The question in Brooke-Willbanks v. Flatland Mineral Fund LP, et al was which party to a Texas mineral deed would bear the burden of two previously reserved nonparticipating royalty interests.
Kay Brooke-Wilbanks owned a 45/100 mineral interest in 320 acres in Howard County, which is equivalent of an undivided 144-acre mineral interest. Her conveyance to Flatland was of an “undivided 72 net mineral acres in 320 acres” and was subject to subsisting oil and gas leases. There were no reservations or exceptions. At the time of the conveyance there was a lease with a 3/16 royalty. During negotiations for a sale of 36 net mineral acres to Expedition, Flatland became aware of two NPRI’s arising out in the 1940’s that burdened the mineral interest. Flatland asked Brooke-Willbanks to execute a correction deed. She refused and sued Flatland to quiet title and for a declaratory judgment.
Did the parties intend that the previously reserved NPRIs would burden Brooke-Willbanks only or the parties proportionately?
The parties disagreed as to the meaning of “net mineral acre”, which treatises have defined this way (thank you Cliff Squibb): “One net mineral acre is typically considered to equal the fee simple mineral estate in one gross acre of land.” The court determined that “net mineral acre” as used in the granting clause was subject to only one reasonable meaning: an undivided fee simple mineral interest in the 72 acres that Brooke-Willbanks conveyed to Flatland, including the right to receive royalty payments therefrom.
The court harmonized all parts of the deed to give effect to all of its provisions. The subject-to clause further clarified the intent of the parties. In the ordinary sense, subject-to clauses limit the estate and associated rights that are granted to a party. At the time of the conveyance, Brooke-Willbanks owned only a possibility of reverter and a royalty interest.
The court determined that the parties intended that Flatland would take its interest subject to the outstanding existing oil and gas lease and receive the same interests that Brooke Willbanks possessed, which was a future reversionary interest and a royalty interest in the 72 acres.
The subject-to clause also clarified the amount of royalty interest conveyed. A severed fraction of a royalty interest such as an NPRI generally would burden the entire mineral estate because it necessarily limits the royalty interest attached to the underlying mineral interests. This principle informed the court’s interpretation of the deed but did not compel an outcome because parties are free to contract for whatever division of interest suits them.
The subject-to clause clarified that Brooke-Willbanks granted “ …. the above stated interest and the grantor’s interest in the royalties … “, which was the royalties in 72 acres. The clause limited Flatland’s interest as grantee to what Brooke-Willbanks possessed at the time, which was royalties associated with 72 acres. There was no express intent to convey anything otherwise. By the use of “net mineral acres” the parties expressed an intent to convey a fixed amount of mineral acres.
The court declined to follow the estoppel principle defined in the Duhig Rule. The court also relied on the recitation that it was the specific intent of the instrument to convey “the right to receive all royalties associated with the interests conveyed”. This indicated that the intent was for Flatland to take the royalty interests associated with the undivided 72 acres as it existed at the time of the conveyance.
The outstanding NPRI’s burdened the parties’ royalty interest proportionately.
David Crosby, RIP.
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