Informal Description Dooms Oil and Gas Leases

Originally published by Charles Sartain.

Conoco Phillips Company v. Ramirez et al is a helpful reminder when preparing a document transferring title:

• “Family vernacular” is a great way to communicate in wedding toasts and funeral eulogies, not so much in land conveyances.
• Absent an express reservation, a conveyance of land includes both the surface and the underlying minerals.
• When there is a claim of ambiguity, extrinsic evidence may not be used to create doubt as to the plain meaning of the words.

 

The Ramirez family owned a number of tracts totaling 7,016 acres in Zapata County, Texas. Over the years the tracts were given informal names. The surface estate was long ago severed from the underlying mineral estate. Among many partitions and exchanges among the family, Leonor exchanged her interest in the surface estate of one tract for a ½ surface interest in the 1,050 acres known as “Las Piedras Ranch”.

Under Leonor’s will, Leon Senior received a life estate in “all of my right, title and interest in Las Piedras Ranch”. Upon Leon Senior’s death “the title shall vest” in [her grandchildren] in equal shares.

The suit was a challenge by the grandchildren to three 1990’s oil and gas leases from purported life tenant Leon Senior to ConocoPhillips. Who owned Leonor’s ¼ mineral interest in the Las Piedras Ranch? Was the “Ranch” separate from the severed mineral estate in the entire 7,016 acres (as ConocoPhillips contended)? If Leon Senior’s life estate extended to the minerals, then the grandchildren inherited Leonor’s ¼ interest in the minerals free and clear of ConocoPhillips’ oil and gas leases.

Ambiguity?

ConocoPhillips argued the will was unclear and asked the court to look into the surrounding circumstances to construe it.

The term “Las Piedras Ranch” was common in the family vernacular. In past transactions the family had treated the severed mineral estate, including the Las Piedras Ranch, as an undivided interest belonging to the entire family. No language in Leonor’s will referenced the mineral interest. This, according to ConocoPhillips, meant that Leonor did not intend the life estate to extend to her mineral interest.

But there was no express reservation of her mineral interest in the life estate devise. Leonor knew how to make an express mineral reservation and had done so in the past. The meaning of “all of my right, title and interest” could be ascertained from the plain language within the four corners of the will.

The result

• Based on the plain language of the life estate devise in Leonor’s will, the grandchildren inherited her 1/4 mineral interest in the Las Piedras Ranch on the death of their father Leon Senior.
• The grandchildren were awarded $3.7 million each for their share of production in a co-tenancy accounting, plus interest and attorneys’ fees.
• The leases signed by Leon Senior were invalid because a life tenant can only convey what he owns and Leon Senior owned nothing. The grandchildren, as contingent remaindermen, were unleased cotenants in the ranch, which entitled them to a co-tenancy accounting.
• Limitations was not a viable defense. Grandchild Leon Junior’s claims did not accrue until Leon Senior’s death in 2006, when Junior’s contingent interest vested and he had the right to possession of the estate.

A musical interlude to remind us of the moment.

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

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