Following the Texas Supreme Court’s ruling in Van Dyke v. Navigator Group that courts interpreting “antiquated instruments” that use 1/8 within a double fraction must begin with the rebuttable presumption that 1/8 refers to the entire mineral estate, Texas courts have wrestled with its implications. Several 2023 decisions rendered by the El Paso Court of Appeals, reflect a trend toward near-automatic application of the presumption. To rebut this presumption, attorneys have made various novel arguments, but none have proven successful to date.
This article discusses a couple more cases in 2024. In each of these cases, one side successfully argued that the Van Dyke presumption applied, and the other side unsuccessfully argued that it was rebutted. Many anticipate that double-fraction cases will continue to steadily flow through Texas courts for the foreseeable future.
Montgomery, Tr. of Tri-Mont Irrevocable Trusts v. ES3 Minerals, LLC, No. 08-23-00153-CV, 2024 WL 2780419, at *1 (Tex. App.—El Paso May 30, 2024, no pet.), one of the most recent post-Van Dyke cases, exemplifies the litany of arguments raised to rebut the presumption. In that case, the El Paso Court of Appeals was asked to interpret a nonparticipating royalty interest (NPRI) in a 1955 deed, the most recent of the “antiquated instruments” that the El Paso Court of Appeals has been tasked with interpreting in this context, to determine whether the deed conveyed a floating ¼ royalty interest or a fixed 1/32 royalty interest.
By way of background, in 1955 J.D. and Elva Arthur conveyed to W. Travis Lattner, Jr., “a non-participating royalty of one-fourth (1/4th) of the landowner’s usual one-eighth (1/8th) royalty on oil and gas produced and saved from said land[.]” The trial court ruled that this language conveyed a fixed 1/32 NPRI.
On appeal, the appellate court outlined the standard announced in Van Dyke and, after reviewing the language in the deed, it emphasized that that the grantor’s use of the phrase “the landowner’s usual one-eighth 1/8th royalty” indicated that the parties were referencing the common understanding that 1/8 represented the full royalty interest, supporting the presumption of a floating royalty interest. Additionally, the court considered that the deed used the word “Grantors” in other parts of the document but switched to “landowner’s usual 1/8 royalty” in the granting clause. According to the court, this deliberate choice of language also supported the presumption.
A number of arguments were made by the Arthurs’ successors to rebut the presumption. First, they argued that the use of the word “all” in the Introductory Clause, the Arthur Reservation, the two conveyance recitals, and the Exception Clause indicated that the grantors were fully aware of their ownership and conveyed a fixed interest. But the court rejected the argument, noting that while “all” was used in some parts of the deed, the language was often modified to clarify the scope of what was actually being conveyed. Next, the court rejected the argument that the use of 1/8 to refer to the landowner’s usual interest was not unique or specific to the royalty conveyance because 1/8 royalty in sulfur had also been reserved to the State as irrelevant to the interpretation of the oil and gas royalty interest.
Additionally, the court rejected the argument that although the deed itself did not explicitly contain a second double fraction for sulfur royalties, such a double fraction would be implied when calculating the quantum of the sulfur royalties conveyed to Lattner. Specifically, the Arthurs’ successors urged the court to multiply the ½ of the grantors’ present interest in sulfur royalties (as mentioned in the Second Conveyance Recital) by the grantors’ 7/8 sulfur royalty (as referenced in the Mineral/Sulfur Reservation). Based on this calculation, they claimed that the deed involved the use of double fractions to determine the amount of sulfur royalties conveyed and thus, argued that the oil and gas royalties should be similarly interpreted as fixed through the use of double fractions. The court rejected the argument, stating that it was unpersuaded by the notion of inserting a double fraction where none explicitly appeared in the deed.
Finally, the court rejected the argument that the Arthur Reservation would be “nonsensical” if the Second Conveyance Recital conveyed everything to Lattner. Specifically, the reservation stated that the grantors reserve unto themselves “all of the oil, gas and other minerals, royalties, and mineral rights not hereinafter expressly conveyed[.]” The Arthurs’ successors argued that this reservation would be “nonsensical” if the Second Conveyance Recital had conveyed everything to Lattner, implying that nothing would be left for the Arthurs to reserve. Thus, they argued, the deed conveyed a fixed 1/32 interest. In rejecting the argument, the court explained that the Lattner successors never argued that the Second Conveyance Recital conveyed everything to Lattner but only a ¼ royalty. Since the reservation was consistent with the conveyance of a floating royalty interest, the court found that the argument failed to rebut the presumption that the deed conveyed a floating ¼ NPRI.
The next case in 2024 represents the first time a federal court in Texas has applied the Texas Supreme Court’s decision in Van Dyke Saddleback Expl., LLC v. Brunelle, No. 4:23-CV-03091, 2024 WL 3626508, (S.D. Tex. July 15, 2024), report and recommendation adopted, No. 4:23-CV-3091, 2024 WL 3628043 (S.D. Tex. July 31, 2024). The court was tasked with interpreting six deeds executed in 1929 that conveyed various fractions of “the landowner’s 1/8 royalty interest.” Notably, this case was filed by the operator, Saddleback, who sought to resolve the question of “what percentages of production it should pay to royalty interest owners under various oil and gas leases.” Id. Not all interpleader-defendants were found, and many were dismissed. But generally, the royalty interests at issue affected over 300 individuals. The owners of the royalty interest that made an appearance moved for summary judgment, arguing that the deeds conveyed “floating” royalty interests, not “fixed” royalty interests.
The district court adopted the Van Dyke decision’s rebuttable presumption that a double fraction like “1/64 of the landowner’s 1/8 royalty interest” refers to the entire mineral estate, unless specific language rebuts that presumption. However, the court provided little analysis as to why the presumption was not rebutted beyond noting that the six deeds lacked language to indicate otherwise. The court stated, “nothing in the text of the six deeds rebuts the presumption that the deeds assign a floating royalty.” As a result, the court granted the owners of the nonparticipating royalty interest partial summary judgment.
The post-Van Dyke legal landscape raises questions about whether the presumption ever truly can be rebutted. As courts apply the presumption with near-automatic deference, the path to overcoming it appears challenging and uncertain. It remains to be seen what level of evidence, specificity, or contextual support will finally tip the scales in favor of finding the presumption rebutted.
