Way back in 2023 it was predicted that the Supreme Court of Texas’ decision in Van Dyke v. Navigator would spawn years of litigation. How right the predictions were!
In Boren Descendants and Royalty Owners v. Fasken Oil and Ranch, Ltd,, consolidated with Mabee Ranch Royalty Partnership v. Fasken Oil and Ranch Ltd., the Court granted petitions for review of a single judgment from the 11th Court of Appeals and returned the cases to the 11th court.
As the supreme court reiterated recently in Clifton v. Johnson, in instruments granting or reserving a royalty expressed as a double fraction, there are two distinct paths to establish ownership of the interest: Construction of the original deed and the presumed grant doctrine. These cases implicate both paths. The 11th Court reviewed only the deed construction path.
At issue is a 1933 deed in which Fasken holds an “undivided one-fourth (1/4) of the usual one-eighth (1/8)“ nonparticipating royalty interest. Fasken sued alleging the NPRI floats with current leases and is not a fixed fraction. The trial court granted partial summary judgment for Fasken agreeing there was no evidence that the presumed grant doctrine applied. The court of appeals affirmed, holding that the deed reserved a floating 1/4th NPRI and affirmed as to affirmative defenses of estoppel, waiver, ratification, and limitations, but concluded it lacked jurisdiction to consider the presumed grant doctrine because it was not included within the list of issues the trial court identified in its order permitting an interlocutory appeal. The supreme court reversed the trial court’s denial of Mabee Ranch’s summary judgment motion on Fasken’s cause of action for breach of contract.
The supreme court noted that for 85 years the parties and their successors treated the instrument as reserving a fixed 1/32nd NPRI. Fasken admitted it treated the royalty as fixed during that entire time, it paid taxes on 1/32nd and no greater interest, and it was not aware of its predecessors treating the NPRI as anything other than 1/32nd.
The court of appeals’ concern that its jurisdiction was lacking was misplaced. The presumed grant issue was among fairly-included subsidiary and ancillary issues in the trial court’s order. The essential question in all of these appeals is, who owns this property today? To answer that question the presumed grant doctrine could not be severed from an appeal involving textual analysis of the deed.
Citing Clifton as a clarification of the law, the supreme court reversed the court of appeals’ opinion on jurisdiction, vacated the judgment on the merits, and remanded the cases for a fresh consideration of the merits because that court did not consider the presumed grant doctrine. The parties will be allowed to present Clifton-related arguments to the court of appeals.
Is a fact issue hiding somewhere in this judicial forest that will send the cases back to the trial court for yet another round? We will see. Full disclosure: My Gray Reed colleagues and I represent royalty owners on the losing side.
RIP Dave Mason, Traffic … songwriter, … guitar player