Dauphin Island Property Owners Ass'n v. Callon Institutional Royalty Investors I
Decision Date | 22 January 1988 |
Citation | 519 So.2d 948 |
Parties | DAUPHIN ISLAND PROPERTY OWNERS ASSOCIATION v. CALLON INSTITUTIONAL ROYALTY INVESTORS I, etc., et al. 85-1074. |
Court | Alabama Supreme Court |
Barry Hess of Hess, Atchison & Horne, Mobile, for appellants.
Conrad P. Armbrecht II, Douglas L. Brown, and David E. Hudgens of Armbrecht, Jackson, DeMouy, Crowe, Holmes & Reeves, Mobile, for appellees.
The issue in this case is whether a perpetual, nonparticipating royalty interest in minerals violates the rule against perpetuities. The Dauphin Island Property Owners Association ("the Association") filed this action, requesting the court to declare that a 1981 royalty deed from the Association to Dan Dumont was void and to quiet title to the subject property in the Association. The complaint named as defendants Dumont and Callon Institutional Royalty Investors I, a Mississippi limited partnership ("Callon"). Other defendants were later added, but they, along with Callon, hold only as successors in interest to Dumont, so the issues as to the Association's royalty deed control the case.
The trial court granted summary judgment for the defendants, holding that the Association's royalty deed "is valid and effective in accordance with its terms and provisions, and [that] the interest conveyed thereby does not violate the rule against perpetuities."
The Association sold to Dumont "a royalty interest free of the costs of production, which is equal to ... 1/8th of the whole of any oil, gas, ... or any other minerals ... produced from an undivided 234/350 interest in the minerals in, on and under" the described property. The provisions of the deed now alleged to violate the rule against perpetuities are contained in the following paragraphs:
The rule against perpetuities provides that no interest is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest. Earle v. International Paper Co., 429 So.2d 989 (Ala.1983); Code 1975, § 35-4-4. The Association's contention is that the interest conveyed by its royalty deed does not vest within the period of the rule because it "is contingent both upon the production of oil, gas or other minerals on the lands and upon the execution of future leases 1 covering said land, neither of which is required to occur within the time limit."
This argument derives from two Kansas cases: Lathrop v. Eyestone, 170 Kan. 419, 227 P.2d 136 (1951), and Cosgrove v. Young, 230 Kan. 705, 642 P.2d 75 (1982). Lathrop held two conveyances of royalty interests void due to the rule against perpetuities. In Cosgrove, relying upon that decision in Lathrop, the court stated:
The dissent in Cosgrove, however, pointed out that the Lathrop decision has been uniformly criticized and seldom, if ever, followed outside of Kansas. The most telling criticism in that dissent is in a quotation at 230 Kan. 724, 642 P.2d 89 from 2 Williams & Myers, Oil & Gas Law § 324.4, pp. 59-60:
The defendants make the same point when they argue that their royalty is vested in interest, though not vested in possession. They cite Hanson v. Ware, 224 Ark. 430, 274 S.W.2d 359 (1955), as the leading case establishing that a perpetual, non-participating royalty interest does not violate the rule against perpetuities. That entire case is well reasoned and worth reading, and we quote a pertinent passage:
224 Ark. at 436-37, 274 S.W.2d at 362-63.
The parties argue over the question of whether a royalty interest in Alabama is an interest in realty or in personalty, citing Nelson v. Teal, 293 Ala. 173, 301 So.2d 51 (1974); Locke v. Locke, 291 Ala. 344, 280 So.2d 773 (1973); McCall v. Nettles, 251 Ala. 349, 37 So.2d 635 (1948); and Kilfoyle v. Wright, 300 F.2d 626 (5th Cir.1962). Clearly a "mineral interest" is real property, see Nelson and Locke, and the defendants argue that a royalty...
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