Boren Descendants et al v. Fasken Oil and Ranch, LTD, offers something to talk about beyond interpretation of the fixed-or-floating NPRI question. At issue was this reservation, expressed as a double fraction, in a 1933 deed:, “an undivided … 1/4th of the usual … 1/8th royalty” from a conveyance of real property”.
The court of appeals affirmed the trial court’s judgment that the deed conveyed a 1/4th floating NPRI in the grantor (Fasken). Grantees and their successors (Boren/Mabee) failed to rebut the presumption that the term “1/8th“ was a term of art to refer to the total mineral estate and not merely 1/8th .
Now, for the interesting part: The court of appeals affirmed the trial court’s rejection of several affirmative defenses asserted by Boren/Mabee that might have prevented Fasken from claiming that its interest is anything other than a fixed 1/32 NPRI.
Estoppel – Grantor wins.
Estoppel does not create a new contractual right, nor does it alter existing contractual rights. The court dispensed with a discussion of equitable estoppel. Quasi estoppel does not require a false representation or detrimental reliance. It precludes a party from asserting to another’s disadvantage a right inconsistent with the position previously taken. It applies when it would be unconscionable to allow a person to maintain a position inconsistent with one in which he acquiesced or from which he accepted a benefit.
Estoppel by deed or contract precludes parties to a valid instrument from denying its force and effect. Boren/Mabee referred to decades of conduct on the part of Fasken, such as execution of deeds, leases and division orders, that bound it to a fixed 1/32nd interest. However, Boren/Mabee were not parties to any of those documents and were not bound by them.
Boren/Mabee were not strictly required to establish justifiable reliance in order to recover on quasi estoppel; however, the court believed it needed to consider whether under the circumstances it would be unconscionable for Fasken to seek recovery of overpayments to Boren/Mabee.
Fasken’s acknowledgment of its interest in documents that are otherwise unrelated to its relationship with Boren/Mabee did not render Fasken’s claims unconscionable.
The purpose of division order estoppel is to protect operators and payors from double liability. Fasken’s division orders were not binding between the distributees themselves.
Judicial estoppel – Grantor wins.
Judicial estoppel is not so much an estoppel as it is a rule of procedure based on justice and sound public policy and is intended to prevent a party from playing fast and loose with judicial system for their own benefit. In a suit by a taxing authority for a .03125 royalty interest (which is the fixed portion of the royalty at issue here), Fasken asserted that the interest belonged to it. Those statements were made at a time when the courts generally used a straightforward mathematical approach to multiplying double fractions to establish the fractional royalty interest (that is, before Hysaw v. Dawkins).
Waiver – Grantor wins.
Waiver permanently alters the parties’ contract rights. Fasken requested and accepted payments of a 1/32nd royalty during a period in which the law relating to the interpretation of double fractions was unsettled. Again, Fasken could not have formed a clear understanding of its rights in connection with a double fraction conveyance with the law was unsettled as it was at the time.
Ratification – Grantor wins.
Ratification permanently alters the parties’ contract rights. Again, Fasken’s acceptance of a 1/32nd royalty was at a time when the law was unclear. The evidence was insufficient to demonstrate that Fasken formed an intention to be legally and permanently bound to the 1/32nd interest it was then receiving.
Presumed grant doctrine – the court passes
The court declined to rule on the presumed grant theory because the parties did not include that defense within the list of issues identified by the trial court in its order permitting an interlocutory appeal.
Limitations – Grantees win, mostly.
Boren/Mabee argued that Fasken’s recovery should be governed by the two-year statute of limitations for unjust enrichment (money had and received) and not the four-year statute for breach of contract.
The trial court erred when it denied Boren/Mabee’s motion for summary judgment on Fasken’s claim for breach of contract. There was no evidence that any of the defendants entered into a contract to ensure that royalty payments were correctly distributed or to turn over payments received from a payor or producer. Boren/Mabee win.
As for unjust enrichment, a payee’s execution of conveyances, division orders, and other documents that are not directly related to its relationship with other payees does not prevent the assertion of claims that such other payees have been overpaid pursuant to the relevant contracts between the parties.
The record wasn’t sufficient to support a defense that Fasken’s claim for money had and received is barred in its entirety. The trial court did not err when it denied Boren/Mabee‘s motion for partial summary judgment on the two-year statute of limitations. Its back to the trial court for more evidence, presumably to determine the amount of royalties paid before and after the two years before suit was filed.