Mineral Rights and Your Ex – What Not to Do
Today the Arkansas Supreme Court issued an opinion in a case that no doubt has some people doing some cussing. The ex-wife ended up with a bunch of mineral rights that were supposed to be her in-laws’. Even with natural gas prices way down, people are still making good money from what was basically pasture in the Fayetteville Shale. The property at issue in this case is in Scott County, south of Fort Smith, but you never know.
The case is Sutton v. Sutton, and involves Ronald and Bonnie Sutton (parents), Lonnie Sutton (son) and Lorene Sutton (ex-wife). Parents originally come to Arkansas and buy the property, and get 1/2 the mineral rights as well. The sellers keep the other half.
Parents subsequently add the then married son and his wife to the deed, resulting in son and wife having 25% of the mineral rights and 50% of the surface rights and parents having 25% of the mineral rights and 50% of the surface rights. The previous sellers still have the other half of the mineral rights.
Here’s where the fun starts. Lonnie and Lorene get divorced. The parents subsequently deed their interest in the surface rights to Lonnie via warranty deed and include the following paragraph regarding the mineral rights:
SUBJECT, however, to a reservation by the seller of an undivided one-half interest in and to all of the oil, gas, coal and other minerals in and under the said property, together with the right to enter on the property for the purpose of exploration for or development of the same.
Lonnie then, for reasons unknown, deeds all his interest in the surface rights to Lorene, his ex, reserving 50% of the mineral rights. Confused yet? Parents think they still have all their mineral rights (the 50% they originally had) and Lorene testifies she thinks she has 25% and the parents have 25%. The circuit court and the Supreme Court disagree with both.
The parents say the paragraph above just put Lonnie on notice that he wasn’t getting any mineral rights and that theirs and Lorene’s testimony reflects that intent. The Supreme Court says intent doesn’t matter, and finds:
Because the deed purports to reserve fifty percent of the mineral rights and convey fifty percent of the mineral rights, the deed attempts to convey one-hundred percent of the mineral rights. However, appellants owned only twenty-five percent of the mineral rights, so both the grant and reservation cannot be given effect. Therefore, the reservation must fail, and the risk of title loss is on
The court calls the reasoning behind that the “Duhig rule”. In English, it means that since the paragraph makes it sound like the parents tried to reserve 50% of the mineral rights and give to Lonnie 50%, without making it clear that they only owned 25% of the mineral rights in the first place, the whole clause is void and thus they conveyed all the interest, mineral and surface, to Lonnie. Who then passed that interest plus his previous 25% on to his ex, Lorene. Can you feel the love toward Lorene, who now has all the surface AND the 50% of the mineral rights parents bought years ago?
What’s the reasoning behind the Supreme Court ruling? Clarity. Without using the Duhig rule, subsequent purchasers could never be sure exactly what they were getting in terms of mineral rights just by looking at the deed. If one looked at the deed from the parents to Lonnie, you would think the highlighted paragraph would mean they were reserving half of the mineral rights and giving Lonnie the other half. Problem is they only owned a quarter of them. The Court doesn’t want to have a lawsuit to determine intent everytime, so it has applied a blanket rule designed to promote clarity. In short, if you’ve started carving up your mineral interests, when you convey the property you had better be drafting the deed carefully.