MOUNGER v. Pittman

108 So. 2d 565, 235 Miss. 85, 9 Oil & Gas Rep. 1124, 1959 Miss. LEXIS 406

• Court: Mississippi Supreme Court
• Decided: January 26, 1959
• Docket: 40968
• Status: Published

Opinions

Gillespie, J.

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 nonparticipating royalty interest are: (1) Such share of production is not chargeable with any of the costs of discovery and production; (2) the owner has ho right to do any act or thing to discover and produce the oil and gas; (3) the owner has no rigid 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.

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 produced from said lands to be delivered in tanks and pipelines in the customary manner,” will next be considered. In McNeese v. Renner, supra, 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, 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 non-participating royalty interest, the Court held the reservation retained an interest in the minerals in place. In Texas Gulf Producing Company v. Griffith, 218 Miss. 109, 65 So. 2d 447, 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, et al. v. Jones, et al., 226 Miss. 716, 85 So. 2d 215, 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 pipelanes 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 or 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, G. J., and Arrington, J., dissent. Hall, J. took no part.