Duhig” Drafting Problem

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 An understanding of the facts and holding in the case of Duhig v. Peavy-Moore Lumber Co., 144 S.W. 2d 878 (Tex. 1940) is essential to drafting or construing reservations of mineral  interests in Alabama deeds. The Duhig problem occurs when a grantor, who owns less than the entire mineral estate, attempts to reserve an undivided mineral interest in a warranty deed or statutory warranty deed that otherwise purports to convey the entire interest in the mineral estate.  In those situations, the Alabama Supreme Court has consistently found that the grantor used the words of exception or reservation solely to protect against liability on the warranties in the deed. Martin v. Knight, 275 So.2d 117 (Ala. 1973); Morgan v. Roberts, 434 So.2d 738 (Ala. 1983); Cole v. Minor, 518 So.2d 61 (Ala. 1987).

 

 As an example of the “Duhig” problem, consider the facts of in the case of Morgan v. Roberts, 434 So.2d 738  (Ala. 1983) Morgan v. Roberts.   In Morgan, the landowner previously had conveyed an undivided one-half mineral interest in the land to a third party. The landowner then “reserved” an undivided one-fourth mineral interest in a warranty deed purporting to convey the entire fee simple interest in the tract of land to the grantee. The Alabama Supreme Court held that the attempted reservation of the one-fourth mineral interest was contrary to the warranties in the deed, when the deed on its face conveyed the surface estate and an undivided three-fourths mineral interest to the grantee. The court held that the grantor kept nothing under the reservation and that the grantee received the entire undivided one-half mineral interest held by the grantor at the time of the execution and the delivery of the deed.

 

 In case of Cole v. Minor, 518 So. 2d 61 (Ala. 1987)  the Alabama Supreme Court reaffirmed that the Duhig principle applies in Alabama.  In Cole, a grantor executed and delivered a warranty deed purporting to convey the entire fee simple estate in a tract of land to the grantee, but reserving an undivided one-half interest in the mineral estate. At the time of the conveyance, the grantor owned only an undivided one-half interest in the mineral estate. The court held that the grantee acquired the entire fee simple interest in the surface and the grantor’s undivided one-half mineral interest, notwithstanding the reservation language.

 

 In Cole, the grantor argued that the grantee had both actual and constructive notice of the prior, outstanding mineral interest. In this regard, the grantor relied upon dicta in the earlier Alabama case of Morgan v. Roberts, suggesting that Alabama recognizes an exception to the Duhig rule where the grantee has actual knowledge of the prior, outstanding mineral interest. In Cole, the Alabama Supreme Court put to rest any suggestion in the Morgan case that Alabama recognizes an “actual knowledge exception” and held that “actual notice should be treated as immaterial in all actions to construe an unambiguous instrument.” Cole, 518 So. 2d at 64.

Copyright 2011 by Edward G, Hawkins. All rights reserved.