## Facts

- W. J. Dantzler conveyed land to Nelson Simmons by deed that included a reservation stating that “in the event of any mineral, oil or gas being found in the bounds of the land we are to share the profits equally.”
- After the deed, Dantzler conveyed one-half of his reserved interest to G. G. Stanford.
- Years later, Simmons executed an oil and gas lease to Gulf Refining Company (Gulf).
- The lease allowed Gulf to produce oil and provided for a one-eighth lessor’s royalty.
- Oil was produced, and Gulf accumulated about \$3,600 in royalties it had not paid because Simmons and Dantzler/Stanford asserted competing claims.
- Gulf deposited the money with the court and filed an interpleader action to have the court determine who was entitled to the royalties.
- Dantzler and Stanford claimed the deed reservation gave them the right to one-half of the oil produced (or its monetary equivalent) and sought an accounting.
- The trial court ruled for Dantzler and Stanford. Gulf appealed to the Supreme Court of Mississippi.

## Issues

1. Does a deed reservation providing that, if minerals are found, the parties will “share the profits equally” create a present, vested one-half interest in the minerals in place (running with the land), rather than only a personal right to share proceeds?
2. If it creates a present mineral interest, is a later oil and gas lease executed by the grantee subject to that reserved interest so that interpleaded royalties must be apportioned between the grantee and the reserving grantor (and his assignee)?

## Decision

- The Mississippi Supreme Court affirmed the trial court’s ruling in favor of Dantzler and Stanford.
- The Court construed the “share the profits equally” language as reserving a present real-property interest in the minerals (oil and gas) under the land, not merely a personal agreement to share money.
- Because the reservation was a property interest, Simmons’s later lease to Gulf could cover only Simmons’s own mineral interest; Gulf’s royalty obligations were subject to Dantzler’s and Stanford’s reserved share.
- The Court approved resolving the competing claims through interpleader and allowing an accounting to determine amounts due under the parties’ respective interests.

## Legal Principles

- Oil and gas may be owned as an interest in real property “in place” in Mississippi, subject to the rule of capture once production occurs.
- Deed language can reserve a present mineral interest even when expressed in terms of “profits” from minerals, if the instrument as a whole shows an intent to retain an interest tied to the minerals under the land.
- A reserved mineral interest is alienable and may be conveyed to others; it burdens the land and is effective against subsequent grantees and lessees who take subject to the recorded deed.
- A lessee under a later oil and gas lease stands in the lessor’s shoes and cannot receive more than the lessor owned; the lease is subject to previously reserved mineral interests.
- Interpleader is an appropriate device for a stakeholder holding disputed royalty funds to deposit the money into court and obtain a judicial determination of entitlement among adverse claimants.

## Conclusion

The Mississippi Supreme Court treated the deed clause requiring the parties to “share the profits equally” upon discovery of minerals as reserving a present one-half mineral interest to the grantor, later shared with his assignee, so the subsequent oil-and-gas lease executed by the grantee was subject to that reservation and the interpleaded royalties had to be distributed in line with the co-owned mineral interests.


Gulf Refining Co. v. Stanford, 30 So. 2d 516 (1947)