United States: Was It A Mineral Deed Or An Oil And Gas Lease?

Last Updated: April 7 2017
Article by Charles Sartain

How to distinguish an oil and gas lease from a mineral deed? In Richardson v. Mills, it was a deed when the instrument uses words like "forever" and imposes no duty to explore for and develop minerals.

An instrument from 1906, when Teddy Roosevelt was busting trusts and creating national parks, was between Mills on the one hand and Lindsey and Harris on the other. The document referred to the parties' "desire" for "development, tests and demonstrations" and for Lindsay and Harris to manage the property so it would be developed for oil and gas or be sold.

The granting language referred to "an undivided one half interest in the oil, gas and other minerals ... " to Harris and Lindsay, and further rights and privileges necessary and proper for the performance of the work of prospecting, testing, operating, etc.

A 1908 release referred to "said contract or lease the time for said development has expired rendering null and void said lease." There was a relinquishment of any right or claim held by Nacogdoches Land Company.

Trial and the clairvoyant expert – it's a lease

Mills offered the opinion of an attorney who reviewed the contract (over 100 years after it was executed) and opined about what the (deceased!) parties possibly intended. It's unknown whether his conclusion was absorbed from the cosmos or the result of a séance with the spirits of the dead.

The trial court determined that the instruments were ambiguous and allowed extrinsic evidence to determine the parties' intent. Alternatively the 1906 instrument was released when Lindsay and Harris did not perform their obligations.

On appeal – it's a deed

Reversed and rendered. The 1906 instrument was not ambiguous. It was a deed:

  • Harris and Lindsay had the right but not the duty to develop the minerals.
  • There was no time within which actions must be taken.
  • The consideration was services rendered.
  • The granting clause said "grant, bargain, sell and convey ... ".
  • The habendum and warranty clauses specified "forever".

This was language of an unconditional conveyance, not for exploitation of minerals.

What about the 1908 release?

The 1908 release referred to an instrument dated July 9, 1907, whereas the document in question was dated July 9, 1906. The 1908 release described the document as a "contract or lease" but not as a deed. There were other discrepancies. No recording information for the 1906 document was mentioned in the 1908 release. Mills argued that there was a latent ambiguity (an ambiguity appearing by reason of some collateral matter). Mills contended that reference to 1907 really meant 1906.

Mills' efforts were rejected, including the testimony from the lawyer. The 1908 release was unambiguous and there was no connection between the two instruments.

In an odd twist, the parties stipulated that if Mills lost they would nevertheless own a small interest in the property. Thus, Mills took nothing from the court but ended up with four percent of the minerals from the stipulation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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