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Two Cases on Royalty Fractions

This year the Texas Supreme Court decided Van Dyke v. The Navigator Group, trying to give some structure to cases construing conveyances and reservations of royalty interests-whether fixed or floating. I wrote about the case last February. Since then two court of appeals cases have grappled with the issue: Royalty Asset Holdings II, LP v. Bayswater Fund III-A LLC, in the El Paso Court of Appeals, No. 08-22-00108-CV; and Thomson v. Hoffman, in the San Antonio Court of Appeals, No. 04-19-00771-CV.

In Royalty Asset, the court construed the following royalty reservation:

EXCEPT that Grantors, for themselves and their heirs and assigns, retain, reserve and except from this conveyance and [sic] undivided 1/4th of the land owner’s usual 1/8th royalty interest (being a full 1/32nd royalty interest) payable or accruing under the terms of any existing or future oil, gas or mineral lease pertaining to or covering the oil, gas and other minerals on, in or under the above described [sic] land. It is distinctly understood and agreed that the interest in royalties hereby retained and reserved by Grantors does not participate in any bonus or delay rentals payable for or accruing under the terms of any such oil, gas and mineral lease or leases, and it shall not be necessary for Grantors to join in, execute or ratify any oil, gas and mineral lease covering said above described tract, the right and privilege to execute any oil, gas and mineral lease or leases covering the full mineral interest in the above described tract being hereby granted and conveyed to Grantees herein, their heirs and assigns.

The court, following its reading of Van Dyke, held that this clause reserved a floating royalty interest–1/4th of the royalty. It held that the reference in the parenthetical “(being a full 1/32nd royalty interest)” did not overcome the Van Dyke presumption that use of a double fraction (1/4th of the usual 1/8th) reserved a floating royalty. The Texas Supreme Court has denied petition for review.

In Thomson v. Hoffman, the court construed a 1956 deed which reserved

an undivided three thirty-seconds (3/32’s) interest (same being three-fourths (3/4’s) of the usual one-eighth (1/8th) royalty) in and to all of the oil, gas and other minerals …

The court of appeals held that this clause also reserved a floating 3/4ths of the royalty. The court’s opinion predated Van Dyke. On petition for review to the Supreme Court, that court issued a per curiam opinion remanding the case to the court of appeals directing it to reconsider the case in light of its holding in Van Dyke. The case is now back in the San Antonio Court of Appeals on remand.

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