties or rentals for gas and other minerals and that Grantees herein shall received [sic] one-sixteenth (1/16)of the royalties provided for in said lease insofar as the same cover the above described land, but Grantees shall have no interest in or be entitled to nor be entitled to receive any part of any rentals paid under said leases, nor shall the Grantees have any interest in any bonus money received by the Grantors, their heirs or assigns, in any future lease or leases given on said land or any part thereof, and it shall not be necessary for the Grantees to join any such subsequent lease or leases so made; that Grantees shall only receive under such subsequent lease or leases a 1/128 (1/16 of the usual 1/8 royalty) part of all of the oil, gas and other minerals taken and saved under such lease or leases and Grantees shall receive same out of the royalty provided for in such lease or leases.
The Court reasoned that in this case, the entire text of the deed makes clear that the fractions in the deed were used in their normal numerical sense, and not to convey a floating royalty: “The deed here … contains language in both the granting clause and the future-lease clause that expressly uses ‘1/128’—the product of two fractions.”
This case illustrates that when deciding whether a royalty is a fractional royalty or fraction-of-royalty, the entire text of the deed must be considered to determine the grantor’s intent. Just because two fractions are used does not necessarily mean the royalty is a floating royalty.