Mounger v. Pittman

Decision Date26 January 1959
Docket NumberNo. 40968,40968
Citation235 Miss. 85,108 So.2d 565
PartiesHenry MOUNGER et al. v. Henry S. PITTMAN.
CourtMississippi Supreme Court

Ernest R. Duff, Roy J. Goss, Columbia, Breed O. Mounger, Tylertown, for appellant.

Joe A. Keith, Sherman, Tex., W. H. Watkins, Jr., Tylertown, for appellee.

GILLESPIE, Justice.

On October 31, 1937, when the subject lands were not under any oil and gas lease, appellants' predecessors in title executed to appellees' predecessor in title a deed to a parcel of land wherein the grantors made the following reservation:

'We do hereby reserve for ourselves, our heirs and assigns, one-eighth of all the oil and gas which may be produced from said lands to be delivered in tanks and pipelines in the customary manner, and this shall be a covenant running with the land and all sales and other conveyances of said lands shall be subject to this reservation and agreement.'

The question is whether the reservation reserved to the grantors a non-participating royalty interest or an interest in the minerals (oil and gas) in place. The chancellor held it was a reservation of the minerals in place.

The distinguishing characteristics of a non-participating royalty interest are: (1) Such share of production is not chargeable with any of the costs of discovery and production; (2) the owner has no right to do any act or thing to discover and produce the oil and gas; (3) the owner has no right to grant leases; and (4) the owner has no right to receive bonuses or delay rentals. Conversely, the distinguishing characteristics of an interest in minerals in place are: (1) Such interest is not free of costs of discovery and production; (2) the owner has the right to do any and all acts necessary to discover and produce oil and gas; (3) the owner has the right to grant leases, and (4) the owner has the right to receive bonuses and delay rentals. Westbrook v. Ball, 222 Miss. 788, 77 So.2d 274; Palmer v. Crews, 203 Miss. 806, 35 So.2d 430, 4 A.L.R.2d 483.

The reservation here involved must be analyzed with the characteristics of the two kinds of estates in mind.

It must be conceded that the reservation retained in the grantors an interest in real estate pertaining to oil and gas. It does not provide, either expressly or by implication, that grantors' share of production is to be free of cost of discovery and production, an important provision in any instrument creating a non-participating royalty interest. The deed containing the reservation did not specifically grant to the grantee any right to discover and produce the one-eighth of the oil and gas, or to grant leases, or to receive bonuses and delay rentals; therefore, all these rights were retained by the grantors. McNeese v. Renner, 197 Miss. 203, 21 So.2d 7; Westbrook v. Ball, supra.

The inescapable conclusion is that the interest reserved by the grantors was an estate in the oil and gas in place. The estate created by the reservation has all the characteristics of an estate in the oil and gas, or minerals, in place. It has none of the characteristics of a non-participating royalty interest.

The effect of the words, 'which may be be produced from said lands to be delivered in tanks and pipelines in the customary manner,' will next be considered. In McNeese v. Renner, supra [197 Miss. 203, 21 So.2d 7], this Court held that the words 'that might hereafter be discovered on the lands herein described,' contained in a reservation of a mineral interest would neither add to nor detract from what the reservation would have meant had they been omitted. And in Westbrook v. Ball, supra [222 Miss. 788, 77 So.2d 275], the reservation included the words, '* * * and as may be mined and produced from said lands, * * *', and in the same reservation this sentence appeared: 'All royalties payable will go to the grantor.' Notwithstanding these expressions, which were of themselves and standing alone consistent with the reservation of a nonparticipating royalty interest, the Court held the reservation retained an interest in the minerals in place. In Texas Gulf Producing Co. v. Griffith, 218 Miss. 109, 65 So.2d 447, 834, 835, the conveyance was held to create a royalty interest notwithstanding it contained the words, 'in, under and upon the following described lands,' and stated that it was the intention of the grantors to convey '24 mineral acres.' In Ford v. Jones, 226 Miss. 716, 85 So.2d 215, 216, the instrument was held to be a deed to minerals in place notwithstanding an intention clause which declared that it conveyed 'ten (10) royalty acres under the above described lands.' It will thus be observed that particular words, phrases, clauses, or sentences in a reservation or deed do not necessarily control the nature of the estate created. The instrument must be considered as a whole.

It cannot be said that the words, 'which may be produced from said lands to be delivered in tanks and pipelines in the customary manner,' are sufficient in themselves to compel the inference that grantors would receive one-eighth of the oil and gas free of all costs of discovery and production. The quoted words do not express or even infer any intention on the part of the grantors to grant to the grantee all of the incidental rights of mineral ownership which characterize an estate in the minerals in place.

We hold, therefore, that the grantors reserved an undivided one-eighth interest in the oil and gas in place and the decree of the chancellor should be and is affirmed.

None of the other questions raised by appellants justify discussion.

Affirmed.

LEE, KYLE, HOLMES and ETHRIDGE, JJ., concur.

ROBERDS, J., McGEHEE, C. J., and ARRINGTON, J., dissent.

HALL, J., took no part.

ROBERDS, Justice (dissenting).

In my opinion the reservation quoted in the majority opinion created in the grantors a royalty interest and was not a conveyance of minerals in place.

Glassmire, in his work entitled Oil and Gas Leases and Royalties, Second Edition, Section 23, p. 73, says: 'A mineral deed is an instrument in the form of a general warranty deed which grants or transfers the minerals in place, or the right to obtain them. It conveys the minerals themselves, which produce the royalty, subject to the lease. * * * A mineral deed is not a 'royalty' but is an evidence of mineral ownership, or the rights thereto, which interest may or may not produce a royalty under an existing or subsequent lease.' The incidents of a mineral lease are the right to execute leases, the right to receive bonus money, the right to receive delay rentals, and the right to receive royalty oil, and gas, or royalty payments. In Westbrook v. Ball, 222 Miss. 788, 77 So.2d 274, 275, this Court said: 'The owner of minerals has the right to execute oil, gas and mineral leases, selecting the lessee and fixing the terms of the lease, and to receive therefrom the bonuses, delay rentals and royalties.'

The courts have well defined the nature of royalty interest. Professor Summers in his work, Summers Oil and Gas, Permanent Edition, Section 571, pp. 4, 5, has this statement: 'Royalties for oil are usually some share of the oil produced. The lessee may agree to deliver a share in kind, in tanks or to the credit of the lessor in a pipe line to which the wells on the lease are connected. The lessor may have the option to take delivery in kind or the value thereof. The lessee may have the option to buy the lessor's royalty oil at the prevailing market price in the field.' He further states, as to the manner of creating the interest, Section 599, pp. 278, 279, 280, 281, of his work: 'Where the instruments use the words 'oil, gas and other minerals in, or under' the land as descriptive of the interest intended to be created, the courts ordinarily hold that a mineral fee interest is created, but if other words descriptive of the oil and gas are added, such as 'produced', 'saved', 'marketed' or 'made available for market', the interest created may be held a royalty, because the fraction or percentage granted or reserved is of oil and gas after production.'

In Westbrook v. Ball, supra [22 Miss. 783, 77 So.2d 275], this Court further said: 'The words 'royalty' and 'minerals' have a well defined meaning as separate and distinct estates when one is compared to the other. * * * The grantor in this deed not only retained the minerals, but retained the right to go upon, enter, to explore for, drill for, mine, store and remove all of said minerals at any and all times. All these rights are necessary to the execution of an oil, gas, and mineral lease, and where minerals are reserved these rights are necessarily implied even though not specifically reserved. * * * However, in this deed all were reserved. A royalty owner has none of these rights but only has the right to...

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