6/26/23 - News
SHJ’s Landmark Victory Clarifies Double Fraction Dilemma in Oil and Gas Law
The Texas Supreme Court recently clarified an issue that has been the source of extensive litigation for decades: the so-called “double fraction dilemma.” In a landmark victory, SHJ partner Marc Tabolsky successfully argued a dispute over a century-old deed containing a reservation of mineral rights that used a double fraction.
The case, Van Dyke v. Navigator Group, grapples with a common issue found in legal instruments used by mineral owners in the early 20th century to either convey or reserve mineral interests. At that time, “one-eighth” was a shorthand for “100%” in mineral interest dealings in Texas, which, as the court explained, evolved out of a common misunderstanding about mineral ownership.
In 1924, George H. Mulkey and Frances E. Mulkey conveyed their ranch and the underlying minerals to G.R. White and G.W. Tom with a reservation of “one-half of one-eighth” of all minerals and mineral rights under the ranch. Per the use of a double fraction employing “one-eighth,” this signified that the Mulkeys were reserving half of the mineral estate. For decades afterward, the Mulkeys, the Whites, and their successors operated as though both sides had split the interests 50/50.
In 2012, Endeavor Energy Resources drilled multiple wells on the land at issue in the case. Shortly after Endeavor’s wells began producing oil and gas, parties who traced their interest back to White’s interest under the 1924 deed filed suit, claiming that White had received fifteen-sixteenths of the mineral estate in 1924, not half. A trial court in Martin County upheld their claim, declaring that the deed unambiguously reserved solely a one-sixteenth interest for the Mulkey parties.
In 2017, the Mulkey parties retained SHJ to appeal the decision. Partner Marc Tabolsky took the case to the Texas Eleventh Court of Appeals, which affirmed the trial court’s decision in 2020. Both courts agreed that simple arithmetic was enough to reach a conclusion.
Tabolsky then sought review in the Texas Supreme Court. After the court called for a full merits briefing, individuals and organizations filed amicus briefs in support, including Christopher Kulander of the South Texas College of Law, one of the nation’s foremost oil and gas law experts, and the Texas Land & Mineral Owners Association.
In October 2022, Tabolsky argued before the Supreme Court that “one-half of one-eighth,” as it was used in mineral conveyances and reservations in 1924, meant one-half of the minerals, not one-sixteenth, and the court should interpret it as such. He also pointed toward the parties’ extensive, unbroken history of recognizing and acting under a 50-50 split. Even if the deed had reserved only a one-sixteenth interest in 1924, the Mulkeys had conclusively established their ownership of half the mineral estate under the presumed grant doctrine.
On February 17, 2023, the Supreme Court reversed the court of appeal’s decision with a 9-0 vote, holding that, as a matter of law, the 1924 deed unambiguously reserved one-half, and not just one-sixteenth, of the mineral estate. “The meaning of an unamended text … is unaffected by the passage of time, linguistic developments, or the evolution of usage,” according to the court. “Whatever that meaning was then remains the meaning today.” The court further held that even if only one-sixteenth of the minerals had been reserved, the Mulkeys nevertheless had established an equal share under the presumed grant doctrine.
More broadly, the court explained how its decision would bring clarity and stability to other mineral title disputes throughout Texas. Relying on its recent ruling in Hysaw v. Dawkins, 483 S.W.3d 1 (Tex. 2016), which found that the term “one-third of one-eighth royalty” in a will signified one-third of the entire royalty interest, it provided a heuristic for other courts confronting the “double fraction dilemma.” “… The logic of our analysis in Hysaw requires that we begin with a presumption that the mere use of such a double fraction was purposeful and that 1/8 reflects the entire mineral estate, not just 1/8 of it,” the court wrote. “… At the same time, Hysaw clarifies that the presumption is readily and genuinely rebuttable. … Any instrument may be unique, and the judicial role is to ensure that individual parties receive a faithful interpretation of their legal instrument. Thus, the entire instrument should be examined to determine whether its text rebuts the presumption.”
Ultimately, Van Dyke v. Navigator Group is a significant decision in Texas law regarding the interpretation of instruments conveying or reserving mineral rights. As the Supreme Court stated in its opinion, “This is not our first case involving double fractions, and it is likely not our last. But building on our precedents, and focused on our duty to faithfully interpret any legal text, we anticipate at least substantially reducing the frequency of disputes about double fractions.”