The Texas Supreme Court addresses “floating” v. “fixed” royalty in Hysaw v. Dawkins

Despite acknowledging the need for more certain and predictable guidance, the Texas Supreme Court refused to adopt a bright line rule regarding the fixed vs. floating royalty interpretation. On January 29, 2016, the Texas Supreme Court delivered the opinion of the Court on the Hysaw v. Dawkins case. This case was argued to the Texas Supreme Court on December 8, 2015 and addressed the issue of a fractional royalty (fixed) versus a fraction of royalty (floating).

In Hysaw v. Dawkins, the double-fraction issue presented itself in the context of a will-construction dispute. The testatrix bequeathed different-sized land tracts to each of her children in fee simple but globally devised to each child a non-participating royalty interest of “an undivided one-third (1/3) of an undivided one-eighth (1/8) of all oil, gas or other minerals in or under or that may be produced from any of said lands.” The heirs of the testatrix were fighting over the proper construction of these will provisions and their respective royalty amounts because some of the lands are now subject to different mineral leases with royalties in excess of 1/8.

The issue in this case was whether the double-fraction language fixed the siblings’ devised royalty at 1/24—allowing the fee owner the exclusive benefit of any negotiated royalty exceeding 1/8—or whether the testatrix intended the devisees to share equally in all future royalties. The Court determined the testatrix’s intent as expressed from the four corners of the will. Ultimately, the Court determined it was clear that the testatrix’s intent was to share future royalties equally and therefore she bequeathed to each child a 1/3 floating royalty.

Questions regarding the testatrix’s intent arose due, in part, to the use of double fractions in two of the will’s three royalty provisions, the absence of any expression of the royalty devise as a single or fixed fraction, the equal-sharing language in the residual royalty clause, the prevalence of 1/8 as the standard royalty at the time the testatrix executed her will, and the fee simple devise of the surface estate. The Court stated that before ascribing any particular meaning to double-fraction language in a conveying instrument, all the other language in the document must be considered to deduce intent. The proper interpretation of the double-fraction language in the testatrix’s will in light of other testamentary language indicated she intended to treat her children similarly with respect to their royalty interests.