written on the face of the instrument.
that the second half of the double-fraction (“of the usual one-eighth”) meant the royalty interest would float with the leases. These are the provisions the Court of Appeals considered (cleaned up for ease of reading):
Next, the court ported over its trans- formation to the next two clauses, which originally read only “3/32’s,” to instead mean “three-fourths of the royalty.” At bottom, the Court of Appeals inter- preted the deed not as written, but as trans- formed by its substituted language. And, in striving to keep “of the usual 1/8th” from being rendered meaningless, it basically dis- regarded the presence of three instances of “3/32’s.” The Supreme Court must carefully con- sider the lower court’s holding. Will the mere presence of “of the usual 1/8th” be sufficient to overcome other language indicating a smaller, fixed royalty interest? Will the Court allow for broader interpretation of deeds (and leases, contracts, and other instruments) by the use of judicially-substituted language? Both of these cases will be fought tooth and nail at the Supreme Court. Not only do they cover issues critical to the calculation of mineral and royalty interests but, espe- cially in Thomson , may change the rules for the interpretation of written instruments as a whole.
• “an undivided 3/32’s interest (same being 3/4’s of the usual 1/8th royalty)”;
• “a full 3/32’s”; and
• “3/32’s of the gross production.”
Despite being faced with three in- stances of “3/32’s,” the court did not find a 3/32’s fixed royalty interest. It did not hold that 3/32’s, placed right next to 3/4’s of 1/8, was the mathematical equivalent of 3/4 × 1/8 = 3/32. Instead, the Court of Appeals fixated on the second part of the double-fraction (“of the usual 1/8th”), and made “substitu- tions” to the language of the deed—some- thing highly questionable as a matter of deed interpretation. Its justification for doing so was to not render any portion of the deed (specifically, the second part of the double- fraction) meaningless. First, the Court of Appeals read “of the usual one-eighth” to mean “of the royalty,” given that lease royalty rates at the time of the deed were typically one-eighth. The court’s substitution therefore trans- formed “an undivided 3/32’s interest (same being 3/4’s of the usual 1/8th royalty)”—the words in the deed—to simply “three-fourths of the royalty.” This is, of course, not what is
deconomou@krcl.com 5051 Westheimer Road 10th Floor Houston, TX 77056 Tel 713.425.7432 Demetri J. Economou Co-Chair, Energy, Oil & Gas Practice Group Kane Russell Coleman Logan PC
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