“Blood may be thicker than water, but oil is thicker than both.” J. R. Ewing.
This family dispute among Ethel’s descendants arose when Ethel’s will employed double fractions in bequeathing royalty interests to her children. Did the instrument create a fixed fractional royalty or a floating fraction of royalty?
Straight to the takeaway
Don’t like math? Avoid a pop quiz by remembering, when describing a royalty conveyance:
- Do not convey a fraction of a fraction unless that is what you intend to do. Why let ambiguity and confusion ruin your carefully crafted document?
- Use language appropriate for the time and circumstances, but think ahead. Is change foreseeable in a way you can plan for?
If you don’t believe me read Hisaw v. Dawkins, from the Texas Supreme Court.
Times were different then
When Ethel’s will was written in 1947 Jackie Robinson was a rookie, LSU beat Texas A&M 19-13 (some things never change), and the standard royalty was 1/8th. Was that figure in Ethel’s will a synonym for the lessor’s royalty, or was the royalty interest fixed without regard for the possibility of a higher royalty in the future?
There were three separate parcels of land and each child received the surface and executive rights to one. Ethel’s will contemplated three scenarios for the royalty under all the tracts. Each child would receive:
- an NPRI of an undivided 1/3rd of an undivided 1/8th of all oil, gas ….
- 1/3rd of 1/8th royalty …
- 1/3rd of the remainder of the unsold royalty, if a conveyance occurred while she was alive.
Clarity from the Supreme Court
The court said it would not embrace a “mechanical approach” to a royalty conveyance that would require “rote multiplication of double fractions”. Bright line rules are arbitrary and will not always give effect to what the conveyance provides as a whole. The court of appeals erred in construing each royalty provision in isolation.
In what it called an analytical approach, the court applied the four corners rule, and attempted to harmonize all provisions of the document. The court reaffirmed its commitment to a “holistic” approach to contract construction by ascertaining the parties’ intent from all words and all parts of the instrument. To harmonize would resolve apparent inconsistencies or contradictions in the document.
The third royalty clause governed. It clearly showed Ethel’s intention to equally divide the royalties among the three children. Each would receive a 1/3rd floating royalty, not a 1/24th fixed royalty (that is, 1/3rd of 1/8th).
The antiquated assumption that all future royalties would be 1/8th did not evidence Ethel’s intent. This is not to say that reference to 1/8th won’t ever mean just that. It might, if the language is clear and unambiguous.
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