Oil and Gas Lawyer Blog
On April 27 the Texas Supreme Court issued its opinion in Perryman v. Spartan Texas Six Capital Partners, Ltd., No. 16-0804. The dispute was over ownership of the royalty interest in 206 acres of land in Montague County and construction of a royalty reservation in a conveyance of the property. The Supreme Court disagreed with the trial court’s and court of appeals’ construction of the deed reservation and with the construction argued by both sides in the dispute. The case illustrates the need to be clear in drafting deed reservations and exceptions.
In 1977, Ben Perryman conveyed the 207 acres to his son and daughter-in-law, Gary and Nancy Perryman. The deed contains the following:
LESS, SAVE AND EXCEPT an undivided one-half (1/2) of all royalties from the production of oil, gas and/or other minerals that may be produced from the above described premises which are now owned by Grantor.
Ben owned all of the minerals and royalty in the land at the time of the conveyance.
In 1983, Gary and Nancy conveyed the land to GNP Inc. The deed contained the following:
LESS, SAVE AND EXCEPT an undivided one-half (1/2) of all royalties from the production of oil, gas and/or other minerals that may be produced from the above described premises which are now owned by Grantor. It being understood that all of the rest of my ownership in and to the mineral estate in and under the above described lands is being conveyed hereby.
The deed did not mention the prior reservation in the 1977 deed.
The Supreme Court held that the 1977 deed reserved to Ben Perryman one-half of the royalty, and that the 1983 deed from Gary and Nancy reserved no royalty interest, but only “saved and excepted” the prior royalty interest reserved by Ben. So in one deed, the “save and except” language was construed as a reservation, but in the other deed it was construed as an exception to the grantors’ warranty of title, not a reservation.
The Perrymans argued that the 1983 deed reserved “1/2 of the royalties … which are now owned by Grantor.” But the Court held that the phrase “which are now owned by Grantor” modifies the word “premises,” not the phrase “1/2 of the royalties.” “[W]e conclude that the most reasonable grammatical construction of this deed is that the clause excepts 1/2 of all royalties from the minerals produced from the “premises which are now owned by Grantor.” Therefore, the deed did not reserve any royalty interest.
With regard to the 1977 deed from Ben, the Court said:
[B]ecause Ben owned all of the fee-simple interest in the entire estate of the time of the grant, the 1/2 royalty interest excepted from the grant necessarily remained with Ben, rather than passing to the grantees or remaining outstanding in another. Although Ben’s deed did not expressly “reserve” the 1/2 royalty interest for himself, “the legal effect of the language excepting it from the grant was to leave it to the grantor.” Pich [v. Langford], 302 S.W.2d at 650.
Deeds like these create huge headaches for title examiners. Drafters loosely use “less and except” and “save and except” both to describe prior reservations and to reserve interests in the grantor. The better practice is to always use “reserve” when intending to reserve a royalty or mineral interest in the grantor, and use “subject to” when describing prior mineral and royalty reservations.