Non-Participating Royalty

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Non-Participating Royalty Interest

 

 Certain grants do not violate the Rule as a matter of law.  For example, in the case of Dauphin Island Property Owners Assoc. v. Callon Institutional Royalty I, 519 So. 2d 948 (Ala. 1988),  the Alabama Supreme Court held that the grant of a perpetual, non-participating royalty interest in oil and gas does not violate the Rule Against Perpetuities as applied in Alabama.  (See Ala. Code §35-4-4 (1975)).  In reaching this holding, the court rejected the contrary position adopted by the Kansas Supreme Court in the cases of Lathrop v. Eyestone, 227 P.2d 136 (Kan. 1951); Cosgrove v. Young, 642 P.2d 75 (Kan. 1982).  The Alabama Uniform Rule would also exclude non-participating royalty interests by virtue of the Dauphin Island Property Owners Assoc. case and § 35-4A-424(8): “a property interest, power of appointment, or arrangement that was not subject to the common-law rule against perpetuities or is excluded by another statute of this state”

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