When 1/8 Isn’t 1/8; Double Fraction Cases Applying Van Dyke’s Rebuttable Presumption

On February 17, 2023, the Texas Supreme Court delivered Van Dyke v. Navigator Group, 668 S.W.3d 353 (Tex. 2023) and established the “Van Dyke presumption.”  Van Dyke concerned a 1924 deed that reserved “one-half of one-eighth of all minerals and mineral rights.”  Building on and reaffirming its holding in Hysaw v. Dawkins, 483 S.W.3d 1 (Tex. 2016), the Texas Supreme Court in Van Dyke wrote that “1/8” was a term of art during a certain era that referred to the total mineral interest based on:  1) the estate-misconception theory, which was a prevalent but mistaken belief that in entering into an oil and gas lease, a lessor retained only a 1/8 interest in the minerals rather than the entire mineral estate in fee simple determinable with possibility of reverter of the entire estate; and 2) the “legacy of the 1/8 royalty,” also called “historical standardization,” which resulted in the mistaken assumption that landowner royalty would always be 1/8.  Van Dyke, 668 S.W.3d at 363.  Accordingly, the court held that the use of 1/8 in a double fraction within antiquated instruments gives rise to a rebuttable presumption that 1/8 refers to the entire mineral estate.  This presumption, however, is “readily and genuinely rebuttable” by the remaining text of the same instrument.  Id. at 364.  Nothing in the 1924 deed at issue in Van Dyke rebutted the presumption, and the court therefore concluded, “as a matter of law that this deed did not use 1/8 in its arithmetical sense but instead reserved to [grantors] a 1/2 interest in the mineral estate.”  Id. at 366.

In the royalty context, this double fraction issue is described in terms of fixed interest (constant amount calculated by multiplying the double fraction; treated as a fraction of gross production; Van Dyke presumption does not apply) versus floating interest (varying amount based on the royalty rate of the current lease; treated as a fraction of the royalty interest; Van Dyke presumption applies).

A handful of Texas cases, summarized below, were decided after Van Dyke and addressed the use of 1/8 in a double fraction in older instruments.  In each case, the respective court determined that Van Dyke’s rebuttable presumption applied and concluded that nothing in the text of the subject instruments rebutted the presumption.  Further, while qualifying instruments are described vaguely with terms like “antiquated,” of a “certain era,” or of a “certain vintage” but not defined by a strict timeline, the cases cited in this article concern instruments from the mid-1920s through the mid-1950s.  In addition, the Permico Royalties court indicated that instruments from the 1920s until the 1960s are appropriate candidates.

Royalty Asset Holdings II, LP v. Bayswater Fund III-A LLC, 08-22-00108-CV (Tex. App.–El Paso Mar. 15, 2023)

• Year of instrument: 1945
• Language: Reservation of an “undivided 1/4th of the land owner’s usual 1/8th royalty interest (being a full 1/32nd royalty interest) payable or accruing under the terms of any existing or future oil, gas or mineral lease . . .”
• Holding: Grantor reserved a 1/4 floating royalty interest.
• Supporting factors: Use of “the land owner’s usual 1/8th royalty interest” and reference to future leases are hallmarks of a floating royalty; placement of “1/32” within parentheses is non-essential explanation of the double-fraction clause.

Permico Royalties, LLC v. Barron Props., 08-22-00168-CV (Tex. App.–El Paso Jul. 10, 2023)

• Year of instrument: 1937
• Language: Reservation of “a one-sixteenth (1/16) free royalty interest, (being 1/2 of the usual 1/8th free royalty) in and to all of the oil and gas . . . and the Grantors . . . shall be entitled to receive 1/16th of the oil and/or gas produced, saved and sold from said land, being 1/2 of the usual 1/8th royalty therein.”
• Holding: Grantor reserved a 1/2 floating royalty interest.
• Supporting factors: Repeated use of “usual 1/8 royalty” within the double fraction.

Johnson v. Clifton, 08-22-00132-CV (Tex. App.–El Paso Jul. 10, 2023)

• Year of instrument: 1951
• Language: Conveyance of “an undivided one-one hundred and twenty-eighth (1/128) interest in and to all of the oil, gas and other minerals . . . said land is under oil and gas leases providing for a royalty of 1/8 of the oil . . . and that Grantees herein shall receive one-sixteenth (1/16) of the royalties . . . Grantees shall have no interest in . . . any rentals paid under said leases [or] any interest in any bonus money . . . in any future lease or leases . . . and it shall not be necessary for the Grantees to join in any such subsequent lease or leases so made; that Grantees shall only receive under such subsequent lease or leases a 1/128 (1/16 of the usual 1/8 royalty) part of all of the oil, gas, and other minerals taken and saved under such lease or leases and Grantees shall receive same out of the royalty provided for in such lease or leases.”
• Holding: Grantor conveyed a non-participating 1/16 mineral interest and corresponding 1/16 floating royalty interest.
• Supporting factors: 1/128 (the single fraction in the granting clause) was a multiple of 1/8; double fraction using the term “usual 1/8 royalty” triggers legacy of the 1/8 royalty doctrine.

Powder River Mineral Partners, LLC v. Cimarex Energy Co., 08-23-00058-CV (Tex. App.–El Paso Dec. 15, 2023)

• Year of instrument: 1947
• Language: Conveyance of “an undivided three sixteenths (3/16ths) interest in and to all the oil, gas and other minerals in and under that may be produced . . .” with stated intent to convey a royalty interest of “3/16ths of all the oil, gas and/or other minerals,” and if leased, grantees are entitled to “3/16ths of one-eighth of all the oil and/or gas or other minerals produced . . .”
• Holding: Grantor conveyed a floating 3/16 royalty interest.
• Supporting factors: Initial use of 3/16 by itself with no reference to 3/128 could not be harmonized with double fraction if parties intended 3/128 fixed royalty.

Montgomery v. ES3 Minerals, LLC, 08-23-00153-CV (Tex. App.–El Paso May 30, 2024)

• Year of instrument: 1955
• Language: Conveyance of “a non-participating royalty of one-fourth (1/4th) of the landowner’s usual one-eighth (1/8th) royalty on oil and gas produced and saved . . .”
• Holding: Grantor conveyed a floating 1/4 nonparticipating royalty interest.
• Supporting factors: Use of “the landowner’s usual one-eighth 1/8th royalty.”

Next time you come across a Texas instrument purporting to convey or reserve a certain fraction “of 1/8,” pause before simply multiplying the fractions and crediting the result.  Consider the age of the instrument, the fractions used, and the remaining text of the instrument against the backdrop of the cases cited in this article to determine if the Van Dykepresumption applies.  When in doubt, reach out to your favorite title attorney.

Kurt Kropp

Carleton Gotlin Law PC