Court Opinion

ID: 9553925
Source: CourtListenerOpinion
Date Created: 2023-08-07 19:37:31.239305+00
Date Added: 2024-06-11T15:32:36.384673
License: Public Domain

ACCELERATED DOCKET DECISION
BAILEY, Judge:
This Accelerated Docket case was orally presented and submitted to the undersigned judges, and case comes before this court on review of the Trial Court’s ruling sustaining Appellees’ Motion for Summary Judgment, holding Appellees entitled to all bonus moneys paid for execution of an oil lease. The Trial Court in its ruling also held that any delay rentals paid by virtue of the lease be equally divided between the Appellants and the Appellees according to a previous reservation of an undivided one-half (½) mineral interest by Appellants in the subject property.
The facts before the Trial Court were and are uncontroverted by the parties. In 1979, Appellants conveyed by warranty deed to Appellees’ predecessors certain property in Cimarron County, Oklahoma, “including all oil, gas and other minerals in, to and under said property, ... RESERVING and EXCEPTING unto [Appellants] his heirs, executors, administrators and assigns, and undivided one-half (½) interest in and to the oil and natural gas in, to and under the above described lands; ... [Appellants] further grant, bargain, sell and convey to [Appellees’ predecessor] exclusive, sole and absolute rights to explore for, develop, produce, transport, and market and/or lease for said purposes, all of the oil, gas and other minerals in and under the property.” Subsequently, Appellees acquired their predecessors’ interest, and in November, 1984, executed an oil and gas lease to Cities Service Oil and Gas Corporation, for which Appellees were paid $146,-530.80 in lease bonus. After learning of the execution of this lease and payment of bonus, Appellants asserted their rights to one-half (V2) of the bonus payments by virtue of their reservation of one-half (½) of the oil and natural gas contained in the warranty deed.
Upon rejection of Appellants’ claim by Appellees, Appellees filed suit in Cimarron County, requesting a declaratory judgment as to the construction of the reservations of the warranty deed and their entitlement to the lease bonus paid. Appellants and Appellees each moved for summary judgment on the issue, and the Trial Court granted judgment to Appellees on the issue of entitlement to bonus, but awarded one-half (½) of all rentals payable to Appellants and one-half (V2) to Appellees. Appellants timely appealed the sustention of Appel-lees’ Motion for Summary Judgment on the entitlement to bonus, and Appellees’ timely cross-appealed on the issue of the division of daily rentals.
This precise issue has not previously been addressed in our state. We must therefore examine the nature of conveyances of mineral ownership to determine the merits of this controversy. In Jolly v. Wilson, 478 P.2d 886 (Okl.1970), the Supreme Court was required to construe a conveyance to determine the nature of an estate *122reserved, whether a “mineral” interest or a “royalty” interest, in a reservation of “one-half of one-eighth of all MINERALS in and under the land, the same being reserved and excepted, and said ROYALTY is nonparticipating in the lease or lease rentals.” (Emphasis added.) 478 P.2d 886-887. The Supreme Court considered numerous factors in determining that in fact, a mineral interest had been retained, one of which was controlling in that case:
“If there is an oil and gas lease in existence at the time the deed is made, the word ‘royalty’ when used to describe the interest conveyed, is usually interpreted to mean royalty in the RESTRICTED sense as a share in production only; but, IN THE ABSENCE OF AN EXISTING LEASE, ‘ROYALTY’ IS LIKELY TO BE INTERPRETED IN ITS LOOSE, BROAD SENSE TO MEAN A MINERAL INTEREST.” 478 P.2d 886, 887. (Emphasis added).
Under the rationale of the Jolly case, and because there was not a mineral lease in effect at the time of the conveyance by Appellants to Appellees’ predecessor, we find that Appellants’ interest, giving the language of the deed its broadest interpretation in the absence of an existing lease, to be a reservation of a mineral interest. Having determined then that Appellants’ interest is a mineral interest, we turn our attention to the substantive rights acquired by ownership of a mineral interest.
In that regard, the authorities are in accord that the ownership of mineral interest “has distinct incidents of ownership with respect to future leases, and [the owner] may alienate such incidents or property rights in whole or in part. Such incidents are: (a) the power to lease, (b) the right to receive bonuses, (c) the right to receive delay rentals, and (d) the right to receive royalties.” 1 Kuntz, Oil and Gas, § 15.1; accord, Hemingway, The Law of Oil and Gas, § 2.7 (2d Ed.1983); Kulp, Oil & Gas Rights, § 10.85, (1962 Suppl.). These incidences of ownership also include the possibility of reverter upon termination of the lease. Kulp, § 10.85, supra. Each of these “incidents of ownership” may be separately transferred. 1 Kuntz, § 15.1, supra; Williams & Meyers, Oil & Gas Law, § 304.10, p. 509; see also, HNG Fossil Fuels Co. v. Roach, 99 N.M. 216, 656 P.2d 879 (1982); Westbrook v. Ball, 222 Miss. 788, 77 So.2d 274 (1955); Burns v. Audas, 312 S.W.2d 417 (Tex.Civ.App.1958). As the New Mexico Supreme Court stated the rule:
“A ‘mineral interest’ includes the following incidents: the right to receive bonuses, delay rentals and royalties; the right to execute oil, gas, and mineral leases; (citations omitted) and the right of ingress and egress to explore for and produce oil and gas. (Citations omitted). A mineral interest may be created and, by appropriate language in a deed, be stripped of one or more of its normal incidents (citations omitted).” HNG Fossil Fuels Co., supra, 656 P.2d 879, 882; accord, 1 Kuntz, Oil and Gas, § 15.3; Williams and Meyers, § 304.10, supra; Hemingway, § 2.7, supra.
With regard to the transfer or conveyance of a mineral estate or interest, it has long been the rule in this state, and others, that all rights not specifically granted in a mineral conveyance are deemed to have been reserved in the absence of specific grant. Hemingway, supra, § 2.7 (I), p. 96; accord, 1 Kuntz, supra, § 15.3, § 15.7. As the Oklahoma Supreme Court has set forth the rule:
“... oil and gas leases, and deeds, are to be construed and interpreted as other contracts, and ... all rights claimed by the lessee (grantee) which are not conferred in direct terms or by fair implication are to considered withheld. Hammett Oil Co. v. Gypsy Oil Co., 95 Okl. 235, 218 P. 501 (1921); George v. Curtain, 108 Okl. 281, 236 P. 876 (1925).” Cronkhite v. Falkenstein, 352 P.2d 396, 398 (Okl.1960); accord, Westbrook v. Ball, 77 So.2d 274, 275, supra; Houston v. Moore Investment Co., 559 S.W.2d 850, 852 (Tex.Civ.App.1977).
With this rule in mind, then, it is clear that the clear and unambiguous language of the deed given by Appellants granted to Appel-lees’ predecessors ONLY the right to execute mineral leases on the entire property; *123that deed did not specifically grant to Ap-pellees’ predecessors (or to Appellees by the subsequent conveyance) any of the other “incidents of ownership.” As such, and under the rule of Cronkkite, supra, the rights to collect bonuses, delay rentals and royalties (in the appropriate proportion to interest retained) were reserved by Appellants, and they should be allowed to share in the bonuses paid to Appellees in the proportion of their retained mineral interest. As the Texas Courts have stated the rule:
“It appears to us that the grantor surrendered only one incident of ownership, the right to execute an oil, gas, and mineral lease, a right known as the executive right. A grant of the executive right does not deprive the grantor of the right to participate proportionally in bonuses, rentals and royalties. Burns v. Audas, 312 S.W.2d 417 (Tex.Civ.App.1958, no writ). A grantor who reserves half of the minerals retains half of all the incidents of ownership inherent in the minerals except those specifically granted. Martin v. Snuggs, 302 S.W.2d 676 (Tex.Civ.App.1957, writ ref. n.r.e.).” Houston v. Moore Investment Co., supra, 559 S.W.2d 850, 852; accord, Williams & Meyers, supra, § 304.10, p. 507-509; § 327.3, p. 94.1-96; Hemingway, supra, § 2.7, p. 96-98; 1 Kuntz, supra, § 15.7.
In Bums v. Audas, supra, the Texas Court of Appeals held that a conveyance by one co-tenant, reserving ½2 mineral interest, but conveying to the other co-tenant the surface and the exclusive right to execute leases, did not deprive the reserving co-tenant of his share of bonus, the Court indicating that the grantor would take ½2 of bonus, delay rentals and royalties. 312 S.W.2d 417, 420. In Houston v. Moore, supra, the Texas Court held that the grant- or, who had reserved ½2 of all minerals in a grant conveying the right to execute leases, was entitled to a proportionate share of bonus and delay, in addition to a share of royalties. 559 S.W.2d 850, 852.
This position is not entirely without support in our State, although our Courts have not spoken directly to this issue. In McNeil v. Shaw, 295 P.2d 276 (Okl.1956), the grantor conveyed V32 interest in minerals in and under the land subject to a lease, including an “undivided ⅛2 interest in all rents and royalties,” but reserving to grantor the exclusive right to lease. The Supreme Court held that the grantee was entitled to and owned V32 of LEASE BENEFITS and ⅛2 of grantor’s Vs royalty. 295 P.2d 276, 278; see also, Williams & Meyers, supra, § 327.3, footnote 2. This holding is instructive, in that the Supreme Court reasoned that because the grantee owned a V32 mineral interest, the grantee was also entitled to ⅝2 of ALL LEASE BENEFITS, including V32 of the Vs lease royalty. McNeill v. Shaw, supra, 295 P.2d 276, 278. Under this rationale, then, because Appellants are the owners of ½ of the mineral interest in the property, they are also owners of ⅝ of ALL LEASE BENEFITS including in our case, ⅛ of all bonuses, delay rentals and royalties.
For these reasons, we hold that Appellants, by reserving ½ of the oil and gas in and under the land, owned a ½ mineral interest in the land, which included ½ of all lease benefits, including the bonuses, delay rentals and royalties paid or payable by virtue of the lease. We accordingly reverse the holding of the Trial Court sustaining the Appellees’ Motion for Summary Judgment on the issue of entitlement to bonus payments, and remand the cause to the Trial Court with instructions to enter judgment for Appellants, awarding them one-half ½) of the $146,530.80 in bonuses paid by Cities Service Oil to Appellees for execution of the lease. We affirm the holding of The Trial Court awarding Appellees and Appellants each one-half (½) of all delay rentals payable under the Cities Service lease.
GARRETT, J., concurs.