Oil and Gas Update

Ohio's 7th District Court of Appeals Issues Opinions on Deed Interpretation - Adopts Duhig Rule

January 4, 2018

The 7th District Court of appeals was busy interpreting deeds in December. The Court issued four opinions involving the interpretation of purported mineral reservations in various conveyances in four separate decisions: Talbot v. Ward, 2017-Ohio-9213, Mcauley v. Brooker, 2017-Ohio-9222, Rubel v. Johnson, 2017-Ohio-9221, and Porterfield v. Bruner Land Company, Inc., 2017-Ohio-9045. While deed interpretation cases are often fact intensive, the court did find that the oil and gas was reserved by one party or another in all four cases. In the four cases the Court effectuated the intent of the parties based on the language of the deeds and, when necessary, parol evidence. This illustrates the driving legal policy of deed interpretation: the court should effectuate the expressed intent of the parties to a deed.

Most notably, the Court adopted the Duhig rule from Texas in its decision in Talbot v. Ward to address an issue with the reservation of fractional mineral interests. Although not expressly adopted by Ohio Courts until now, the Duhig rule, or its logic, had often been applied and relied on by landmen and title examiners in the state.

Below are summaries of the four decisions. If you would like further information on any of the cases, please contact Andrew Schock at anschock@jacksonkelly.com.

Talbot v. Ward, 2017-Ohio-9213

The 7th District Court of Appeals recently adopted the Duhig rule in Talbot v. Ward, 2017-Ohio-9213. The Duhig rule is a Texas rule which dates back to 1940. It estops a grantor and his successors from claiming title in a reserved interest fractional interest, when to do so would breach the grantor’s warranty as to the title and interest purportedly conveyed to the grantee.

In Duhig, the granting clause purported to convey all of the land and minerals, and the reservation clause reserved a one-half mineral interest in the grantor, Duhig. Id. at 880. The warranty deed failed to mention that Duhig did not own all of the minerals and that a prior owner had also reserved a one-half interest. See id. Thus, because the warranty deed did not mention the third-party interest in the minerals, the grantee expected that the conveyance included a one-half mineral interest. The Duhig court explained that in this situation, the grantor breaches his warranty in the warranty deed by appearing to convey more than he actually did. See id. The court reasoned that because the grantor holds “the very interest, one-half of the minerals, required to remedy the breach,” Duhig, 144 S.W.2d at 880, the grantor should be “estopped from asserting a claim to that ½ mineral interest because of the prior outstanding reservation and the deed's purported conveyance of all of the minerals less only a ½ interest.” Gore Oil Co. v. Roosth, 158 S.W.3d 596, 601 (Tex.App.–Eastland 2005, no pet.) (discussing Duhig).

Combest v. Mustang Minerals, LLC, 502 S.W.3d 173, 184 (Tex.App.2016).

Although the 7th District also relied on other factors to reach its decision, the Talbot decision is the first instance where an Ohio court has adopted the Duhig rule to clarify issues with fractional mineral reservations or exceptions.

Mcauley v. Brooker, 2017-Ohio-9222

In Mcauley the 7th District found that certain language reserved all the oil and gas from the operation of a deed. The language at issue read:

RESERVING from the operation of this deed the undivided interest in the oil, gas, coal and other minerals underlying said premises and reserved in a deed from Isaac Atkinson and Hannah Atkinson to George Rice and further reserved in a deed from Isaac W. Atkinson to Cora Atkinson, in Volume 89 at Page 576, Deed Record of Noble County, Ohio.

In its majority decision, the 7th District parsed the language of the reservation to determine that the clear and unambiguous language includes (1) a reservation of all oil and gas; (2) a reference to a prior partial reservation contained in the deed from Isaac Atkinson and Hannah Atkinson to George Rice; and (3) a reference to a second prior reservation contained in the deed from Isaac W. Atkinson to Cora Atkinson. Therefore all oil and gas was reserved in accordance with the unambiguous language.

The dissenting of Judge Waite found that because of a lack of a comma the language refers to only one interest, being the partial interest reserved in the deed from Isaac Atkinson and Hannah Atkinson to George Rice, and later referenced in the deed from Isaac W. Atkinson to Cora Atkinson. Based on such a reading, Judge Waite opined that the entire mineral estate had not been reserved, and a portion was therefore conveyed.

Rubel v. Johnson, 2017-Ohio-9221

In Rubel the 7th District found that the following clause constituted a mineral reservation: “Subject, however, to all right title and interest of the grantor herein in the above three tracts in all minerals rights thereunder including coal, gas and oil.”

In reaching this conclusion the 7th District analyzed case law from multiple jurisdictions, noting that magic words are not required nor are variations of the words “except” or “reserve.” The Court also notes that while “subject to” clauses are often used to protect a grantor from a claimed breach of warranty, they are also used for other purposes. In this case, the use of a “subject to” clause which explicitly references the rights of the grantor clearly and unambiguously excepted or reserved the mineral rights. Any other interpretation would give the clause an unnatural construction.

Porterfield v. Bruner Land Company, Inc., 2017-Ohio-9045

In Porterfield the 7th District found that the following clause excepted and reserved the oil and gas for Bruner Land Company, Inc., where Bruner Land Company, Inc. was also the grantor in the previous deed: “Excepting and reserving to the former grantors, their heirs and assigns, all coal, oil and gas.”

The Court acknowledged that the language could not reserve the oil and gas for a third party, or the grantor in the immediate deed. However, because Bruner Land Company, Inc. was also the grantor in the previous deed in the chain of title, it was a former grantor, and the language was effective to create a new reservation in its favor when the deeds were taken together. The prior deed in which Bruner Land Company, Inc. was a grantor was incorporated by the reference to “former grantors.”