Moeller v. Ferrari Energy, LLC
2020 COA 113. No. 18CA1844. Quiet Title Action—Mineral Interest Reservation—Ambiguous Deed.
July 23, 2020
In 1954, Burns conveyed to Todd real property subject to an express reservation of one-half of all of the oil, gas, and minerals on and under the land (the Burns reservation). Todd later conveyed the property to the Wilsons, subject only to the Burns reservation. In 1964, the Wilsons, who now owned the one-half mineral interest not reserved by Burns, sold to the Katzdorns. The 1964 warranty deed conveyed fee simple title to the real property “excepting and reserving to the Grantors herein an undivided ½ interest in and to all the oil, gas and minerals in, upon and under said land.”
The property was eventually conveyed to the Moellers, but the operative reservation remained the one in the 1964 deed. In 2002, the Moellers entered into a mineral lease with PDC Energy, Inc. (PDC), and began receiving royalties. In 2016, PDC learned that the Wilsons might own the mineral interest, so it entered into a duplicative mineral lease agreement with the Wilsons. The Wilsons conveyed any interest they had in the minerals to Ferrari Energy, LLC (Ferrari) and assigned Ferrari the right to collect any royalty payments. The Moellers filed this action to quiet title in the mineral interest. On a summary judgment motion, the district court quieted title in the minerals, as a matter of law, in Ferrari.
On appeal, the Moellers contended that the district court erred in concluding that the 1964 deed unambiguously reserved a one-half mineral interest to the Wilsons, conveying no portion of the mineral estate to the Katzdorns. The 1964 deed conveyed the real property without reference to the Burns reservation. Thus, the question was whether the 1964 deed reserved a total of a one-half interest in the minerals and thereby conveyed the other one-half interest to the Katzdorns (in which case the Wilsons retained no mineral interest) or whether it reserved to the Wilsons a one-half interest along with the Burns reservation (in which case the Moellers received no mineral interest).
Terms in a deed are ambiguous when they are susceptible of more than one reasonable interpretation. In light of the Burns reservation, the warranty deed is ambiguous because it is susceptible of two interpretations: (1) that the warranty deed conveyed to the grantees the half of the mineral estate that had not previously been reserved; or (2) that the warranty deed reserved one-half of the mineral estate to the grantors, in addition to the previous reservation, leaving no portion of the mineral estate for the grantees. The Court of Appeals concluded that in light of the Burns reservation, which left the Wilsons with only a one-half interest in the minerals, the language of the 1964 deed is ambiguous because it could reasonably be interpreted in either of the foregoing ways. To resolve the ambiguity, the Court followed the rule that an ambiguous deed is construed against the grantor. Therefore, it was error to quiet title in the mineral interest in Ferrari.
The judgment was reversed and the case was remanded with directions to enter judgment in favor of the Moellers on their quiet title claim.