Deed Reformed to Retain Oil & Gas Rights

Learn from an interesting, recent case in the Seventh Appellate District where the fight was about ownership of the oil and gas under a 13-acre tract. Robenolt v. Zyznar, 13 MA 129, CA7, June 13, 2014,

On March 24, 2010, the parties entered into a real estate sales contract for the sale of 13 acres out of the Robenolts’ 48-acre tract. The contract specifically provided that the Robenolts would retain the mineral rights to the property. At the original closing, Zyznar recognized that there was a problem with the legal description of the property being conveyed, particularly as it related to the size of the parcel and the inclusion, or not, of a tree line. He also realized that the deed did not contain any reservation of mineral rights, but during negotiations about the tree line he did not bring this omission to anyone’s attention.

After the closing, the Robenolts realized that their contractual right to the mineral rights had not been included in the deed, but Zyznar refused to agree to a corrective deed. The Robenolts then sued Zyznar, seeking rescission and reformation of the deed based upon mutual mistake.

The trial court found that there was a mutual mistake concerning the Robenolts’ retention of the mineral rights and ordered reformation of the deed. Zyznar appealed.

The appellate court summarized the law of merger and mistake:

“Generally, under the merger doctrine, when a deed is delivered and accepted without qualification, the underlying purchase contract becomes merged into the deed and a cause of action no longer exists upon the contract. Instead, the purchaser is limited to the express covenants in the deed. However, one exception to the merger doctrine that has evolved is mistake. When there is a mutual mistake by the parties to an instrument resulting in an instrument that does not evince the actual intention of those parties, equity allows for reformation of the instrument to reflect the real intention of the parties.” (citations omitted)

The appellate court found that there was competent, credible evidence to support the trial court’s finding of mutual mistake. As the trial court noted, the real estate sales contract was the best evidence of the parties’ true intent. And it clearly stated that the Robenolts were retaining their mineral rights to the property. In bold and underlined typeface, it stated, “the owner shall retain any and all oil and mineral rights on the property.” This constitutes clear and convincing evidence that the execution and recording of the deed without that reservation was a mutual mistake.

Additionally, there was other evidence that supported the trial court’s finding of mutual mistake – Zyznar’s testimony at trial about both the tree line and mineral issues that arose during negotiations with Robenolt. It was clear that the Robenolts had not changed their position about the mineral issue while giving on the tree line issue.

The court summarized,

“All parties were fully aware that, upon transfer of the real estate in question to Zyznar, the Robenolts were to retain all of the mineral rights. This was evidenced by the real estate sales contract and Zyznar’s own testimony at trial. The omission of the mineral rights retention from the deed was, therefore, a mutual mistake and the Robenolts are entitled to equitable reformation of the deed.”

When oil and gas are at stake, litigation — even appellate litigation — are more likely. It has always been thus.

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