Holding: Because the Wilson parents owned enough mineral interests in the 160-acre tract of land to fully satisfy their conveyances to Leach, we conclude that the interests of Leach successors-in-interests, Acoma and Bassett, are not burdened by the 6.5% royalty. Takeaway: Notice seems to be only relevant if the deed in question should give sufficient notice of a potential problem to prompt futher investigation. o Look to the 4 corners regardless of what the grantee knows The effect of Duhig is that a grantor does not own a large enough mineral interest to satisfy both the 146
grant and the reservation, the grant must be satisfied first because the obligation incurred by the grant is superior to the reservation.” o Grant over reservation o If grant cannot be satisfied get equity and relief Can be brought up in any conveyance though different jurisdictions will not apply Duhig to o&g lease. There has to be an outstanding interest not disclosed and a general warranty. And there may or may not be a reservation. Notes: 1) Duhig does not seem to cover these cases, and the burden should be applied proportionately. Duhig only seems to apply when the grantor claims/reserves title that was given to the grantee and retains enough to title to make the grantee whole. Unsure how this would be handled. Effect of Pooling on Property Interests : o Wagner v. Brown, Ltd. V. Sheppard : Facts: Sheppard owns a 1/8 interest in 62.72 acre unit just north of Tyler. Sheppard’s lease had a special addendum providing that if royalties were not paid within 120 days after first gas sales, her lease would terminate the following month. o Sheppard’s lease allowed pooling with adjacent tracts. 147
Sept. 1, 96, Sheppard’s tract was pooled with 8 other units to form the W.M. Landers Gas Unit. o In 2000, Wagner & Brown found out that Sheppard had not been paid within the first 120 days after gas had been sold and thus the lease terminated. They tried to renegotiate a lease, but Sheppard refused and became an unleased co-tenant, entitled to her share of proceeds from minerals sold less her share of the costs of production and marketing. Issue: Did the lease terminate, thus making Sheppard an unleased cotenant? Should Sheppard bear any costs occurred before her lease terminated, or any costs incurred after the lease terminated that relate to the unit but not her lease? Discussion: Did the lease termination terminate the unit? o A proper interpretation would hold that Sheppard’s lease termination does not terminate the pool. Both lease and unit pooled certain premises and lands, not just their leased interests “the continued validity of any such pooling was not dependent upon a 148
subsisting leasehold estate in the adjacent land.” Court finds that the unit was comprised of Sheppard’s land not the lease; Sheppard is entitled to 1/8 th of proceeds due to the mineral owners of her tract, that does not entitle her to 1/8 th of the proceeds that must be shared with mineral owners of other tracts by the terms of the unit agreement.
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