Gore Oil Co. v. Roosth

Peyton McKnight issued a warranty deed, granting a tract of land to Eagle Investment Company (Eagle). The land was subject to an outstanding mineral and royalty interest. The deed stated that McKnight reserved “free of all liens a full one-eighth (1/8) non-participating royalty interest in the Property subject to any previously conveyed or reserved mineral interest.” The deed also stated that the conveyance was “made and accepted subject to all restrictions, reservations, covenants, conditions, rights-of-way and easements now outstanding.” Steve Roosth (plaintiff), the successor in interest to McKnight, sued for a declaratory judgment as to who should bear the burden of the outstanding royalty. Roosth claimed that McKnight’s one-eighth royalty reservation was in addition to the prior, outstanding royalty interest, and thus Roosth should be entitled to a full one-eighth royalty. Roosth also sought back pay, as the successors in interest to Eagle (defendants) had reduced their royalty payments to Roosth by the amount of the prior, outstanding royalty. The defendants claimed that the reservation in the McKnight deed was limited by the prior outstanding royalty, meaning that Roosth was entitled to a one-eighth royalty minus the outstanding royalty amount. The trial court found that the deed was ambiguous, because the two subject-to clauses could not be reconciled. The trial court thus looked to an affidavit filed by the attorney for Eagle, which was the only extrinsic evidence of the parties’ intent presented at trial. The attorney’s affidavit stated that he understood that the deed reserved McKnight a full one-eighth royalty. The trial court thus held that the deed reserved McKnight a full one-eighth royalty, in addition to the prior, outstanding royalty. The trial court ordered the defendants to pay Roosth past royalties. The defendants appealed.