Legal Definitions - Duhig rule

The Duhig rule is a principle of property law, primarily applied in the context of oil and gas rights, that helps resolve conflicts when a seller attempts to convey more fractional interest in mineral rights than they actually own, while also trying to reserve a portion for themselves.

When a property owner sells land and tries to both grant a specific fractional interest in the mineral rights to the buyer and reserve a separate fractional interest for themselves, a problem can arise if the seller doesn't actually own enough mineral rights to satisfy both. The Duhig rule addresses this "overconveyance" by prioritizing the interest granted to the buyer. In essence, if there isn't enough to go around, the seller's reserved interest is reduced or eliminated first to ensure the buyer receives the full interest they were promised. This rule is typically applied to conveyances made through a warranty deed, which includes a guarantee from the seller about the title being conveyed. It's important to note that this rule is not universally adopted in all U.S. states.

Here are some examples illustrating how the Duhig rule might apply:

• Example 1: Seller owns less than assumed.

  Scenario: Sarah owns a tract of land. She believes she owns 100% of the mineral rights beneath it. She sells the land to Ben via a warranty deed, stating in the deed that she is conveying the land "reserving unto herself a 1/4 undivided interest in all oil, gas, and other minerals." This language implies Ben is receiving 3/4 of the mineral rights. However, it is later discovered that Sarah only owned a 3/4 undivided interest in the mineral rights to begin with, due to a prior conveyance by a previous owner.

  Application of Duhig rule: Without the Duhig rule, there would be a conflict: Ben expects 3/4, and Sarah expects to reserve 1/4, totaling 100%, but only 3/4 exists. The Duhig rule would prioritize the interest granted to Ben. Since Sarah only owned 3/4, and she tried to reserve 1/4 for herself while implicitly granting 3/4 to Ben, her reserved interest would be entirely eliminated to ensure Ben receives the 3/4 interest he was promised. Sarah would end up with no mineral interest, and Ben would receive the full 3/4 interest Sarah actually owned.

• Example 2: Prior reservation by a third party.

  Scenario: Mr. Jones owns a tract of land where a previous owner had already reserved a 1/8 royalty interest in the minerals. So, Mr. Jones effectively owns 7/8 of the mineral estate. Mr. Jones sells the land to Ms. Smith via a warranty deed, stating that he is "reserving unto himself a 1/4 undivided interest in the minerals." This implies Ms. Smith is receiving 3/4 of the mineral rights.

  Application of Duhig rule: Mr. Jones only owns 7/8 (or 0.875) of the mineral rights. He attempted to grant 3/4 (0.75) to Ms. Smith and reserve 1/4 (0.25) for himself. The total of these (0.75 + 0.25 = 1.0) exceeds what he actually owns (0.875). The Duhig rule dictates that Ms. Smith's granted interest of 3/4 must be satisfied first. After Ms. Smith receives her 3/4, only 1/8 (0.875 - 0.75 = 0.125) of the mineral rights remains from what Mr. Jones owned. Therefore, Mr. Jones's reserved 1/4 interest is reduced to this remaining 1/8. Ms. Smith gets 3/4, the prior owner retains their 1/8 royalty, and Mr. Jones ends up with 1/8 of the minerals, not the 1/4 he tried to reserve.

• Example 3: Developer's overconveyance.

  Scenario: A land developer, "BuildCo," owns a 1/2 undivided interest in the mineral rights under a large parcel of land. BuildCo sells the surface estate and a portion of the mineral rights to a buyer, "Green Valley Homes," using a warranty deed. The deed states that BuildCo "grants to Green Valley Homes a 3/8 undivided interest in the minerals and reserves unto BuildCo a 1/4 undivided interest in the minerals."

  Application of Duhig rule: BuildCo only owned a 1/2 (or 4/8) interest. By granting 3/8 to Green Valley Homes and reserving 1/4 (or 2/8) for itself, BuildCo has attempted to convey a total of 5/8 (3/8 + 2/8), which exceeds the 4/8 (1/2) it actually owned. The Duhig rule would operate to ensure Green Valley Homes receives its granted 3/8 interest first. After Green Valley Homes receives its 3/8, only 1/8 (4/8 - 3/8 = 1/8) of the mineral rights remains from what BuildCo owned. Therefore, BuildCo's reserved 1/4 interest is reduced to this remaining 1/8. Green Valley Homes gets 3/8, and BuildCo ends up with 1/8 of the minerals, not the 1/4 it tried to reserve.