Title: Conway Land, Inc. v. Terry
Citation: 542 So. 2d 362
Docket Number: 70845
State: Florida
Issuer: Florida Supreme Court
Date: March 30, 1989

542 So. 2d 362 (1989)
CONWAY LAND, INC., Etc., et al., Petitioners,
v.
David E. TERRY, et al., Respondents.
No. 70845.

Supreme Court of Florida.
March 30, 1989.
*363 Fletcher G. Rush of Rush, Marshall, Bergstrom, Reber, Gabrielson &amp; Jones, P.A., Orlando, and John A. Reed, Jr. of Lowdes, Drosdick, Doster, Kantor &amp; Read, Professional Ass'n, Orlando, for petitioners.
Robert N. Reynolds of Robert N. Reynolds, P.A., Miami, and Richard W. Lassiter, Clifford D. Edelston and Leon H. Handley of Gurney &amp; Handley, P.A., Orlando, for respondents.
GRIMES, Justice.
We review Terry v. Conway Land, Inc., 508 So. 2d 401 (Fla. 5th DCA 1987), because of apparent conflict with Miller v. Carr, is predicated on article V, section 3(b)(3), of the Florida Constitution.
This dispute arose out of a condemnation proceeding instituted by the City of Orlando. The petitioners derived their title to the land through two deeds executed in 1954 to Weewahotee Ranch, Inc., a predecessor in title. Both deeds contained an identical reservation of rights to Magnolia Ranch, Inc. The respondents are successors in interest to Magnolia Ranch, Inc. The issue in this case is whether respondents are entitled to participate in the condemnation award by reason of the reservations contained in the deeds.
The language of the reservations under which respondents claim an interest in the land reads as follows:
The trial court entered summary judgment against the respondents on the premise that the reservation applied only to the Warren Petroleum Corporation lease identified in the deed, which had long since expired. The district court reversed saying:
508 So. 2d  at 405-06. The case was remanded for a determination of the value of respondents' royalty interest.
We fully agree with the rationale of the district court of appeal. While the first portion of paragraph 2 refers only to the Warren Petroleum Corporation lease, the language which follows, "except however," contains an express reservation of a royalty interest "for the benefit of Magnolia Ranch, Inc., its successors and assigns forever." These are words used in creating an interest in fee simple. See Reid v. Barry, 93 Fla. 849, 860-61, 112 So. 846, 851 (1927). The caveat which follows speaks of "existing or any future oil, mineral and gas leases" on the property. This language flies in the face of the contention that the reservation was limited to the existing lease.
When viewed in light of prevailing oil and gas law, paragraph 2 expresses a clear intent to preserve a perpetual nonparticipating royalty interest. It is not an interest in the minerals in place. Neel v. Rudman, 160 Fla. 36, 33 So. 2d 234 (1948). It also differs from a landowner's royalty which is a special creature created by an oil and gas lease. As explained in Maxwell, The Mineral-Royalty Distinction  A Question of How Much, 10 Gonzaga Law Review 731, 735 (1975):
In Welles v. Berry, 434 So. 2d 982, 984-85 (Fla. 2d DCA 1983), the court said:
Consistent with the foregoing definition, paragraph 2 provides that the delay rentals, which are payable each year by the lessee under a typical oil and gas lease for the privilege of maintaining the lease, are surrendered to the owner of the executive right. The reservation pertains only to royalties for oil and gas removed from the land.
The petitioners argue that because the language refers to an interest in royalties which may be "paid or obtained" from the land, paragraph 2, at most, was intended only to reserve an interest in personal property which would not be encompassed in a condemnation of real estate. It was the petitioners' reliance upon Miller v. Carr, 137 Fla. 114, 188 So. 103 (1939), for this contention which originally persuaded this Court to accept jurisdiction of the case. Yet, upon close analysis, we are persuaded that Miller v. Carr actually supports the decision of the district court of appeal that the royalty interest created by paragraph 2 was real property. In Miller v. Carr, the Court passed on the sufficiency of a complaint alleging an oral agreement to bequeath the decedent's oil royalty interest. Because of the statute of frauds, it was necessary to decide whether the interest in the royalties was real or personal property. The Court held that royalties in oil which had already been severed from the ground at the time of owner's death were personalty. However, royalties in oil still in the ground were held to be part of the realty which descended to the heirs and not subject to an oral contract to devise. Thus, under paragraph 2, the royalty interest becomes *365 personal property only when the minerals are severed from the ground.
Finally, we address the contention that the reservation violates the rule against perpetuities. In Story v. First National Bank &amp; Trust Co., 115 Fla. 436, 156 So. 101 (1934), this Court explained that the rule against perpetuities is concerned only with the vesting of estates or interests and is indifferent to their enjoyment. Further, the Court observed that the law favors an interpretation which provides for the early vesting of estates. The leading case on the vesting of oil royalty interests is Hanson v. Ware, 224 Ark. 430, 436, 274 S.W.2d 359, 362 (1955), which held:
Other courts have reached the same result. Price v. Atlantic Ref. Co., 79 N.M. 629, 447 P.2d 509 (1968); J.M. Huber Corp. v. Square Enters., Inc., 645 S.W.2d 410 (Tenn. Ct. App. 1982); McGinnis v. McGinnis, 391 P.2d 927 (Wyo. 1964). In the discussion notes at 4 Oil &amp; Gas Rep. 325, 330 (1955), the Hanson decision is stated as being "both salutary and sound." At 2 H. Williams and C. Meyers, Oil and Gas Law § 323 (1985), the following comment appears:
See also 1 E. Kuntz, A Treatise on the Law of Oil and Gas § 17.3 (1987).
Apparently, only the State of Kansas has squarely adopted the rule that a royalty interest is personal property which does not vest until the oil is severed from the ground so that an attempt to create a perpetual nonparticipating royalty interest violates the rule against perpetuities. Cosgrove v. Young, 230 Kan. 705, 642 P.2d 75 (1982). This view has been criticized by scholars in the field. 1 E. Kuntz, A Treatise on the Law of Oil and Gas §§ 15.4, 17.3 (1987); 3A W. Summers, The Law of Oil and Gas § 605 (1958); 2 H. Williams &amp; C. Meyers, Oil and Gas Law § 323 (1985); Meyers, The Effect of the Rule Against Perpetuities on Perpetual Non-Participating Royalty and Kindred Interests, 32 Tex.L.Rev. 369, 375 (1954).
We hold that the reservation of the royalties set forth in paragraph 2 did not violate the rule against perpetuities because it created a presently vested interest in the land. The fact that production is uncertain and may never occur does not defeat the interest.
*366 Accordingly, we approve the opinion of the district court of appeal.
It is so ordered.
EHRLICH, C.J., and SHAW, BARKETT and KOGAN, JJ., concur.
McDONALD, J., concurs in part and dissents in part with an opinion, in which OVERTON, J., concurs.
McDONALD, Justice, concurring in part and dissenting in part.
I disagree that the Terrys retained any interest in the land in question. What was retained was "`one-half of any and all royalties that may be paid or obtained from the lands aforesaid on account of any oil, minerals, or gas which may be taken from said real property.'" Terry v. Conway Land, Inc., 508 So. 2d 401, 403 (Fla. 5th DCA 1987) (quoting deed). As written, the reserved interest in royalty payments does not equate to a reservation of mineral rights.[*] The Terrys retained no rights of ownership of the real estate; they reserved no mineral rights, nor could they demand severance of minerals to generate royalties. Their interest was not a part of the value of the land but was limited to sharing in monies derived from severed minerals. Upon severance the minerals become personal property. Miller v. Carr, 137 Fla. 114, 188 So. 103 (1939). The Terrys possessed only a contingent interest in personal property.
I agree with the dissent in the opinion under review on the issue of the Terrys' interest in the property. I concur in the part of the district court opinion which disallows attorney's fees caused by the controversy between these parties against the condemning authority.
OVERTON, J., concurs.
[*]  I agree with the Oklahoma courts that, where there is no oil and gas lease upon property, the term "royalty" is construed in the broad sense of denoting mineral rights, but, where property is under lease for oil and gas, as is the case here, the term is construed in a restricted sense of denoting an interest in production. Doss Oil Royalty Co. v. Lahman, 302 P.2d 157, 162 (Okla. 1956).