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Did a Texas Deed Convey a Mineral Interest or a Royalty Interest?

When you ask a Texas oil and gas or real estate attorney to draft a deed for you, one of the first things they will ask you is just what do you want to convey: the surface, the water rights, the mineral interest, only royalties from the mineral interest or some combination of these? The reason is that a properly prepared deed must be specific about what is conveyed, and must use the correct language to do so. Otherwise, you or your heirs could end up in court over the deed’s meaning. Recently, the Texas Court of Appeals decided a case that demonstrates the confusion that occurs when the language in the deed is not clear.

In Reed v. Maltsberger/Storey Ranch, LLC, the court examined a 1942 deed in order to determine whether it meant to convey a mineral interest or simply a royalty interest.The deed said it conveyed “an undivided one-fourth (1/4) interest in and to all of the oil, gas and other minerals in and under and that may be produced from” certain lands in LaSalle County, Texas. The 1942 deed acknowledged that, at the time the deed was signed, the described lands were subject to an existing oil and gas lease:

And said above described lands being now under an oil and gas lease originally executed in favor of L.V. Chenoweth, Trustee and now held by said L.V. Chenoweth, Trustee, it is understood and agreed that this sale is made subject to said lease, but covers and includes one-fourth (1/4) of all the oil royalty and gas rental or royalty due and to be paid under the terms of said lease, insofar as it covers the above described property. (Emphasis added)

The deed then strips the grantees of certain rights normally given to mineral-interest owners:

In the event the above lease to L.V. Chenoweth, trustee, shall for any reason become cancelled or forfeited, it is agreed that the joinder or consent of grantee, his heirs or assigns, shall not be required to another or new lease upon said property by L.V. Chenoweth, his heirs or assigns, nor shall grantee, his heirs or assigns, be entitled to share in any bonus consideration therefor or delay rentals thereunder, it being the purpose and intent hereof to grant and convey an undivided one-fourth (1/4) of the one-eighth (1/8) royalty (including any annual gas rentals) under said existing lease and an equivalent royalty interest under any future mineral leases thereon by the said L.V. Chenoweth, his heirs, administrators or assigns. (Emphasis added)

This sounds like a royalty deed, doesn’t it? The court took a “holistic approach” and paid attention only to what was stated in the deed, and looked at all the language in the deed, as opposed to what the parties claimed the intentions of the grantor were.  In doing so, the court noted that although the document was entitled “Royalty Deed,” the title in and of itself was not determinative. The court further explained that the deed had the makings of a mineral rights transfer, especially since it used the language— “interest in and to all of the oil, gas[,] and other minerals in and under . . .”  On the other hand, the deed then went on to strip away certain rights in the property, creating something reminiscent of a simple royalty interest. Ultimately, the court was convinced that since there would have been no need for the  grantor to take away some of the grantee’s rights if this was merely a royalty deed, that the deed conveyed a mineral interest, but with certain limitations.

In this case, the grantor may have intended to only convey royalties, but the language he used was contradictory and so a court was called on to interpret it. If you are interested in transferring any kind of property right, whether mineral rights, surface rights, water rights, etc., do yourself a favor and contact an experienced attorney. Deeds use specific language that is not used in its everyday sense. The cost to have an attorney prepare a deed properly is modest and it is a fraction of what you will spend on litigation over the meaning of a poorly drafted deed!





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