Parham v. Worthen Trust Company, Inc.
Annotate this Case
James W. PARHAM, Sue F. Parham, Obie Cooper,
Cleo Cooper, Howard M. Smith, Linda Payn,
Paul Cooper, David Cooper, Pam Kopcheck, John
Kopcheck, Dennis Medford, and Jo Ann Stevens
v. WORTHEN BANK and TRUST COMPANY, INC., and
Anne H. Monroe, Trustees of the Monroe Family
Trust I and T. Archie Monroe
96-100 ___ S.W.2d ___
Supreme Court of Arkansas
Opinion delivered November 25, 1996
1. Oil, gas, & minerals -- fractional-share royalty defined. --
A "fractional share" royalty means that the royalty owner will
receive an absolute, predetermined fraction of the gross
production of the well; the royalty owner's fractional
interest will not fluctuate according to the amount of royalty
interest retained by the grantor in subsequent leases.
2. Oil, gas, & minerals -- fraction-of-a-share royalty discussed
-- distinguished from fractional-share royalty. -- A "fraction
of a share" royalty is dependent upon the interest retained by
the grantor in leases to third parties; while language
creating a "fractional share" royalty refers to a fraction of
the gross production, a "fraction of a share" royalty refers
to a fraction of the royalty interest retained by the grantor.
3. Oil, gas, & minerals -- language in granting clause of release
deed clearly established fractional share -- chancellor's
ruling correct. -- Where the granting clause of the release
deed in question clearly established that the royalty owners
were entitled to a fraction of the gross production and not of
the royalty interest, the chancellor was correct that the
granting clause created a "fractional share" royalty whereby
the appellants were entitled to a consistent 1/16th of the
gross production regardless of the interest retained by the
appellees in subsequent leases.
4. Oil, gas, & minerals -- appellants' argued explanatory phrases
in deed led to different conclusion -- intent of grantors
clear. -- After describing the property to be conveyed, the
deed provided additional explanatory clauses that appellants
argued created a "fraction of a share" royalty; however, this
interpretation would have resulted in the grantees receiving
only a 1/96 interest, and it was clear in the deed that the
grantors anticipated that future leases were susceptible to
fluctuation and that the grantors intended the appellants'
royalty interest to be a constant 1/16 despite any changes in
leases subsequently executed.
5. Property -- appellants' argument without merit -- plain
meaning of deed clear. -- The appellants' assertion that in
1922, 1/8 was the traditional interest retained by grantors in
oil and gas leases, thus, the grantors used the customary 1/8
designation when they really meant to state 1/2 of whatever
interest was retained by the grantors in future leases, was
without merit where it was obvious that the grantors wished to
make it clear that the interest conveyed was 1/16 of the total
production and not merely 1/16 of the 1/8 royalty interest
they retained; the appellate court will give a deed its plain
meaning and will not go beyond the four corners of the
instrument unless the language of the deed is uncertain,
doubtful, or ambiguous; it was obvious that the plain meaning
of the deed was to create a "fractional share" royalty; there
was no need to go beyond the unambiguous language of the
document to consider tradition or custom in construing the
language of the 1922 deed.
Appeal from Columbia Chancery Court; Hamilton R. Singleton,
Chancellor; affirmed.
Crumpler, O'Connor & Wynne, by: William J. Wynne, for
appellants.
Woodward & Epley, by: Michael G. Epley and Bridges, Young,
Matthews & Drake, PLC, by: Cary E. Young, for appellees.
Andree Layton Roaf, Justice.
This appeal involves the construction of a 1922 deed by which
the appellants, heirs and grantees, obtained a non-participating
royalty interest in the mineral rights to property located in
Columbia County, Arkansas. The appellees own the property,
including the mineral rights. On appeal, the appellants claim that
the Columbia Chancery Court erred when it found that they owned a
1/16 instead of a 1/12 royalty interest in the oil and gas produced
pursuant to a lease executed by the appellees in 1992. We find no
error and affirm.
By the execution of a release deed dated August 10, 1922,
Claude and Helen Smith conveyed to I.L. and J.P. Cooper a non-
participating royalty interest in the mineral rights in some 200
acres of land located in Columbia County, Arkansas. The Smiths
subsequently conveyed ownership of this property in 1922 and 1927
to T.A. and Alice E. Monroe. The property is currently held by
appellees, the Monroe Family Trust, with Worthen Trust Company,
Inc., and Anne H. Monroe as trustees, and T. Archie Monroe ("Monroe
family"). Over the years, the Coopers devised or conveyed their
non-participating royalty interest to various individuals, twelve
of whom are the appellants ("Cooper heirs").
In 1992, the Monroe family executed oil and gas leases of the
property to a third party. The new leases provided that the Monroe
family's reserved royalty interest would be 1/6 of the gross
production of the wells on their property.
The Cooper heirs in essence contend that the 1922 deed granted
them a 1/2 interest in whatever royalty interest was retained by
the Monroe family. Accordingly, the Cooper heirs asserted that
they were entitled to 1/2 of the 1/6 royalty interest retained by
the Monroe family in the 1992 leases, or 1/12 of the total
royalties from the wells. The Monroe family disputed this claim,
and contended that the 1922 deed granted the Cooper heirs only a
1/16 royalty interest in the wells regardless of the interest
retained by the Monroe family, and that the Cooper heirs' 1/16
interest was thus unaffected by the 1992 leases.
The oil purchaser and well operator refused to pay the portion
of the royalties in dispute until the Monroe family and the Cooper
heirs resolved their conflict. The Monroe family filed suit in the
Columbia County Chancery Court seeking a declaratory judgment. Both
the Monroe family and the Cooper heirs filed motions for summary
judgment.
After a hearing, Chancellor Hamilton H. Singleton granted
summary judgment in favor of the Monroe family and found that the
Cooper heirs were only entitled to 1/16, instead of 1/12, of the
royalties from the oil and gas wells. In a letter opinion, the
chancellor explained that the 1922 deed gave the Cooper heirs an
absolute, 1/16 "fractional share" royalty which was unaffected by
the interest retained by the Monroe family in subsequent leases.
Hence, the 1992 leases had no bearing on the Cooper heirs' royalty
interest in the wells. The Cooper heirs appeal from this grant of
summary judgment.
This Court has jurisdiction pursuant to Ark. S. Ct. R. 1-
2(a)(15) & (17) because this appeal involves a question of oil and
gas law, and the construction of a deed.
The sole issue on appeal is whether the 1922 release deed
granted the Cooper heirs a "fractional share" royalty, as was
decided by the chancellor, or a "fraction of a share" royalty. A
"fractional share" royalty means that the royalty owner will
receive an absolute, predetermined fraction of the gross production
of the well. Howard R. Williams & Charles J. Meyers, 2 Oil and Gas
Law 327 (1986). The royalty owner's fractional interest will not
fluctuate according to the amount of royalty interest retained by
the grantor in subsequent leases. Id. For example, "an undivided
1/16 royalty interest in any oil, gas or minerals that may
hereafter be produced" creates a "fractional share" royalty whereby
the royalty owner is entitled to 1/16 of the gross production of
the well, regardless of the interest retained by the grantor in
subsequent leases to third parties. Id.
In contrast, a "fraction of a share" royalty is dependent upon
the interest retained by the grantor in leases to third parties.
Id. While language creating a "fractional share" royalty refers to
a fraction of the gross production, a "fraction of a share" royalty
refers to a fraction of the royalty interest retained by the
grantor. Id. For example, "an undivided one-sixteenth interest of
the royalty" creates a "fraction of the royalty" interest whereby
the royalty owner is entitled to 1/16 of whatever interest is
retained by the grantor in leases to third parties. Id. Hence, if
the grantor retains a 1/8 interest, the royalty owner will be
entitled to 1/16 of the grantor's 1/8 royalty or a 1/128 interest.
The granting clause of the 1922 release deed in question
states:
That we, Claude L. Smith and Helen E. Smith...grant,
bargain, sell, convey, set over and assign and deliver
unto the said I.L. and J.P. Cooper the following to-wit:
An undivided 1/16 interest in and to all of the oil, gas
and other minerals in the soil and under the surface
thereof that may be produced from the land hereinafter
described.
(Emphasis added.) This language clearly establishes that the
royalty owners are entitled to a fraction of the gross production
and not of the royalty interest. Hence, the chancellor was correct
that the granting clause creates a "fractional share" royalty
whereby the Cooper heirs are entitled to a consistent, 1/16 of the
gross production regardless of the interest retained by the Monroe
family in subsequent leases. See Phillip E. Norvell, Pitfalls in
Developing Lands Burdened by Non-Participating Royalty, 48 Ark. L.
Rev. 934, 937 (1995) (referring to Hanson v. Ware, 224 Ark. 430,
274 S.W.2d 359 (1955)).
If the pertinent language in the deed had ended at this point,
there would be no dispute as to amount of the royalty interest
conveyed to the Cooper heirs. However, after describing the
property to be conveyed, the deed further provides:
...said undivided 1/16 interest in the oil, gas and other
minerals herein conveyed is to cover and apply to that
portion only, which is 1/2 of 1/8 of the oil, gas and
other minerals, reserved by the grantor herein, his heirs
or assigns, in any lease for the development of oil, gas
and other minerals now in existence, or that may
hereafter be executed and delivered to any lessee...
...it being the intention of the parties hereto that this
grant in no way shall prevent or interfere with the grant
herein or his heirs or assigns in their own name to lease
the land herein described for the purpose of developing
for oil, gas and other minerals, the grant herein giving
the grantee a mineral interest only to 1/16 of the oil,
gas or other minerals to be delivered out of any royalty
existing by virtue of any lease now on said land, or any
that may be placed on said land by any party.
(Emphasis added.) The issue is thus whether either or both of
these additional explanatory clauses create a "fraction of a share"
royalty, and if so, how these clauses should be construed with the
granting clause which clearly creates a "fractional share" royalty.
In Palmer v. Lide, 263 Ark. 731, 567 S.W.2d 295 (1978), this
court construed the following language as a "fraction of a share"
royalty:
It is hereby intended to convey to the said John C. Orr
one-eighth of one-eighth of whatever royalty in the oil,
gas, and minerals in, under and upon said land which has
been retained....
...the said John C. Orr, however, to receive and be
entitled to one-eighth of one-eighth of whatever oil, gas
or mineral royalty may be reserved....
(Emphasis added.) This court held that Orr was entitled to 1/8 of
1/8 of the 1/8 royalty interest retained by the grantor in the
lease of the wells to a third party. Id. Thus, Orr was only
entitled to a 1/512 royalty interest. Id.
Likewise, this court in Barret v. Kuhn, 264 Ark. 347, 572 S.W.2d 135 (1978), interpreted "one-eighth of all oil and/or gas
run to the credit of the royalty interest reserved" to be a
"fraction of a share" interest. The same conclusion was reached by
this court again in 1993 when construing the phrase "an undivided
13/240th...part of all royalties on oil gas produced...." Anadarko
Petroleum Co. v. Venable, 312 Ark. 330, 850 S.W.2d 302 (1993)
(emphasis supplied).
In this case, the two explanatory clauses from the 1922
release deed refer to "1/2 of 1/8 of the oil, gas, and other
minerals, reserved by the grantor" and "1/16 of the oil, gas or
other minerals to be delivered out of any royalty." Thus, if we
were to agree with the Cooper heirs' argument and construe the
explanatory clauses as creating a "fraction of a share" royalty,
their resulting royalty share would be 1/2 of 1/8 of 1/6, and 1/16
of 1/6 respectively, or only a 1/96 interest.
Moreover, it is clear in the 1922 deed that the grantors
anticipated that future leases were susceptible to fluctuation, and
that the 1/16th royalty interest would not be affected by changes
"in any lease...now in existence, or that may hereafter be
executed...the grantor herein giving the grantee a mineral interest
only to 1/16 of the oil, gas and other minerals...out of any
royalty existing by virtue of any lease now...or any that may be
placed on said land...." Thus, it is clear from this language that
the grantors intended the Cooper heirs' royalty interest to be a
constant 1/16th despite any changes in leases subsequently
executed.
Finally, the Cooper heirs assert that in 1922, 1/8 was the
traditional interest retained by grantors in oil and gas leases.
Thus, they argue that the grantors used the customary 1/8
designation when they really meant to state 1/2 of whatever
interest was retained by the grantors in future leases.
Although the Cooper heirs are correct that 1/8 was the
customary interest retained by grantors, Norvell, supra, an equally
logical explanation is that the grantors wished to make it clear
that the interest conveyed was 1/16 of the total production and not
merely 1/16 of the 1/8 royalty interest they retained. Moreover,
this court has said on numerous occasions that it will give a deed
its plain meaning and will not go beyond the four corners of the
instrument unless the language of the deed is uncertain, doubtful,
or ambiguous. Wilson v. Brown, 320 Ark. 240, 897 S.W.2d 546 (1995);
Wynn v. Sklar & Phillips Oil, Co., 254 Ark. 332, 493 S.W.2d 439
(1973). It is obvious that the plain meaning of the deed is that
it creates a "fractional share" royalty. Hence, there is no need
to go beyond the unambiguous language of the document to consider
tradition or custom in construing the language of the 1922 deed.
Affirmed.
Special Chief Justice Edward Wilson McCorkle and Special
Justices Jim Burnett and Margaret Meads join in this opinion.
Jesson, C.J., Dudley, and Brown, J.J., not participating.
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