Royalty and Royalty Interests: Deed; Interpretation Power to Lease: Duty to Non-Executive

摘要

Betty Lou Bradshaw owns a nonparticipating royalty interest ("NPRI") in real property in Hood County, Texas, which she inherited from her parents who had reserved the royalty interest in two deeds they executed in 1960 ("1960 Deeds"). In 2006, Steadfast Financial, LLC, ("Steadfast") owns property in Hood County, a portion of which is covered by Bradshaw's reserved royalty interest. Steadfast conveys the surface estate to Range Resources Corp. but reserves to itself all of the oil, gas, and other hydrocarbons in the property. At the same time, Steadfast also enters into an oil and gas lease with Range Production I, L.P., covering the property and providing for a one-eighth royalty. Bradshaw files suit alleging that Steadfast has breached its fiduciary duty to her by entering into a one-eighth royalty lease when Steadfast owes her a duty to secure a one-fourth royalty in the lease because at the time of the lease the "going royalty rate in Hood County, Texas, was one-fourth." Defendants argues that Bradshaw's NPRI is a fixed one-sixteenth "fractional royalty" so no fiduciary duty is owed or breached. The trial court concludes that the 1960 Deeds create a "fraction of royalty" rather than a "fractional royalty" and grant partial summary judgment in favor of Bradshaw on that issue and Defendants appeal. Held: affirmed. Tthe 1960 Deeds provide for a "fraction of royalty." A "fractional royalty" interest entitles the owner to the specified fractional amount and remains constant, regardless of the amount of royalty contained in a subsequent oil and gas lease. A "fraction of royalty" interest entitles the owner to a fractional share of the royalty that is contained in a subsequent oil and gas lease—it "floats" in accordance with the size of the landowner's royalty contained in the lease—and where a non-participating royalty has been reserved, the holder of the executive right owes a duty to an NPRI owner in establishing the landowner's royalty in the lease.