06 Sep To Duhig or not to Duhig, that is the Question… by Adam W. Burke

Duhig v. Peavy-Moore Lumber Co.

In the annals of Texas jurisprudence, few cases so impact the law of the land that they are known on a first name basis; Duhig v. Peavy-Moore Lumber Co., 135 Tex. 503, 144 S.W.2d 878, (1940), is one such case. Duhig is the namesake of the Duhig Rule or Duhig Doctrine, which states:

It is a general rule, supported by many authorities, that a deed purporting to convey a fee simple or a lesser definite estate in land and containing covenants of general warranty of title or of ownership will operate to estop the grantor from asserting an after-acquired title or interest in the land, or the estate which the deed purports to convey, as against the grantee and those claiming under him.

Id. at 880.

Estoppel by Deed and After-Acquired Title

The Duhig Rule has its roots in longstanding concepts of estoppel by deed and after-acquired title. For example, if you and your brother own the family farm, 1/2 each, and you execute a deed to A warranting title to all of the family farm, regardless of what you and A may have been thinking (generally speaking), you will be held to the promises you made in the deed. So should your brother later convey his 1/2 to you, you don’t get to keep it. It automatically passes to X because your deed to A promised to convey all of the farm to A even if you only owned half of it at the time.

Duhig in Oil and Gas

Where Duhig really comes into play, however, is taking such principles and applying them to conveyances of oil and gas. In Duhig, X owned 100% of the surface to the land and 1/2 of the minerals, with the other 1/2 of the minerals owned by Y. X conveyed the land to Z but X reserved to himself 1/2 of the minerals in the deed, which warranted title to the land. The deed made no mention of the 1/2 in Y. Note that X did not say that he “excepted” the 1/2, i.e., X did not say that 1/2 of the minerals were excluded from the conveyance; instead, X reserved 1/2 of the minerals to himself when he only owned 1/2 of the minerals. X claimed that the deed effectively only conveyed the surface, leaving the minerals 1/2 in X and 1/2 in Y. Z claimed the deed conveyed all of the surface and 1/2 of the minerals to Z, leaving nothing in X.

The court held that as written, the deed warranted title to 100% of the surface and 1/2 of the minerals but, because of X’s reservation, it in fact only conveyed the surface. However, this meant the X breached his warranty the moment he executed the deed. “The result is that [X] has breached his warranty, but that he has and holds in virtue of the deed containing the warranty the very interest, one-half of the minerals, required to remedy the breach. Such state of facts at once suggests the rule as to after-acquired title…” Id. In essence, X could not come to court and assert his title to the reserved 1/2 of the minerals if doing so would breach his warranty.

Selman v. Bristow

Duhig, though often criticized, was adopted in numerous other states and has been followed in numerous other situations over the years, see generally 1 Texas Law of Oil and Gas 3.7. For example, in Selman v. Bristow, 402 S.W.2d 520 (Tex. Civ. App.—Tyler 1966, writ ref’d n.r.e.), the grantor owned all of the land subject to an outstanding 1/8 royalty. Grantor conveyed all of the land to grantee by warranty deed, but reserved 1/4 of the minerals. Citing Duhig, the court held that the deed warranted and effectively conveyed an unencumbered 3/4 of the minerals, with grantor bearing the entirety of the outstanding 1/8 royalty.

Trial v. Dragon

Recent decisions, however, have stripped the scope of Duhig in the last few years. In Trial v. Dragon, 593 S.W.3d 313 (Tex. 2019), the grantors executed a deed that purported to convey all of the minerals in and under the land, however one of the grantors had previously conveyed a 1/14 mineral interest to his wife as her separate property. Subsequently, the interests of the wife and the grantor husband both passed to their sons. The grantee sought title to the 1/14 mineral interest, per Duhig. However, the Texas Supreme Court stated that:

Although Duhig still has its place in our jurisprudence, we conclude that it does not apply in this case. Importantly, while Duhig discussed the after-acquired title rule within the confines of the broader estoppel theory, Duhig did not hold that any after-acquired title passed. Indeed, Duhig, at the very time of execution and breach, owned the exact mineral interest required to remedy that breach and was thus subject to an instant transfer based on equitable principles. Accordingly, Duhig stands for the proposition that if a grantor reserves an interest and breaches a general warranty at the very time of execution, then an immediate passing of title is triggered to the grantee for that property that was described in the reservation—in other words, if the grantor owns the exact interest to remedy the breach at the time of execution and equity otherwise demands it.

Id. at 319. Trial further narrowed future use of Duhig when it stated that “Duhig applies the doctrine of estoppel by deed to a very distinct fact pattern, and its holding is narrow and confined to those specific facts.” Id at 318.

Brooke-Willbanks v. Flatland Mineral Fund, LP

Following the Texas Supreme Court’s lead, the Texas Court of Appeals distinguished Selman v. Bristow in Brooke-Willbanks v. Flatland Mineral Fund, LP, 660 S.W.3d 559 (Tex. App.—Eastland 2023, no pet. h.). As in Selman, the grantor in Brooke-Willbanks conveyed a mineral interest subject to an outstanding royalty. However, unlike in Selman, the grantor did not reserve any interest. The court refused to follow Duhig in light of Trial v. Dragon, instead finding that the deed conveyed an interest in the minerals in place, including the “corresponding interest in the royalty,” Id. at 565. The court held that a severed royalty generally burdened the entire mineral estate such that grantor conveyed the minerals as burdened by the royalty, and each party bore the royalty proportionately. “Therefore, if parties to a deed desire for their agreement to operate differently from this basic principle of mineral conveyance, they should ‘plainly and in a formal way express that intention.’” Id. (quoting Benge v. Scharbauer, 152 Tex. 447, 259 S.W.2d 166, 169 (Tex. 1953)). The

Gardner Energy Corp. v. McNeil

Indeed, a recent case, Gardner Energy Corp. v. McNeil, No. 08-23-00140-CV, 2023 Tex. App. LEXIS 9618 (Tex. App.—El Paso Dec. 27, 2023, pet. filed), dealt with a deed where grantor warranted title to an undivided 1/2 mineral interest where a non-participating royalty was outstanding. The Gardner court did not even mention Duhig in its analysis, relying instead on Brooke-Willbanks to burden both halves of the mineral interest proportionately with the royalty. However, Gardner is currently on appeal with the Texas Supreme Court as of the time of this writing.

Echols Minerals, LLC v. Green

Echols Minerals, LLC v. Green, 675 S.W.3d 344, 347 (Tex. App.—Eastland 2023, no pet. h.), dealt with a grantor that conveyed more minerals than the grantor owned, but where grantor also reserved a non-participating royalty interest or NPRI. Echols established a two (2) part test to determine whether Duhig applied:

First, we must determine if there is ‘a Duhig problem’ with the conveyance—did the grantor convey an interest greater than what he or she possessed, such that there is an over-conveyance and therefore, a failure of title, while at the same time reserving an interest? … If there is a Duhig problem, then we must determine if Duhig provides the grantee and its successors a remedy—did the grantor own the very interest required to remedy the breach of warranty at the time of the conveyance so as to nullify or reduce the grantor’s reservation?

Applying the test, the court found that a Duhig problem existed because the grantors purported to convey more minerals than they owned while reserving an NPRI. However, as the grantors reserved an NPRI, they did not own the exact interest to remedy the breach of warranty, as a royalty interest severed from the mineral estate is not of the same nature as the mineral interest conveyed nor was the NPRI the quantity necessary to remedy the breach. Since the test failed, the grantors could assert title to the reserved NPRI.

As Texas courts reexamine Duhig, examiners should pay close attention to how Trial v. Dragon and its progeny affect how we treat mineral and royalty ownership when over conveyances occur. Given that Brooke-Willbanks and Echols were only decided last year, several assumptions and case law upon which landmen and attorneys relied may no longer apply. Brooke-Willbanks and Echols each went to great lengths to distinguish themselves from very similar previously decided cases that relied on Duhig to reach opposite conclusions. Drafters, too, should take pains to carefully consider how to protect themselves from failure of title and how any existing mineral burdens should be handled.

Written by Adam W. Burke, Senior Attorney at KMD Law