Oil and Gas Lawyer Blog
On January 29, the Texas Supreme Court issued its opinion in Hysaw v. Dawkins, a unanimous decision with opinion by Justice Guzman. Our firm represents one group of the plaintiffs in the case, which concerns construction of Ethel Hysaw’s will.
Ethel Hysaw had three children: Dorothy, Howard and Inez. Her will, executed in 1947, divided her lands in Karnes County among her three children. She gave one tract to each child. But she divided the royalties on oil and gas differently, and the dispute in the case was over how the will disposed of her royalty interest in the three tracts. The descendants of Dorothy and Howard argued that Ethel’s will divided all oil and gas royalties equally among Dorothy, Howard and Inez. The descendants of Inez argued that Ethel’s will divided a 1/8th royalty equally among her children, but left all other royalties to the child who got the surface of the property. Wells producing from the Eagle Ford shale were drilled on the lands willed to Inez, and the lease signed by Inez’s descendants provides for 22.5% royalty. Inez’s heirs argued that Dorothy and Howard’s descendants each should receive 1/3 of 1/8th royalty, or 4.1666%, from those wells, and that they should receive the rest, .141666%. Dorothy and Howard’s descendants argued that each family should receive 1/3 of the 22.5% royalty, or 7.5% each.
Ethel’s will provided that
each of my children shall have and hold an undivided one-third (1/3) of an undivided one-eighth (1/8) of all oil, gas or other minerals in or under or that may be produced from any of said lands, the same being a non-participating royalty interest.
Other language in the will provided that, if Ethel sold any of her royalty during her lifetime, then her children “shall each receive one-third of the remainder of the unsold royalty.”
The trial court sided with Howard and Dorothy’s descendants. The San Antonio Court of Appeals reversed, holding that Inez’s descendants’ construction of the will was the correct one. The Supreme Court held that the trial court was correct, ruling that Ethel intended to devise all of her royalty equally among her three children.
The issue addressed by the Supreme Court in construing Ethel’s will is known as the “double-fraction problem.” It appears more often in construction of deeds that convey or reserve a royalty interest. The problem arises when the royalty interest conveyed or reserved is described as a fraction of 1/8th — as, in Ethel’s will, she described the interest devised to each child as 1/3 of 1/8. As Justice Guzman says, “when viewed against a historical backdrop in which the standard royalty was 1/8 and many landowners erroneously believed the landowner’s royalty could be no greater than 1/8, the quantum of the interest conveyed or reserved by double-fraction language is subject to disagreement.” The Supreme Court decided to take the case because “the proper construction of instruments containing double-fraction language is a dilemma of increasing concern in the oil and gas industry, as uncertainty abounds, disputes proliferate, and courts have seemingly varied in their approaches to this complicated issue.” After reviewing all of the language of Ethel’s will, the Court concluded that Ethel intended to treat her three children equally, giving each 1/3 of the royalty in all of her property.
Our firm has handled several disputes involving the double-fraction problem. Justice Guzman’s opinion is a valuable addition to the jurisprudence in this area and will provide guidance to lawyers construing instruments that contain double fractions.