In Occidental Permian, Ltd. et al v. Citation 2002 Investment LLC the Supreme Court construed a 1987 assignment from Shell Western E& P Inc. to Citation of a large number of properties. The instrument contained these numerous provisions:
- 1st granting clause: … all right, title and interest in the … leasehold estates described in Exhibit A.
- 2d granting clause: … all right, title and interest in contracts … including, but not limited to, … rights above or below certain footage depths or geological formations, affecting the property described in EXHIBIT A.
- 3d granting clause: It is the intent of this assignment to … convey … all rights and interests now owned by Shell Western … regardless of whether same may be incorrectly described or omitted from Exhibit A … .
- Exhibit A with six columns, including “Column IV”: describing Permits from the surface to the base of certain formations.
- Seven “subject to” clauses.
The dispute
Instruments with this many moving parts are good candidates for controversy which is, of course, what happened here. The Supreme Court, in affirming the court of appeals (See this post for the facts and that opinion) described “overlapping property interests, overarching leasehold mineral estates, tracts within those leases with depth applications, smaller property interests encompassing larger property interests with no express reservation of the property beyond the smaller interests.”
There is no need to decipher this sui generis instrument. You are welcome to do that on your own. The takeaways:
(1) Interpretation of an unambiguous contract is a question of law. The court’s job was to consider the entire agreement and, to the extent possible, resolve conflicts by harmonizing the provisions so as to give effect to all provisions so that none will be rendered meaningless.
(2) The Court considered the entire conveyance together with Exhibit A to conclude that the assignor Shell (predecessor to Occidental) conveyed its entire ownership in the leasehold without reserving an interest in portions outside identified tracts within the leases. It was the leases that were the significant interest described in Exhibit A and Shell intended to convey all rights inherent in the leases to Citation.
(3) The Court declined to disregard the third granting clause as an overly broad Mother Hubbard clause It was a general grant or conveyance. It could not be read as covering only overlooked interests. Mother Hubbard clauses are not intended to convey significant property interest not adequately described in the deed.
(4) The subject-to clauses did not limit the grant. Those clauses are widely used for other purposes than their ordinary meaning of subordinate to, subservient to, or limited by. An agreement may be subject to a term that does not limit the scope of the conveyance but instead notifies the granting of a right or obligation attendant to the property conveyed.
(5) one might be inclined to treat this case as a lesson in sloppy drafting. But in such a complicated transaction, a better way to see the case is as a potential hazard that comes with such a complex transaction. If there’s enough at stake, somebody will look for a reading of such an agreement to that party’s advantage.
What’s your mood today?
A melancholy musical interlude …
Or comforting with punch?
[View source.]
