The Duhig Rule and Mineral Rights>Important to Know

The “Duhig” rule was developed to deal with the frequent problem of people accidentally drafting deeds that sold more than they actually owned. There was actually a case called Duhig v. Peavy-Moore Lumber Company in 1940 (Texas) which is the namesake of this rule.

That case summarized the rule as follows:

When full effect cannot be given to the granted interest because of a previous outstanding interest, priority will be given to the granted interest (rather than to the reserved interest) until full effect is given to the granted interest.

The Duhig rule is applied only to “warranty” and “special warranty” deeds in most of the states that have adopted this rule. A warranty deed “promises” or “warrants” certain interest, and must be taken as a “stand alone” document, without regard to other documents or previous deeds.

An example of the Duhig Rule in action follows:

Suppose Adam owns 100% of the “Happy Acres” farm and later sells it to Betty using a warranty deed, reserving 1/3 of the minerals for himself.

Betty, who now owns the farm and 2/3 of the mineral rights under it, later sells Happy Acres to Charlie using a warranty deed, and she reserves an additional 1/3 of the minerals (leaving 1/3 for Charlie.) She forgets to mention on the deed to Charlie that Adam had kept 1/3 of the mineral rights when he sold the farm to her.

What does Betty own after selling to Charlie? None of the land and 1/3 of the mineral rights, right? Well, not according to the Duhig Rule she doesn’t! According the Rule, she owns none of Happy Acres (which makes her pretty UNhappy when she finds out)!

Betty’s intent was to sell Charlie all of the Happy Acres land and 1/3 of the minerals under the land…keeping the other third for herself. However, according to the Duhig rule “priority will be given to the granted interest” and so Betty is actually left with nothing because Charlie, reading the deed on a “stand-alone” basis (and having no knowledge of Adams’s reservation,) would reasonably conclude that 2/3 of the minerals under Happy Acres were being conveyed to him, since the deed Betty gave him only mentions that 1/3 of the minerals are being reserved.

The warranty deed must be taken on its own; without regard to the prior reservation from Adam (since it was not mentioned.) Therefore, if the deed to Charlie says that 1/3 of Happy Acres minerals are reserved to Betty, then Charlie would logically expect to get the other 2/3 according to this deed, assuming he had no knowledge of Adams’s reservation. As far as Charlie knew, Betty owned ALL the minerals, not just 2/3 of the minerals.

One way to avoid this problem would have been for Betty to reference the prior reservation from Adam on her deed to Charlie, thus giving Charlie a “head’s up” that she only owned 2/3 of the minerals under Happy Acres. That way, Charlie, and anyone else looking at the deed, would know that Betty only owned 2/3 of the minerals at the time she sold Happy Acres. Charlie would know then he was only going to get 1/3 of the minerals under Happy Acres, not 2/3.

However, since the prior reservation wasn’t mentioned, it’s quite possible that Charlie or his heirs would have no idea that Betty only owned 2/3 of the minerals when she sold it to him, and so would argue that based on what the deed says a full 2/3 of the minerals were granted since all the deed says is that 1/3 was reserved.

It’s because of “bad” deed drafting like Betty’s deed (i.e. not including prior reservations on future deeds) that the Duhig case came about. Keep in mind that the Duhig rule does not apply to quit-claim deeds, because they do not warrant anything. Most jurisdictions have adopted the Duhig Rule, but not all.