Concord Oil Co. v. Pennzoil Exploration and Production Co.

A.B. Crosby executed a deed to Southland Lease and Royalty Corp. (Southland) conveying “an undivided one-ninety sixth (1/96)” mineral interest on his land. The deed stated that the conveyance was “made subject to the terms of any valid subsisting oil, gas and/or mineral lease or leases on above described land or any part thereof, but covers and includes one-twelfth (1/12) of all rentals and royalty . . . that may be payable by the terms of such lease or leases insofar as the same pertain to the above described land, or any part thereof.” The deed also stated that the conveyance would not be affected by the termination of leases. At the time the deed was executed there was an outstanding oil and gas lease on the land. The lessee owned a mineral interest subject to reversion to Crosby. After this original lease expired, Crenshaw acquired the interest conveyed in the deed and executed an oil and gas lease to Concord Oil Co. (Concord) (plaintiff). Also after the original lease expired, Crosby’s successor in interest executed an oil and gas lease to Pennzoil Producing Co. (Pennzoil) (defendant). Concord brought suit against Pennzoil, claiming that the Crosby deed conveyed a one-twelfth mineral interest. Pennzoil argued that the deed conveyed a one-ninety-sixth mineral interest and a one-twelfth royalty interest in the original lease that had expired. The trial court found in favor of Pennzoil, basing its decision on the two-grant theory. The court of appeals affirmed, finding that the deed conveyed two separate estates: a one-ninety-sixth mineral interest and a one-twelfth royalty interest in the lease that was in existence at the time of the deed’s execution. Concord appealed.