Oil and Gas Lawyer Blog
Dragon v. Trial, from the San Antonio Court of Appeals, No. 04-16-00758-CV, decided November 8, is a case that may be of interest only to title attorneys and landmen and those of us who delight in the minutiae of land titles. It is also, like many title disputes, the story of a dispute over land whose minerals have become fantastically valuable. The case involves 237 acres in Karnes County, in the heart of the Eagle Ford play.
In 1932, the 237 acres was conveyed in equal shares to eight siblings. One of the siblings died, and the property was thereafter owned by the remaining seven. One of the siblings was Leo Trial. In 1983, Leo conveyed one-half of his 1/7th share to his wife Anna Ruth.
In December 1992, Jerome and Patricia Dragon purchased the property from Leo Trial and his siblings. They financed a part of the purchase with a 15-year note. Also, the grantors reserved the mineral estate in the 237 acres for a term of 15 years, after which title to the minerals would go to the Dragons. But Anna Ruth Trial did not sign the deed – an oversight that was not discovered until years later.
Leo Trial had died in 1996, and he devised his estate to a trust with his wife Anna Ruth as life beneficiary, and on her death his estate would go to his sons Joseph and Michael. After Leo’s death, Anna Ruth continued to accept Leo’s share of payments on the Dragons’ note, and when the debt was paid, she signed a release of lien, along with Leo’s other siblings.
The minerals in the land were leased and production commenced. In 2008, the Dragons informed the operator that the 15-year mineral reservation had expired so all royalties should be paid to them. But the operator’s title opinion concluded that, because of the 1983 deed to Anna Ruth, the Dragons did not acquire her interest in the property. Since Anna Ruth had died, the operator’s title attorney credited Anna Ruth’s 1/2 of 1/7 interest in the property to her two sons. The Dragons then sued the two sons over title to the 1/2 of 1/7 interest.
This brings us to the Duhig Rule, established in Duhig v. Peavy-Moore Lumber Co., 144 S.W.2d 878 (1940). In Duhig, Gilmer sold land to Duhig, reserving a one-half mineral interest. Duhig then conveyed the land to Miller-Link Lumber Company, also reserving a one-half mineral interest. But Duhig’s deed to Miller-Link failed to mention the prior mineral reservation by Gilmer. The Supreme Court held that, because Duhig had warranted title in his deed, his deed reserved no mineral interest, and the minerals were held 1/2 by Gilmer and 1/2 by Miller-Link.
The San Antonio Court of Appeals held that the Duhig Rule applied to the deed to Dragon. It held that, because Leo Trial’s sons derived their title claim from their father Leo, and because Leo had conveyed his interest in the 237 acres to Dragon by a general warranty deed, Leo’s sons were estopped from claiming ownership of an interest in the land. In the words of the court:
The Trials are remainder beneficiaries of Leo’s estate and trust, and, therefore, they are his privies in blood, privies in estate, and privies in law. As such, they also are bound by the recitals in the 1992 Deed. The Trials are therefore estopped from asserting title to any interests in contradiction to Leo’s duty to defend the Dragons against all claims to “all that certain parcel or tract of land.”
Lawyers love phrases like “privies in blood.”
Many law review articles and treatises have been written about the Duhig Rule and its legal basis. It is at its core a rule of fairness. Under the circumstances, it would not have been fair for the Trial sons to claim an interest in the land that their father sold, the Dragons paid for, and their mother accepted note payments on.
Duhig lives on.