In Echols Minerals, LLC v. Green,[1] issued on August 17, 2023, the 11th Court of Appeals applied the precedent set by the Texas Supreme Court in Trial v. Dragon[2] to a case involving a Duhig issue.[3] In Dragon, the Texas Supreme Court narrowed the applicability of the “Duhig rule” to fact patterns which closely align with the facts in Duhig. Below is a brief summary of the facts in Echols Minerals, the court’s Duhig analysis, and the court’s application of the holding in Dragon in concluding that the Duhig rule did not apply to estop the appellants from asserting title to a reserved 33.25/278.5 nonparticipating royalty interest.
In 1942, Floyd Haynes, Robert Haynes, and D’Lorz Haynes acquired all of the mineral interest in a tract of land in Martin County, Texas. In 1944, the Hayneses conveyed an undivided 1/2 mineral interest in the land to K. M. Regan, and by a separate mineral deed, Floyd Haynes, as Guardian for Roselyn Haynes, also conveyed an undivided 1/2 mineral interest in the land to K. M. Regan. By a declaration of interest executed in 1949, the Hayneses stipulated that at the time of the 1944 deeds, Floyd Haynes, Robert Haynes, and D’Lorz Haynes owned an undivided 5/6 mineral interest in the land, and Roselyn Haynes owned an undivided 1/6 mineral interest in the land.
In 1952, by a general warranty deed, Floyd, Robert, and D’Lorz Haynes (the “Haynes Grantors”) conveyed to Lois Madison an undivided 5/6 mineral interest in the land and reserved an undivided 33.25/278.5 nonparticipating royalty interest (the “NPRI”) in the land (the “1952 NPRI Deed”). The 1952 NPRI Deed did not except the 1/2 mineral interest conveyed to Regan in 1944, nor did it contain a “subject-to” clause. Additionally, in 1952, Robert Haynes, Guardian for Roselyn Haynes, conveyed to Lois Madison an undivided 1/6 mineral interest in the land “subject to all outstanding royalty and mineral conveyances” (the “1952 Guardian Deed”).
Echols Minerals is a successor-in-interest to the Haynes Grantors and claims ownership of 1/2 of the 33.25/278.5 NPRI. Donald Mac Green, as Trustee of the Donald and Betty Lou Green Trust (“Green”), is a successor-in-interest to Lois Madison. Green claimed that under Duhig the NPRI reservation was ineffective because the 1952 NPRI Deed failed to except the 1/2 mineral interest conveyed to Regan in 1944. Echols Minerals argued that the 1952 NPRI Deed should be read together with the 1952 Guardian Deed, such that the “subject-to” clause in the 1952 Guardian Deed also applied to the 1952 NPRI Deed. However, because the 1952 Deeds had different grantors, different terms, and conveyed different interests, the court concluded that the deeds could not be read together as a unified instrument.
The Court’s Duhig Analysis:
To determine whether the Duhig rule operated to render the 33.25/278.5 NPRI reservation ineffective, the court in Echols Minerals relied on the Texas Supreme Court’s 2019 decision in Trial v. Dragon. There, the Court noted that Duhig applied the doctrine of estoppel by deed to a very distinct set of facts and that its holding was confined to those particular facts. Duhig involved a scenario in which the grantor purported to convey all of the surface and minerals in a tract of land by a deed with a general warranty, while reserving a 1/2 mineral interest, and failing to reference a prior 1/2 mineral reservation. The Court in Duhig noted that the grantor held, by virtue of the deed containing the warranty, the exact interest needed to remedy the breach, being 1/2 of the minerals, at the time the deed was executed. As a result, the Court applied the equitable principle of estoppel by deed to pass title to the reserved 1/2 mineral interest to the grantee’s successors. In Dragon, the Texas Supreme Court held that the equitable remedy provided by Duhig, being the immediate passage of title to the reserved interest, is limited to situations where the grantor owns title to the exact interest needed to remedy the breach of warranty at the time the deed is executed. The Court’s holding in Dragon thus narrowed the applicability of the equitable remedy provided by Duhig. If such equitable remedy is unavailable, the proper remedy for breach of warranty in a sale of property is monetary damages.
Based on the holding in Dragon, the court in Echols Minerals employed a two-part test to determine whether Duhig was applicable. First, there must be a “Duhig problem,” and second, it must be determined whether Duhig provides the grantee a remedy. A “Duhig problem” requires an over-conveyance and a reservation of an interest at the same time. Since the Haynes Grantors only owned a 1/3 mineral interest in the land (5/6 less 1/2 conveyed to Regan equals 1/3), and purported to convey a 5/6 mineral interest, while at the same time reserving a 33.25/278.5 NPRI (and failing to reference the prior conveyance of a 1/2 mineral interest), the first part of the test was satisfied.
In order for Duhig to provide the grantee a remedy, the grantor must own the exact interest needed to remedy the breach of warranty at the time of execution. In this case, the exact interest needed to remedy the breach was a 1/2 mineral interest (5/6 less the 1/3 the grantor’s actually owned equals 1/2), which quantity the Haynes Grantors did not reserve or own. Because the 33.25/278.5 NPRI reserved by the Haynes Grantors was not the very interest needed to remedy the title failure, the court ruled that Duhig did not apply to estop the successors-in-interest to the Haynes Grantors from asserting title to the NPRI.
Green, as an owner of the mineral interest burdened by the NPRI, referred to the Eastland court’s 1985 decision in Blanton v. Bruce[4] in arguing that the grantor bears the loss from the over-conveyance to the effect that the grantee has a right to any interest the grantor attempted to reserve until the grantee can be made whole. However, in Echols Minerals, the Eastland court noted that Blanton predated Dragon and stated that its application of the Duhig rule in 1985 “must now be viewed through the prism of Dragon” which established that the over-conveying grantor must own the exact interest required to remedy the breach at the time of execution. As discussed above, the Haynes Grantors did not own such an interest.
The court in Echols Minerals followed the Texas Supreme Court’s lead in limiting the scope of the Duhig rule. In future situations involving an over-conveyance and a reservation of an interest, the Duhig rule may not apply to render the reservation ineffective unless the fact pattern closely corresponds with the facts in Duhig. Instead, recovery may be limited to monetary damages for breach of warranty.
[1] Echols Minerals, LLC v. Green, Trustee of Donald and Betty Lou Irrevocable Trust 675 S.W.3d 344 (Tex.App.—Eastland 2023), rule 53.7(f) motion granted (Oct. 2, 2023).
[2] Trial v. Dragon, 593 S.W.3d 313 (Tex. 2019)
[3] See Duhig v. Peavy-Moore Lumber Co., 135 Tex. 503, 144 S.W.2d 878 (1940).
[4] Blanton v. Bruce, 688 S.W.2d 908 (Tex. App.—Eastland 1985, writ refused n.r.e).