As we discussed recently regarding the Texas Supreme Court case of Hysaw v. Dawkins, 483 SW 3d 1 (2016), old deeds, oil and gas leases, and other documents containing “1/8th royalty” clauses continue to be the source of confusion among the public, lawyers, and sometimes courts.
For decades, the standard oil royalty in Texas was one-eighth of the total royalty. The standard was so prevalent that the words “one-eighth” or “one-eighth royalty” came to be synonymous with — and a proxy for — “the total royalty interest.” In the Hysaw case, decided in 2016, the Texas Supreme Court held that the words “1/8 royalty” was used in this historical manner to mean the “total of the royalty.”
The San Antonio Court of Appeals reached a similar result in the case of Kardell v. Acker, 492 S.W.3d 837 (Tex. App.-San Antonio 2016).
Facts of the Case
In Kardell, the Court was interpreting the meaning of provisions contained in a 1980 correction deed. The 1980 correction deed conveyed to Johnie Lorene Acker “… an undivided one-fifth (1/5) of the whole and entire royalty interest as her separate, sole and individual property in and to all of the oil, gas and other minerals …” in the property being conveyed.
The Acker heirs argued that the 1980 correction deed was not ambiguous and, under the standard “four corners” rule used by Texas courts to interpret documents, the Acker heirs were entitled to an undivided one-fifth of the whole and entire royalty interest. By contrast, the Snowden heirs argued that the 1980 correction deed had to be construed in the context of all the documents in the chain of title going to back to 1948.
Mabel M. Snowden and Johnie Lorene Acker were daughters of J.E. Murphy, who died in 1948. When Mr. Murphy died, he owned five ranches and he wanted those split among his five children. Pursuant to his wishes, his children executed various partition deeds in 1948. Each of the deeds divided the surface surface rights among the various children but reserved 1/5 of “a base one-eighth (1/8) royalty interest” in the oil and mineral rights in each tract to each child and their heirs. In the 2009 dispute, the Snowden heirs claimed that, based on the wording of the 1948 deeds, the Acker heirs were entitled only to a 1/5th share of 1/8th of the royalties (in other words, 1/40). The Acker heirs argued the 1980 correction deed was not ambiguous, and that even if it was, the result in the context of other deeds in the chain of title would be the same. The 1948 deeds used the words “one-eighth (1/8) royalty interest” in the historical sense to mean the “total royalty interest.” This interpretation would obviously result in a significantly larger royalty to the Ackers heirs.
One-Eighth Royalty Clause in 1948 Deeds Was Used in the Historical Sense
The Court of Appeals reviewed the case de novo and agreed with the Acker heirs that the Acker heirs were entitled to 1/5 of the whole and entire royalty. The Court stated that the result would be the same even in the context of all the deeds in the chain of title. The Court determined that, based on a review of all the deeds, it was clear that the 1948 deeds used the words “one-eighth (1/8) royalty interest” in the historical sense. Mr. Murphy’s intent had been to grant one-fifth of the total royalty to each child.
If you have a deed or an oil and gas lease that is unclear to you, have an experienced oil and gas attorney review the language so that you can be sure you’re getting the full amount of royalties to which you are entitled.